CAPITAL MARKET

What do we need to know.

Basics of financial market and its
importance
Characteristics of various financial
instruments
Various participants in the capital market
Role of the regulator in the financial market
Contours of development of the Indian
capital market.

Introduction

Sweeping changes
Spurt in the amount mobilised,SEs
Number of new instruments
Mutual funds
Active secondary market
Regulatory changes
Increased awareness

Financial Market
Capital market, Money Market, Foreign
Exchange market
Benefits:
Flow of Funds, Capital formation,
Risk allocation, Liquidity,
wealth function

Capital Market and Money Market

Capital Market Instruments

Securities defined by SCRA
Fixed Income Securities
Preference shares

Bonds: Government bonds or treasury bonds.

Municipal bonds, Corporate bonds, Foreign bonds

Equity Shares
MF units
Derivative securities

Capital Market Participants

Stock exchanges
Brokers,
Sub brokers
Custodians
Depositories, Depository participants
Merchant bankers
Bankers to the issue
Underwriters
Registrars to the issue
Portfolio managers
Mutual funds
Foreign Institutional Investors (FII s)
Debenture trustees
Credit rating agencies,
Collective Investment Schemes and,
Venture capital funds

CAPITAL MARKET:REGULATORY
FRAMEWORK

The SEBI Act ,1992.

The Companies Act ,1956
The Securities Contract (Regulation)
Act,1956
The Depositories Act,1996

Role of SEBI in Indian Capital Market

SEBI is an autonomous organization.
Functions as the market regulator or the
watch dog of the capital market.
Comparable to the Securities Exchange
Commission (SEC) in the US capital
market.

SEBI guidelines : Primary market

DisclosureandInvestorProtection(DIP)Guidelines
2000:
Salient Features:
1.
2.
3.
4.
5.
6.

Eligibility norms for public issues

Promoters contribution
Contents of offer documents
Pricing of Issues
Book building
Green shoe option

SEBI guidelines : Secondary market

1. Recognition of stock exchanges
2. Registration of brokers, sub-brokers and
other intermediaries
3. Listing of securities
4. Trading in securities
5. Controlling volatility
6. Risk management

Indian Capital Markets - Review

Structure of the market
Securities markets consists of issuers, investors and
intermediaries
According to the SEBI- NCAER Survey in March2003,an
estimate of 13 million households have been found to
have investments in capital market. This is roughly 7% of
the total Indian households .
The Society for Capital Market Research and
Development estimated a total of 20 million investors in
1997.
The number of investor accounts with the Depositories is
around 10227490 as on March2007.

Indian Capital Markets - Review

Capital Mobilised
Considerable increase in amount mobilised, number of
IPOs issued over the period of years.
Total amount raised from the market through equity and
debt issues and through private placement has also gone
up considerably.
Euro issues has shown a phenomenal rise over the years.
According to a study by Ernst and Young, the Indian IPO
market has been ranked 7th globally in terms of the
proceeds and 5th largest in terms of the number of issues
in the year 2007.

Indian Capital Markets - Review

Secondary Market
No of stock exchanges and brokers
Index behaviour and market capitalisation
Turnover
Volatility of market
Derivatives market

Conclusion

A vibrant capital market enables the corporate sector to

access funds for investment.

The formation of SEBI paved the way for an orderly growth of

the market intermediaries in India.
Investor protection and development of the securities market
are kept as the two primary objectives of regulation in India .
Penetration of the corporate bond market is still low in india.
Private placement market is dominating over the public issue
market.

The potential for growth in capital market still exists in India.

Resource Mobilisation in
Primary Market

Market Intermediaries

Market Turnover