capital maret.pptx very us content management

Range motion

1. Capital Market 5

2. Chapter Objectives To understand the functions of capital market primary capital market and secondary capital market history of the Indian capital market capital market scams reforms in the capital market.

3. Capital Market A market for long term funds Aids economic growth through capital formation by: Issue of primary securities Issue of secondary securities Secondary market transactions

4. Mobilise savings Provide risk capital Provide liquidity Lower costs Disseminate information Enable valuation of assets Insurance against risk Provide operational efficiency Develop integration among markets and segments Channelise funds to productive sectors Functions of a Capital Market

5. A market for new issues Leads to capital formation Nature of fund raising Domestic equity and debt issues External GDRs, ADRs and ECBs FDI, FII and NRI deposits Primary Market

6. FDI and FII FDI In the form of fully-owned subsidiary or a joint venture, stable, enhances management quality, transfer of technology and generation of employment. FII In the form of portfolio investment; augments the pool of investible funds; volatile. 25 Other non-FDI flows 29 Total portfolio investments 11 Total net FDI flows India(in US $ bn) Data for 2003-05

7. Fund Raising in the Primary Market Public issue by prospectus Private placement Rights issues Preferential issues

8. Secondary Market A market for outstanding securities Facilitates liquidity, marketability, and valuation of securities Helps in price discovery Creates a wealth effect

9. Segregation of Indian Secondary Market Secondary market for corporate and financial intermediaries Secondary market for government securities and PSU bonds

10. History of the Indian Capital Market Under British rule – Not organised and developed Post independence – Small size and supervised by CCI In 1950s – Rampant speculation; Government enacted Securities Contract (Regulations) Act and Companies Act, 1956;Development of Financial Institutions. In 1960s – Ban on badla, UTI set up in 1964 In 1970s – Badla resumed; Promulgation of the Dividend Restriction Ordinance – slump in BSE sensex; FERA issues revive stock markets In 1980s – Small investor participation; Introduction of PSU bonds; popularity of convertible debentures. In 1990s – Capital Issues (Control) Act repealed. Emergence of SEBI; Free pricing; entry of new players and new trading mechanism; Capital market scams

11. The 1991-92 Securities Scam (Harshad Mehta Scam) Misuse of public sector banks, mutual funds, bank receipts, and SGL ledger accounts; a bank scam, repos banned The 2001 Ketan Parekh Scam Misuse of pay orders, private sector banks and cooperative banks; a securities scam; badla banned Capital Market Scams

12. Reforms in the Capital Market Specialised Regulator Emergence of specialised intermediaries Entry to FIIs Pricing of securities through book building Access to international markets Emphasis on corporate governance Screen-based trading system Rolling settlement Dematerialisation of securities Derivatives trading Comprehensive risk management systems