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Capital Market

Capital Market

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Published by saurabh khatate
A project on Capital Markets
A project on Capital Markets

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Published by: saurabh khatate on Sep 28, 2009
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06/18/2013

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Capital Market 
 
Chapter 1 - Capital Market in India
Introduction:-
 The capital market is the market for securities, where companies andgovernments can raise long term funds. Selling stock and selling bondsare two ways to generate capital and long term funds. Thus bond marketsand stock markets are considered capital markets. The capital marketsconsist of the primary market, where new issues are distributed toinvestors, and the secondary market, where existing securities are traded.The Indian Equity Markets and the Indian Debt markets together form theIndian Capital marketsIndian Equity Market at present is a lucrative field for investors. Indianstocks are profitable not only for long and medium-term investors but alsothe position traders, short-term swing traders and also very short termintra-day traders. In India as on December 30 2007, market capitalisation(BSE 500) at US$ 1638 billion was 150 per cent of GDP, matching well withother emerging economies and selected matured markets.For a developing economy like India, debt markets are crucial sources of capital funds. The debt market in India is amongst the largest in Asia. Itincludes government securities, public sector undertakings, othergovernment bodies, financial institutions, banks and companies.
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Equity MarketDebt MarketIndian Capital MarketPrimaryMarketPrimaryMarketSecondarySecondary
 
Capital Market 
Equity market in India:-
Stock is the type of equity security with which most people arefamiliar. When investors (savers) buy stock, they become owners of a"share" of a company's assets and earnings. If a company is successful,the price that investors are willing to pay for its stock will often rise andshareholders who bought stock at a lower price then stand to make acapital profit. If a company does not do well, however, its stock maydecrease in value and shareholders can lose money. Stock prices are alsosubject to both general economic and industry-specific market factors. The equity market is classified as :-
(a) Primary market(b) Secondary market
(a) Primary market:-
The primary market provides the channel for creation of newsecurities through the issuance of financial instruments by publiccompanies as well as government companies , bodies and agencies.
Features of primary markets are:
 This is the market for new long term capital. The primary market isthe market where the securities are sold for the first time. Thereforeit is also called the New Issue Market (NIM).
In a primary issue, the securities are issued by the company directlyto investors.
 The company receives the money and issues new securitycertificates to the investors.
Primary issues are used by companies for the purpose of setting upnew business or for expanding or modernizing the existing business.
 The primary market performs the crucial function of facilitatingcapital formation in the economy. The primary market issuance is done either through public issue orprivate placement . A public issue does not limit any entity in investingwhile in private placement , the issuance is done to select people. Interms of Indian Companies Act , 1956 as issue becomes public if it
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Capital Market 
results in allotment to more than 50 persons. This means an issueresulting in allotment to less than 50 persons is private placement .An IPO is the first sale of stock by a company to the public. In this marketcompany can raise money by issuing equity. If the company has neverissued equity to the public, it's known as an IPO. Mostly public companiesgo for IPO. But large privately-owned companies may also go for an IPO tobecome publicly traded. In an IPO the company offloads a certainpercentage of its total shares to the public at a certain` price In an IPO,the issuer obtains the assistance of an underwriting firm, which helps itdetermine what type of security to issue (common or preferred), bestoffering price and time to bring it to market.. Most IPO’S these days do nothave a fixed offer price. Instead they follow a method called BOOK BUILDIN PROCESS, where the offer price is placed in a band or a rangewith the highest and the lowest value (refer to the newspaper clipping onthe page). The public can bid for the shares at any price in the bandspecified. Once the bids come in, the company evaluates all the bids anddecides on an offer price in that range. After the offer price is fixed, thecompany allots its shares to the people who had applied for its shares orreturns them their money in case of non allotment of shares.
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