Professional Documents
Culture Documents
MONEY MARKET
CAPITAL MARKET
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Capital Market
The market where investment
instruments like bonds, equities and
mortgages are traded is known as the
Capital Market.
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Significance of Capital Market
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Types of Capital Markets :
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PRIMARY 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. This process
is called disintermediation where the
funds flow directly from investors to
issuers.
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Features of Primary Market:
This is the market for new long term capital. The primary
market is the market where the securities are sold for the
first time. Therefore it is also called New Issue Market
(NIM).
In a primary issue, the securities are issued by the
company directly to investors.
The company receives the money and issue new security
certificates to the investors.
Primary issues are used by companies for the purpose of
setting up new business or for expanding or modernizing
the existing business.
The primary market performs the crucial function of
facilitating capital formation in the economy.
The new issue market does not include certain other
sources of new long term external finance, such as loans
from financial institutions. Borrowers in the new issue
market may be raising capital for converting private
capital into public capital; this is known as ‘going public’.
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Methods of raising capital in the
Primary Market:
Public issue
Private placement
Euro issues
Government securities
Offer for sale
Right issue
Electronic initial public offering
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SECONDARY MARKET :
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Participants in the Secondary
Market
Stock Exchange
Clearing Corporation
Depositories/ DP
Trading Member (Stock Broker)/
Clearing Member
Registrar to an Issue and Share Transfer
Agent
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What are the products dealt in
Secondary Markets ?
Equity shares
Debentures
Government securities
Bonds
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Difference between Primary and
Secondary Market
In the primary market, securities are
offered to public for subscription for the
purpose of raising capital or fund.
Secondary market is an equity trading
avenue in which already existing/pre-
issued securities are traded among
investors.
Secondary market could be either auction
or dealer market. While stock exchange
is a part of an auction market.
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Market Participants
Investors
Issuers
Regulators
Custodians
Broker Dealers
Depositories
Clearing Agents
Lead Managers
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Issuer - An Issuer is a legal entity that develops,
registers and sells securities for financing its
operations.
Investors - A stock investor is an individual or
institution who puts money to buy securities,
offering potential profitable returns, as interest,
income, or appreciation in value.
GOAL: CAPITAL GAINS
Rely on fundamental analysis for investment
decisions
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Regulators -Financial institution responsible for
supervision, which subjects issuers to certain
requirements, restrictions and guidelines, aiming
to maintain the integrity of the financial system.
Non-Government Bodies Government Bodies
Registrars- A Registrar is an institution or
organization that is responsible for keeping
records of bondholders and shareholders
Custodians - A custodian bank, or simply
custodian, is a specialized financial institution
responsible for safeguarding a firm's or individual's
financial assets.
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Brokers and Dealers Clients Members
licensed to sell securities Broker /Dealer
Regulatory Bodies Structure of the
Financial Industry A broker/dealer is the
catalyst for financial transactions Buyer
Broker Stock Exchange Broker Seller
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Securities and Exchange Board of
India (SEBI)
SEBI is the regulator of securities market
in India. It was established on 12 April
1988.
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SEBI is required to regulate and promote the securities
market by:
Providing fair dealings in the issues of securities and
ensuring a market place where funds can be raised at
a relatively low cost.
Providing a degree of protection to the investors and
safeguard their rights and interests so that there is a
steady flow of savings into the market.
Regulating and developing a code of conduct and fair
prices by intermediaries in the capital market like
brokers and merchant banks with a view to make
them competitive and professional. 19
Role of SEBI in Indian Capital Market
Power to make rules for controlling stock exchange :
SEBI has power to make new rules for controlling stock exchange in India. For example, SEBI
fixed the time of trading 9 AM and 5 PM in stock market.
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