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Forex Market
Capital Market
Money Market
It is for short term Supplies funds for WC Instruments are Tbill, CM, etc Each single instrument is of large amount Central bank and Commercial banks are major.
It is for long term Supplies funds for fixed capital requirement Instruments are shares, debentures, etc. Each single instrument is of small amount Development bank and insurance
Conti..
These instruments do not have secondary market. Transactions are on over phone and no formal place Transaction
These instruments have secondary market. Transactions are at formal place. Eg stock market. Transaction have to be conducted with the help of
Capital markets facilitate the transfer of capital (i.e. financial) assets from one owner to another. They provide liquidity. Liquidity refers to how easily an asset can be transferred without loss of value. A side benefit of capital markets is that the transaction price provides a measure of the value of the asset.
Mobilization of Savings & acceleration of Capital Formation Promotion of Industrial Growth Raising of long term Capital Ready & Continuous Markets Proper Channelisation of Funds Provision of a variety of Services
Develop integration among -real sector and financial sector -equity and debt instruments -long term and short term funds -Private sector and government sector and -Domestic funds and external funds Direct the flow of funds into efficient channels through -investment -disinvestment -reinvestment
Factors contributing to growth of Indian Capital Market Establishment of Development banks &
Industrial financial institution. Legislative measures Growing public confidence Increasing awareness of investment opportunities
Stock Market was for a privileged few Archaic systems - Out cry method Lack of Transparency - High tones costs No use of Technology Outdated banking system Volumes - less than Rs. 300 cr per day No settlement guarantee mechanism High risks
1994-Equity Trading commences on NSE 1995-All Trading goes Electronic 1996- Depository comes in to existence 1999- FIIs Participation- Globalisation 2000- over 80% trades in Demat form 2001- Major Stocks move to Rolling Sett 2003- T+2 settlements in all stocks 2003 - Demutualisation of Exchanges
Each scam has brought in reforms - 1992 / 2001 Screen based Trading through NSE Capital adequacy norms stipulated Dematerialization of Shares - risks of fraudulent paper eliminated Entry of Foreign Investors Investor awareness programs Rolling settlements Inter-action between banking and exchanges
The 1990s have witnessed the emergence of the securities market as a major source of finance for trade and industry in India. A growing number of companies have been accessing the securities market rather than depending on loans from financial institutions / banks.
Corporatisation of exchange memberships Banning of Badla / ALBM Introduction of Derivative products Index / Stock Futures & Options Reforms/Changes in the margining system STP - electronic contracts Margin Lending
MARKET STRUCTURE
(JULY 31, 2005)
22 Stock Exchanges, Over 10000 Electronic Terminals at over 400 locations all over India. 9108 Stock Brokers and 14582 Sub brokers 9644 Listed Companies 2 Depositories and 483 Depository Participants 128 Merchant Bankers, 59 Underwriters 34 Debenture Trustees, 96 Portfolio Managers 83 Registrars & Transfer Agents, 59 Bankers to Issue
Market
Instruments
Intermediaries Regulator
SEBI
Primary
Secondary
Equity
Debt
Players
CRA
Corporate Intermediaries
Individual
Banks/FI
FDI /FII
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)
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
270 971
753 1292
1812 2675
2614 3273
3973 6750
9723 25302
24
63
113
168
175
224
86
107
167
211
298
582
1770
5564
358
170
148
126
170
260
344
803
Primary Market
Market for new issues/fresh capital (IPOs) New issues mkt. Participants issuer investors intermediaries
Mobilization of funds
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Before 1992,Regulator of new issues was CCI (Controller of Capital Issues) Approval from CCI for raising funds in primary mkt. Timing, quantum ,and pricing of the issue were decided by the controller New co.s can issue shares only at par Existing companies with substantial reserves could issue shares at premium Fixed price mechanism resulted in under pricing of many issues After 1992, promoter and merchant banker together decide the price of the issue.
CCI regime To offer share at a fixed price Firm and merchant banker decide an offer price Investor opinion wasnt considered while setting offer price Long time lag among the date of pricing, the date the issue opens ,and the date when trading commences Raises possibility of price fluctuations in intervening period
mechanism through which an offer price for IPOs based on investors demand is determined . Auction of shares
3.
4.
5.
Appointment of book runner i.e. merchant banker Preparation and submission of draft documents to SEBI and obtaining of an acknowledgement card. A specified price band (range) is to be determined by issuer and book runner Different price levels are invited from syndicate members .Adv. Should mention opening and closing dates for the bids Issuer arrives at a final cut-off rate & final allocation in consultation with book runner and lead manager
Contd..
6.Issuer and book runner may impose restrictions on number of shares that can be allotted to each client 7. Final prospectus is filed with the (ROC) along with procurement agreement 8.Placement portion opens for subscription 9.Placement portion closes a day before the opening of public issue portion
No road shows done Still dependent on good faith No. of investors invited to apply are limited Lack of transparency Not proved to be good price discovery mechanism Lag time of more than 60 days between issue pricing and listing Issuer may have to sell cheap due to collective bargaining High institution holding may affect stocks liquidity Volatility may increase due to bulk offloading
Secondary Market
Secondary/Stock market!!!!
SHARE MUTUAL FUNDS. PAR VALUE vs. MARKET VALUE BULLISH vs. BEARISH
Corporate governance Creates investment opportunities for small investors Government raises capital for development projects Barometer of the economy
Functions Of SEBI
Regulates Capital Market. Checks Trading of securities. Checks the malpractices in securities market.
It enhances investor's knowledge on market by providing education. It regulates the stockbrokers and sub-brokers. To promote Research and Investigation
Functions Of RBI
Monetary Authority: Issuer of currency:
Regulator and supervisor of the financial system: Authority On Foreign Exchange:
Unethical practices. Big irrational greed, excessive speculation. Lack of protection to interests of the genuine and small investors . Trading is extremely thin and restricted. Structural and organisational imbalance in the growth of the stock market. Volatility of the market has increased over the years.
Lack of transparency Physical settlement Variety of manipulative practices Institutional deficiencies Insider trading