Growth of Financial Market in India & reasons behind it

What Are Financial Markets?

GOOD MORNING, FRIENDS TODAY I WOULD LIKE TO DISCUSS SOMETHING

ABOUT FINANCIAL MARKET.

Financial markets refer broadly to any marketplace where the trading of securities occurs,
including the stock market, bond market, forex market and derivatives market. Financial
markets are vital to the smooth operation of capitalist economies.

Introduction & History of Financial Market in India

What is India Financial Market?
The India Financial market comprise of the primary market, FDIs, alternative investment
options, banking and insurance, the pension sectors and asset management segment as well.
With all these elements in the India Financial market, it happens to be one of the oldest
across the globe and is definitely the fastest growing and best among all the financial
markets of the emerging economies. The history of Indian capital markets spans back 200
years, around the end of the 18th century. It was at this time that India was under the rule of
the East India Company. The capital market of India initially developed around Mumbai;
with around 200 to 250 stock brokers participating in active trade during the second half of
the 19th century.
A financial market plays a vital role in the economic growth of a country. It acts as an intermediary
between the flow of funds which belong to those who save a part of their incomes and those who
invest in the productive assets. It helps in mobilisation and usefully allocating scarce resources of a
country. A financial system is a complex, well-integrated set of sub-systems of financial
institutions, markets, instruments, and services which facilitates the transfer and allocation of funds,
efficiently and effectively.

HISTORY OF INDIAN FINANCIAL MARKET

As an ancient civilization, the Indian subcontinent always had some rudimentary form of the functioning of
financial system. This early age financial system supported world GDP contribution as high as 32% in
history. However, as the arrow of time moved, fragmented Indian subcontinent lost pace with the world in
terms of socio-economic development.

Pre-Independence era, especially the period of 1857 to 1947, was a mixed bag for the re-birth of the modern
“Indian Financial System”. In this era, the financial system was highly informal with elementary financial
market structures.

After “Independence” political leadership favoured socialist ideals and undertook an approach of planned
economic development. This approach needed the distribution of financial resources under government
control. This need for control resulted in the public ownership of financial institutions starting with the
Reserve Bank of India. In the year 1956, the “Imperial Bank” became the “State Bank of India”. In this same
year, political leadership nationalized 245 insurance companies and provident societies to create “Life
Insurance Company” (LIC) of India. In the year 1969. This era also witnessed the establishment of
government-controlled new institutions, like “Unit Trust of India” (1964) which gave birth to the Mutual
Fund industry in the country.
Indian Financial System hit with a wave of transformation after the BOP crisis of 1991 and consequent
liberalization of the economy. Post-1991 Indian political leadership embraced the ideals of a liberal market
economy. This adoption of the market lead approach started reduction in state control over the financial
system. State also started accepting a role of facilitator or regulator and reformer than the owner of financial
intermediaries and markets. This change started a reorganization of the financial system at a fundamental
level. Political leadership established three new regulators, namely SEBI (Est. 1992, Statutory status was
given), IRDAI (Est. 1999), and PFRDA (Est. 2003).

Two sectors that need their due credit are Insurance and Mutual fund and, the post-1991 period was
especially good for these sectors. Various national and foreign entities beginning to participate in the Mutual
fund sector and lead to the diversification of the sector. Under the regulatory purview of IRDA, the
insurance sector has become a much more disciplined and dynamic sector with the participation of national
and foreign players. This sector with a highly diversified product portfolio with a much wider inclusion of
customers has also strengthened the financial system in India.

The post-1991 era transformed the Indian Financial System with a newer type of organizational
infrastructure like Credit Rating Agencies, Technical Consultancies, Custodian Service Providers, portfolio
managers, Foreign Institutional Investors brought much needed dynamism in the economy.

Scope of the India Financial Market -

The financial market in India at present is more advanced than many other sectors as it became organized as
early as the 19th century with the securities exchanges in Mumbai, Ahmedabad and Kolkata. In the early
1960s, the number of securities exchanges in India became eight. Today there are 23 regional securities
exchanges in India.

The Indian stock markets had remained stagnant due to the rigid economic controls. It was only in 1991,
after the liberalization process that Indian securities market witnessed a flurry of IPOs. The market saw
many new companies spanning across different industry segments and business began to flourish.

The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange of India) in
the mid-1990s helped in regulating a smooth and transparent form of securities trading.

The regulatory body for the Indian capital markets was the SEBI (Securities and Exchange Board of India).
The capital markets in India experienced turbulence after which the SEBI came into prominence. The
market loopholes had to be bridged by taking drastic measures.

Potential of the India Financial Market -

Indian Financial Market helps in promoting savings of the economy - helping to adopt an effective channel
to transmit various financial policies. The Indian financial sector is well-developed, competitive, efficient
and integrated to face all shocks. In the India financial market there are various types of financial products
whose prices are determined by the numerous buyers and sellers in the market. The other determinant factor
of the prices of the financial products is the market forces of demand and supply. The various other types of
Indian markets help in the functioning of the wide India financial sector.

CONCLUSION
India is expected to be the fourth largest private wealth market globally by 2028.
India is today one of the most vibrant global economies on the back of robust banking and insurance sectors.
The relaxation of foreign investment rules has received a positive response from the insurance sector, with
many companies announcing plans to increase their stakes in joint ventures with Indian companies. Over the
coming quarters, there could be a series of joint venture deals between global insurance giants and local
players.
The Association of Mutual Funds in India (AMFI) is targeting nearly five-fold growth in AUM to Rs. 95
lakh crore (US$ 1.47 trillion) and more than three times growth in investor accounts to 130 million by 2025.
India's mobile wallet industry is estimated to grow at a Compound Annual Growth Rate (CAGR) of 150% to
reach US$ 4.4 billion by 2022, while mobile wallet transactions will touch Rs. 32 trillion (USD$ 492.6
billion) during the same period.
According to Goldman Sachs, investors have been pouring money into India’s stock market, which is likely
to reach >US$ 5 trillion, surpassing the UK, and become the fifth-largest stock market worldwide by 2024.

Features of the Financial Market in India:

 India Financial Indices - BSE 30 Index, various sector indexes, stock quotes, Sensex charts, bond
prices, foreign exchange, Rupee & Dollar Chart
 Indian Financial market news
 Stock News - Bombay Stock Exchange, BSE Sensex 30 index, S&P CNX-Nifty, company
information, issues on market capitalization, corporate earning statements
 Fixed Income - Corporate Bond Prices, Corporate Debt details, Debt trading activities, Interest
Rates, Money Market, Government Securities, Public Sector Debt, External Debt Service
 Foreign Investment - Foreign Debt Database composed by BIS, IMF, OECD, & World Bank,
Investments in India & Abroad
 Global Equity Indexes - Dow Jones Global indexes, Morgan Stanley Equity Indexes
 Currency Indexes - FX & Gold Chart Plotter, J. P. Morgan Currency Indexes
 National and Global Market Relations
 Mutual Funds
 Insurance
 Loans
 Forex and Bullion
If an investor has a clear understanding of the India financial market, then formulating investing strategies
and tips would be easier.