Organized Indian Financial

System

Regulator Financial Financial Financial

s Instruments Markets Intermediarie
s

Forex Capital Money Credit

Market Market Market Market

Primary Market

Secondary Market

Money Market Capital Market

Instrument Instrument
 Money Market Vs Capital Market
MONEY MARKET CAPITAL MARKET
Short term Long term
Funds for working capital Funds for fixed capital requirement

Instruments are T-bill, CP, currency Instruments are shares, debentures,

etc etc.

Central bank and Commercial banks Development bank and insurance

companies
No secondary market. Secondary market.

Transactions on over phone and no Transactions are at formal place. Eg

formal place stock market.

Without the help of broker. Help of brokers

Why Capital Markets Exist

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.
Definition
Capital market is a market for medium and long term
funds .It refers to all organizations, institutions and
instruments, that provides long term funds and exclude
only the short term markets having a maturity up to 1
year. The organization and institution s which constitutes
the capital market includes the new issue market and stock
exchange.
Role of Capital Markets
Mobilization of Savings

Promotion of Industrial Growth

Raising of long term Capital

Ready & Continuous Markets

 Functions of a capital market
• > Enable quick valuation of financial instruments

• > Provide insurance against market risk or price risk

• > Enable wider participation

• > Provide operational efficiency through

• - simplified transaction procedure

• - lowering settlement timings
• - lowering transaction costs
 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

• # Setting up of SEBI
 CAPITAL MARKET REFORMS IN INDIA
• The 1990s- 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 institution/banks.
MARKET STRUCTURE (JULY 31,
2005)

• 22 Stock Exchanges

• Over 10,000 Electronic Terminals at over 400

locations all over India.

• 9108 Stock Brokers and 14582 Sub brokers

• 9644 Listed Companies

 Indian Capital Market

Market Instruments Intermediaries Regulator

SEBI
•Brokers
•Stock Exchanges
Primary Secondary •Underwriters

Equity Hybrid Debt

Players

Corporate Intermediaries Individual Banks/FI FDI

Stock Exchanges in INDIA
 Mangalore Stock Exchange
 Bombay Stock Exchange
 Hyderabad Stock Exchange

 Madhya Pradesh Stock Exchange

 Uttar Pradesh Stock Exchange

 Coimbatore Stock Exchange

 Vadodara Stock Exchange
 Cochin Stock Exchange

 Bangalore Stock Exchange

 The Ahmedabad Stock Exchange

 Saurashtra Kutch Stock Exchange

 Magadh Stock Exchange
 Pune Stock Exchange

 National Stock Exchange  Gauhati Stock Exchange

 OTC Exchange of India

 Bhubaneswar Stock Exchange
 Calcutta Stock Exchange

 Madras Stock Exchange

 Jaipur Stock Exchange

 Delhi Stock Exchange Assoc

 Ludhiana Stock Exchange

 Growth Pattern of the Indian Stock Market
1946 1961 1971 1975 1980 1985 1991 1995
No. of
1 Stock
7 7 8 8 9 14 20 22
Exchanges
No. of
2 Listed Cos.
1125 1203 1599 1552 2265 4344 6229 8593

No. of Stock
3 Issues of
1506 2111 2838 3230 3697 6174 8967 11784
Listed Cos.

Capital of
4 Listed
270 753 1812 2614 3973 9723 32041 59583
Cos. (Cr. Rs.)

Market value
5 of
971 1292 2675 3273 6750 25302 110279 478121
Capital of
Listed
Cos. (Cr. Rs.)

Capital per
6 Listed Cos.
24 63 113 168 175 224 514 693
(4/2)
(Lakh Rs.)

Market Value
7 of
86 107 167 211 298 582 1770 5564
Capital per
Listed
Cos. (Lakh
Rs.)
(5/2)
Free pricing regime
Regulator of new issues was CCI (Controller of Capital
Issues), before 1992.

Approval from CCI for raising funds in primary market.

Timing, and pricing of the issue were decided by the CCI.

New company’s can issue shares only at par.

Existing companies with substantial reserves could issue

shares at premium.
The role of the stock exchange

Investment opportunities for small investors

Corporate governance

Barometer of the economy

Government raises capital for development projects

 Functions Of SEBI
• Regulates Capital Market.

• Checks Trading of securities.

• Checks the malpractices in securities market.

• Enhances investor's knowledge on market by providing education.

• Regulates the stockbrokers and sub-brokers.

• Promote Research and Investigation

 WHY STOCK PRICE RISES?

• News about company.

• News about the country.

• Exchange rate regime.

• Depends on demand and

supply for that stock.
DRAWBACKS OF INDIAN STOCK
MARKET •Unethical practices.

• Big irrational greed,

excessive speculation.

• Lack of protection to
interests of the genuine and
small
investors .

• Organizational imbalance in
the growth of the stock
market.
Thank
THANK
YOU
you