indian financial markets
TRANSCRIPT
Indian Financial Market
Shruthika.N
Finance is the study of money – its nature, creation, behaviour, regulation and administration System stands for a set of bodily organs All those activities dealing in finance are organized in a system known as the financial system
Financial institutions
Financial markets
Financial instruments
Financial services
Indian financial system
Financial markets is the institutional arrangements for dealing in financial assets and credit instruments of different types like currency, cheques, bills, etc…
Functions:
Creation & allocation of credit & equity Mobilization of savings Cater to various credit needs Assist balanced economic growth
The financial market is divided into two categories based on the credit requirement for short term or long term purposes
Money Market – Short term funds
Capital Market – Long term funds
Money market is the collective name given to the various firms and institutions that deal in various grades of near money - Crowther
Loans for less than a year Credit instruments are called near
money assets
MONEY MARKET
Components of Money Market:
Call money market
Collateral loan
Acceptance market
Bill market
Call money market: Loan disbursed by commercial banks 1 day – 7 days Bank can recall the loan at its discretion Usually advanced to bill brokers & stock
exchange brokers.
Collateral loan market: Lender - Commercial banks
Borrower - Stock brokers
Short term - Few months
Back up – Securities, bonds, stocks
If the loan is not paid the bonds or securities become the property of the lender
Acceptance market: “ A draft drawn by an individual or a firm upon a bank & accepted by the bank whereby it is ordered to pay to the bearer a sum of money at a specified time in future.” - Raymond.P.Kent
Primarily used in international trade Bank merely adds a guarantee to the draft Its importance has declined now
Bill market:Bills of Exchange
Written unconditional order which is signed by the drawer & the drawee to pay on demand or at a fixed time in the future a definite sum of money
Usually used by traders Popular in the West
especially London
Treasury bills:
Government Paper Securities
Duration of 91 days
Promissory note of the government to pay a specified sum after a specified period
Significance/Functions of Money market
Economic development Profitable Investment Borrowings by the governor Importance for Central Bank Mobilization of funds Self-sufficiency of Commercial Banks Savings & investment
Defects of Indian Money market:
Unorganized money market Disparity in interest rates Seasonal diversity of the market Lack of a proper bill market Lack of a well organized Banking
system
Capital market: An organized mechanism for effective & efficient transfer of financial resources from the investing parties engaged in industry or commerce in the business either be it public or private sectors of the economy.
Functions:Mobilization of funds Securing foreign capitalPromote balanced regional development
Components of Capital market
Primary market
Secondary market
Primary market :
New issue market New shares & bonds that have never been
issued are offered Facilitates transfer of funds from willing
investors to the entrepreneurs to set - up new enterprises
The sentiment of the stock market influences the primary market
Instruments:
Equity shares
Preference shares
Deferred shares
Debentures
STOCK MARKET “Stock exchanges are privately organized markets which are used to facilitate trading insecurities” - Husband & Dockeray
Functions: Ensure liquidity of capitalMarket for securitiesMobilize surplus savingsRaising new capitalListing securities
Procedure for dealing at stock exchanges
Selection of Broker
Placing an order
Making a contract
Contact Note
Settlement note
PRE - REQUISITES TO BUY A SHARE:
Register with a stock broker. A PAN card holder. Open a demat account.
REGISTERING AS A CLIENT:
Filing a client registration form.Sign the member constituent agreement.
STAGES OF TRANSACTION: Place an order Execution Reporting the deal Settlement of transaction
Order confirmation slip Trade confirmation slip Control note slip Purchase/ Sale note
DOCUMENTS:
BASIS TO BUY SHARES OF A PARTICULAR FIRM
Product manufactured. Demand. Amount of dividend. Ranking of the company. Change in prices.Reputation of the company.
TYPES OF SPECULATORS :
Bull
Bear
Stag
Lame Duck
Factors influencing prices on stock exchange:
Financial position of the firm Demand & Supply position Lending rates Trade cycle Speculation activities Government control
Stock Exchanges in India:
Native Stock& Share Brokers Association
24 recognised Stock Exchanges in India Bombay Stock Exchange National Stock Exchange Over the Counter Exchange of India
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