Capital Market and SEBI

1. Dr. Aruni Kumar
INDIAN CAPITAL MARKET: BASIC
CONCEPT
BA Pt- I (H) Economics
[Paper II (Module 3 of Gr B) ]
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2. INVESTMENT : WHY?
•To make sure we have enough funds to be prepared for the future
• We know that simply earning and saving is not enough.
•Inflation – the price rise beast- eats into the value of our money.
•To make up for the loss through inflation, we invest and earn extra
This is the investment fundamentals
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3. In this we will learn:
Various types of Financial Markets.
What is Capital Market.
Significance of Capital Market.
Nature of Capital Market.
Types of Capital Markets.
SEBI and its Features.
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4. Financial Markets Can broadly be divided into:
 Money Market
 Capital Market
Capital Market: The market where investment instruments like bonds, equities
and mortgages are traded is known as Capital Market.
The primal role of this market is to make investment from investors who have
surplus funds to the ones who are running a deficit
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5. Dr. Aruni Kumar
Significance of Capita Matket
 Link between savers and investors.
Stability in security prices.
Speed up economic growth and development.
Helps in Capital Formation.
Helps in creating liquidity.
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6. Dr. Aruni Kumar
Types of Capital Market
Secondary Market
Stock Market
Over – the - Counter
Primary Market
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7. Primary Market:
A market where the issuers access the prospective investors directly for funds
required by them either for expansion or for meeting the working capital needs.
This process is called disintermediation where the funds flow directly from
investors to issuers.
Primary market is also called new issue market.
Methods of raising capital in the Primary Market:
Public issues
Private placement
Euro issues
Government securities
Offer for sale
Right issues
Electronic Initial Public offerings
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8. Dr. Aruni Kumar
Secondary Market:
A market where securities are traded after being initially offered to the
public in the Primary Market and/or listed in the stock exchange. Majority
of the trading is done in the Secondary Market . This Market comprises of
Equity Market and Debt Market.
Secondary Market provides liquidity to the securities on the exchanges
and this activity commences subsequent to the original issues.
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9. Dr. Aruni Kumar
Features of the Secondary Market:
 Help in determining fair prices based on demand and supply forces and all
available information.
Provides easy marketability and liquidity for investors.
Facilitation in capital allocations in Primary Market through Price Signaling.
Enabling investors to adjust portfolios of securities.
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10. Dr. Aruni Kumar
Participants in the Secondary Market:
 Stock Exchange
Clearing Corporations
Depositories/DP
Trading Member (Stock Broker)/Clearing Member
Registrar of an Issue and Share Transfer Agent
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11. Dr. Aruni Kumar
Products dealt in Secondary Markets:
 Equity Shares.
Debentures.
Government Securities.
Bonds.
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12. Dr. Aruni Kumar
Difference between Primary and Secondary Market:
In the Primary Market, securities are offered to public for subscription
for the purpose of raising capital or fund.
Secondary market is an equity trading avenue in which already
exixting/pre issued securities are traded among investors Secondary
Market could either auction or dealer market, while Stock Exchange is
a part of an auction market.
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13. Securities and Exchange Board of India (SEBI)
SEBI is the regulator of securities market in India. It was established
on 12 April1988.
SEBI is required to regulate and promote the securities market by:
Providing fair dealings in the issues of securities and ensuring a
market place where funds can be raised at relatively low cost.
Providing a degree of protection to the investors and safeguard their
rights and interests so that there is a steady flow of savings into the
market.
Regulating and developing a code of conduct and fair prices by
intermediaries in the capital market like brokers and merchant banks
with a view to make them competitive and professional.
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14. Role of SEBI in the Indian Capital Market:
• Power to make rules for controlling Stock Exchange
•To provide license to dealers and brokers.
•To stop fraud in Capital Market.
•To control the Merger, Acquisition and Take over of the companies
•To audit the performance of Stock Market.
•To make new rules on carry forward transactions.
•To create relationship with ICAI.
•To educate the investors.
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15. Thank you
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