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Capital Market - Structure

Structure of Capital Market in India

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Capital Market - Structure

  2. 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. 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. 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. 5. Major Suppliers of Funds Commercial Banks Insurance Companies Business Corporations Retirement Funds
  7. 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. 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. 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. 10. Types of Capital Market CAPITAL MARKET Primary Market Secondary Market
  11. 11. Primary Market
  12. 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. 13. IPO - Trend 95 36 IPO’s Issued through NSE 21 73 41 12 5 2007 2008 2009 2010 2011 2012 2013(Sep)
  14. 14. Secondary Market - Examples NASDAQ London Stock Exchange BSE NSE Tokyo Stock Exchange NYSE
  15. 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. 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. 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. 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. 19. THANK YOU !
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Structure of Capital Market in India


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