Problems in Indian Capital Markets before 1992 Multiplicity of administration Poor disclosure in prospectus Investors faced problems of delays (Refund, Transfers etc.) No concept of capital adequacy No inspections of stock exchanges undertaken
Problems in Indian Capital Markets before 1992 Stock Exchanges management dominated by brokers Poor disclosures by Mutual Funds (NAV not published, No valuation Norms) No prohibition of insider trading, or fraudulent and unfair trade practices. Primary markets not in the main stream of the financial systems
Reforms in Indian Capital Market Companies free to raise funds from securities markets after filing prospectus with SEBI SEBI introduces regulation for primary & other secondary market intermediaries Listed Co’s to furnish annual statement to the exchanges Book Building introduced for institutional investors SEBI introduces regulations governing substantial acquisition of shares and takeovers.
Reforms in Indian Capital Market NSE establishment as a stock exchange with national wide electronic trading BSE introduces screen based trading Capital adequacy requirement for brokers System of mark to market margins introduced Stock Lending schemes introduced NSCCL setup by NSE
Reforms in Indian Capital Market SEBI strengthen surveillance mechanisms and have a separate surveillance departments with all stock exchanges Depositories act introduces for Electronic transfer of shares. Permission to access in international capital markets by Indian companies through Euro issues FDI allowed in stock broking ,AMC’s, Merchant Bankers , NBFC’s. FII’s allowed to access Indian capital markets on registration with SEBI
Regulatory Framework of Indian Capital Markets Regulatory Framework SEBI Stock RBI DCA Exchange
SEBI Setup in 1992 , as a statutory body Registering & regulating intermediaries Investor protection through regulating Indian capital markets Boost up the development of Indian Capital Markets Registering & regulating service providers, Mutual funds, collective investment schemes, venture capital funds, takeovers etc. Power to inspect book, records, suspend registered entities and cancel registration
RBI Regulatory involvement in Indian Capital Markets Limited to the Debt Management Foreign Exchange Control Liquidity support to market participants Regulate primary dealers in the Government securities markets Securities transactions that involve foreign exchange transaction need prior permission of RBI Important role in NSE debt Markets
DCA(Dept of Company Affairs) Administered by Controller of capital issue(CCI) Part of Ministry of Finance In 1992 ,Liberalize capital issuance and pricing Public & Private Companies were governed by companies act 1956, which continued to be administered by DCA. Specify certain aspects concerning capital issuance and securities trading.
Stock Exchanges Two major exchanges (NSE,BSE) in India. Automated Trading System developed for fast & transparent execution of trades Listing of securities in exchanges Introduced risk management systems Committees of stock exchange set up to handle matters of discipline , default and investor-broker disputes
Major crash in Indian Capital Markets 28 April 1992 • Sensex fall by 570 points (12.77%) • Harshad Mehta securities scam 18 May 2006 • Nifty crash by 496.50 points(8.70%) • Heavy selling by FII’s due to weakness in global markets 21 JAN 2008 • Sensex crash by 1408 points • Due to recession in US
Major Rallies in Indian Capital Markets 18 May 2009 • Sensex Rise by 2111 points (20.00%) • Victory of UPA in election