SATHYABAMA UNIVERISITY

FACULTY OF BUSINESS ADMINISTRATION

SUBJECT TITLE: SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

SUBJECT CODE: SBA 5602
COURSE: MASTER OF BUSINESS ADMINISTRATION
SEMESER- II LEVEL –I TERM-II

Unit-II

Financial market

Financial market refers to the network and structural facilities for the transfer of funds between
buyers and sellers of financial assets, services etc. Financial markets helps the participants to deals in
financial instruments. Financial markets facilitates business firms as well as governments to raise needed
funds by issuing and selling different instruments. Financial markets also helps investors to facilitate
them to invest surplus funds and earn a return.

Types and classification of financial markets

(i) Organised market and unorganized market

Organised market is the part of the financial market which operates under a defined set of rules
regulations and legal provisions. The statutory authorities such as central Government, The central bank,
the Exchange commission such as SEBI in India etc.

Un organized market is part of the financial market which is not standardized and is outside the
preview of government control. When the financial transaction takes place outside the organized
components, it is called unorganized or informal financial market..

Money market and capital market

Money market is a market for short term financial assets of maturity period less than one year.
Assets used for transaction substitutes money,

Capital market is a market for long term financial assets that is shares , mutual fund units and
debenture. The investor buys share which are issued by corporate. Apart from these securities,
derivatives products such as futures and options are also traded in capital markets.

Primary market and secondary markets

All financial instruments are first issued in primary market and the subsequent transactions take
place in secondary market. Primary market helps in mobilization of savings of individual investors. It is
also know as new issue market. Secondary market is represented by the securities dealers and stock
exchanges.

Players and participants in Financial markets

The individuals- the investors who are the net savers and purchasers of financial instruments.

The firms and corporate- They offer different types of securities to the investors. Sometimes they also
act as an investors.

Regulators- Government agencies normally regulates this system of flow of funds. In India two basic
regulators are RBI and SEBI.

Government-

Government needs fund to take care of the budgets deficits or as a measure of controlling the liquidity.

Market Intermediaries: There are a number of market intermediaries known as financial intermediaries
or merchant bankers, operating in financial systems.

Some of the intermediaries

Stock exchanges.

The secondary market is represented by the stock exchanges in any capital markets. The stock
exchanges provides an organized market place for the investors to trade in the securities. This may be
the most important function of stock exchange. In India , The secondary market represented by the
stock exchanges network, is more than 100 years old when in1875 the first stock exchange started its
operation in Mumbai. Gradually stock exchanges at other places have also been established and at
present 23 stock exchanges operating in India. After the operation of OTCEI and National stock
exchanges and the NSE.

The stock exchange Mumbai is known as BSE it is established in 1875. BSE witness to continuous rise
and fall in share price over all these years. The trading system has gradually shifted from open outcry
system to computerized on line system now it is called BOLT system. At present the trading at BSE takes
place on screen based national-wide network on real times basis, members sitting in remote office and
workstations can enter into securities transactions.

BSE has introduced a number of first in securities market. In 1986 BSE launched the first Index
number of share price in India called SENSEX( Base year 1978-79). At present 13 different types of
Indices are calculated to tell the price behavior sector wise or group wise.

National stock exchange ( NSE): It is incorporated in the year 1992 November by IDBI and other al India
financial institutions and became recognized stock exchange with effect from April’26.

The NSE if fully automated screen based trading system. It operates on the principle of an order driven
market. It was a part of the financial market sector reforms begins undertaken in the economy. To
identify the lacunae of the Indian stock market and to investigate what was wrong with current system
a number of committee were formed. The trading system of NSE is known as National Stock exchange
Automated trading ( NEAT).

Market segment of NSE

Wholesale debt market- Market which involves in debt trading like treasury bills, PSU bonds,
Commercial papers, Certificate of deposits etc. Members of the debt market can trade on their own
behalf and on behalf of their clients. NSE trading systems facilities making of two ways quotes in a highly
flexible manner.

Capital market segments- It covers trading in equities and retail trade in convertible and non convertible
debentures and hybrids.

Future and options trading- It is dealing of derivatives.

Functions of SEBI

SEBI- Securities and Exchange Board of India is the nodal agency to regulate the capital market and
other related issues in India. It was established in 1988 after the Capital Issues( contract) Act 1947. It
constitute of the chairman and 8 members one from RBI and two from official of central government
and balance of five from central government from different field ,

It provides a protection to investors

It provides a fair dealings

It regulates the market.

It prohibits unfair trade practice.

Registering and regulating credit rating agencies.

It educates the investors.

It prohibits insider trading.

Part- A

1. In what way money market differ from capital market.

2. What is a primary market?

3 Write about Secondary market.

4 Give a short notes on SEBI.

5. What is meant by debt market? List some of the debt market instrument.
Part- B

1. Elaborately explain the function of SEBI in Investors protection.

2. Write short notes on BSE and NSE.

3. Stock exchanges is an indicator of economic prosperity of a nation – comment.

4. Differentiate Primary market with Secondary market.

5. Diagrammatically classify and explain the Indian financial market.