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Introduction to Capital Market (Indian Financial System)

Presentation · July 2018

DOI: 10.13140/RG.2.2.35968.53764

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Mrunal Chetanbhai Joshi

Veer Narmad South Gujarat University
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Introduction to Capital Market

Mrunal Joshi
 Introduction
• Economy and Financial System
• Capital Market and Financial System
• Meaning of Capital Market: It is a market for
long-term funds—both equity and debt—and
funds raised within and outside the country.
• The capital market aids economic growth by
mobilising the savings of the economic sectors
through financial system and directing the
same towards channels of productive use.
BRCM College of Business Administration
Mrunal Joshi
BRCM College of Business Administration
Mrunal Joshi
 Indian Financial System

MoF: Ministry of Finance

SEBI: Security Exchange Informal
Board of India
RBI: Reserve Bank of India
Formal (Organised) (Unorgan
IRDA: Insurance Regulatory ised)
and Development Authority

Money
Financial Lenders,
Regulators:
Institutions Financial Financial Financial Local
MoF, SEBI,
(Intermediari Markets Instruments Services Bankers,
RBI, IRDA
es) Traders,
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Mrunal Joshi
 Public Sector,
Private Sector,
Foreign Banks,
Commercial Regional Rural
Banks Banks
Banking
Institutions
Cooperative
Banks

Financial Non-Banking
Institutions Institutions Finance
(Intermediaries) Companies

Mutual Funds

Development IDBI, SIDBI,

Insurance and Finance NABARD, SFCs,
Housing Finance Institutions: ECGC, DIGC
Companies
BRCM College of Business Administration
Mrunal Joshi
 Equity
Capital Market
* Public Issue
Market Primary Market * Private Placement
(Domestic and
Financial Markets

International)

NSE, BSE, OTCEI, ISE,

Secondary Market
Regional SEs

Derivative Market Stock and Index

(F&O) (SEs Based) based Derivatives

Debt Private Corporate Debt, PSU Bonds,

Market Govt Sec. Mkt

Primary and Secondary Market of:

Money
Treasury Bill, Call Money Mkt, Commercial Bills,
Market Commercial Papers, Certificates of Deposit, Term Money
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 Financial Instruments

Types Terms:
Primary Secondary
Securities Securities
Short,
Term Deposits,
Medium, Long
Equity, Preference,
MFs,
Debt and Others
Insurance Polices
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 Depositories
Factoring is a financial transaction and a
Custodial type of debtor finance in which a
business sells its accounts receivable
Credit Rating (i.e., invoices) to a third party (called
a factor) at a discount. ...
Factoring Forfaiting is a factoring arrangement
used in international trade finance by
Forfaiting exporters who wish to sell their
receivables to a forfaiter.
Merchant banking
Leasing
Hire Purchasing
Guaranteeing
Portfolio Management
Underwriting
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Mrunal Joshi
Notes:
IDBI : Industrial Development Bank of India
IFCI : Industrial Finance Corporation of India
SIDBI : Small Industries Development Bank of India
IDFC : Infrastructure Development Finance Company Limited
NABARD: National Bank for Agriculture and Rural Development
EXIM Bank : Export-Import Bank of India
SFC : State Financial Corporation
SIDC : State Industrial Development Corporation
ECGC : Export Credit Guarantee Corporation of India
DICGS : Deposit Insurance and Credit Guarantee Corporation
OTC : Over the Counter
NHB : National Housing Bank
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BRCM College of Business Administration
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 Importance of capital market
• Mobilize long-term savings to investment
• Provides equity capital to entrepreneurs
• Productive use of financial resources
• Provides liquidity
• Lower cost of transaction and information
• Competitive pricing in Capital allocation
• Quick valuation of financial instrument
• Insurance against investment risk – Derivatives
• Wider participation – network of institutions and
experts
• Improvement in operational efficiency
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 Recent Trend in Capital Market
• Economic Growth

• Inflation: The inflation rate in India edged up to 5 percent in June of 2018

from 4.87 percent in May
• (Source: https://tradingeconomics.com/india/inflation-cpi)

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• Primary Market: In the first nine months of 2017-18,
153 companies access primary market through public
and right issue to raise Rs 727.87 billion compared to Rs
497.05 billion raised through 85 issues during the same
period last year, showing 46 per cent increase in
resource mobilisation over the year. There were only 5
public debt issues that raised Rs 41 billion over this
period (as compared to Rs 239 billion raised through 10
public debt issues during the same period in the
previous financial year (SEBI Bulletin, January 2018).

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• Secondary Market: As of end December 2017, the domestic
market capitalisation of the NSE stood at US$ 2.35 trillion, a
notch higher than that of the BSE (US$ 2.33 trillion).
• S&P BSE Sensex, the benchmark index of BSE, closed at
34,056 points as on end-2017, witnessing a gain of 28 per
cent from its closing of 26,626 points from a year ago. During
the same period, Nifty 50, the benchmark index of NSE,
closed at 10,531 points, witnessing a gain of 29 per cent from
its closing of 8,186 points at the end of 2016.

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• Mutual Funds:
• During April–December 2017 with a net inflow of Rs 2.15 trillion.
• There was net outflow of Rs 70.56 billion from income / debt
oriented schemes and
• a net inflow of Rs 1.33 trillion into growth / equity oriented
schemes.
• Balanced schemes recorded inflow of Rs 703.11 billion.
• Exchange traded funds witnessed net inflow of Rs 195.89 billion.
• The cumulative net assets under management by all mutual funds
increased by 22 per cent to Rs 21.38 trillion at the end of
December 2017 (SEBI Bulletin, January 2018).
• Equity Derivative Markets: The total turnover in equity
derivatives at NSE increased to Rs 1,155 trillion in April-December
2017 from Rs 667.53 trillion in the same period last year, with
1,359 million contracts traded during this period vs. 1,023 million
contracts traded in the corresponding period last year.
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• Foreign Institutional Investor in India: In FY17, the gross turnover
of FPIs in the equity market segment on the major Indian stock
exchanges (NSE and the BSE) was Rs 20.8trn. the ratio of FII equity
turnover to total turnover for both the exchanges (NSE and BSE)
was 20.6 percent in FY17.

BRCM College of Business Administration

Mrunal Joshi
BRCM College of Business Administration
Mrunal Joshi
References
• Pathak, B. V. (2014). Indian Financial System (Fourth Ed.):
Pearson Education India.
• A Review Indian Securities Market. (2017) (Vol. XX).
Mumbai: National Stock Exchange of India.
https://www.nseindia.com/content/us/ismr_full2017.pdf

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