INDIAN CAPITAL MARKET.pptx

8/19/2019 INDIAN CAPITAL MARKET.pptx

1/24

INDIAN CAPITAL MARKET

Primary and Secondary

Markets


2/24

Instruments of Indian Capital Market

•

! E"uity S#ares• $! Preference S#ares

• %! S&eat E"uity

•'! De(entures

• )! *arrant

• +! Secured Premium Notes ,SPNs-

• .! Deri/ati/e


3/24

T#e Money and Capital Markets• Two types of external markets for funds0

1. Money market• S#ort1term de(t securities0 maturity of less

than 1 year

• T1(ills2 commercial paper2 (ankers3acceptances2 and s#ort1term certi4cates of

deposit

2. Capital market

• Intermediate-term securities0 maturity of

more than 1 (ut less t#an 5 years• Long-term securities0 maturity of 10 or

more years

• Euity securities0 preferred and commonstock #a/e lon6est time #ori7on since t#ey areissued for life of corporation


4/24

! E"uity s#ares

•

E"uity s#ares referred to commonstock or ordinary s#ares!

• S#are 8 refers to t#e unit of s#arecapital of a co!

• ,T#e s#are capital of a co! is di/idedinto a num(er of small units of e"ual/alue called as s#are-

• Stock refers to t#e a66re6ate of amem(er3s fully paid up s#ares of e"ual/alue mer6ed into one fund!


5/24

$! Preference s#ares

• 9ne type of s#are ic# o:ers somepri/ile6e to t#e s#are #olders!

• ! T#eir claims on t#e company3sincome are limited!

• $! T#ey recei/e a 4;ed percenta6e ofdi/idend!

• %! In t#e e/ent of li"uidation of t#eco! t#eir claims on t#e assets of t#e4rm are also 4;ed

and also t#ey 6et priority to recei/e

t#eir in/estment!


6/24

%! S&eat E"uity

• Ne& e"uity instrument introduced int#e Companies ,Amendment-9rdinance2


7/24

Meanin6 of s&eat e"uity

• ! S#ares issued at a discount toemployees and directors!

• S#ares issued for consideration ot#er

t#an cas# for pro/idin6 kno&1#o&etc!

• $! Second type of s&eat e"uity can

(e issued at par or a(o/e par /alue!


8/24

'! De(entures

• Accordin6 to Cos! Act De(entures includes de(enturestock2 (onds and any ot#er securities

of company2 et#er constitutin6 ac#ar6e on t#e assets of t#ecompany or not?!

• T#ey are issued (y t#e pri/ate cos!as a lon61term promissory note forraisin6 loan capital!


9/24

)! *arrant

• A &arrant is a (earer document of titleto (uy speci4ed num(er of e"uitys#ares at a speci4ed price! It is

e;ercised o/er a no! of yrs!• *arrants are issued to make t#e (ond

or stock more attracti/e!

•

*arrants can (e sold (y t#e in/estor int#e market ,Can (e traded in t#emarket-


10/24

+! Secured premium notes ,SPNs-

•

SPN is issued alon6 &it# adetac#a(le &arrant and isredeema(le after a noti4ed period&it# features of medium to lon6 ternnotes!

• Eac# SPN #as a &arrant attac#ed toit ic# 6i/es t#e #older t#e ri6#t toapply for or seek allotment of e"uitys#are2 pro/ided t#e SPN is fully paid!


11/24

.! Deri/ati/es

• A deri/ati/e is a 4nancial instrumentose c#aracteristics and /aluedepend upon t#e c#aracteristics and/alue of some underlyin6 asset

typically commodity2 (ond2 e"uity2currency2 inde;2 e/ent etc!

• Types of deri/ati/es are i- 9ptions ii-@utures

iii- S&aps


12/24

9ptions

• Deri/ati/es in t#e nature of le6alcontracts are called as 9ptions!

• T#ey are deri/ed from underlyin6assets ic# could (e stocks2 (ondsor currencies!

• An option contract 6i/es t#e #oldert#e ri6#t to (uy sell t#e stock at a

price on a future date! ,T#e price iscalled as Strike price-


13/24

Call Put options

• Dependin6 on et#er t#e #older isa (uyer or a seller2 t#e options aretermed as Put Call options!

• Call 8 Con/eys t#e ri6#t of t#e #olderto (uy

• Put 1 Con/eys t#e ri6#t of t#e #older

to sell


14/24

@utures• A future contract is a series of for&ard

contract! T#ere are t#ree types of peopleo deal in futures!

• ! Speculators0 *#o speculates t#e

market ,Buy at a lo& price and sell at a#i6# price-

• $! ed6ers0 T#ey (uy and sell futures too:set a risky position in t#e spot market!

,T#ey eit#er produce or use t#e asset-• %! Ar(itra6eurs0 T#ose o 6ain from t#e

price di:erentiation of di:erent markets!


15/24

S&aps

•

A S&ap deal is a transaction in ic#t#e (ank (uys and sells t#e speci4edforei6n currency simultaneously fordi:erent maturity dates ic# &ould#elp (anks to eliminate e;posurerisk!


16/24

T&o cate6ories of Indian Capital Market

• ! Ne& Issue Market ,PrimaryMarket-

• $! Stock Market ,Secondary Market-


17/24

Ne& Issue Market ,Primary-

• A Primary market represents t#e ne&issue of securities ,s#ares (onds-t#at #a/e ne/er (een pre/iously

issued are o:ered!

• Bot# ne& cos! And t#e e;istin6 cos!

can raise capital in t#e ne& issuemarket!


18/24

@eatures of primaryNe& issue market

• It is concerned &it# ne& lon6 term capital

• Securities are sold for t#e 4rst time in t#emarket

• Securities are issued directly to in/estors!

•

Security certi4cates are issued to in/estors!• Issued for cos! @or settin6 up ne& (usiness2 for

e;pansion2 moderni7ation of e;istin6 (usiness

• @acilitates capital formation in t#e economy

• @unds are used for purc#ase of 4;ed assets• It is t#e process of 6oin6 pu(lic ,Pri/ate capital

into pu(lic capital-


19/24

@unctions of primary market

• T#e primary function is to facilitatet#e transfer of funds from t#einterested in/estors to t#e ne&(usiness entrepreneurs

• i- To set up Cos!

• Ii- E;pansion

• Iii- ro&t# or Moderni7ation

• I/- di/ersi4cation

• - to secure t#e funds of corporatecos!

oc ar e econ ar


20/24

oc ar e econ aryMarket-

• Stock market or a secondary market is

also called as >aftermarket?!• It is a 4nancial market ere pre/iously

issued securities and 4nancial

instruments ,Stock2 (onds2 options andfutures- are (ou6#t and sold!

• Second market refers to used 6oods assets or an alternati/e use for an

e;istin6 product asset ,E;0 Corn 8primary as a food product and feedstock Secondary 1 use in et#anol-


21/24

@utures of stock market

• Secondary market deals in pre/iously

issued securities!• Securities are not directly issued (y t#e

Cos! To in/estors!

• Securities are sold (y e;istin6 in/estorsto anot#er in/estors!

• Any (uyer and seller can (uy and sell

t#eir securities t#ro3 (rokers!• Security market pro/ides li"uidity to

t#e in/estment and #elps marketa(ility

of securities!


22/24

@unctions of stock market• ! Ensures Li"uidity of Capital0 Stock market

is a place ere securities are con/erted intocas#!

• $! Continuous market for securities0 It pro/idesa ready market for securities! Listed securitiescontinue to (e traded at t#e e;c#an6e!

•%! E/aluation of securities0 T#e in/estors cane/aluate t#e &ort# of t#eir #oldin6s from t#eprices "uoted at di:erent e;c#an6es for t#esecurities!


23/24

functions 1 ctd!

•

'!Mo(ili7in6 surplus sa/in6s0 Anyin/estor can purc#ase s#ares2 (ondsetc! from t#e ready market!

•

)! elpful in raisin6 ne& capital0 T#ene& and e;istin6 companies needcapital for t#eir acti/ities!

• +! Safety in dealin6s0 Dealin6s ofstock e;c#an6e are 6o/erned (y SEBIand #ence no scope for manipulatin6transactions!


24/24

functions 1 ctd!

• .! Listin6 of securities0 only listedsecurities can (e purc#ased at stocke;c#an6es! E/ery co! interested in

listin6 &ill apply to t#e e;c#an6eaut#orities2 o &ill scrutini7e t#ecos! Mana6ement2 capital structure

and prospectus!

INDIAN CAPITAL MARKET.pptx

Documents