Provided resources needed by medium and large
Purpose for these resources
Mergers and Acquisitions
Deals in long term instruments and sources of
Functioning as an institutional mechanism to
channelize funds from those who save to those who
needed for productive purpose.
Provides opportunities to various class of
individuals and entities.
• Growth of savings,
• Efficient allocation of investment resources,
• Better utilization of the existing resources
• The primary market is that part of the capital
markets that deals with the issue of new
• The primary market provides the channel for
creation of funds through issuance of new
securities by companies, governments, or
Types of issues in Primary market
• Initial public offer (IPO)
• Follow-on public offer (FPO)
• Rights offer
• Preferential issue/ bonus issue/
• Composite issue
• The secondary market is the financial market
where previously issued securities and
financial instruments such as stocks, bonds,
options, and futures are traded
Structure of Capital Markets
Primary Markets Secondary Markets
When companies need financial resources for
its expansion, they borrow money from
investors through issue of securities.
The place where such securities are traded
by these investors is known as the
a) Preference Shares
b) Equity Shares
Securities like Preference Shares and
Debentures cannot be traded in the
Equity shares is issued by the under writers
and merchant bankers on behalf of the
Equity shares are tradable through a private
broker or a brokerage house.
People who apply for these securities are:
a) High networth individual
b) Retail investors
d) Financial Institutions
e) Mutual Fund Houses
Securities that are traded are traded by the
One time activity by the company. Helps in mobilising the funds for the
investors in the short run.
• A marketplace in which securities,
commodities, derivatives and other financial
instruments are traded. The core function of a
stock exchange is to ensure fair and orderly
trading, as well as efficient dissemination of
price information for any securities trading on
Leading stock exchanges:
• Bombay Stock Exchange Limited
• National Stock Exchange
• New York Stock Exchange NYSE)
• London Stock Exchange
Functions of Stock Exchanges
• Liquidity and marketability of securities
• Fair price determination
• Source of long-tern funds
• Helps in capital formation
• Reflects general state of economy
• mostly in international finance.
• long-term loans for companies.
• no regular banking services to the general public.
• (e.g.) Goldman Sachs etc..
• customers' securities for safekeeping.
• electronic or physical form.
• tend to be large and reputable firms.
• Buys and sells shares and other securities
• Stock brokers- Sharekhan, Angel broking ltd,
Kotak Securities etc..
Foreign Institutional Investors (FII)
• registered in a country outside of the one in
which it is currently investing.
• include hedge funds, insurance companies,
pension funds and mutual funds.
• (e.g.) Kotak Mahindra (UK)ltd, Morgan Stanley
investment management etc..
• a pool of funds collected from many investors
• portfolio is structured
(e.g.) Kotak Mahindra, HDFC mutual fund etc..
• An institution or organization that is responsible
for keeping records of bondholders and
• investors seeking private equity stakes in
startup and small- and medium-size
• high-risk/high-return opportunities.
• (e.g.) Reliance venture, DFJ India etc..
• an intermediary between the issuing company
and the investors
• buys the newly issued securities from the
company and sells them to investors on
the secondary market.
• persons responsible for investing
• implements investment strategy
• manages the day-to-day portfolio trading.
• (e.g.) UTI etc..