SECURITIES MARKET IN

INDIA
: An Introduction
Made by:
Arti Sharma Mehta
 Securities Market in India
 What and Why of Securities Market?
In every economic System, some units which
may be individual or Institution are surplus-
generating while others are deficit- generating.
 Securities Market in India

 Surplus-Generating Units are called Savers while

Deficit-generating units are called spenders.

 Households are surplus-generating and Corporate and

Government are deficit generators.

 By placing the surplus funds in Financial claims or

Financial securities the Spending community gets funds
at a cost and saving community gets various benefits
like interest, dividend, capital appreciation, Bonus etc.
 Securities Market in India
 The Surplus generating units (Savers) are
investors and Deficit generating units
(spenders) are issuers.
 These investors and issuers of financial
securities constitute two important elements of
the securities markets.
 Securities Market in India
 The third critical element of markets is the
intermediaries who act as conduits between the
investors and issuers.
 Regulatory bodies, which regulate the
functioning of the securities markets, constitute
the last but very significant element of
securities markets.
 Securities Market in India
Thus the four important elements of securities
markets are:
 Investors

 Issuers

 Intermediaries

 Regulators
 Securities Market in India

Securities Can be
 Government or Industrial
 Long-term or short-term
 Primary Market or Secondary Market
 Securities Market in India
Primary Market is the segment in which new
issues are made whereas secondary market is
the segment in which outstanding issues are
traded. It is for this reason that the Primary
Market is called the New issues Market and the
secondary market is called Stock Market.
 Securities Market in India

History of Indian Stock Market

 From Scattered and small beginning in the 19th

Century, India’s stock market has risen to great
heights.
 By 1990, we had 19 stock exchanges in the
country.
 There were around 6,000 listed companies and
the investors population stood around 15
Million.
 Securities Market in India

Role & Functions of Stock Exchange

 Liquefy capital: to convert it into cash

 Investment

As per the Union of India Vs. Allied International Products

Ltd. [ (1971) 41 Comp Cas 127 SC]: (1970) 3 SCC 5941), the
Supreme Court of India has enunciated the role of the Stock
Exchanges in these words:
 Securities Market in India
The stock exchange is really an essential pillar of the
private sector corporate economy. It discharges three
essential functions:

 First, the stock exchange provides a market place for purchase

and sale of securities viz. shares, bonds, debentures etc. It,
therefore, ensures the free transferability of securities which is
the essential basis for the joint stock enterprise system.
 Secondly, the stock exchange provides the linkage between
the savings in the household sector and the investment in the
corporate economy
……….. Condt.
 Securities Market in India
It mobilizes savings, channelizes them as securities into these
enterprises which are favored by the investors on the basis of such
criteria as future growth prospects, good returns and appreciation
of capital.

 Thirdly, by providing a market quotation of the prices of shares

and bonds- a sort of collective judgment simultaneously reached
by many buyers and sellers in the market- the stock exchange
serves the role of a barometer, not only of the state of health of
individual companies, but also of the nation’s economy as a
whole.
 Securities Market in India
Regulation of Stock Market
Since the savings of the investing community
namely, public, needs to be protected from
various kinds of malpractices, frauds, defaults
etc., it was obligatory on the part of the Governing
system to establish Regulatory bodies.
U.K has the Securities and Investment Board (SIB)
U.S. has the Securities and Exchange Commission
(SEC)
 Securities Market in India

Regulation of Stock Markets

 By a notification issued on 12th April’1988,
Securities and Exchange Board of India (SEBI)
was constituted as an interim administrative
body to function under the overall
administrative control of the Ministry of
Finance of the Central Government.
 The SEBI was given a statutory status on 30th
January,1992 by an ordinance to provide for
the establishment of SEBI.
 Securities Market in India
Organization Structure of SEBI
 -a Chairman( to be appointed by Central Govt.)
 - two members from amongst the officials of
the Ministries of the Central .Govt. dealing
with Finance and Law.
 - One Member from RBI
 - two members to be appointed by Central
Govt.
 Securities Market in India

Activities of SEBI
 -Rules regarding registration of intermediaries
 - Guidelines and Code of Conduct for Merchant Bankers

 - Categorization of Merchant Bankers

 - Guidelines for Portfolio Management Services

 - Circulars on various issues (Periodical)

 - Guidelines for Lead managers

 -Regulation for Registrars and Share-Transfer agents

 -Guidelines for IPO’s, Debt. Instruments

 - Regulation on Insider trading

………. Contd.
 Securities Market in India
 - Guidelines for Mutual funds
 - Regulation on takeovers
 - Code for Corporate Governance
 -Consultative Paper on free market pricing of Capital
Issues.
 - Advisory committees for Primary and Secondary
Market reviews
 -Investor Protection guidelines
 -Guidelines on SRO’s for Merchant Bankers
 -Regulation of Futures and Options, Index Market
 - Informal Guidance
Thank You