CENTRAL UNIVERSITY OF SOUTH BIHAR

SCHOOL OF LAW & GOVERNANCE

Financial Market Regulation
PROJECT

Capital Market in India & USA: A Comparative Study

Under the Supervision of –Dr. Pradip Kumar Das

SubmittedBy:-
RAJEEV RAJ
B.A.LL.B:- 8th Semester
Enrolment- CUSB1513125033

1
ACKNOWLEDGEMENT

During the course of writing this project, I have received the help, encouragement from my
teacher, colleagues, friends and others. I am very thankful to all of them.
I am practically very thankful to my “FINANCIAL MARKET REGULATION” Assistant
Professor , Dr. Pradeep Kumar Das for encouragement and support that he provided during the
preparation of the project.
I am deeply indebted to the eminent legal experts and company law experts and other scholars
of repute whose valuable work has been highly useful in writing this project.

RAJEEV RAJ

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RESEARCH METHODOLOGY

The research is based on capital markets in India and USA. Basically the data which has been
collected for the research purpose is particularly of qualitative nature. It has been collected
from various sites, magazines and newspaper articles. So it was very difficult to use some
typical statistical tools and techniques. So basically the analysis has been done through editing
and coding the information. Graphical representation has also been used for the analysis
purpose.

LIMITATIONS OF THE STUDY

In the current project there are some limitations that have been found. These limitations are as
follow:-
In this project capital market of only India and USA are taken into consideration.
The comparison is done on the basis of PESTEL analysis of both.
The present study is concerned with the analytical data only.
Every person has different view in comparison to other person. Same is the case with this
project also.

OBJECTIVES OF STUDY
To understand the scenario of capital market.
To study the capital market in India.
To study the capital market in USA.
To highlight the difference between capital market in India and USA
To make a PESTEL analysis of both

RESEARCH QUESTIONS

1. WHEATHER CAPITAL MARKET IN USA IS BETTER THAN INDIAN CAPITAL

MARKET?
2. WHEATHER SEC IS A BETTER REGULATORY BODY?

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TABLE OF CONTENTS:

1. INTRODOCTION 5
2. DEFINITION AND MEANING OF CAPITAL MARKET 7
2.1. NATURE AND PARTICIPANTS 8
2.2. CAPITAL MARKET PARTICIPANTS 8
3. INDIAN CAPITAL MARKET SYSTEM 9
3.1.CAPITAL MARKET INSTRUMENT 10
3.2. HISTORY OF INDIAN CAPITAL MARKET 11
3.3.ROLE AND IMPORTANCE OF CAPITAL MARKET 11
3.4.TYPES OF CAPITAL MARKET 13
3.5.SEBI AND REGULATIONS OF THE CAPITAL MARKET 14
3.5.1. REGULATIONS OF SEBI 14
3.5.2. REGULATIONS OF CAPITAL MARKET 15
4. U.S.A. CAPITAL MARKET 16
4.1. FUNCTIONS OF SECURITY EXCHANGE COMMISSION 17
4.2. ORGANIZATIONS OF SEC 18
5. COMPARISION BETWEEN INDIAN CAPITAL MARKET
AND USA CAPITAL MARKET 20
6. CONCLUSION 23

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1. INTRODUCTION

The capital market is a vital of the financial system. Capital market provides the support of
capitalism to the country. The wave of economic reforms initiated by the government has
influenced the functioning and governance of the capital market. The Indian capital market is
also undergoing structural transformation since liberalisation. The chief aim of the reforms
exercise is to improve market efficiency, make stock market transactions more transparent,
curb unfair trade practices and to bring our financial markets up to international standards.
Further, the consistent reforms in Indian capital market, especially in the secondary market
resulting in modern technology and online trading have revolutionized the stock exchange.
Capital market concerned with the industrial security market, government securities markets,
and long-term loan market. Capital market deals with long term loan market. It supplies long-
term and medium-term funds. It deals with shares, stocks debentures and bonds. Security dealt
in capital markets are long-term securities. It provides a market mechanism for those who have
saving and to those who have saving and to those who need funds for productive investments.
The capital market aids economic growth by mobilising the savings of the economic sector and
directing the same towards channels of productive uses. Companies turn to them to raise funds
needed to finance for the infrastructure facilities and corporate activities.
The Bombay Stock Exchange was setup in 1875 and is one of the oldest stock exchanges in
India. The BSE Sensex is the benchmark index of the country and acts as a barometer of the
economy. It is also called the BSE (30) Sensitive Index (Web 2), The Sensex has 30 stock
index, composed of the largest and most traded stocks representing various sectors in the
economy.
America has the largest and deepest capital markets in the world – according to the federal
Reserve, the capital markets provide approximately 80% of debt financing for business in the
U.S. The securities industry facilities access to those markets, creating investor opportunity,
capital formation, job creation and economic growth.
The capital markets landscape has changed considerably over the past two decades, including
the expansion of private capital markets and related regulatory changes. Policymakers should
be mindful of these changes as they consider their objectives for capital formation and the
means to achieve them. US public companies are fewer in number today than 20 years ago but
much larger by market capitalization. They are also more stable, and delisting rates are much
lower than immediately following the dot-com boom. In general, the total number of domestic

5
US-listed companies has stabilized, especially post-2008, and the number of foreign companies
listed on US exchanges has steadily increased over the same time.
Some observers raise concerns about the prospect of companies leaving the US to list in
international markets and foreign companies potentially choosing other markets over the US.
Those fears, however, are not borne out by the data. Attracted to the stability and liquidity of
US capital markets, foreign companies today overwhelmingly choose the US when they list
outside of their home markets. Companies based in the US rarely elect to list elsewhere.
Increased market volatility stemming from interest rate and geopolitical uncertainty likely
drove down IPO numbers in 2016. But one major and sometimes overlooked driver is the
dramatic growth in private capital. Today’s emerging companies have more options than ever
to find private financing for a longer term and in greater amounts. Legislation enacted over the
past five years has made it easier for emerging companies to stay private longer by relaxing
certain regulatory requirements and encouraging more private financing. Investors with large
amounts of capital — including traditional venture capital and private equity as well as large
corporate and institutional investors — have turned to the private market in search of
investment opportunities in high-growth companies.1
During the dot-com peak in 1996, US listings hit a record high of more than 8,000 domestically
incorporated companies listed on a US stock exchange with an average market capitalization
of $1.8b in today’s dollars. The number of domestic US-listed public companies decreased
precipitously through 2003, with almost 2,800 companies lost because of M&A activity and
delisting’s. By 2003, there were 5,295 domestic US-listed companies. The loss of domestic
US-listed companies in 1996–2003 represents 74% of the loss from 1996 to date.
Since the 2008 financial crisis, the total number of domestic US-listed companies has largely
stabilized again, ranging between 4,100 and 4,400. During this same period, foreign companies
listed on US exchanges have steadily increased in number.

1
http://www.ey.com/Publication/vwLUAssets/an-analysis-of-trends-in-the-us-capital-markets/$FILE/ey-an-
analysis-of-trends-in-the-us-capital-markets.pdf, last accessed on 23/03/2018

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2. DEFINITIONS AND MEANING OF CAPITAL MARKET

The capital market is a place where people buy and sell securities. Securities in this sense is
simply a bundle of rights sold to the public by companies, authorities or institutions on which
people then trade in the capital market.
There are different types of securities or bundles of rights. These include shares, debentures,
bonds, etc. There are two levels of the market. The primary market is the market where those
wishing to raise funds from the stock market sell their securities to the public. The secondary
market is where those who bought the securities in the Initial Public Offer (IPO) can sell them
any time they wish. The reason why people buy securities from the primary market is because
they have the assurance that there is a secondary market where they can sell those shares
possibly at a profit.
According to Arun K. Datta, The capital market may be define as “The capital market is a
complex of institutions investment and practices with established links between the demand
for and supply of different types of capital gains”.
Capital market defined as “The market for relatively long-term financial instruments. It consists
of gilt edged market and the industrial securities market. The gilt-edged market refers to the
market for government and semi-government securities backed by the RBI. The securities
traded in this market are stable in value and are much sought after by banks and other
institutions”.
As per above definitions, meaning of capital market as follow:
1. The capital market is the market for securities, where companies and governments can raise
long-terms funds.
2. The market in which corporate equity and loner-term debt securities those maturing in more
than one year are issued and traded.
3. The capital market is market for long-term debt equity shares. In this market, the capital
funds comprising of both equity and debt are issued and traded.
4. The market in which long-term securities such as stocks and bonds are bought and sold.
5. The capital market comprises financial securities, government securities, semi-government
securities.
6. The capital market concerns two broad types of securities traded, debts and equity. Buying
stock allows investors to gain an equity interest in the company and become owner.2

2
http://lexicon.ft.com/Term?term=capital-markets, last accessed on 04/04/2018

7
2.1 NATURE AND PARTICIPANTS

The nature of the capital market is wider. The capital market consists of a number of individuals
and institution. The government is also an important player in the capital market. The players
in the capital market canalize the supply and demand for long-term capital. The constituents of
exchange, commercial banks, co-operative banks, savings banks, development banks,
insurance companies, investment trust and companies etc.

2.2 CAPITAL MARKET PARTICIPANTS

The supply in this market comes from savings from different sectors of the economy. These
savings accrue from the following sources:

1. Individuals.

2. Corporate.

3. Governments.

4. Foreign countries.

5. Banks.

6. Provident Funds.

7. Financial Institutions

All these entities contribute to savings in the economy part of these savings naturally flow in
the capital markets. Individuals invest in these markets directly by investing in shares or
debentures of companies through bond issues of public sector units or through mutual funds.
Corporate who have more savings than their requirement for funds also are participants in this
market.3

3
http://shodhganga.inflibnet.ac.in/bitstream/10603/33042/11/11_chapter%201.pdf, last accessed on
04/04/2018

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3. INDIAN CAPITAL MARKET SYSTEM

3.1. CAPITAL MARKET INSTRUMENT

Financial instruments that are used for raising capital resources in the capital market are known
as Capital Market Instruments‟. The changes that are sweeping across the Indian capital market
especially in the recent past are something phenomenal. It has been experiencing metamorphic
in the last decade, thanks to a host of measures of liberalization, globalization, and privatization
that have been initiated by the Government. Pronounced changes have occurred in the realm
of industrial policy, Licensing policy, financial services industry, interest rates, etc. The
competition has become very intense and real in both industrial sector and financial services
industry. As a result of these changes, the financial services industry has come to introduce a
number of instruments with a view to facilitate borrowing and lending of money in the capital
market by the participants.

The various capital market instruments used by corporate entities for raising resources are as
follows:

1. Preference shares

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2. Equity shares

3. Non-voting equity shares

4. Cumulative convertible preference shares

5. Company fixed deposits

6. Warrants

7. Debentures

8. Bonds

9. Mutual fund

10. Derivatives

11. Commodities

12. Currency exchange.4

3.2 HISTORY OF INDIAN CPITAL MARKET

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years
ago. The earliest records of security dealings in India are meagre and obscure. The East India
Company was the dominant institution in those days and business in its loan securities used to
be transacted towards the close of the eighteenth century. The history of the Indian capital
markets and the stock market, in particular can be traced back to 1861 when the American Civil
War began. The opening of the Suez Canal during the 1860s led to a tremendous increase in
Exports to the United Kingdom and United States, Several companies were formed during this
period and many banks came to the fore to handle the finances relating to these trades. With
many of these registered under the British Companies Act, the Stock Exchange, Mumbai, came
into existence in 1875.

It was an unincorporated body of stockbrokers, which started doing business in the city under
a banyan tree. Business was essentially confined to company owners and brokers, with very
little interest evinced by the general public. There had been much fluctuation in the stock

4
http://www.eiiff.com/capital-market/instruments.html, last accessed on 04/04/2018

10
market on account of the American war and the battles in Europe. Sir Premchand Roychand
remained a kingpin for many years.5

3.3 ROLE AND IMPORTANCE OF CAPITAL MARKET

ROLE:

The capital market plays a very important role in Indian financial system as follow:

1. To mobilize long-term savings to finance long term investments.

2. To inspirations broader ownership of productive assets.

3. To improve the efficiency of capital allocation through a competitive pricing mechanism.

4. To provide liquidity with mechanism enabling the investor to see financial assets.

5. To make lower the costs of transactions and information.

6. To make bridge between investors and companies.

7. To make quick valuation of financial instruments both equity and debt.

8. To security against market risk or price risk trough derivative trading and default risk through
investment protection fund.

9. To provide operational efficiency.

10. To direct the flow of funds into efficient channels through investment, disinvestment, and
reinvestment.

11. To make integration between financial sectors and non-financial sectors, Long term fund
and short-term fund.

12. To give opportunities to risk taker in term of equity and return taker in term of debt.

Thus, a capital market serves as an important link between those who save and those who aspire
to invest their savings.

5
http://shodhganga.inflibnet.ac.in/bitstream/10603/33042/11/11_chapter%201.pdf, last accessed on
04/04/2018

11
IMPORTANCE:

1. It is only with the help of capital market; long-term funds are raised by the business

community.

2. It provides opportunity for the public to invest their savings in attractive securities which
provide a higher return.

3. A well-developed capital market is capable of attracting funds even from foreign country.
Thus, foreign capital flows into the country through foreign investments.

4. Capital market provides an opportunity for the investing public to know the trend of different
securities and the conditions prevailing in the economy.

5. It enables the country to achieve economic growth as capital formation is promoted through
the capital market.

6. Existing companies, because of their performance will be able to expand their industries and
also go in for diversification of business due to the capital market.

7. Capital market is the barometer of the economy by which you are able to study the economic
conditions of the country and it enables the government to take suitable action.

8. Through the Press and different media, the public are informed about the prices of different
securities. This enables the public to take necessary investment decisions.

9. Capital market provides opportunities for different institutions such as commercial banks,
mutual funds, investment trust; etc., to earn a good return on the investing funds. They employ

12
financial experts who are able to predict the changes in the market and accordingly undertake
suitable portfolio investments.6

3.4 TYPES OF CAPITAL MARKET

PRIMARY CAPITAL MARKET - The primary capital market is a market for new or fresh
issues. It deals to the long-term flow of fund from the surplus sector to the government and
corporate sector through primary issues and to banks and non-bank financial intermediary
secondary issues, primary issues of the corporate sector lead to capital formation. The Primary
market for securities is the new issues market which brings together the “supply and demand”
or “sources and uses” for new capital funds.

SECONDARY CAPITAL MARKET - The secondary market also called "aftermarket” is the
financial market for trading of securities that have already been issued in its initial private or
public offering. Stock exchanges are examples of secondary markets. Alternatively, secondary
market can refer to the market for any kind of used goods.

Secondary market is also called share market. Share market includes exchange of those
securities which are already sold and listed in the Primary market. Any transaction in the share
market can be executed by the members of the exchange keeping in mind the rules and
regulations of the SEBI.

3.5 SEBI AND REGULATIONS OF THE CAPITAL MARKET

Before the establishment of the securities and exchange board of India, the principal
legislations governing the securities market in India were the capital issues control act 1956
and the securities contract act 1956. The regulatory powers were vested with controller of
capital issues for the primary market and the stock exchange division for the secondary market
in the Ministry of finance, Government of India.

In the year 1989, SEBI was created by an administrative fiat of the ministry of finance. Since
then, SEBI as gradually was granted more and more powers. With the repeal of the capital

6
https://accountlearning.com/role-and-importance-of-capital-market-in-economy/, Last accessed on
04/04/2018

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issues control act and the enactment of the SEBI act in 1992, the primary market has become
the preserve of SEBI. Further, the ministry of finance, government of India, has transferred
most of the powers under the securities contracts act 1956 to SEBI.

SEBI protects the interest of investors in securities and promote the development of securities
market.

3.5.1 FUNCTIONS OF SEBI

Regulate the business in stock exchanges and any other securities markets.

Register and regulate the working of capital market intermediaries like as brokers, merchant
bankers, portfolio managers and so on.

Register and regulate the working mutual funds.

Promote and regulate self-regulatory organizations.

Prohibit fraudulent and unfair trades’ practices in securities markets.

Promote investors’ education and training of intermediaries of securities markets.

Prohibit insider trading securities.

Regulate substantial acquisition of shares and takeover of companies.

Perform such other functions as may be prescribed by the government.

Review any intermediary or market participant information.

Review books of depository participants, issuers of beneficiary owners.

Investigate and inspect books of accounts and record of insiders.

Suspend the registration of banker if and quarry is there.

Suspend certificates and registration if and quarry is there.7

7
http://www.economywatch.com/financial-regulatory-body/securities-and-exchange-board-of-india.html, last
accessed on 7/04/2018

14
3.5.2 REGULATIONS OF CAPITAL MARKET

Securities and Exchange Board of India (SEBI) was set up as an administrative arrangement in
1988.In 1992, the SEBI Act was enacted, which gave statutory status to SEBI. It mandates
SEBI to perform a dual function: investor protection through regulation of the securities market
and fostering the development of this market. SEBI has been vested most of the functions and
powers under the Securities Contract Regulation (SCR) Act, which brought stock exchanges,
their members, as well as contracts in securities which could be traded under the regulations of
the Ministry of Finance. It has also been delegated certain powers under the Companies Act.
In addition to registering and regulating intermediaries, service providers, mutual funds,
collective investment schemes, venture capital funds and takeovers, SEBI is also vested with
the power to issue directives to any person(s) related to the securities market or to companies
in areas of issue of capital, transfer of securities and disclosures. It also has powers to inspect
books and records, suspend registered entities and cancel registration.

The securities market is regulated by various agencies such as the Department of Economic
Affairs (DEA), The Department of company affairs (DCA), the Reserve Bank of India and the
SEBI. The activities of these agencies are coordinated by a high-level committee on capital and
financial markets.8

4. USA CAPITAL MARKET

America has the largest and deepest capital markets in the world – according to the Federal
Reserve, the capital markets provide approximately 80% of debt financing for businesses in
the U.S. The securities industry facilitates access to those markets, creating investor
opportunity, capital formation, job creation and economic growth.9

The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United
States federal government. The SEC holds primary responsibility for enforcing the
federal securities laws, proposing securities rules, and regulating the securities industry, the

8
http://shodhganga.inflibnet.ac.in/bitstream/10603/33042/11/11_chapter%201.pdf, last accessed on
07/04/2018
9
https://www.sifma.org/resources/research/us-capital-markets-deck-2017/, last accessed on 07/04/2018

15
nation's stock and options exchanges, and other activities and organizations, including the
electronic securities markets in the United States.10

In the U.S., the primary regulator for an exchange is the Securities and Exchange Commission
(SEC). This industry context is often meant when "capital markets" are contrasted with
"financial markets."

The U.S. Securities and Exchange Commission (SEC) is an independent federal government
agency responsible for protecting investors, maintaining fair and orderly functioning
of securities markets and facilitating capital formation. It was created by Congress in 1934 as
the first federal regulator of securities markets. The SEC promotes full public disclosure,
protects investors against fraudulent and manipulative practices in the market, and monitors
corporate takeover actions in the United States.

Generally, issues of securities offered in interstate commerce, through the mail or on the
Internet, must be registered with the SEC before they can be sold to investors. Financial
services firms, such as broker-dealers, advisory firms and asset managers, as well as their
professional representatives, must also register with the SEC to conduct business.

4.1 FUNCTIONS OF SECURITIES EXCHANGE COMMISSION

The SEC's primary function is to oversee organizations and individuals in the securities
markets, including securities exchanges, brokerage firms, dealers, investment advisors and
various investment funds. Through established securities rules and regulations, the SEC
promotes disclosure and sharing of market-related information, fair dealing and protection
against fraud. It provides investors with access to registration statements, periodic financial
reports and other securities forms through its comprehensive electronic, data gathering,
analysis and retrieval (EDGAR) database.

There are various laws that are at the SEC's disposal for accomplishing its objectives. They
are:

Securities Act of 1933

10
https://en.wikipedia.org/wiki/U.S._Securities_and_Exchange_Commission, last accessed on 08/04/2018

16
Securities Exchange Act of 1934

Trust Indenture Act of 1939

Investment Company Act of 1940

Investment Advisers Act of 1940

Sarbanes-Oxley Act of 2002

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

Jumpstart Our Business Start-ups (JOBS) Act of 2012. 11

4.2 ORGANIZATION OF THE SEC

The SEC is headed by five commissioners who are appointed by the president, one of which is
designated as chairman of the SEC. Each commissioner's term lasts five years, but they may
serve for an additional 18 months before a replacement is found. The law requires that no more
than three of the five commissioners be from the same political party to promote non-
partisanship.

The SEC consists of five divisions and 23 offices. Their goals are to interpret and take
enforcement actions on securities laws; issue new rules; provide oversight over securities
institutions; and coordinate regulation among different levels of government. The five divisions
are:

Division of Corporate Finance: Ensures investors are provided with material information in
order to make informed investment decisions

Division of Enforcement: In charge of enforcing SEC regulations by investigating cases and

prosecuting civil suits and administrative proceedings

Division of Investment Management: Regulates investment companies, variable insurance

products and federally registered investment advisors

Division of Economic and Risk Analysis: Integrates financial economics and data analytics
into the core mission of the SEC

11
https://www.investopedia.com/terms/s/sec.asp, last accessed on 08/04/2018

17
Division of Trading and Markets: Establishes and maintains standards for fair, orderly and
efficient markets.12

The SEC has four major divisions.

The Division of Corporation Finance ensures corporate disclosure of important information to

the investing public.

The Division of Trading and Markets ensures fairness, order and efficiency in market activities.

The Division of Investment Management helps protect investors and encourages capital
formation through oversight and regulation of the investment management industry.

The Division of Enforcement investigates securities law violations and initiates civil and
criminal actions.

Offices of the SEC include:

General Counsel

Chief Accountant

Economic Analysis

Compliance

International Affairs

Investor Education

Investor Advocacy

Policy and Investor Outreach

Public Documents

Information Technology

Executive Director

Financial Management

Human Resources

12
https://www.investopedia.com/terms/s/sec.asp, last accessed on 08/04/2018

18
 Administrative Services

Risk Assessment

Legislative Affairs

Public Affairs

Secretary

Equal Employment Opportunity

Inspector General

Administrative Law Judges.

The SEC was created during the Great Depression with the passage of the Securities Exchange
Act of 1934, which was designed to bolster confidence in capital markets by providing
investors with reliable information and by requiring that individuals and corporations deal with
each other honestly.13

5. COMPERISION OF INDIAN CAPITAL MARKET AND USA CAPITAL MARKET

CAPITAL MARKET OF INDIA CAPITAL MARKET OF USA

Political: The capital market of India is very Political: The political state of USA is very stable as
vulnerable. India has politically instable in past but compare to the India and trading there is done not on
it is little politically stable now days. The political speculation but on hard in prudent fact. They do not
instability of the country has a very strong impact invest on feeling as Indian investor do. It is a well-
on the capital market. The share market of India known fact as the political factor plays an important
changes as the political changes took place. The role in capital market, but in USA due to strong
Sensex goes up and down with any kind of the democracy, there is almost hundred percent
small and big political news. The capital market of employment in the capital market.
India is too weak and is based on speculations. The
political stability of the country is very important
for stability and growth of capital market in India.

13
https://searchfinancialsecurity.techtarget.com/definition/Securities-and-Exchange-Commission, last
accessed on 08/04/2014

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The political imbalance or balance of the country Economical:- the economical factor of any country are
is the major factors in deciding the capital market very important for the capital market of that country
of India. and USA is no exception. For example, the great
Economical:- the economical measures taken by depression of 1931, the USA stock market crash on
the Government of India has a very strong October 29, 1959. It id also known as black Tuesday.
relationship in the capital market. Whenever the This crash led hues loss for investor and the capital
annual budget id announced the capital market market on its knees. Thus, the economical factor are
goes up and down with the economical policies of important and unavoidable factor.
the Government. If the policies are supporting to
the companies then the capital market takes it Social:- social factor almost do not affect the capital
positively and if there is any other policies that is market in USA because the County is very rigid in its
not supportive and not welcomed then the capital social roots. They are very less emotionally attached
market goes down. to each other especially in term of business. There
Social:- India is a Country of unity and diversity. social system is of that kind that it is two difficult to
India is socially rich but the capital market is not disturb the capital market. There social pattern is very
very attached with the social factor. But there is much developed.
some relation between social factor and capital
market. Like, there was opposition of reliance fresh
in many cities and many stores were closed. The Technological:- USA is the technologically developed
share price of reliance went down but the impact country and country spend lots of money on the
was on an individual firm there was not much product, the do not bother about the cost incurring on
impact on capital market on whole the social factor it. And the investors are very active in technological
have not much impact on capital market in India. changes. Any new technological improvement in the
Technological:- the technological factor have not industry will result in growth of capital market.
that much effect on the capital market. India is
technologically backward country. Same as social Legal:- legal factors are one of the most important
factor technological factor can have an effect on an factors in the capital market. It encourages and
individual firm but it can not have a big impact on discourages the investors depending upon the nature of
whole capital market. The technological change in law passed. The legal system of any country can be a
India is always on a lower basis and it does not hues factor in its improvement of primary and
affect the country as a whole. secondary market.
Legal:- legal factor play an important role in the
development and sustain the capital market. Legal

20
issue relating to any industry and firm decides the
fate of the capital market. If the Government of
India or the Parliament introduces the new Law
that can affect the running of the industry then the
industry will be demotivated and this will result in
fall of capital market. Like after the Hardhat Mehta
Scam, new rule and regulation were introduced
like, PAN Card was made necessary for trading.
These regulations were meant to maintain
transparency in capital market, but at that time
investment were discourage legal factors are
necessary for the improvement and stability of the
capital market.

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6. CONCLUSION

Capital Markets refers to activities that gather funds from some entities and make them
available to other entities needing funds. The core function of such a market is to improve the
efficiency of transactions so that each individual entity doesn't need to do search and analysis,
create legal agreements, and complete funds transfer.

Capital market is a platform where investors and buyers get into the trade of financial securities,
including stocks, bonds and so on. The transactions may be carried out by participants, such as
individuals or even institutions. Capital market helps in channelizing excess funds from savers
to the organizations, which later invest them into something productive. In general, this market
trades mostly in long-term securities.

The comparison of capital market in India and USA.

In India the investment is done on the basis of emotions and speculations but in USA the
business in much more practical and informative.

USA investors are very much risk taking but I Indian investors tends to keep low risk.

The US capital market is much more regulated and transparent than Indian capita; market.

The governing body of capital market on both the countries is trying to regulate it with much
more efficiency but the US SEC is more efficient and has more powers in compare to SEBI.

Here in India people still feel it is gamble to invest the money in capital market due to which
there is low investment. But in US investors takes risk at higher rate.

Also the Government of USA provides full support to the companies and investors on their
country in case of new big ventures, whereas in India capital market lacks Government support.

22