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Capital market - sample presentation

  2. Meaning of Capital Market  A Market in which individuals and institutions trade financial securities. Organisations/institutions in the public and private sectors also often sell securities on the capital market in order to raise funds.  Capital markets are Financial markets for the buying and selling of long term debt and equity backed securities.  Capital Market is where trading in financial instruments is conducted to raise capital
  3. Three categories of Capital Market  Issuer of securities: Borrowers or deficit savers who issue securities to raise funds( corporate sectors and central government).  Investors: Surplus savers who deploy savings by subscribing these securities(include retail investors and mutual funds).  The Intermediaries: Agents who match the need of users and suppliers of funds.
  4. Nature of Capital Market  It has two segments primary and secondary market.  It performs trade-off function.  It deals in long term securities.  It helps in creating securities.  It creates dispersion in business ownership.  It helps in capital function.
  5. Role and Function of Capital Market  Capital formation  Avenue provision of investment.  Speed up Economic growth and Devolopment.  Mobilisation of savings  Proper Regulation of Funds  Service Provision  Continous Availability of Funds
  6. Characteristics of Capital Market  The main characteristics of capital market:  Connects savers and entrepreneurial borrowers: The capital market links savers with the borrowers of funds. It routes money from savers to entrepreneurial borrowers.  Deals in medium and long-term investments: Capital Market is a market for medium and long-term financial instruments.
  7. Contd…  It helps in rasing long-term funds. Through this market, Corporates, Industrial organisations, financial institutions and so on get access to long-term funds from both domestic and foreign markets.  Capital Market doesn’t deal with short-term financial instruments linke Banker’s Acceptance, Certificate of deposits and commercial paper.
  8.  Presence of Intermediaries: Capital Market operates with the help of intermediaries like brokers, underwriters, merchant bankers, sub-brokers, collection bankers and so on. These intermediaries are important element of a capital market.
  9.  Determinant of rate of capital formation: Capital Market is a determinant of the rate capital formation in an economy as it mobilizes funds. Capital formation is the net addition to the existing stock of an economy’s capital .  Variety of Investors: Capital Market has a wide variety of investors. It comprises both individuals like general public and institutional investors like mutual funds, LIC, and so on.
  10.  Deals in marketable and non-marketable securities: Capital market trades in both marketable and non-marketable securities. Marketable securities are securities that can be transferred e.g. shares, debentures, and so on. On the other hand, non-marketable securities are those which cannot be transferred e.g. Term Deposits, Loans and advances.
  11. Capital markets are regulated by government rules and regulations: Capital Market operates freely. However, it is regulated by government rules, regulation and policies. For example, BSE and NSE are regulated by SEBI, A government body.
  12.  Provides Liquidity: Capital Market instruments are liquid. Investors can sell securities as and when needed and get cash.  Foreign Investors: Foreign investors, both individuals and institutions, and Non-Resident indians can also invest in the Indian securities market.
  13.  Over-the counter market: An over-the-counter (OTC) are financial instruments like currencies and stocks which are traded directly between two parties.
  14. Structures of Capital Market  Government Securities Market: This is also known as the Gilt-edged market. This refers to the market for government and semi-government securities backed by the Reserve Bank of India.  Industrial Securities Market: This is a market for industrial securities for shares and debenturesof the existing and new corporates firms. Buying and selling of such instruments take place in this market.
  15. Contd… This market is further classified into two types such as the New Issues Market(Primary), and the old issues market (secondary). In primary market, fresh capital is raised by companies by issuing new shares, bonds, unit of mutual funds and debentures. However in secondary market, already existing i.e.old shares and debentures are traded.
  16.  Devolopment Financial Institutions(DFIs): DFIs is the another segment of Indian Capital market. This comprises various financial institutions. These can be special purpose institutions like IFCI, ICICI, SFCs, IDBI, IIBI, UTI, etc… These financial institutions provide long-term finance for those purposes for which they are set up.
  17.  Financial Intermediaries: The fourth important segment of the indian capital market is the financial intermediaries. This comprises various merchant banking institutions, mutual funds, leasing finance companies and other financial institutions.
  18. Players of capital market  Key players in the primary market: Corporation: a corporation is a legal entity that is seperated and distinct from its owners. It is usually a group of people or entities authorized to act as a single entity. Corporations enjoy most of the rights and responsibilities that individuals possess, enter contracts, offer loan and borrow money, hire employees, own assets and pay taxes.
  19.  Institution: Institutionsin capital market consist of the fund managers, institutional investors and retail investors. The investors provide funds needed by the corporations for the growth of businesses. The fund is raised by these investors in the form of bond and shares.
  20.  Investment bankers: The role of investment banks is to guide their clients in making the right decisions and finalising right deals so that they face minimum loss. Investment banks in India also advice their clients to buy back their shares from the market at the right time and offer advisory services to big companies and corporate bodies.
  21.  Public Accounting Firms: Public accounting firms refers to business that provides accounting services to other firms. Public accountants provide accounting expertise, auditingand tax servicies to their clients. This can include the handling of many accounting functions on an outsourced basis.
  22. Key players in the secondary market  Buyers and sellers: The buyers and sellers transact on an exchange in the secondary market. In the secondary market, fund managers or any investors who wish to purchase securities or debts will have to locate seller. Transactions are facilitated through a central market place, including a stock exchange or Over the Counter(OTC).
  23.  Invesment Banks: The investment banks are specialised in the field of debt and equity research and they work closely with traders and security sales personnel to determine the approximate prices of securities in the current market situation. They expedite the sales and trading of issued debts and equities between buyers and sellers in the secondary market.