in India
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Capital Markets
It is an organized market mechanism for effective and efficient
Individuals
Institution
s
Governme
nt
Investors
Lenders
Sellers of money
capital
Middlemen
Capital
Market
Stock exchange
New issue
market
Finance and
Entrepreneurs
investment
Borrowers corp.
Clearing house
for long term or
permanent
Demand
for funds
Individuals
Institution
s
Governme
nt
Buyers of
money capital
Govt.
securities
Corporate
securities
PSUs
Bonds
UTI
Mutual
Funds
New Issues
Market
players
original
Stock
market
intermediari
es
New Issues
Market
players for
Issues
Non-Marketable
Securities
Bank
Deposits
Deposits
with
Companie
s
Loans and
advances
of banks
and FIs.
POC and
deposits
Secondary Markets
Securities issued
a)Preference Shares
b)Equity Shares
c)Debentures
Stock Exchange
An organised market place where
securities are traded.
Securities include (i). Shares,
scrips, bonds, debentures, (ii).
Government securities.
Securities are issued by Govt,
Semi Govts bodies, PSUs & COs
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Securities
Market
Equity
Market
Government
Securities
Market
Debt
Market
Corporate
Debt
Market
Derivatives
Market
Money
Market
Options
Market
Futures
Market
Terminology
Capital Market
Primary Market
Secondary Market
Bear Market
Bull Market
Blue Chips Companies
Gilt Edged Securities
Kerb Trading
Public Issue
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Public Issue
Public Issue -- Sale of bonds or stock to
the general public.
Securities are sold to hundreds, and often
thousands, of investors under a formal contract
overseen by federal and state regulatory
authorities.
When a company issues securities to the
general public, it is usually uses the services of
an investment banker.
Investment Banker
Investment Banker -- A financial institution that
underwrites (purchases at a fixed price on a fixed
date) new securities for resale.
Investment banker receives an underwriting spread
when acting as a middleman in bringing together
providers and consumers of investment capital.
Underwriting spread -- the difference between the
price the investment bankers pay for the security
and the price at which the security is resold to the
public.
Traditional Underwriting
Underwriting -- Bearing the risk of not being able
to sell a security at the established price by
virtue of purchasing the security for resale to the
public; also known as firm commitment
underwriting.
underwriting
If the security issue does not sell well, either
because of an adverse turn in the market or
because it is overpriced, the underwriter, not
the company, takes the loss.
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Kerb trading
On the curb is a financial term that
describes the act of trading securities
outside the mainstream stock exchange,
either because the company operating the
exchange has very strict listing
requirements (cf: alternative stock
exchange) or because investors are so
interested to continue trading even after
the official ...
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Benefits to community
Encourage people to save money.
Helps in capital formation.
Performance of any company is
reflected through stock exchange. like
infosys,
Encouraging private COs to go public.
Encouraged by recent boom 8000+ COs
are going public by offering shares.
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Benefits to Investors
Ready market for trading.
Interest is safeguard through SEBI
Law.
Hedge against inflation.
SE provides day to day informations
that are published in all dailies.
Multiplies your investment.
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Bull (Tejiwala)
A person who first buys & then sells
shares expecting a rise in price of
that share.
So, he buys the shares & when
prices go up, he sells them & enjoys
price difference.
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Bear (Mandiwala)
He first sells & then buys the shares
expecting a fall in prices of a
particular securities.
So when prices would fall in future he
will buy at cheaper rtes & then make
a profit.
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Stag
A speculator who always applies for
shares of a new company .
He acts with an intention of snatching
a quick profits.
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Securities Contracts
(Regulation) Act (SCRA)
In India the dealings on the
SEs are regulated by
1. SCRA, and
2. the SEBI
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Provisions of SCRA
1. Grant of recognition to stock exchange.
2. Submission of periodical returns.
3. Power to direct rules to be made or to
4.
5.
6.
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make rules.
Power to make or amend by-laws.
Power to impose penalties.
Power to make listing of securities
compulsory..
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SEBI
Objective of SEBI are:To protect the interests of
investors in securities
To promote the development of
SEs
To regulate the securities market
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