CAPITAL MARKET

Presented by, Group- 4

Financial Markets

CAPITAL MARKET ORGANIZED MARKET

FINANCIAL MARKETS

MONEY MARKET

UNORGANIZED MARKET MONEY LENDERS,INDIGENEOU S BANKERS

Capital Markets
Provided resources needed by medium and large scale industries. Purpose for these resources
Expansion Capacity Expansion Investments Mergers and Acquisitions

Deals in long term instruments and sources of funds

Main Activity Functioning as an institutional mechanism to channelize funds from those who save to those who needed for productive purpose. Provides opportunities to various class of individuals and entities.

SIGNIFICANCE
Growth of savings, Efficient allocation of investment resources, Better utilization of the existing resources

Capital market instrument

Debt Prefernce share Equity ADRs/GDRs Derivatives

Primary market
The primary market is that part of the capital markets that deals with the issue of new securities The primary market provides the channel for creation of funds through issuance of new securities by companies, governments, or public institutions.

Types of issues in Primary market

Initial public offer (IPO) Follow-on public offer (FPO) Rights offer Preferential issue/ bonus issue/ Composite issue

Secondary market
The secondary market is the financial market where previously issued securities and financial instruments such as stocks, bonds, options, and futures are traded

Structure of Capital Markets

Primary Markets
When companies need financial resources for its expansion, they borrow money from investors through issue of securities. Securities issued a) Preference Shares b) Equity Shares c) Debentures Equity shares is issued by the under writers and merchant bankers on behalf of the company. People who apply for these securities are: a) High networth individual b) Retail investors c) Employees d) Financial Institutions e) Mutual Fund Houses f) Banks One time activity by the company.

Secondary Markets
The place where such securities are traded by these investors is known as the secondary market. Securities like Preference Shares and Debentures cannot be traded in the secondary market. Equity shares are tradable through a private broker or a brokerage house. Securities that are traded are traded by the retail investors.

Helps in mobilising the funds for the investors in the short run.

Stock exchange
A marketplace in which securities, commodities, derivatives and other financial instruments are traded. The core function of a stock exchange is to ensure fair and orderly trading, as well as efficient dissemination of price information for any securities trading on that exchange

Leading stock exchanges:

Bombay Stock Exchange Limited National Stock Exchange New York Stock Exchange NYSE) NASDAQ London Stock Exchange

Functions of Stock Exchanges

Liquidity and marketability of securities Fair price determination Source of long-tern funds Helps in capital formation Reflects general state of economy

Capital Market Intermediaries

Merchant Banks
mostly in international finance. long-term loans for companies. no regular banking services to the general public. (e.g.) Goldman Sachs etc..

Custodian
customers' securities for safekeeping.
electronic or physical form. tend to be large and reputable firms.

Stock brokers
Buys and sells shares and other securities Sub-brokers Stock brokers- Sharekhan, Angel broking ltd, Kotak Securities etc..

Foreign Institutional Investors (FII)

registered in a country outside of the one in which it is currently investing. include hedge funds, insurance companies, pension funds and mutual funds.

(e.g.) Kotak Mahindra (UK)ltd, Morgan Stanley investment management etc..

Mutual Fund
a pool of funds collected from many investors portfolio is structured

(e.g.) Kotak Mahindra, HDFC mutual fund etc..

Registrar
An institution or organization that is responsible for keeping records of bondholders and shareholders.

Venture Capital
investors seeking private equity stakes in startup and small- and medium-size enterprises.
high-risk/high-return opportunities. (e.g.) Reliance venture, DFJ India etc..

Underwriter
an intermediary between the issuing company and the investors buys the newly issued securities from the company and sells them to investors on the secondary market.

Portfolio Managers
persons responsible for investing implements investment strategy
manages the day-to-day portfolio trading. (e.g.) UTI etc..

ORGANISATIONS

NSE(National Stock Exchange) BSE(Bombay Stock Exchange)

National Securities Depository Limited (NSDL) and Central Securities Depository Limited (CSDL)