Capital Market

Capital Market

Long term
Industrial Govt. Securities loans
Securities market Market market

Primary Secondary
market Market
Primary Market
 New Issue Market
Primary market provides opportunity to issuers of
securities, government as well as corporates, to raise
resources to meet their requirements of investment
and/or discharge some obligation.
There are three ways by which a company may raise
capital in primary market.
The most common method of raising capital by
the new companies is through sale of securities
to the public called “ Public Issue”
  Securities are first offered to the existing share
holders on a pre-emptive basis is called as “ Right
Issue ”
“Private placement” is a way of selling securities
privately to a small group of investors.
Secondary Market
Indian Stock Market:

 As business and industry expanded and

the economy assumed more complex
nature, the need for “permanent
finance” arose. Entrepreneurs needed
money for long term was as investors
demanded liquidity. The answer was a
ready market for investments and this
was how the stock exchange came into
being.

 The market where existing securities are

traded is referred to as secondary market
or stock market.
Functions or Services of Stock
exchanges
 Liquidity and Marketability
 Safety of funds
 Supply of long term funds
 Flow of capital to profitable ventures
 Motivation for improved performance
 Promotion of investment
 Reflection of business cycle
 Marketing of New Issues
 Miscellaneous services
Regulatory frame work
 A comprehensive legal frame work was
provided by the Securities Contract
Regulation Act, 1956 and the Securities
Exchange Board of India, 1992.
 A three tire regulatory structure
comprising of Ministry of Finance, SEBI
and the Governing Boards of stock
exchanges regulates the functioning of
stock exchanges.
Regulatory frame work
 Ministry of Finance
- Application of the provision of the SCR
act
Supervisory powers over SEBI
- power to grant recognition of stock
exchanges
- power to approve the appointments of
executive chiefs and nominations of the
public representatives in the Governing
Board of stock exchanges
- Responsibility of preventing undesirable
speculation.
Regulatory frame work
 The Securities and Exchange Board of India
- The SEBI even though established in the year
1988, received statutory powers only on 30th
January 1992.
- Under the SEBI act, wide variety of powers is
vested in the hands of SEBI
- SEBI has the powers to regulate the business of
stock exchanges, other security markets and
mutual funds
- Responsibility to prohibit the fraudulent unfair
trade practices
- Promoting healthy growth of capital markets and
protecting investors interest
Regulatory frame work
 The Governing Body
- Elected members, directors, government
nominees and public representatives
- Rules bylaws and regulations of the stock
exchange provide substantial powers to
the executive director for maintaining
efficient and smooth day to day
functioning of the stock market
- Responsibility of maintaining orderly and
well regulated market.