The document discusses capital markets, which allow companies and governments to raise long-term funds by selling securities. It describes the primary market, where new securities are first sold, and the secondary market, where existing securities are traded. In the primary market, merchant bankers provide investigative, advisory, and underwriting services to facilitate the origination, distribution, and sale of new issues. The secondary market provides liquidity and allows investors to resell securities on a stock exchange. Well-functioning capital markets are important for economic growth by allocating funds efficiently.

1. S E C U R I T I E S M A R K E T , P R I M A R Y M A R K E T ,
S E C O N D A R Y M A R K E T , S T R U C T U R E O F
C A P I T A L M A R K E T
INVESTMENT MANAGEMENT
UNIT - IV

2. CAPITAL MARKET
 It is the market for securities like shares, debentures
etc, through which companies and Government can
raise their Long-Term Funds.
 It is also known as Securities Market

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

4. Working of Capital Market

5. Importance of Capital Markets
 Help firms and governments to raise cash by selling
securities
 Allow investors with excess funds to invest and earn a
return
 Channel funds from savers to borrowers
 Allocate resources optimally (i.e., provide funds to
those who can make the best use of them)
 Help allocate cash to where it is most productive
 Help lower the cost of exchange
 Secondary markets, where investors trade existing
securities, assures investors that they can quickly sell
their securities if the need arises

6. Factors to be considered by Investors
Promoters Credibility
Project Details
Product
Financial data
Risk factors
Auditors report

7. STRUCTURE OF CAPITAL MARKET
Capital
Market
Primary
Market
IPO
Public
Issue
Right Issue
Preferential
Allotment
Secondary
Market
NSE
BSE

8. 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.
The money collected from this market is generally
used by the companies to modernize the plant,
machinery and buildings, for extending business,
and for setting up new business unit.

9. Functions of Primary Market
Functions of
Primary
Market
Origination Underwriting Distribution

10. Functions of Primary Market…
Origination:
Investigative Services:
 The merchant bankers and other agencies provide the
investigative services
 These services include technical analysis, economic
analysis, financial analysis, and analysis of legal and
environmental aspects of the proposed business.
 Merchant bankers provide the above information to
investors so as to enable the investors in making a
choice as to the type, quality and quantity of the issue

11. Functions of Primary Market…
Origination:
Advisory Services:
 To improve the quality of capital issues
 The relevant services include determining the type,
the mix, the price, the timing, the size, the selling
strategies, the methods of floatation, and the terms
and conditions of issue of securities

12. Functions of Primary Market…
Underwriting
 It aims at guaranteeing the subscription of public
issue
 This function is provided for a fee
 It benefits the issuing company, the investing
public and the capital market in general

13. Functions of Primary Market…
Distribution:
 The function that facilitates the sale of securities to
ultimate investors is called “distribution”
 These services are rendered by specialized agencies
like brokers, and dealers in securities

14. Parties Involved in Primary Market
 Managers to the Issue
 Registrar to the Issue
 Underwriters
 Bankers
 Advertising Agencies
 Financial Institutions
 Government & Statutory Agencies

15. Problems faced by Primary Market
 Inefficient Mobilization of Savings
 Functional & Institutional Gap
 Risk Aversion
 Inordinate delay in the allotment process
 Problems of the company

16. Secondary Market
 It is the market in which the buying and selling of the
previously issued securities is done.
 The transactions are generally done through the
medium of stock exchange.
 The chief purpose of it is to create liquidity in
securities.
 If an individual has bought some security and he now
wants to sell it, he can do so through the medium of
stock exchange to sell
 Purchase through the medium of stock exchange
requires the services of the broker presently.
 There are 24 stock exchange in India

17. Features of Secondary Market
 It Creates Liquidity
 It Comes After Primary Market
 It Has A Particular Place
 It Encourage New Investments
 Aids in financing the industry
 Ensures safe & fair Dealing( MEDIA
BROADCASTING)

20. Methods of Floating New Issues
 Public Issue – the issuing company offers to
public, a fixed number of shares through a legal
document called Prospectus.
 Sale through a prospectus is a direct method of floating shares
 Offer for Sale – It is a indirect method of floating
issue.
 Securities are offered to public through intermediaries such as
issue house and brokers

21. Methods of Floating New Issues
 Placements – the issue is placed with limited
number of financial institutions, corporate bodies
and individuals
 These intermediaries purchase the shares & sell them to
investors at later date at suitable price
 Right Issue – Shares of existing companies which
are already listed in the stock exchange are sold
through right issue.
 Shares are first offered to the existing shareholders

22. Thank You….