Structure of Capital Market in India

1. STRUCTURE OF
CAPITAL MARKET
EUGENE ITTIARA (440)
VALERIAN ANTHONY (406)
NEHA DUKHANDE (426)
RAJESH KHARE (451)

2. Prologue
Capital markets are a sub-part of the financial
system. Conceptually, the financial system includes a
complex of institutions and mechanism which affects
the generation of savings and their transfers to those
who will invest. It may be said to be made of all those
channels through which savings become available for
investments.

3. Definition
“The capital market (securities markets) is the market
for securities, where companies and the government
can raise long-term funds. The capital market
includes the stock market and the bond market”

4. Features
1
• Mobilization of Savings
2
• Capital Formation
3
• Proper Regulation of Funds
4
• Provision of Investment Avenue
5
• Engine of Economic Growth and Development

5. Major Suppliers of Funds
Commercial Banks
Insurance Companies
Business Corporations
Retirement Funds

6. Major Elements of Capital Market
FINANCIAL
ASSETS /
INSTRUMENTS /
SECURITIES
FINANCIAL
INTERMEDIARIES
FINANCIAL
MARKETS

7. Financial Assets
Debt instrument Loan made by a bank
Equity
Capital
Debenture
Term
Loan
FINANCIAL ASSETS
/ financial institution
Equity Shareholder’s
ownership Capital

8. Financial Intermediates
Financial intermediaries are institutions that
channelize the savings of investors into
investments/loans.
As institutional source of finance, they act as a link
between the saver and the investors which results in
institutionalization of personal savings.
Their main functions is to convert direct financial
assets into indirect securities. The indirect securities
offer to the individual investor better investor
alternative then the direct/primary security by
pooling which it is created, for example, units of
mutual funds.

9. Financial Markets
Financial markets perform a crucial function in the
financial system as facilitating organizations. Unlike
financial intermediaries, they are not a source of funds but
are a link and provide a forum in which suppliers of funds
and demanders of loans/investments can transact business
directly.
 money market: is created by financial relationship
between suppliers and demanders of short term funds
having maturities of one year or less.
 securities markets: is a financial relationship created
by a number of institutions and arrangements that
allows suppliers and demanders of long term funds
with maturities exceeding one year to make
transactions.

10. Types of Capital Market
CAPITAL
MARKET
Primary
Market
Secondary
Market

11. Primary Market

12. Significant Terms – Primary Market
1) Underwriting : The process by which investment bankers raise
capital from investors on behalf of corporations and
governments that are issuing securities.
2) IPO : The first sale of stock by a private company to the public.
Methods to Issue securities in Primary Market :-
a) Public Issuance (including IPO)
b) Rights Issue
c) Preferential Issue

13. IPO - Trend
95
36
IPO’s Issued through NSE
21
73
41
12
5
2007 2008 2009 2010 2011 2012 2013(Sep)

14. Secondary Market - Examples
NASDAQ
London Stock Exchange
BSE
NSE
Tokyo Stock Exchange
NYSE

15. BSE
 Oldest exchange in Asia.
 In 1956, BSE became the first stock exchange to be
recognized by the Indian Government under the
Securities Contracts Regulation Act.
 First in India to launch US$ version of BSE Sensex.
 First in India to introduce Equity Derivatives
 'BSE On-Line Trading System (BOLT) has been
awarded the globally recognised the Information
Security Management System standard BS7799-
2:2002.
 First in India to launch Exchange Enabled Internet
Trading Platform.
 Indexes: BSE SENSEX, BSE Small Cap, BSE Mid-
Cap, BSE 500 .

16. Regulatory Authority
 Security Exchange Board of India:
 SEBI protects the interests of investors in securities and promotes the
development of the securities market.
 The board helps in making registration and regulate the functioning.
 SEBI conducts inspection and thus prohibits fraudulent practices.
 Reserve Bank of India:
 RBI is the apex bank of India.
 RBI is also known as the banker’s bank.
 Maintains price stability .
 Provides cost effective banking services to the Public.
 Formulates, implements and monitors the monetary policy.
 Issue new currency and coins and exchange/destroy currency and coins not
fit for circulation.

17. Why Invest in Indian Market ?
 India’s accounting standards are closer to international
standards.
 SEBI has made corporate governance guidelines mandatory for
listed companies.
 Mutual funds are permitted to invest overseas up to $3 billion.
 Almost 100 per cent risk free electronic settlement through
depository system .
 In India the transactions are totally electronic on a real time
basis.
 Business Week says that of 100 emerging market firms which
are rapidly globalizing 21 are Indian firms.
 Economists project India to become the third largest economy
in the world by 2040.

18. Conclusion
 Indian market is amongst the best regulated markets in the
world.
 Need for greater integration with international markets in
terms of capital flows, products and processes
 Need to introduce new age financial products &
 to encourage participation of new age investors.

19. THANK YOU !