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Capital Market
Introduction to Capital Market
The Ministry of Finance (MoF), the Securities & Exchange Board of India
(SEBI) and the Reserve Bank of India (RBI) are the three regulatory
authorities governing Indian capital markets.
Authorities Governing Capital Markets
in India
The Reserve Bank of India Act, 1934 governs policies framed by the Reserve
Bank of India. The functions of RBI in this regard are as follows:
Implementation of Monetary and Credit policies
Issuance of Currency Notes
Government’s Banker
Banking System Regulator
Foreign Exchange through Foreign Exchange Management Act, 1999
Managing payment & settlement system
Apart from the above functions, RBI is also actively involved in developing the
financial market
Securities & Exchange Board of India
(SEBI)
For example, 1:4 rights issue means an existing investor can buy one extra
share for every four shares already held by him/her. Usually the price at
which the new shares are issued by way of rights issue is less than the
prevailing market ..
Resource mobilization by Mutual
Funds
Mutual funds have come as a boon to the small and medium investors and
they have emerged as the popular media through which small and medium
investors can reap the benefits of good investing. There is no other safe way to
enter in the capital market, except the mutual funds. Mutual fund is a specific
type of investment institution, which collects the savings of the community and
invests large funds in a fairly large and well diversified portfolio of sound
investments. It is set-up in the form of a trust. Mutual funds are the vehicles
through which savings from individuals are mobilized to the capital market.
With the emerge of mutual funds; a change is taking place in the composition
of investors. The traditional investors, who used to invest in mutual funds,
keeping in view the college education for children and retirement age, are
giving way to youngest generation with shorter time horizon and greater
expectations. The realization that no single investment product could meet all
the financial needs of investors, had led the mutual funds to develop a wide
variety of products
Depository Accounts
A Mutual Fund basically pools money from multiple investors, such as you, and
invests them in baskets of investments. These baskets form what is called a
portfolio.
This means, your money is invested in a group of investments (either stocks or
debt instruments), and in a simple, as well as accessible manner. On a basic
level, mutual funds are classified as equity funds, debt funds, and money
market funds on the basis of where they invest.
Equity Mutual Funds are the most numerous as well as popular form of Mutual
Funds you will come across
Equity Mutual Funds invest the pooled investor money into shares of various
companies. The gains or losses arising from the rise or drop in prices of these
shares in the stock market decide the performance of the Mutual Fund.
Investment by Foreign Portfolio
Investors (FPIs)