Capital Markets

An overview
 Financial Market
Provides channels for allocation
of savings to investment

Money Market Capital Market

Short term funds (< 1 yr) Markets for financial investments that
for liquidity needs are direct/ indirect claims to capital

Primary Secondary
Fresh issue of securities Transfer of securities

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 Capital Market

Other forms of lending

Securities Market
and borrowing
Market for those financial instruments
that are transferable by sale Term loan, CC, OD, etc.

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Need for Capital Market

Investor Business Macro

• Effective source of • Easy financing for • Mobilization of funds
investment capital intensive to enterprises
• Improves projects • Enhancing countries
information quality, • Makes ESOPs long term growth
corporate possible perspective
governance and • Excellent route for • Medium for
integrity divestment diversification of risk
• VC and PE funds • Easy acquisition via in the economy
investing in unlisted share swaps
companies get exit
option during IPO

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Recent
Developments
In Indian Capital Market

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GDP growth rates – World wide
India is fastest growing economy in the world as per
IMF data
Region / Country 2016 2017 2018 2019
World output 3.2 3.8 3.6 3.3
Advanced Economies 1.7 2.3 2.2 1.8
United States 1.5 2.3 2.9 2.3
Euro-area 1.8 2.3 2.2 1.6
Germany 1.9 2.5 1.5 0.8
France 1.2 1.8 1.5 1.3
Italy 0.9 1.5 0.9 0.1
Spain 3.3 3.1 2.5 2.1
Japan 0.9 1.7 0.8 1
United Kingdom 1.9 1.8 1.4 1.2
Canada 1.4 3 1.8 1.5
Emerging Markets and Developing Economies 4.4 4.8 4.5 4.4
Brazil -3.5 1 1.1 2.1
Russia -0.2 1.5 2.3 1.6
India 7.1 6.7 7.1 7.3
China 6.7 6.9 6.6 6.3
South Africa 0.6 1.3 0.8 1.2
For educational purpose only (data from IMF official website)
Primary market statistics (1/2)
IPOs cover 90% of Primary Market - Equity
2017-18 2018-19 Share in total amount
(per cent)
Particulars
No of Amount No of Amount
issues (Cr) issues (Cr) 2017-18 2018-19
Public Issues, 202 83,696 123 16,087 79.6 88.2
(Equity/ PCD /FCD) of
which
IPOs 201 83,684 123 16,087 79.6 88.2
FPOs 1 13 0 0 0 0
Rights Issues 21 21,400 10 2,149 20.4 11.8
Total 223 105,097 133 18,235 100 100

This signifies that most of the money coming in the system of primary market are from IPS and right issues.

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Primary market statistics (2/2)
Most of the IPOs were for Finance Companies
Industry wise resource mobilization

2017-18 2018-19 By industry, the miscellaneous category in

Industry
(%) (%) the industry classification raised 44.9 per
Finance 9.4 20.5 cent of the resources mobilized in 2018-19
followed by Finance (20.5 per cent), Hotels
Hotel 2.4 9 (9.0 per cent), Textiles (7.3 per cent) and
Textile 0.7 7.3
Banking/FIs (6.2 per cent).
There were 14 mega issues in 2018-19
Banking / FI 7.7 6.2
compared to 48 mega issues in 2017-18.
Miscellaneous 19.1 44.9 Mega issues = issues size > INR 300 Cr.

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Secondary market statistics (1/2)
Both Sensex and Nifty reached their respective
all-time highs of 38,897 and 11,739 on August 28,
2018.
• Despite several challenges, including liquidity crises in domestic non-banking finance companies
(NBFCs), the delay in Brexit and global trade tensions, Indian equity markets fared well during the
year 2018-19
• During the year, the mutual fund assets under the management rose by 11.4 per cent on account of
strong participation of retail investors despite volatile markets
• However, after two years of good foreign funds inflow, foreign inflows witnessed reversal in the trend
during 2018-19. The foreign investors net sold 88 crore in 2018-19 compared to net inflow of 25,635
crore in 2017-18 and 55,705 crore in 2016-17, mainly on account of rising uncertainty over US-China
trade war and capital outflows from emerging markets due to interest rate hike by US Federal Reserve
• India benchmark blue chip indices S&P BSE Sensex (henceforth referred to as Sensex) and Nifty 50
(henceforth referred to as Nifty) continued its growth momentum in 2018-19, as Sensex and Nifty
gained 17.3 per cent and 14.9 per cent respectively during the year
• Sensex up by 5,704 points and nifty by 1,510 point from Mar-18 to Mar-19

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Secondary market statistics (2/2)
Average market growth S&P – 11% and Nifty – 8.3%
Major Indicators of the Indian Securities Markets

Amount in INR 2017-18 2018-19Growth 17-18 (%) Growth 18-19(%)

S&P BSE Sensex

Year-end 32,969 38,673 11.3 17.3
Average 32,397 35,972 18.5 11.0
Nifty 50
Year-end 10,114 11,624 10.2 14.9
Average 10,030 10,860 17.6 8.3

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Mutual fund – Overview

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Mutual Fund – Asset under management

2.6x
•Apr’09 •Apr’19
Rs5.9tr •Apr’14 Rs25tr
9.5tr
1.6x
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Mutual Fund: Investments Composition - Apr’19
ETF/ FOF
6%

Liquid assets
Equity
23%
42% Institutional
45%
Individual
55%

Debt
29%

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Mutual Fund: Rights and grievance redressal
Rights:
• Eligible to claim interest for delay in case of failure to:
• Redemption or repurchase proceeds within 10 working days from the date of
receipt of request
• Dividend within the stipulated 30 day period

• AMC(s) are liable to pay interest at 15%

• Investors can lodge their complaints online through: INVESTOR
GRIEVANCES REDRESSAL THROUGH SEBI COMPLAINTS REDRESS
SYSTEM (SCORES)

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Portfolio Managers - Overview
Definition
• Portfolio manager is a body corporate
• who advises or directs or undertakes on behalf of the client
• management or administration of a portfolio of securities or the funds of the client.

Minimum amount by each investor - Rs. 25 lacs

SEBI is considering to double or even quadruple this amount to keep small investor away from
PMS
Current Scenario –
• India is home to the fourth largest population of HNIs in the Asia-Pacific region
• Total AUM increased under PMS increased by 9% from 2018 to 2019 to Rs. 16 trillion

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Portfolio Management Services : Rights of Investor
Periodically a report to the client, not exceeding a period of six months containing –
1. The composition and the value of the portfolio, description of security, number of
securities, value of each security held in the portfolio, cash balance and aggregate value of
the portfolio as on the date of report
2. Transactions undertaken during the period
3. Interest, dividend, bonus shares, rights shares and debentures
4. Expenses incurred
5. Details of risk foreseen by the portfolio manager and the risk relating to the securities
recommended by the portfolio manager for investment or disinvestment

How can the investors redress their complaints?

Investors can approach SEBI at registered address for redressal of their complaints. On receipt of
complaints, SEBI takes up the matter with the concerned portfolio manager and follows up with
them.

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Alternative Investment Funds (AIF)

Definition –
• Privately pooled investment
• collects funds from sophisticated investors (Indian or foreign)
• for investing it in accordance with a defined investment policy for the benefit of its investors.
Current Scenario
Amt in Cr Cumulative net Cumulative net Cumulative net Increment Increment
figures as at the figures as at the figures as at the 2017-2018 2018-2019
end of 31st March end of 31st March end of 31 March (%) (%)
2017 2018 2019
Commitments raised 84,304 165,095 282,148 95.83 70.90

Funds raised 40,956 85,276 134,209 108.22 57.38

Investments made 35,099 61,402 109,781 74.94 78.79

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Rights of Investor under AIF
All Alternative Investment Funds shall ensure transparency and disclosure of information to
investors on the following:
1. financial, risk management, operational, portfolio, and transactional information
regarding fund investments shall be disclosed periodically to the investors;
2. any fees ascribed to the Manager or Sponsor;
3. any inquiries/ legal actions by legal or regulatory bodies in any jurisdiction, as and when
occurred
4. any material liability arising during the Alternative Investment Fund‘s tenure shall be
disclosed,
5. any breach of a provision of the placement memorandum or agreement made with the
investor or any other fund documents
6. change in control of the Sponsor or Manager or Investee Company
7. provide at least on an annual basis, within 180 days from the year end,
a. Financial information of investee companies.
b. Material risks and how they are managed

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How can the investors redress their complaints against
AIFs?
SEBI has a web based centralized grievance redress system called SEBI Complaint Redress
System (SCORES) at http://scores.gov.in where investors can lodge their complaints against
AIFs.
Further, in terms of the AIF Regulations, for dispute resolution, the AIF by itself or through the
Manager or Sponsor, is required to lay down procedure for resolution of disputes between the
investors, AIF, Manager or Sponsor through arbitration or any such mechanism as mutually
decided between the investors and the AIF.

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REITs and InvITs
An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct
investment of small amounts of money from possible individual/institutional investors in
infrastructure to earn a small portion of the income as return.

REIT or Real Estate Investment Trust refers to an entity created with the sole purpose of
channelling investible funds into operating, owning or financing income-producing real estate.

Benefits-
1. Providing of wider and long-term re-finance for existing infrastructure projects.
2. Freeing up of current developer capital for reinvestment into new infrastructure projects
3. Refinancing/takeout of existing high cost debt with long-term low-cost capital and help
banks free up/reduce loan exposure,

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Q&A

CA Sumit Motwani
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