capital makt

8/8/2019 Capital Makt

1/36

10/3/2010 1


2/36

10/3/2010 2

Capital market plays a

catalytic roleA vibrant capital market

is a function of economic

growth The capital market

consists primarily of thedebt and equity markets.Historically, it contributed

significantly to mobilisingfunds to meet public andprivate companiesfinancing requirements


3/36

10/3/2010 3

Capital Market an engine for

growth Economic growth by mobilising savings

of economic sectors and directing sametowards channels of productive uses

Issue of primary securities

Issue of secondary securities

Secondary MarketTransactions tofacilitate liquidity


4/36


5/36

10/3/2010 5

INVESTORS IN CAPITAL

MARKET Individual Corporate Governments Foreign Companies Banks

Provident Funds FinancialInstitutions


6/36

10/3/2010 6

INTERMEDIARIES IN

CAPITAL MARKET Stock exchanges Banks

Investment trustand companies

Development banks Mutual funds

Non banking financialinstitutions International

Financial Investorsand Institutions.


7/36

10/3/2010 7

MARKET STRUCTURE

22 Stock Exchanges, 15 Subsidiaries

Over 10000 Electronic Terminals at over 400 locations all over

India

9394S

tock Brokers and2

3148Sub

b

rokers 5892 Listed Companies

2 Depositories and 494 Depository Participants

138 Merchant Bankers

55 Underwriters

32 Debenture Trustees

139 Portfolio Managers

83 Registrars & Transfer Agents

60 Bankers to an Issue

4 Credit Rating Agencies


8/36

10/3/2010 8

MARKET STRUCTURE

Venture Capital Funds

39 Foreign

80 Domestic

38 Mutual Funds and 479 Schemes

Asset Base: US $ 44.94 bln

928 Foreign institutional investors

Cumulative FII investment - US$ 44.17 bln


9/36

10/3/2010 9

ROLE OF CAPITAL

MARKET Capital formation

Economic growth

Development of backward areas Generates employment

Long term capital to industrial sector

Generation of foreign capital Developing role of financial insititutions

Investment opportunities


10/36

10/3/2010 10

Who Owns How Much?


11/36

10/3/2010 11

Capital Market It is an important constituent of

financial system.

It is a market for long term funds bothequity & debt

Funds are raised within the country aswell as outside the country


12/36

10/3/2010 12

All Over AgainCapital MarketCapital Market-- The market for relatively long-term

(greater than one year original maturity) financial

instruments.Primary MarketPrimary Market-- A market where new securities are

bought and sold for the first time (a new issuesmarket).

Secondary MarketSecondary Market-- A market for existing (used)securities rather than new issues.


13/36

10/3/2010 13

Fund raising can be classified as

Public Issue by prospectus

Private Placement Right Issue


14/36

10/3/2010 14

Private Placement

Eliminates the underwriting function of the investmentbanker.

The dominant private placement lender in this group is thelife-insurance category (pension funds and bank trustdepartments are very active as well).

Private (or Direct) PlacementPrivate (or Direct) Placement -- The sale of an

entire issue of unregistered securities (usually

bonds) directly to one purchaser or a group ofpurchasers (usually financial intermediaries).


15/36

10/3/2010 15

Secondary MarketA market for outstanding securities

An equity instrument provides an alltime market

Debt instrument is traded till maturity


16/36

10/3/2010 16

Two parts Secondary market for corporates &

financial intermediaries through-

Recognised Stock Exchanges

NSE

OTCEI

Participants- Regd brokers bothindividuals and institutions,operatedthrough sub brokers & sub dealers


17/36

10/3/2010 17

Nature of Fund raising in Primary market

Domestic

Equities, Debt Instruments

ExternalEquity GDR,ADR

Debt Inst ECB

Other External BorrowingsFDI - Equity & Debt

FII - portfolio invst

NRI - short,medium term deposits


18/36

10/3/2010 18

Sarbanes-Oxley

Act of2

002

SarbanesSarbanes--Oxley Act of 2002 (SOX)Oxley Act of 2002 (SOX)

Addresses, among other issues, corporate

governance, auditing and accounting,

executive compensation, and enhanced andtimely disclosure of corporate information.


19/36

10/3/2010 19

Are Banks really the

Big players in CapitalMarket in India ?


20/36

10/3/2010 20

Banks in India have statutory

/ regulatory restrictions

As per regulatory norms, banks areallowed to take exposure to thecapital market up to 40 per cent oftheir networth. It includes thebanks direct investment in equity,

its proprietary holding, investmentin equity mutual funds, andadvances to brokers.


21/36

10/3/2010 21

Sensitive Sector Exposure Total exposure of SCBs to the

sensitive sectors constituted 20.4

per cent of aggregate bank loansand advances (comprising 18.7 percent to real estate, 1.5 per cent tothe capital market and 0.1 per centto commodities) as compared with18.8 per cent last year.

Source Trend & Progress Of Banking RBI Publication


22/36

10/3/2010 22


23/36

10/3/2010 23

Source Trend & Progress of Banking

RBI publication


24/36

10/3/2010 24


25/36

10/3/2010 25

Nexus between Broker/s &

Bank To avoid any nexus emerging between

inter-connected stock broking entities

and banks, the RBI has authorisedboards of each bank to fix, withinoverall ceiling of 40% of their net worthas on March 31 of previous year, a sub-

ceiling for total advances to stockbrokers and to any single stock brokingentity and its associates.


26/36

10/3/2010 26

Margin requirement for Bankguarantee for capital Market

operations The guidelines prescribe a uniform

margin of 50% to be applied on all

advances/financing of IPOs/issue ofguarantees for capital marketoperations and a minimum cash marginof 25% (within the margin of 50%) tobe maintained in respect of guaranteesissued by banks for capital marketoperations.


27/36

10/3/2010 27

Looking to pledge

securities with a bank? You will now get only up to Rs 20 lakh

loans against shares from the entire

banking system. However, these shareswould have to be held in thedematerialised form. For shares held inthe physical form you would only get Rs10 lakh. Thanks to RBI's revisedguidelines on banks capital marketexposure. These guidelines are witheffect from April 1, 2007.


28/36

10/3/2010 28

Equity Investors Money

Misused In the recent market downslide, small

investors are the worst affected. To add

to their woes, unscrupulous brokersuse this opportunity to misuse theirclients' money. There are many cases of

brokers using investor money for intra-day trading without prior knowledge ofthe investor. Equity investors must bemade aware of such unfair practices.


29/36

10/3/2010 29

Who is actually swinging

the balance? The Sensex had peaked at 18,845

(before correcting to 18,419.04 in

subsequent trading sessions). Boostedby robust flows from foreigninstitutional investors (FIIs), of $7billion (Rs 28,846 crore) betweenSeptember 19 and October 11, 2007 thebenchmark index pole vaulted from15,500 to close to 18,850 thats ajump of 22 per cent in just 16 tradingsessions.


30/36

10/3/2010 30

FII INVESTMENT IN INDIA Simple and speedy registration process

Minimum registration formalities

956 FIIs registered as on Aug 2006

3000 sub accounts registered as on Aug-2006

FII are from across jurisdiction & include pension

funds & university endowments etc. like CALPERS &

Harvard University

Cumulative net FII Investment- US$ 44.17


31/36

10/3/2010 31

FII INVES

TMENT

(1.0)

(0.5)

0.0

0.5

1.0

1.5

2.0

2.5

93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06

0

5

10

15

20

25

30

35

40

45

Monthly FII investment (LHS) Cumulative FII investment (RHS)

(US$bn) (US$bn)

Cumulative FII investment = US$ 44.15 bn

Number of registered FIIs =956


32/36

10/3/2010 32

FIIs shying away?This year so far, FIIs havesold equities worthRs13,693 crore in India

They had bought Rs17,288 crore in the sameperiod last year

The rapid fall in the rupee

has seriously skewed the

math.There are markets whichare going up, such asBrazil and Taiwan Whyshould an investorleave them and come

here?

DNA 28-05-08


33/36

10/3/2010 33ET23-09-08


34/36

10/3/2010 34

JULY2009


35/36

10/3/2010 35

Dooms day is not far off Nouriel Roubini, professor of economics

at New York Universitys Stern School ofBusiness, calls it the worst financialcrisis since the Great Depression. Andhe paints a frightening picture: whenthe dust settles, credit losses will beclose to $2 trillion about two years

worth of Indias GDP and the failureof hundreds of small banks all over theUS (by his estimate, 67 per cent of theassets on small banks books are

hou

sing loans).


36/36

10/3/2010 36

THANK YOU

capital makt

Documents