Transcript
7/29/2019 Welcome to the Indian Capital Market
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WELCOME TO THE INDIAN CAPITAL MARKET
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Capital Market
A market for borrowing and lending long-
term capital funds required by business
enterprises
The dealings in the capital are done through
the securities like shares, debentures etc. The
capital market is thus called securities market
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Features of Capital market
1. Mobilization of savings and acceleration of
capital formation
2. Promotion of industrial growth
3. Raising long term capital
4. Proper channelization of funds
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Capital market instruments
Equity shares
Preference shares
Government bondsCorporate bonds/ debentures
Perpetual bonds
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Functions of capital market
Allocation
function
Other function such asindicative, savings&investment, transfer
and merger.
Liquidity
functions
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Security prices
It depend upon a large number of factors:
1. Yield of securities
2. Extent of funds available from public savings
3. Level of demand for funds
4. Flow of funds from the banking system
5. Price situation in general
6. Attitude towards liquidity on the part ofinvestors
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Participants of capital market
1. Governments
2. Pubic sector undertakings
3. Insurance companies
4. Mutual funds
5. Non-banking financial institutions6. Commercial banks
7. Provident and pension funds
8. Financial institutions
9. Corporate10. Retail investors
11. Others: FFI, NRI , HNI ,Investment funds
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Evolution and growth
1.Infrastructurestage
2.New issuesstage
3.The SEBI stage4.New financial
services
5.committees
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The gilt-edged market
The industrial securitiesmarket
Classification of Indian capital market
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1.The gilt-edged market
The marketable debt issued by the government or
semi government bodies, which represents a claim
on the government, is known as a government
security or gilt-edged security.
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FEATURES OF GOVERNMENT
SECURITIESIssued at face value
No default risk as the securities carry sovereignguarantee.
Ample liquidity as the investor can sell the securityin the secondary market
Interest payment on a half yearly basis on facevalue
No tax deducted at source
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Can be held in Demat form.
Rate of interest and tenor of the security is fixed at
the time of issuance and is not subject to change.
Redeemed at face value on maturity
Maturity ranges from of 2-30 years.
Securities qualify as SLR investments.
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The dated Government securities market in
India has two segments:
Primary Market:
The Primary Market consists of the issuers of the
securities, viz., Central and Sate Government andbuyers include Commercial Banks, Primary Dealers,
Financial Institutions, Insurance Companies & Co-
operative Banks. RBI also has a scheme of non-
competitive bidding for small investors.
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Secondary Market:
The Secondary Market includes Commercial banks,
Financial Institutions, Insurance Companies,Provident Funds, Trusts, Mutual Funds, Primary
Dealers and Reserve Bank of India. Even Corporate
and Individuals can invest in Government Securities.
The eligibility criteria is specified in the relative
Government notification
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2. The industrial securities market
The industrial securities market is composed offollowing segments:
1. Primary market:
A market where new securities are bought andsold for the first time
2. Secondary market:
A market which deals in securities that havebeen already issued by companies. It is alsocalled the stock exchange or the share market
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Types of issues in Primary market
Initial public offer (IPO) (in case of an unlisted
company),
Follow-on public offer (FPO),
Rights offer such that securities are offered to
existing shareholders,
Preferential issue, Composite issue
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New financial institutions
1. Venture fund institutions
2. Mutual funds
3. Factoring institutions
4. Credit rating institutions5. Over-the-counter exchange of india(OCTEI)
6. National stock exchange of india limited(NSEI)
7. National clearance and depository systems(NCDS)
8. National securities depositories limited
9. Stock holdings corporations of india limited(SHCIL)
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New financial instruments
1. Commercial paper
2. Certificate of deposit
3. Secured premium notes(SPN) with attachedwarrant
4. Non-convertibledebenture( NCD) withdetachable equitywarrants
5. Zero coupon bonds
6. Zero interest fullyconvertibledebenture(FCD)
7. Deep discount bonds
8. Stock invest
9. Equity shares withdetachable warrants
10. Equitypre shares11. Preference shares with
warrants attached
12. Euro issues
13. Non-voting right shares
14. Other innovativeinstruments.
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Major issues in Indian capital market
1. Vanishing companies
2. Lack of commitment
3. Stock scams4. Malaises
5. Lack of professional expertise
6. The defaults committed by brokers7. Multiplicity of investor complaints
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