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Unit-II

The capital market is a long-term financial market that facilitates the transfer of funds from surplus to deficit units, involving savings, investment, and finance. It consists of two segments: the primary market for new issues and the secondary market for trading existing securities, with various instruments and participants. Key roles include industrial growth, resource mobilization, and addressing the demand-supply gap of funds, although it faces defects like limited investor participation and lack of transparency.

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3 views

Unit-II

The capital market is a long-term financial market that facilitates the transfer of funds from surplus to deficit units, involving savings, investment, and finance. It consists of two segments: the primary market for new issues and the secondary market for trading existing securities, with various instruments and participants. Key roles include industrial growth, resource mobilization, and addressing the demand-supply gap of funds, although it faces defects like limited investor participation and lack of transparency.

Uploaded by

prajktaravale98
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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CAPITAL

MARKETS
CAPITAL MARKET
➢A market for long term capital which provides
funds to the needy units.

➢ Theprimal role of this market is to make


investment from investors who have surplus
funds to the ones who are running a deficit.
TRANSFORMATION PROCESS

 SAVINGS
 INVESTMENT
 FINANCE

Transformation process is a triangle between these three concepts. Capital markets help in completing this process
Nature of capital market

The nature of capital market is brought out by the


following facts:
➢ It Has Two Segments
➢ It Deals In Long-Term Securities
➢ Deals within financial system
➢ Pool of resources
➢ Instruments: Equity Shares, Preference Shares,
Debentures, Innovative instruments etc.
➢ Participants: Bankers, underwriters, agents/brokers, FIs
etc.
➢ Marketable and non-marketable securities.
ROLE OF CAPITAL MARKETS
 Industrial Growth
 Mobilization of resources
 Long-term funds generation
 Continuous market
 Foreign capital
 Coordination with other financial players.
 Demand-supply gap of funds
Organized-Unorganized?
Just like…

 Kiryana Store

 Easy Day, Reliance Mart, SRS Value Bazaar,


Big Bazaar
Structure of Capital Market
Capital Market

Financial Institutions Security Market

Government Securities Corporate Securities


ICICI

IDBI Govt Loans Primary Market

IFCI T-Bills Secondary Market

LIC PSU Bonds

UTI SFCs Bonds

SIDBI
Defects in Indian Capital Markets
 Only few investors
 Trading in few scrips
 Tradeable securities shortage
 Lack of transparency in dealings
 Insider trading
 Cumbersome procedure of settlement
FEATURES OF DEVELOPED CAPITAL
MARKETS
 Screen based trading
 Dematerialization of securities
 Shorter settlement cycle
 Foreign institutional investors
 Investor protection
 Electronic clearing services
 Listing of securities
Types of capital market

There are two types of capital market:


➢ Primary market,
➢ Secondary market
THE PRIMARY
MARKETS
Primary Market
➢ It is that market in which shares,
debentures and other securities are sold for
the first time for collecting long-term
capital.
➢This market is concerned with new issues.
Therefore, the primary market is also called
NEW ISSUE MARKET.
Functions of Primary Market

 Organization
 Underwriting
 Distribution
Features of Primary Market
➢ It Is Related With New Issues
➢ It Has No Particular Place
➢ It Has Various Methods to Float Capital:
Following are the methods of raising capital in the
primary market:
i) Public Issue; IPO (Unlisted company)/FPO (Listed
Company)
ii) Offer For Sale; Existing shareholders to public
iii) Private Placement/QIB
iv) Right Issue
v) Electronic-Initial Public Offer
vi) Bonus Shares
vii) Book-Building
https://www.moneycontrol.com/stocks/marketinfo/bonus/index.php?sel_year=2023
Price Band fixed: Rs. 110-135
(company advertisement)
No. of Equity shares for public: 35,000
No. of Equity shares for
Institutional investors : 50,000
Bids received
25,000 shares: Rs. 135
50,000 shares: 130
80,000 shares: 125
1,20,000 shares: 120
*Book runner (merchant banker) will record names and number of securities
and investors
Primary Market Intermediaries
 Merchant Bankers
 Registrar to issue
 Share transfer agents
 Bankers to the issue
 Brokers to the issue
 Advertising agents
 Underwriters
 Debenture trustees
https://www.moneycontrol.com/ipo/ipo-historic-table?classic=true
https://www.moneycontrol.com/news/tags/private-placement.html

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