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Capital Market In
India
AMRUTA NEWALKAR PG-10
RAHUL JAIN PG-17
RAHUL RAVANAGE PG-09
Capital Market
ACE Textile Ltd
Want to expand its business
Mr. ACE
Makes a Business Deal with GUCCI
brand to export textile cloth to their
manufacturing unit
Where can he get the money from?
1.Banks
 1. From Banks Mr. Ace can approach
banks, but it will not prove to be a healthy
option because: -
 Bank will charge him High rate of interest.
 Lending of loans is a very tedious task.
 Bank first scrutinizes the papers/
documents, verifies them.
 Very time Consuming Process. Thus, this
idea is not an effective one.
Can Go Public and get listed on the stock
companies.
Meaning of Capital Market
 Capital Market is the part of financial
system which is concerned with raising
capital funds by dealing in Shares, Bonds,
and other long-term investments.
 The market where Investment instruments
like bonds, equities and mortgages are
traded is known as the capital market.
The different types of financial
instruments that are traded in the
capital markets are
1. equity instruments
2. credit market instruments,
 3. insurance instruments,
 4. foreign exchange instruments,
 5. hybrid instruments.
Role and Function of Capital Market
Capital Formation
Avenue Provision of Investment
 Speed up Economic Growth and Development
Mobilization of Savings
Proper Regulation of Funds
Service Provision
Continuous Availability of Funds
Factors affect the Capital Market
• Economy of the Country
• Money Supply
• Interest Rate
• Corporate Results
• Foreign Funds Inflow
• Strength/Weakness of the local currency
Classification of Capital Marketing
CAPITAL MARKET
PRIMARY MARKET
SECONDARY
MARKET
PUBLIC
ISSUE
RIGHT
ISSUE
BONUS
ISSUE
PRIVATE
PLACEMENT
STOCK MARKET
Primary Market
 It is that market in which shares,
debentures and other securities are sold
for the first time for collecting long-term
capital.
This market is concerned with new
issues. Therefore, the primary market is
also called NEW ISSUE MARKET.
Features of Primary Market
It Is Related With New Issues
It Has No Particular Place
It Has Various Methods Of Float Capital: Following are the
methods of raising capital in the primary market:
i) Public Issue
ii) Offer For Sale
iii) Private Placement
iv) Right Issue
v) Electronic-Initial Public Offer
It comes before Secondary Market
Classification of Issue
PUBLIC ISSUE :
It involves raising of funds directly from the public and get themselves listed
on the stock exchange.
 In case of new companies ,the face value of the securities is issue at par;
and
 In the case of existing companies, the face value of securities are issued at
premium.
 Initial public offer (IPO): When an unlisted company makes either a fresh
issue of securities or offers its existing securities for sale or both for the
first time to the public, it is called an IPO. This paves way for listing and
trading of the issuer’s securities in the Stock Exchanges.
 Further public offer (FPO): When an already listed company makes
either a fresh issue of securities to the public or an offer for sale to the
public, it is called a FPO.
Cont…
 RIGHT ISSUE:
Right issue is the method of raising additional finance from existing
members by offering securities to them on pro rata bases. The rights offer
should be kept open for a period of 60 days and should be announced
within one month of the closure of books.
 BONUS ISSUE:
 Companies distribute profits to existing shareholders by way of fully paid
bonus share in lieu of dividend.
 These are issued in the ratio of existing shares held.
 The shareholders do not have to make any additional payment for these
shares.
 PRIVATE PLACEMENT:
Private Placement is an issue of shares by a company to a select group of
persons under the Section 81 of the companies act 1956. It is a faster way
for a company to raise equity capital.
Secondary Market
 The secondary market is that market in which
the buying and selling of the previously issued
securities is done.
The transactions of the secondary market are
generally done through the medium of stock
exchange.
The chief purpose of the secondary market is to
create liquidity in securities.
Features of Secondary
Market
• It Creates Liquidity
• It Comes After Primary Market
• It Has A Particular Place
• It Encourages New Investments
Financial instruments dealt in
secondary market
 Equity Shares:
 An equity share is commonly referred to as an ordinary share.
 It is an form of fractional ownership in which a shareholder, as a
fractional owner, undertakes the entrepreneurial risk associated with the
business venture.
 Holders of the equity shares are members of the company and have
voting rights.
 Right shares:
 This refers to the issue of new securities to the existing shareholders, at
a ratio to those shares already held.
 Bonus Shares:
 These shares are issued by the companies to their shareholders free of
cost by capitalization of accumulated reserves from the profit earned in
the earlier years.
Cont…
 Preference shares:
 These shareholder do not have voting rights.
 Owners of these shares are entitled to a fixed dividend or a dividend calculated
at a fixed rate to be paid regularly before any dividend can be paid in respect of
equity shares.
 These shareholders also enjoy priority over the equity shareholders in the
payment of surplus.
 Cumulative Preference Shares:
 This is a type of preference shares on which dividend accumulates if it remains
unpaid.
 Cumulative Convertible Preference
Shares:
 This is a type of preference shares on where the dividend payable on the same
accumulates, if not paid. After a specified date, these shares will be converted
into equity capital of the company.
Capital market

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Capital market

  • 1. Capital Market In India AMRUTA NEWALKAR PG-10 RAHUL JAIN PG-17 RAHUL RAVANAGE PG-09
  • 3. ACE Textile Ltd Want to expand its business Mr. ACE
  • 4. Makes a Business Deal with GUCCI brand to export textile cloth to their manufacturing unit
  • 5. Where can he get the money from?
  • 6. 1.Banks  1. From Banks Mr. Ace can approach banks, but it will not prove to be a healthy option because: -  Bank will charge him High rate of interest.  Lending of loans is a very tedious task.  Bank first scrutinizes the papers/ documents, verifies them.  Very time Consuming Process. Thus, this idea is not an effective one.
  • 7. Can Go Public and get listed on the stock companies.
  • 8. Meaning of Capital Market  Capital Market is the part of financial system which is concerned with raising capital funds by dealing in Shares, Bonds, and other long-term investments.  The market where Investment instruments like bonds, equities and mortgages are traded is known as the capital market.
  • 9. The different types of financial instruments that are traded in the capital markets are 1. equity instruments 2. credit market instruments,  3. insurance instruments,  4. foreign exchange instruments,  5. hybrid instruments.
  • 10. Role and Function of Capital Market Capital Formation Avenue Provision of Investment  Speed up Economic Growth and Development Mobilization of Savings Proper Regulation of Funds Service Provision Continuous Availability of Funds
  • 11. Factors affect the Capital Market • Economy of the Country • Money Supply • Interest Rate • Corporate Results • Foreign Funds Inflow • Strength/Weakness of the local currency
  • 12. Classification of Capital Marketing CAPITAL MARKET PRIMARY MARKET SECONDARY MARKET PUBLIC ISSUE RIGHT ISSUE BONUS ISSUE PRIVATE PLACEMENT STOCK MARKET
  • 13. Primary Market  It is that market in which shares, debentures and other securities are sold for the first time for collecting long-term capital. This market is concerned with new issues. Therefore, the primary market is also called NEW ISSUE MARKET.
  • 14. Features of Primary Market It Is Related With New Issues It Has No Particular Place It Has Various Methods Of Float Capital: Following are the methods of raising capital in the primary market: i) Public Issue ii) Offer For Sale iii) Private Placement iv) Right Issue v) Electronic-Initial Public Offer It comes before Secondary Market
  • 15. Classification of Issue PUBLIC ISSUE : It involves raising of funds directly from the public and get themselves listed on the stock exchange.  In case of new companies ,the face value of the securities is issue at par; and  In the case of existing companies, the face value of securities are issued at premium.  Initial public offer (IPO): When an unlisted company makes either a fresh issue of securities or offers its existing securities for sale or both for the first time to the public, it is called an IPO. This paves way for listing and trading of the issuer’s securities in the Stock Exchanges.  Further public offer (FPO): When an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, it is called a FPO.
  • 16. Cont…  RIGHT ISSUE: Right issue is the method of raising additional finance from existing members by offering securities to them on pro rata bases. The rights offer should be kept open for a period of 60 days and should be announced within one month of the closure of books.  BONUS ISSUE:  Companies distribute profits to existing shareholders by way of fully paid bonus share in lieu of dividend.  These are issued in the ratio of existing shares held.  The shareholders do not have to make any additional payment for these shares.  PRIVATE PLACEMENT: Private Placement is an issue of shares by a company to a select group of persons under the Section 81 of the companies act 1956. It is a faster way for a company to raise equity capital.
  • 17. Secondary Market  The secondary market is that market in which the buying and selling of the previously issued securities is done. The transactions of the secondary market are generally done through the medium of stock exchange. The chief purpose of the secondary market is to create liquidity in securities.
  • 18. Features of Secondary Market • It Creates Liquidity • It Comes After Primary Market • It Has A Particular Place • It Encourages New Investments
  • 19. Financial instruments dealt in secondary market  Equity Shares:  An equity share is commonly referred to as an ordinary share.  It is an form of fractional ownership in which a shareholder, as a fractional owner, undertakes the entrepreneurial risk associated with the business venture.  Holders of the equity shares are members of the company and have voting rights.  Right shares:  This refers to the issue of new securities to the existing shareholders, at a ratio to those shares already held.  Bonus Shares:  These shares are issued by the companies to their shareholders free of cost by capitalization of accumulated reserves from the profit earned in the earlier years.
  • 20. Cont…  Preference shares:  These shareholder do not have voting rights.  Owners of these shares are entitled to a fixed dividend or a dividend calculated at a fixed rate to be paid regularly before any dividend can be paid in respect of equity shares.  These shareholders also enjoy priority over the equity shareholders in the payment of surplus.  Cumulative Preference Shares:  This is a type of preference shares on which dividend accumulates if it remains unpaid.  Cumulative Convertible Preference Shares:  This is a type of preference shares on where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company.