CAPITAL MARKET: INTRODUCTION AND CHARACTERISTIC

Capital market is a market for borrowing and lending long term capital funds required by corporate.

CHARACTERISTICS:-1. They deal in securities

2. Price depends on factors like - returns

- D&S - flow of cash.

Functions:Functions

Allocation function.

Liquidity functions.

Other functions.

Indicative

Saving and

invest

Transfer

Merger

Evolution and growth of capital market

Constituents of Indian Capital MarketConstituents of Indian Capital Market

The gilt edged market The Indian Securities market

Primary

Secondary

Primary Market: Meaning & Services Primary market involves in fresh capital funds by both new & existing companies.

Services of N.I.M.(New Issue Market )• Investigative services

•Advisory•Transfer•Guarantee•Distribution

Methods of Marketing SecuritiesMethods:

•Pure prospectus•Offer for sale

•Private placement• Initial public offers•Bough-out-deals•Deguts issue• Bonus issue• Stock option

•Book building methods

SEBI Guidelines1. Listed companies

• Filling of offer document• Letter of offer

• Companies barred• Application of listing

• Issue of securities in DEMAT form2. Unlisted companies

• Track record• Project appraisal

Intermediaries in NIMName of intermediaries

1. Merchant bankers2. Underwriters

3. Bankers to an issue4. Brokers to an issue5. Debenture trustees

MERCHANT BANKERS: INTRODUCTIONIntermediaries in the stock market who are

responsible for public issue management.

Conditions and Role of Merchant Banking

Conditions for registration:1. Capital adequacy

2. Infrastructure3. Expertise

4. Fees5. Undertaking

Roles

1. Contract2. Registration

3. Minimum underwriting4. Due diligence certificate

5. Document submission

UnderwritersMeaning: institutions that provide a

commitment to take up the issue of securities even at the failure of subscription from public.

Roles: 1. Registration2. Agreement

3. Code of conduct4. Compliance

5. Termination of agreement.

Bankers to an issue

Roles:1. Registration2. Fees to SEBI

3. Contract4. Daily statement

5. Info to SEBI6. Book and records7. Code of conduct

Registrars to an issue &share transfer agents

Functions:1. Registration

2. Maintenance of records3. Absorbing of code of conduct.

Debentures trusteeRoles:

1. Registration2. Content

3. Possession4. Protector of interest

5. Due diligence6. Meeting

7. Code of conduct8. Maintenance of books of A/C

9. Information to SEBI10. Inspection

SECONDARY MARKET

Meaning: A market which deals in securities that have

been already issued by companies.

New Financial Institutions1. Venture fund institutions

2. Mutual funds3. Factoring institutions

4. Credit rating institutions5. OTCEI (Over The Counter Exchange of India)

6. NSEI7. NCDS(National Clearance & Depository

System)8. NSDL

9. SHCIL(Stock Holding Corporation of India Limited)

New Financial Instruments1. Commercial paper

2. Certificate of deposit3. Secured premium notes

4. Non-convertible debentures with detachable warrants

5. Zero compound bonds6. Stock invest

7. Zero interest fully convertible debentures8. Deep discount bonds

9. Equity shares with detachable warrants10. Euro issues

CAPITAL MARKETIndex:

1. Meaning2. Characteristics3. Participants4. Functions

5. Different phases of capital market6. Constituents of capital market gilt edged: industrial securities

a. Primaryb. Secondary

7. New financial institutions8. Capital market doldrums

9. Recent initiatives in capital market10. New issue market

a. Meaningb. Servicesc. Methods

11. SEBI guidelines for different companies12. Merchant banking

13. Underwriters14. Stock exchange and trading

STOCK EXCHANGE

Meaning: Organized market place for the investors to buy and sell securities freely.

They ensure liquidity and transferability of financial assets of country.

Definition: Securities or stock exchanges are privately organized market which are used to

felicitate trading in securities-Husband & Dockeray

FUNCTIONS AND ROLES:1. Ideal meeting place

2. Mobilization of savings3. Providing safety to the investors4. Distribution of new securities

5. Ready market6. Liquidity

7. Capital formation8. Speculative trading9. Sound price setting10. Economic barometer

11. Efficient channeling of savings12. Evaluation of savings13. Industrial financing14. Company regulation.

ORGANISATION STRUCTURE

Governing board•Six members of stock exchange•Three members of government•Three public representatives.

Vice-President & President

MODE OF ORGANISATION AND MEMBER

Mode of Organization• Voluntary association

• Public limited companies• Companies limited by guarantee

Membership• Stock exchange traders

• Remises• Authorized clerks• Brokers & robbers