Capital Market

Need of Finance…!

Economic System

Household Sector Business Sector

Economic system System

Financial MarketTypes of Financial Market

A financial market is a market in which people and entities can trade financial securities, commodities and fungible items of value at low transaction cost and at prices that reflect supply and demand.

Money MarketCapital Market

Capital Market

A market deals in medium and long-term funds, both debt and equity, is termed as Capital Market.

The market is an institutional arrangement for borrowing medium and long-term funds and which provides facilities for marketing and trading of securities

Factors Responsible for Growth of Indian Capital Market

• Growth of Stock Exchange• Growth of Financial Institution• Growth of Mutual Fund• Growth of Merchant Bank Service• Development of Venture Capital Funds• Development of Credit Rating Agency• Setting up SEBI• National securities Clearing Corporations• Corporate Governance

Capital Market TypesPrimary Market Secondary Market

A market where the issuers

access the prospective

investors directly for funds

required by them either for

expansion or for meeting

the working capital needs.

A market where securities are traded after being initially offered to the public in the primary market and/or listed in the stock exchange.

Pricing Of the ShareFixed Pricing book Building

Methods of raising capital in the Primary Market:

Initial Public OfferFollow-on Public OfferPrivate PlacementOffer for SaleRights IssueE-Ipo Qualified Institutional Placement

11

Secondary Market

Secondary/Stock market!!!!

Functions of Stock MarketsLiquidity for SecuritiesEvaluation Promotion of Savings HabitsReady & Continuous MarketsPublic FinanceGrowth of Joint Stock Company

Stock Exchanges in INDIA Mangalore Stock Exchange Hyderabad Stock Exchange Uttar Pradesh Stock Exchange Coimbatore Stock Exchange Cochin Stock Exchange Bangalore Stock Exchange Saurashtra Kutch Stock

Exchange Pune Stock Exchange National Stock Exchange OTC Exchange of India Calcutta Stock Exchange Inter-connected Stock Exchange

(NEW) Madras Stock Exchange

Bombay Stock Exchange Madhya Pradesh Stock Exchange Vadodara Stock Exchange The Ahmedabad Stock Exchange Magadh Stock Exchange Gauhati Stock Exchange Bhubaneswar Stock Exchange Jaipur Stock Exchange Delhi Stock Exchange Assoc Ludhiana Stock Exchange

Bombay Stock Exchange Bombay Stock Exchange, commonly

referred to as the BSE, (Bombay Share Bazaar) is a stock exchange located on Dalal Street, Mumbai, Maharashtra, India.

It is the oldest stock exchange in Asia. The equity market capitalisation of the companieslisted on the BSE was US$1 trillion as of December 2011, making it the 6th largest stock exchange in Asia and the 14th largest in the world. The BSE has the largest number of listed companies in theworld.

National Stock Exchange The National Stock Exchange (NSE) is

stock exchange located at Mumbai,

Maharashtra, India. It is in the top 20

largest stock exchanges in the world by

market capitalization and largest in India

by daily turnover and number of trades,

for both equities and derivative trading.

NSE has a market

capitalization of around

US$1 trillion and over 1,652 listings

Fully Automated SystemUniversal MembershipListing DematSettlement Cycle

Stock Exchanges names and their Indices Name:

Country Stock exchange name Indices name

India National Stock Exchange

S & P Nifty

India Bombay Stock Exchange Sensex

Hong Kong Hong Kong Stock Exchange

Hang Seng

USA New York Stock Exchange

NYSE

Korea Korean Stock Exchange KRX 100

Russia Russian Stock Exchange RTS Index

Some Important Terms Relating To ‘Stock Market’

Speculators Market CapitalizationCapital StructureCorneringSpeculation

Bull BearLame DuckArbitrageur

Source-Securities and Exchange Board of India

Getting startedTo start trading the following are required –

Bank accountTrading accountDemat accountPermanent Account Number (PAN)Unique Client Code

Source -Securities and Exchange Board of India

Where to tradeThe secondary market is divided into two

segments Cash/ Equity segmentDerivative segment –

Equity Futures and Option (F & O) Currency Futures/ Option Interest Rate Futures

Trading Procedure in Stock MarketSelection Of BrokerOpening Demat Account with DepositoryPlacing the OrderExecuting the OrderSettlement

22Source-Securities and Exchange Board of India

Settlement

The settlement in the securities market is done on a T+2 Rolling Settlement Cycle (where T = Trading Day).

Trading (T)

Option of Early Pay-in

(T1)

Auction (T3)

Close out (T4)

Pay-in and Pay out

(T2)

TRADE SETTLEMENTT + 2

FAILURE TO

PAY-IN

SEBI Guidelines in Capital MarketPrimary Market Secondary MarketInitial Public offerFollow-on Public OfferUnderwriting Public Issue and Right

IssueInnovative InstrumentsBonus Shares a) source of fund b) residual reserves c) past profit d) other conditionsIssue of Debenture

Compulsory Registration of Intermediaries

DemutualizationTransparency in TradingCompulsory AuditInvestor protectionCapital Adequacy Norms

Major crash and Rallies in Indian Capital Market

28 April 1992Sensex fall by 570 points Harshad Mehtha Security Scam

18 May 2006Nifty crash by 496.50 pointsHeavy selling by FII’s due to weakness in

global market

21 January 2008Sensex crash by 1408pointsDue to recession in USA

18 may 2009Sensex raise by 2111 points Victory of UPA in election

Money Market Vs. Capital Market

Concluded

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