The document discusses various topics related to financial markets in India including what a financial market is, the key components of India's financial market structure such as money markets, capital markets, stock exchanges, and the trading of different financial instruments like stocks, debentures, and preference shares. It provides details on the primary and secondary markets, types of equity and preference shares, features and types of debentures, and the key functions of stock exchanges.

1. UNIT : INVESTOR ANALYSIS
AND PORTFOLIO
Presented
Vikash Barnwal

2. FINANCIAL MARKET
 The word financial Market is derived from two word
finance and market , where finance means study of fund
and market is a place where buyer and seller come to
contact with each other is called Financial market .
 So we can say financial market is a place where
financial instruments sale and purchase for mutual
benefits.
 Just like any other market, the financial market also
involves trading, that is, buying and selling of nothing
but financial products and services. Subsequently, the
financial markets basically deal with the sale and
purchase of several types of investments, financial
services, loans, etc. The demand and supply of financial
instruments is dynamic as the financial instruments
determine their prices.

3.  The financial market refers to the market
where the sale and purchase of financial
products occurs.
 Such products include stocks, bonds,
currencies, derivatives, commodities,
cryptocurrencies, etc.
 It acts as a platform for sellers and buyers
to connect and deal in their desired financial
assets at a price determined by market
forces.

4. FEATURES OF FINANCIAL MARKET
 Financial market implies any marketplace where
the trading of securities takes place.
 There can be several kinds of financial markets
including (but not limited to) forex, bond markets,
stock, money, etc.
 Financial markets may include securities or assets
that are either listed on regulated exchanges or
over-the-counter (OTC).
 The economic development of the country is based
on the financial markets. If the markets fail, it can
result in recession and unemployment as well.

5. STRUCTURE OF FINANCIAL MARKET IN INDIA
Money
Market
Capital Market
Organised Unorganized
Primary Market
Secondary
Market

6. MONEY MARKET
 The organized sector of the money market in India
consists of the Reserve Bank of India, and
commercial banks, and the companies lending
money. The financial intermediaries such as the Life
Insurance, Unit Trust of India, Credit and
Investments Corporation of India, Land Mortgage
Banks, Cooperative Banks, Insurance Companies,
etc. and call loan brokers, and stock brokers are
also part of it.
 Unorganized Sector The unorganized sector is
made up of indigenous bankers, money lenders,
traders, commission agents, etc., some of these
components combine money lending with trade and
other activities.

7. CAPITAL MARKET
 Primary Market : Primary market is the market for new
shares or securities. A primary market is one in which a
company issues new securities in exchange for cash
from an investor (buyer).It deals with trade of new
issues of stocks and other securities sold to the
investors.
 Secondary Market: Secondary market deals with the
exchange of prevailing or previously-issued securities
among investors. Once new securities have been sold in
the primary market, an efficient manner must exist for
their resale. Secondary markets give investors the
means to resell/ trade existing securities.Another
important division in the capital market is made on the
basis of the nature of security sold or bought, i.e. stock
market and bond market.

9. Basis Primary market Secondary market
Definition A primary market is a
marketplace where
corporations imbibe a
fresh issue of shares for
being contributed by the
public for soliciting capital
to meet their necessary
long-term funds like
extending the current
trade or buying a unique
entity.
A secondary market is a
prototype of the capital
market where
debentures, current
shares, options, bonds,
treasury bills, commercial
papers, etc., of the
enterprises are
patronised amongst the
investors.
Also known as New issue market (NIM) After Issue Market
Purchasing type Direct purchase Indirect purchase
Parties of buying and
selling
Buying and selling takes
place between the
company and the
investors.
Buying and selling takes
place between the
investors.

10. Basis Primary Market Secondary Market
To whom it provides
financing
It provides financing to
the existing companies
for facilitating growth and
expansion.
It does not provide any
kind of financing.
Intermediaries
involved
Underwriters Brokers
Price levels Remain fixed Price level varies with
variations in demand and
supply

11. STOCK EXCHANGE
Stock Exchange market is a vital component of a
stock market. It facilitates the transaction between
traders of financial instruments and targeted
buyers.
A stock exchange in India adheres to a set of rules
and regulations directed by Securities and
Exchange Board of India or SEBI.
The said authoritative body functions to protect the
interest of investors and aims to promote the stock
market of India.

12.  The stock exchange in India serves as a market where
financial instruments like stocks, bonds and
commodities are traded.
 It is a platform where buyers and sellers come together
to trade financial tools during specific hours of any
business day while adhering to SEBI’s well-defined
guidelines. However, only those companies who are
listed in a stock exchange are allowed to trade in it.
 Stocks which are not listed on a reputed stock exchange
can still be traded in an ‘Over The Counter Market’. But
such shares would not be held high in esteem in
the stock exchange market.

13. FEATURES OF STOCK EXCHANGE:
a) A market for securities- It is a wholesome market where securities
of government, corporate companies, semi-government companies
are bought and sold.
b) Second-hand securities- It associates with bonds, shares that
have already been announced by the company once previously.
c) Regulate trade in securities- The exchange does not sell and buy
bonds and shares on its own account. The broker or exchange
members do the trade on the company’s behalf.
d) Dealings only in registered securities- Only listed securities
recorded in the exchange office can be traded.
e) Transaction- Only through authorised brokers and members the
transaction for securities can be made.
f) Recognition- It requires to be recognised by the central
government.
g) Measuring device- It develops and indicates the growth and
security of a business in the index of a stock exchange.
h) Operates as per rules– All the security dealings at the stock
exchange are controlled by exchange rules and regulations and
SEBI guidelines.

14. FUNCTIONS OF STOCK EXCHANGE
 Role of an Economic Barometer: Stock exchange serves
as an economic barometer that is indicative of the state of the
economy. It records all the major and minor changes in the
share prices. It is rightly said to be the pulse of the economy,
which reflects the state of the economy.
 Valuation of Securities: Stock market helps in the valuation
of securities based on the factors of supply and demand. The
securities offered by companies that are profitable and
growth-oriented tend to be valued higher. Valuation of
securities helps creditors, investors and government in
performing their respective functions.
 Transactional Safety: Transactional safety is ensured as the
securities that are traded in the stock exchange are listed, and
the listing of securities is done after verifying the company’s
position. All companies listed have to adhere to the rules and
regulations as laid out by the governing body.

15.  Contributor to Economic Growth: Stock exchange
offers a platform for trading of securities of the various
companies. This process of trading involves continuous
disinvestment and reinvestment, which offers
opportunities for capital formation and subsequently,
growth of the economy.
 Making the public aware of equity investment: Stock
exchange helps in providing information about investing
in equity markets and by rolling out new issues to
encourage people to invest in securities.
 Offers scope for speculation: By permitting healthy
speculation of the traded securities, the stock exchange
ensures demand and supply of securities and liquidity.

16.  Facilitates liquidity: The most important role of the stock
exchange is in ensuring a ready platform for the sale and
purchase of securities. This gives investors the confidence that
the existing investments can be converted into cash, or in
other words, stock exchange offers liquidity in terms of
investment.
 Better Capital Allocation: Profit-making companies will have
their shares traded actively, and so such companies are able
to raise fresh capital from the equity market. Stock market
helps in better allocation of capital for the investors so that
maximum profit can be earned.
 Encourages investment and savings: Stock market serves
as an important source of investment in various securities
which offer greater returns. Investing in the stock market
makes for a better investment option than gold and silver.

17. TRADING ON SECURITIES
EQUITY SHARES
 An equity share, normally known as ordinary share
is a part ownership where each member is a
fractional owner and initiates the maximum
entrepreneurial liability related to a trading concern.
Features of Equity Shares Capital
 Equity share capital remains with the company. It is
given back only when the company is closed.
 Equity Shareholders possess voting rights and
select the company’s management.
 The dividend rate on the equity capital relies upon
the obtainability of the surfeit capital. However,
there is no fixed rate of dividend on the equity
capital.

18. TYPES OF EQUITY SHARE
 Authorized Share Capital- This amount is the highest amount an
organization can issue. This amount can be changed time as per the
companies recommendation and with the help of few formalities.
 Issued Share Capital- This is the approved capital which an
organization gives to the investors.
 Subscribed Share Capital- This is a portion of the issued capital which
an investor accepts and agrees upon.
 Paid Up Capital- This is a section of the subscribed capital, that the
investors give. Paid-up capital is the money that an organization really
invests in the company’s operation.
 Right Share- These are those type of share that an organization issue
to their existing stockholders. This type of share is issued by the
company to preserve the proprietary rights of old investors.
 Bonus Share- When a business split the stock to its stockholders in the
dividend form, we call it a bonus share.
 Sweat Equity Share- This type of share is allocated only to the
outstanding workers or executives of an organization for their excellent
work on providing intellectual property rights to an organization.

19. ADVANTAGES OF EQUITY
 Equity capital is the building block of a company. It is the
last thing added in the list of claims and it produces a
cushion for creditors.
 Equity capital generates creditworthiness to the
company and boosts up the confidence of various loan
producers.
 Equity shares are preferred by investors who are willing
to take larger risks.
 It is not compulsory to pay the dividend to the equity
shareholders. So, the company will not face any burden
for this.
 The funds are raised by equity issues without generating
any charge on the assets of the company.
 The management of the company may be controlled by
the equity shareholders by their voting rights.

20. DISADVANTAGES
 Risk-averse investors with the preference of
fixed income will not like equity shares.
 The cost of raising funds from other sources is
lower than the cost of equity shares.
 The voting rights and earnings of existing equity
shareholders are dismissed by the issue of the
additional equity shares.
 Equity share is a time-consuming process as it
involves various formalities and administrative
delays.

21. PREFERENCE SHARE
Preference shares commonly known as preferred
stocks, are those shares that enable shareholders
to receive dividends announced by the company
before receiving to the equity shareholders.

22. FEATURES OF PREFERENCE SHARES
 Preferential dividend option for shareholders.
 Preference shareholders do not have the right to
vote.
 Shareholders have a right to claim the assets in
case of a wind up of the company.
 Fixed dividend payout for shareholders, irrespective
of profit earned.
 Acts as a source of hybrid financing.

23. TYPES OF PREFERENCE SHARES
 Cumulative preference share: Cumulative preference shares are a special type
of shares that entitles the shareholders to enjoy cumulative dividend payout at
times when a company is not making profits. These dividends will be counted as
arrears in years when the company is not earning profit and will be paid on a
cumulative basis, the next year when the business generates profits.
 Non-cumulative preference shares: These types of shares do not accumulate
dividends in the form of arrears. In the case of non-cumulative preference
shares, the dividend payout takes place from the profits made by the company in
the current year. If there is a year in which the company doesn’t make any profit,
then the shareholders are not paid any dividends for that year and they cannot
claim for dividends in any future profit year.
 Participating preference shares: These types of shares allow the shareholders
to demand a part in the surplus profit of the company at the event of liquidation
of the company after the dividends have been paid to the other shareholders. In
other words, these shareholders enjoy fixed dividends and also share a part of
the surplus profit of the company along with equity shareholders.
 Non-participating preference shares: These shares do not yield the
shareholders the additional option of earning dividends from the surplus profits
earned by the company. In this case, the shareholders receive only the fixed
dividend.

24.  Redeemable Preference Shares: Redeemable preference shares are
shares that can be repurchased or redeemed by the issuing company at
a fixed rate and date. These types of shares help the company by
providing a cushion during times of inflation.
 Non-redeemable Preference Shares: Non-redeemable preference
shares are those shares that cannot be redeemed during the entire
lifetime of the company. In other words, these shares can only be
redeemed at the time of winding up of the company.
 Convertible Preference Shares: Convertible preference shares are a
type of shares that enables the shareholders to convert their preference
shares into equity shares at a fixed rate, after the expiry of a specified
period as mentioned in the memorandum.
 Non-convertible Preference Shares: These type of preference shares
cannot be converted into equity shares. These shares will only get fixed
dividend payout and also enjoy preferential dividend payout during the
dissolution of a company.

25. ADVANTAGES OF PREFERENCE SHARE
 1. It does not influence the control of equity
shareholders over the management.
 2. There may be a hike in dividend for the equity
shareholders in the good time.
 3. The income of the shareholders is steady and
fixed.
 4. They have a preferential power of repayment
over the equity shareholders.
 5. Any sort of charge against the assets of a
company is not created by the preference capital.

26. DISADVANTAGES OF PREFERENCE SHARE
 The amount dividend is higher than the rate of interest on
debentures.
 The dividend on these shares is regulated by the revenue of
the company.
 Risk lovers will not prefer this kind of share.
 Claims of equity shareholders diluted by the preference
capital.
 It is not possible to deduct the dividend paid from the profits as
an expense.
 So, in a nutshell, shares of certain companies are based on
two types of shares namely equity shares and preference
shares. Both the shares are equally important in respect of
shareholders of companies and both of them have certain
merits and demerits.

27. DEBENTURES
 Debentures refer to long-term debt instruments issued
by a government or corporation to meet its financial
requirements. In return, investors are compensated with
an interest income for being a creditor to the issuer.
 They are usually an unsecured form of borrowing from
the public and have a lengthy tenure, usually exceeding
ten years.

28.  1. Written Promise : A company issues a debenture as a written promise to
a holder specifying the money it owes to the latter.
 2. Repayment Tenure : A debenture is a debt instrument that specifies the
maturity of the repayment tenure within which an issuing company needs to
repay the interest and principal amount to the investor.
 3. Face Value : A debenture may carry a face value of ₹ 100 or multiples of
the same amount.
 4. Fixed Interest Rate : An interest rate of a debenture is fixed, which an
issuing company can pay to the holder either yearly or half-yearly. However,
an interest rate may differ with each company, type of business and present
market conditions.
 5. Redeemable Debt Instrument : A redemption means repayment of debt to
a holder. A company can redeem debentures at par, premium or discount.
 6. No Right to Voting : A debenture holder does not enjoy voting rights in an
issuing company's general meetings unless it permits him or her to express
an opinion in special circumstances.

29.  7. Parties Involved in Debenture : There are three
parties involved in a debenture -
1) A company that issues debenture and borrows money
through it.
2) Another is a trustee, through which a company
communicates with a holder. The company draws an
agreement between a holder and trustee. This is
known as a 'Trust Deed', which specifies obligations of
a company, holder's rights and other necessary details.
3) Finally, a debenture holder is an individual who gives a
loan to the company. In return, he or she gets a
debenture certificate as proof of participation.
 8. Listing : A debenture is required to be listed at least
in one stock exchange.

30. TYPES OF DEBENTURES
 1. Secured Debenture : These types of
debentures are secured against a company's
assets. This implies that if the company fails to
repay debt due to insufficient funds, it will have to
sell its mortgaged assets to repay the dues. There
may be a fixed charge against particular assets or
floating against all a company's assets.
 2. Unsecured Debentures : Unsecured
debentures are not secured by any collateral. This
implies that there are no fixed or floating charges
against an issuing company's assets. However,
Indian companies do not issue these debentures.

31.  3. Convertible Debenture
 Under a convertible debenture, the holder enjoys the right to
convert his or her debenture into a company's equity share. The
company provides information about the holder's rights,
conversion date and additional terms and conditions during the
time of issuance.
 There are further three types of convertible debentures –
 Partly Convertible Debentures-The company can partly change
debentures into equity shares. It determines the conversion date
and ratio when issuing this debt instrument. The holder exercises
the right of creditor and shareholder in the company.
 Optionally Convertible Debentures-In this, the holder enjoys
an option whether they wish to change their debenture into equity
shares or not at a rate determined by the issuer during the time
of issuance of the debt instrument.
 Fully Convertible Debentures-As the name suggests, the
company that issues debentures can fully change them into
equity shares. Like partly convertible debentures, the issuer
determines the conversion date and rate at the time of issuance.
After conversion, the holder holds similar rights as a shareholder
in the issuing company.

32.  4. Non-Convertible Debentures
 A non-convertible debenture does not entitle a holder to
convert his or her debentures into an equity share. This
debt instrument has a higher interest rate than its
regular counterparts.
 5. Redeemable Debentures
 These debentures are payable at the maturity of the
tenure in instalments or lump sums over a particular
time. These debentures are redeemable at a premium,
par or discount.
 6. Irredeemable Debentures
 There is no particular date fixed to repay the debt under
these debentures. It is redeemable when the issuer
liquidates its shares or after a long interval.

33. ADVANTAGES OF DEBENTURES
 Debentures are debt instruments through which a
company borrows money without diluting the equity.
 The interest payable towards debentures is charged
against the issuing company's profit. The expenditure on
the interest payment qualifies for a tax deduction that
helps to reduce a company's taxable income.
 These debt instruments are liquid assets, and a
company can trade these on the stock exchange.
 Unlike other sources of borrowing, debentures are
comparatively cheaper due to a lower interest rate than
other debt instruments.
 The holder has a lower risk of facing default in
repayment by the borrower since there is an assurance
of receiving the interest payment even if the company
experiences financial loss.
 Borrowing funds through debentures is beneficial even
during inflation due to their fixed interest rates.

34. DISADVANTAGES OF DEBENTURES?
 Go through the following disadvantages of debentures:
 The interest payment is a financial burden on a
company because it must pay the interest dues to the
debenture holders even if it faces monetary loss.
 Issuing debentures assists a company in trading on
equity. However, such debt instruments make it reliant
on debt. Often, an imbalanced debt-equity ratio hampers
the financial viability of a company.
 Redeeming debentures causes a huge cash outflow
which may imbalance a company's liquidity.
 Debentures can be expensive during a depression when
profits decrease, but the interest rate remains fixed.

35. TRADE ORDER
An order is a command to execute a trade. This
command is typically for buying or selling stocks,
bonds, ETFs, REITs, and other tradable
instruments.
A retail investor or trader will use their stock
broker’s trading application on their mobile or web
interface to place an order. The order will then be
executed on the stock exchange.

36. TYPES OF ORDERS IN THE STOCK MARKET:
a) Market Order
b) Limit Order
c) Stop-Loss Order
d) Stop-loss market order
e) After Market Order
f) Bracket Order
g) Cover Order
h) Based on time duration

37. MARKET ORDER
 Market Order is the simplest types of orders.
 A market order is a trading order to buy or sell a
security at the best possible price at the current
market.
 It means once the order to buy or sell is entered,
the system will execute the orders with the best
prices available in the market.
 Market order gets executed almost immediately.
 In a market order, the trader or investor do not have
control on the price but there is a very high
probability that the order will get executed.

38. LIMIT ORDER
 A limit order is one of the types of orders, where the
trader can set a price to buy or sell a security.
 Unlike market order, where the trader doesn’t have any
control over price, in a limit order, the trader will set the
price.
 If a trader places a limit order to buy shares at Rs. 100,
the shares will be bought at Rs. 100 or lower.
 If the trader places a limit order to sell shares at Rs.
100, the shares will be sold at Rs. 100 or higher.
 A limit order is one of the types of orders which can be
used during high volatility to control the price at which
we buy or sell a security.

39. STOP-LOSS TYPES OF ORDERS
 A stop-Loss order is one of the most important
types of orders where a trader can limit his or her
losses by exiting a trade if a specific price is
reached.
 By placing a stop-loss order, one can save himself
from incurring high losses if the price goes against
them.
 When a trader places a buy order, he is expecting
the price to rise, so that he can earn a profit.
 But it may so happen, instead of the price rising,
the price falls.
 To avoid high losses when prices fall, he can place
a stop-loss order at a price below the buy price.

40.  Example:
 A trader places a buy order:
 Share price = Rs. 500
 Stop loss at Rs. 498
 He expects the share price to go higher, to earn a profit. In case the price falls
below Rs. 500, say it falls to Rs. 495.
 The trader will book a loss of Rs. 2 per share (500 – 498) and exit the trade.
 If he had not put a stop-loss, the loss would have been Rs (500-495) = Rs 5 per
share, which is greater than the above scenario.
 Similarly, when a trader places a sell order, he expects the price fall, so that he can
earn a profit.
 But it may so happen, instead of the price going down, the price goes up.
 To avoid high losses when prices go down, he can put a stop-loss at a price higher
than the selling price.
 If a trader has placed a buy order at Rs. 500, he can place a stop-loss price at Rs.
495.

 In case the price goes down, he will book a loss of Rs. 5 per share and exit the
trade.

41. STOP-LOSS MARKET ORDER
 Stop-loss market order is types of orders, where the
trader sets a trigger price to exit the trade if the price
goes against his expectation.
 Suppose there is a sell position at Rs. 1000 and trigger
price for stop-loss is placed at Rs. 1002.
 If the price hits Rs.1002, it will place a buy order to exit
the trade.
 The buy order will get executed at the market price.
 It is used by traders to make certain that the exit trades
get executed if the price goes against them.
 In the stop-loss market order, trades are placed with a
trigger price.
 If a buy trade is placed and the price falls and hits the
trigger price, it will exit the trade at any price available in
the current market.
 In the stop-loss market order, the losses can be more if
there is high volatility in price.

42. STOP-LOSS LIMIT ORDER
 Stop-loss limit order is almost similar to stop-loss types
of orders but it does not get executed at market price.
 It will get executed at the specified limit price set by the
trader.
 In these types of orders, the trader will have to set a
trigger price and a limit price.
 Eg: We place a stop-loss limit sell order when we
already have a long position.
 A long position at price – Rs. 1000
 Stop-loss limit price- Rs. 990
 Trigger price – Rs. 991
 If the price falls to Rs. 991, it will trigger a sell order at
Rs. 990. And if the price gets to Rs. 990, it will get
executed.

43. AFTER MARKET ORDER (AMO)
 Aftermarket orders are types of orders that are
placed beyond market hours.
 The normal market hours are between 9.15 am to
3.30 pm.
 But, the entire period outside market hours cannot
be used to place aftermarket orders.
 Different brokers specify a time interval, within
which we can place the AMOs.
 There are also conditions on the price of security
you can set in limit orders, normally it is in range of
5-10% of the adjusted closing price but the exact
range varies among different brokers.
 AMOs can also be set at market price.

44. BRACKET ORDER (BO)
 Bracket order is a type of orders in which 3 orders
are bundled into one.
 You can enter a new position with a target and a
stop-loss. All bracket orders are limit orders.
 The stop-loss and target will have to be in absolute
points (i.e. 1,2,5,10, etc).
 Eg: If the share of ABC is trading at Rs. 1000. We
can put a bracket order to buy it at Rs. 1000 with a
target of 10 points and a stop loss of 5 points.

45. COVER ORDER
 Cover order is one of the types of orders by which we can enter a
position along with a stop-loss in the same order form.
Based on Time Duration
 Also based on time duration, there can be:
 Good For Day Order – order will stay valid till the end of the current
trading session.
 Good Till Day Order – We can keep our order active for a few days.
 Eg- If we place an order on 1st March and it does not get executed, we
can carry forward to say till 4th March.
 If it doesn’t get executed even on 4th March, the order will be cancelled.
 Immediate or Cancel Order – Types of orders once placed will be
executed immediately if it is not executed it will cancel itself.
 In this case, it may so happen that the order will be partially executed.
 Eg- If we place an order to buy 1000 shares and only 600 shares get
immediately purchased, the rest order of 400 will gets cancelled.

46. MARGIN TRADING
 Margin trading refers to the process
of trading where an individual increases his/her
possible returns on investment by investing more
than they can afford to.
 Here, investors can benefit from the facility of
purchasing stocks at a marginal price of their actual
value. Such trading transactions are funded by
brokers who lend investors the cash to purchase
stocks. The margin can later be settled when
investors square off their position in the stock
market.

47. ADVANTAGES OF MARGIN TRADING
 The benefits imparted through this trading process can be
summarized as follows –
 Ideal for Short Term Profit Generation: Margin trading is ideal
for investors looking to profit from short term price fluctuations
in the stock market, but not having enough cash in hand for
investing.
 Leverage Market Position : This trading process helps
investors to leverage their position in securities that are not
from the derivatives sector.
 Maximize Returns: It allows investors to maximize the rate of
return on the capital they invest.
 Utilize Securities as Collateral: Investors can utilize the
securities in their Demat account or their investment portfolio
as collateral for margin trading.
 Regulated under SEBI : The facility of margin trade is under
constant supervision of stock exchanges and SEBI.

48. CLEARING AND SETTLEMENT PROCEDURE
Introduction
Once you buy/sell a stock, what happens
next? Well, the entire process from the time your
order gets confirmed on the exchange to the time
your account gets credited with (funds/securities) is
called the Clearing and Settlement Process.
The clearing is a process through which the
obligation is determined and this obligation is
discharged through the way of settlement.

49. TO UNDERSTAND THIS PROCESS, LET’S TAKE
AN EXAMPLE
 You purchase 10 shares of Asian Paints on 27/01/2021.
 At the end of that day, a contract note will be generated and sent to you
by the broker which will give you the following details
 Security purchased
 Order number
 Quantity purchased
 Price at which the share has been purchased
 Date of purchase
 Settlement number ( these numbers are issued by exchanges and are unique)
 Brokerage
 On the same day, your bank account which is linked to the DEMAT
account is debited with the amount for the stocks purchased along with
the brokerage and other associated charges
 The next day(28/01/2021), you don’t have to do anything but rather the
custodians, DP and clearing banks have to work and ensure that the
money and securities are delivered to the clearing corporations.
 On the day after (29/01/2021) i.e T+2 day, the actual transfer of the
money and securities takes place. The account through which you have
purchased the security will be credited with the shares.

50. WHAT HAPPENS WHEN YOU SELL SHARES
now let’s take another case where you have sold shares
of a company.
 On the Trade day(27/01/2021) shares are blocked in your DP
account immediately so that the same shares can not be sold
again and again
 The next day (28/01/2021), the broker delivers these shares to
the stock exchange
 On the 3rd day(29/01/2021) the shares in your account are
debited and your bank account gets credited with the funds.
 If you have decided to transact in the stock market you need
to understand the clearing and settlement process so that you
can understand when the shares/funds will be
credited/debited to/from your DP/Bank accounts.

51. MINISTRY OF FINANCE (MOF)
 The Department of Economic affairs directly
manages the Capital Markets segment under the
directions of MoF.
 This segment formulates the rules for the efficient
growth of the Stock Market which includes
derivatives, debt, and equity. It also formulates
regulations for safeguarding the interest of the
investors

52.  This segment regulates the Indian Capital Market
regulators through the following laws:
Depositories Act, 1996
Securities Contract (Regulation)
Act, 1956
Securities and Exchange Board of
India Act, 1992

53. RESERVE BANK OF INDIA (RBI)
 The Reserve Bank of India Act, 1934 governs policies
framed by the Reserve Bank of India. The functions of
RBI in this regard are as follows:
 Implementation of Monetary and Credit policies
 Issuance of Currency Notes
 Government’s Banker
 Banking System Regulator
 Foreign Exchange through Foreign Exchange
Management Act, 1999
 Managing payment & settlement system
 Apart from the above functions, RBI is also actively
involved in developing the financial market.

54. SECURITIES & EXCHANGE BOARD OF INDIA (SEBI)
 The Securities & Exchange Board of India (SEBI) Act, 1992 regulates the functioning of SEBI. SEBI is the apex body governing
the Indian stock exchanges.
The primary functions of SEBI are as follows:
Protective Functions
 I. It checks Price rigging
II. Prohibits insider trading
III. prohibits fraudulent and Unfair Trade Practices
Development Functions
 I. SEBI promotes the training of intermediaries of the securities market.
II. SEBI tries to promote activities of stock exchange by adopting a flexible and adaptable approach
Regulatory Functions
 I. SEBI has framed rules and regulations and a code of conduct to regulate the intermediaries such as merchant bankers,
brokers, underwriters, etc.
 II. These intermediaries have been brought under the regulatory purview and private placement has been made more
restrictive.
 III. SEBI registers and regulates the working of stockbrokers, sub-brokers, share transfer agents, trustees, merchant
bankers, and all those who are associated with the stock exchange in any manner
 IV. SEBI registers and regulates the working of mutual funds etc.
 V. SEBI regulates takeover of the companies
 VI. SEBI conducts inquiries and audits of stock exchanges.
 The participation in the Indian Stock Market of both the domestic or foreign financial intermediaries is governed by the
regulations framed by SEBI. Additionally, Foreign Portfolio Investors (FPIs) can participate in the Indian Stock Market after
registering them with an authorized Depository Participant.

55. NATIONAL STOCK EXCHANGE OF INDIA (NSE)
 National Stock Exchange of India (NSE)
 NSE is responsible for formulating and
implementing the rules pertaining to:
 Registration of Members
 Listing of Securities
 Monitoring of Transactions
 Compliance
 Other additional functions related to the above
functions

56. STOCK EXCHANGE
 In simple terms, a Stock Market is a platform where people buy and
sell stocks, prices of which are set according to the prevalent
demand and supply situation. It is very similar to a marketplace
where traders buy and sell goods, quoting prices on the basis of the
demand for the good and the availability or supply of it.
 The term trade, in the context of the bourses, means the transfer of
money from the seller to the buyer in exchange for a security/
share. The price at which the seller sells or the buyer buys is listed
on the stock exchange. You can easily trade through a trading
member registered on a Stock Exchange.

57.  As per National Securities Clearing Corporation Limited “A Trading
Member means any person admitted as a member in any exchange
in accordance with the Rules, Bye-laws and Regulations of that
Exchange.”
 The Stock Market doesn’t differentiate between any citizen of the
country. Outside investments were only permitted in the 1990s and
can take place through either Foreign Direct Investments (FDIs) or
Foreign Portfolio Investments (FPIs). Thus, the Stock Market
participants range from small individual investors to Insurance
Companies, Banks, Mutual Fund companies, Manufacturing
companies etc.
 However, the rules and regulations formulated by SEBI remain the
same for all types of market participants and everybody is obligated
to abide by such rules and mandates.

58. FUNCTIONS OF CAPITAL MARKET REGULATOR
The growth of the Economy:
 The capital market reflects the condition of the economy and
also accelerates economic growth. It allocates the resources
from the people who have surplus capital to those who require
capital.
 By this, we can conclude that capital market regulators help in
the growth of the economy as well as the trade of both public
and private sectors. This leads to balanced economic growth
in the country.

59.  Encourage people to save: The development of capital markets has
helped the banking institutes to provide facilities and provisions to
encourage people to save more. People might have just invested in
land or gold in the non-existence of a capital market.
 Stabilizing stock prices: Capital Market regulators have reduced
speculation activities and also provided capital to the borrowers at
the lowest interest rate possible. This helped in keeping away the
prices of stocks from fluctuating.

60. ROLE OF CAPITAL MARKET REGULATORS
 Proper Allocation of Funds: The capital market is an important
platform for allocating idle savings from the people to productive
channels of an economy. It puts the idle funds in proper
investment.
 Formation of capital: The capital market helps in the formation of
capital by adding capital to the existing capital in the economy. This
helps in the expansion of capital in the economy
 A platform for Investment: The capital market raises resources for
longer periods of time. Thus it provides an investment avenue for
people who wish to invest resources for a long period of time. It
provides suitable interest rate returns also to investors. Instruments
such as bonds, equities, etc. definitely provide diverse investment
avenues for the public.

61.  Accelerates Economic Development: The financial requirements of
the businesses are met by the capital market regulators as it makes
funds available for a longer period. Capital market regulators also
help in the research and development. This results in increasing the
productivity of the economy.
 Provides Service: Capital Market regulators provide various services
like medium and long-term loans consultancy services. export
finance etc.

62. TYPES OF INVESTORS