Download - Capital Marketing
26th Oct. ‘09Duration: 1 hour 30 mins
Capital Marketing
IntroductionCapital market is the market for securities,
where corporates and government can raise long term funds
The major participants areo Government (Central and State)o Corporates (Reliance, Infosys)o Regulators (SEBI,RBI),o Institutions (LIC,FII)
Types of marketStock markets: Which provide financing through
issue of new shares and subsequent trading thereofBond markets: Which provides financing through
issue of bond and subsequent trading thereofCommodity market: Which facilitates trading in
commoditiesMoney market: Which provides short term financingDerivatives market: Which facilitates trading in
derivative securities
Stock marketsWhere new issued stock and existing stocks are
tradedPrimary market: where funds are mobilized by
issuing new shares. (IPO) Secondary markets: where existing listed
shares are tradedThe main stock exchanges in India are:o National stock exchange (NSE)o Bombay stock exchange (BSE)
Primary marketPrimary markets are the markets for long term capital.
Also called new issue markets. (NIM)Primary issues are used by companies for the purpose
of setting up new business or expanding or modernizing existing business
In primary markets securities are issued by companies directly to general public
Primary markets performs crucial function of facilitating capital formation in the economy
There are so many formalities to be performed before “going public” (MOA, AOA, registration of company etc)
Secondary marketSecondary market is the financial market of
trading the securities that have already been issued
In the secondary market securities are traded between investors
Indian stock markets are highly liquid, deep and well organized
Stock exchanges info.Major stock exchanges are NSE & BSENumber of companies listed at NSE are
1319 and BSE are 4000The major index are NIFTY and SENSEXBoth stock exchanges trade in following
segments:o Equityo Retail debt market and wholesale debt marketo Futures and options
Innovations at NSELargest in terms of daily turnover and number of tradesFirst national electronic limit order book (LOB) exchange
in IndiaSetting up first clearing corporation National securities
Clearing Corporation Ltd. (NSCCL)Co-promoting and setting up of National Securities
Depository Limited. (NSDL)Setting up S &P CNX Nifty, commencement of internet
trading in Feb. 2000.First exchange to start Exchange traded derivatives
(1996) and equity derivatives (2000)First exchange to start Gold ETF. (Exchange Trade Funds)
Bond marketNational stock exchange also has bond market where
bonds are traded. It has two segments:Wholesale Debt market's segment provides trading
facilities for a variety of debt instruments including Government Securities, Treasury Bills and Bonds issued by Public Sector Undertakings/ Corporate/ Banks. Large investors and a high average trade value characterize this segment
Retail debt market: With a view to encourage wider participation of all classes of investors across the country (including retail investors) in government securities, the Government, RBI and SEBI have introduced trading in government securities for retail investors
Money marketMoney market is global short term borrowing and
lending market which provides short term liquid funding
The major players are Banks, financial institutions, mutual funds, central banks and corporates
The main instruments in the money market are:o Treasury billo Commercial papero Certificate of deposito Money market mutual funds
Commodities and DerivativesCommodities exchange is the exchange where
commodities are tradedThe exchange of commodities in India is MCDX
Derivatives are the instruments whose values are derived from any underlying like stock, index, commodities
Futures are the contract where two parties agree to do trade at a fixed price and fixed terms but in the future
Options: Option is the contract which gives its buyer a right but not the obligation to buy or sell certain instruments at predetermined price
Securities exchange board of IndiaSecurities exchange board of India (SEBI) is an
autonomous body created by the Govt. of India in 1992. It is the regulator of securities markets in India
The main functions of SEBI are:o Regulation of capital marketo Monitoring trading and clearingo Regulation the brokers and investorso Promoting research and investigationo Drafting regulation, investigation and enforcement of
laws
Responsibilities and requirements of SEBISEBI has responsibility towards three groups: Investors,
Issuers of securities and Market intermediariesFollowing are the major requirements laid down by SEBIAll the brokers and sub-brokers have to get register with
SEBIAll underwriters have to deposits Rs. 20 lacs with SEBIAll the mutual funds are covered under Mutual Fund
Regulation Act 1993All companies are free to decide their stock prices and
share premium amounts