Stock Market

STOCKMARKETS

Presented By:Shilpi Jain

FINANCIAL MARKETS

• In economics, a financial market is a mechanism that allows people to easily buy and sell financial securities, commodities, and other fungible items of value at low transaction costs & at prices that reflect the efficient-market hypothesis.

Financial Markets Contd.

• Whereas in finance, financial markets facilitate–

- The raising of capital- The transfer of risk- International trade• & are used to match those who want capital

to those who have it.• Financial markets have evolved significantly

over several hundred years & are undergoing constant innovation to improve liquidity.

Financial Markets Contd.

• In our country, there is a large informal financial sector coexisting with the organized one.

• Several steps have been taken to expand the scope of organized markets.

• Yet, significant segments of our economy are outside the organized sector.

• There is an urgent need to analyze the participants, magnitudes, nature and characteristics of the unorganized and informal financial markets & to explore ways of either bringing them directly into the mainstream or establish suitable linkages with the organized financial markets.

Financial Markets Contd.

• The main segments of the organized financial markets or the types of Financial Markets are:

FINANCIAL MARKETS

CapitalMarkets

Commodity Markets

MoneyMarkets

DerivativesMarkets

InsuranceMarkets

ForeignExchangeMarkets

Government Securities Market

CAPITAL MARKETS

Stock Markets Bond Markets

DERIVATIVES MARKETS

Futures Markets

Financial Markets Contd.

CAPITAL MARKETS- The capital market is the market for securities, where

companies & governments can raise long term funds. - It is a market in which money is lent for periods longer than a

year. - Includes the stock market & the bond market.- Consists of Primary Markets & Secondary Markets.- Newly formed (issued) securities are bought or sold in

primary markets. - Secondary markets allow investors to sell securities that they

hold or buy existing securities.

Financial Markets Contd.Capital Markets

• A Stock Market is a public market for the trading of company stock & derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

• The Bond Market (also known as the Debt, Credit, or Fixed Income Market) is a financial market where participants buy and sell debt securities, usually in the form of bonds.

Financial Markets Contd.

COMMODITY MARKETS• Markets where raw or primary

products are exchanged. • These raw commodities are

traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts.

Financial Markets Contd.MONEY MARKETS● Global financial market for short-term borrowing and

lending.● Provides short-term liquidity funding for the global

financial system.● Participants borrow and lend for short periods of time,

typically up to thirteen months. ● Money market trades in short-term financial

instruments commonly called "paper." ● This contrasts with the capital market for longer-term

funding, which is supplied by bonds & equity.

Financial Markets Contd.

DERIVATIVES MARKETS• Financial markets for derivatives.• Divided in two:- For Exchange Traded derivatives & that for Over-The-

Counter (OTC) derivatives.● A futures exchange is a central financial

exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.

Financial Markets Contd.

INSURANCE MARKETS• Insurance is defined as the equitable transfer

of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought prevent a large, possibly devastating loss.

• An insurer is a company selling the insurance.• An insured is the person or entity buying the

insurance.

Financial Markets Contd.

FOREIGN EXCHANGE MARKETS

• Also known as Currency, Forex or FX markets.

• Currency trading takes place. • It is where banks and other

official institutions facilitate the buying and selling of foreign currencies.

• FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another.

Financial Markets Contd.

GOVERNMENT SECURITIES MARKET• One of the most important segments

of the financial market. • Serves as an important transmission

channel for monetary policy. • Without it, or with one that functions

poorly, the regulatory power to intervene during times of crisis would be severely circumscribed.

Financial Markets Contd.

• Indian financial markets are governed by three regulators namely :

1) Securities & Exchange Board of India (SEBI) that governs the Equity markets and Depositories.

2) Forward Market Commission (FMC) that governs Commodities markets.

3) Reserve Bank of India (RBI) that governs Fixed Income Money Markets.

Financial Markets Contd.

• The three regulatory bodies don’t interfere in one another’s area , though the regulatory frame work of SEBI and RBI overlap to some extent.

• The two stock exchanges in India, governed SEBI, National Stock Exchange (NSE) & Bombay Stock Exchange (BSE), contribute almost 99.9% turnover in the market.

Financial Markets Contd.

• The Depositories takes care of the share certificates in Dematerialized (DEMAT) form thus enhancing the efficiency of markets.

• There are two depositories in Indian market namely:

1) National Securities Depositories Limited (NSDL)

2) Central Depositories Services Limited (CDSL)

● These depositories also hold Commodities in DEMAT form.

Financial Markets Contd.

• The Commodities Market is governed by Forward Market Commission (FMC).

• The two prominent Commodities exchanges in India are:

1) Multi Commodity Exchange (MCX)2) National Commodities & Derivatives

Exchange (NCDEX)

Financial Markets Contd.

• Reserve Bank of India (RBI) governs money markets in India .

• The trading platform for money markets is Negotiated Dealing System (NDS).

• Trading in money markets is dominated by Institutional players and thus retail investors can participate only through Liquid Mutual funds.