FINANCIAL MARKETS - SEBI, CAPITAL

& MONEY MARKET

 FINANCIAL MARKETS

 THE FINANCIAL MARKETS CAN BE BROADLY DESCRIBED AS ANY MARKET

PLACE WHERE BUYERS AND SELLERS PARTICIPATE IN THE TRADE OF ASSETS
SUCH AS EQUITIES, BONDS, CURRENCIES AND DERIVATIVES ETC.
 FINANCIAL MARKETS ARE WHERE COMPANIES GET CAPITAL TO EXPAND, AS
IN THE STOCK OR BOND MARKETS, OR HEDGE THEIR RISKS, LIKE THE
FOREIGN EXCHANGE OR COMMODITIES MARKETS.
 MARKETS FOR SALE AND PURCHASE OF STOCKS, BONDS, BILLS OF
EXCHANGE, COMMODITIES, FUTURES AND OPTIONS, FOREIGN CURRENCY,
ETC.
 FINANCIAL MARKETS ARE TYPICALLY DEFINED BY HAVING TRANSPARENT
PRICING, BASIC REGULATIONS ON TRADING, COSTS AND FEES AND MARKET
FORCES DETERMINING THE PRICES OF SECURITIES THAT TRADE.
 FUNCTIONS OF FINANCIAL MARKETS

 THEY CHANNELISE SURPLUS FUNDS FROM SAVERS TO THOSE WHO ARE SHORT OF FUNDS
THEREBY CONTRIBUTING TO HIGHER PRODUCTION AND EFFICIENCY IN THE ECONOMY OF A
COUNTRY.

 THEY FACILITATE CROSS-BORDER MOVEMENT OF FUNDS TO COUNTRIES PROVIDING HIGHER

RETURNS.

 THEY PLAY A VITAL ROLE IN PRICING AND MANAGEMENT OF ECONOMIC AND FINANCIAL RISKS.

 THEY PLAY A CRUCIAL ROLE IN TRANSMISSION OF MONETARY POLICY IMPULSES.

 THEY ENABLE THE CENTRAL BANK OF A COUNTRY TO USE MARKET BASED INSTRUMENTS OF
MONETARY POLICY TO TARGET MONETARY VARIABLES EFFECTIVELY.

 THEY ARE INSTRUMENTAL IN ENHANCING THE LEVEL OF OUTPUT AND EMPLOYMENT IN THE
ECONOMY.
 CLASSIFICATION OF FINANCIAL MARKETS IN INDIA

BROAD CLASSIFICATION

1. UNORGANISED MARKETS- THERE ARE A NUMBER OF MONEY LENDERS, INDIGENOUS

BANKERS, TRADERS WHO LEND MONEY TO THE PEOPLE WHO HAVE NO ACCESS TO
THE BANKS. THESE ARE NOT REGULATED MARKETS.
2. ORGANISED MARKETS- THERE ARE A SET OF STANDARDISED RULES & REGULATIONS
GOVERNING THEIR FINANCIAL DEALINGS. THESE MARKETS ARE SUBJECT TO
STRICT SUPERVISION AND CONTROL BY RBI, SEBI, IRDA & OTHER REGULATORY
BODIES LIKE PFRDA.
3. ORGANISED MARKETS ARE FURTHER CLASSIFIED INTO;THE CAPITAL MARKET &THE
MONEY MARKET. THE CAPITAL MARKET HAS TWO SUB-DIVISIONS:
A) PRIMARY MARKET
B) SECONDARY MARKET
Securities & Exchange Board of India
www.sebi.gov.in

 SEBI IS THE REGULATORY AUTHORITY ESTABLISHED UNDER THE SEBI ACT

1992 & IS THE PRINCIPAL REGULATOR FOR STOCK EXCHANGES IN INDIA.
THE ACT LAYS DOWN THE OBJECTIVES OF SEBI, ITS POWERS AND
FUNCTIONS.

 SEBI’s BOARD OF MEMBERS CONSISTS OF A CHAIRMAN, TWO MEMBERS

FROM THE OFFICIALS OF THE UNION MINISTRIES DEALING WITH FINANCE
AND LAW, ONE MEMBER FROM RBI,TWO OTHER MEMBERS APPOINTED BY
THE CENTRAL GOVERNMENT WHO WOULD BE PROFESSIONALS WITH
ADEQUATE KNOWLEDGE OF THE SECURITIES MARKET.
 POWERS & FUNCTIONS OF SEBI

1. TO PROMOTE AND DEVELOP THE SECURITIES MARKET & TO PROTECT THE INTERESTS OF THE INVESTORS.

2. TO REGISTER AND REGULATE THE STOCK BROKERS, SUB-BROKERS, SHARE TRANSFER AGENTS, BANKERS
TO THE ISSUE, MERCHANT BANKERS, UNDERWRITERS ETC. & TO REGISTER & REGULATE THE MUTUAL
FUNDS

3. TO PROMOTE & REGULATE THE SELF-REGULATORY ORGANISATIONS LIKE AMFI & TO PROMOTE
INVESTORS’ EDUCATION.

4. TO PROHIBIT FRAUDULENT AND UNFAIR TRADE PRACTICES & PROHIBITING INSIDER TRADING.

5. TO REGULATE SUBSTANTIAL ACQUISITION OF SHARES & TAKEOVERS.

6. TO CALL FOR INFORMATION, UNDERTAKE INSPECTION, CONDUCT INVESTIGATIONS, TO CONDUCT AUDITS

OF STOCK EXCHANGES & INTERMEDIARIES & TO ISSUE DIRECTIONS.
 THE CAPITAL MARKET

 THE CAPITAL MARKET PROVIDES AN ALTERNATIVE MECHANISM OF

REALLOCATING RESOURCES.

 IT CHANNELISES HOUSEHOLD SAVINGS TO CORPORATE SECTOR AND

ALLOCATES FUNDS AMONG FIRMS.IN THE PROCESS IT ALLOWS BOTH FIRMS
AND HOUSEHOLDS TO SHARE RISK.

 IT ENABLES THE VALUATION OF THE FIRMS ON CONTINUOUS BASIS.

 CONSTITUENTS OF CAPITAL MARKET

1. DEVELOPMENT BANKS ( STATE & NATIONAL LEVEL BANKS) & SPECIALISED

FINANCIAL INSTITUTIONS & INVESTMENT INSTITUTIONS

2. MUTUAL FUNDS

3. LEASING COMPANIES & FINANCIAL SERVICE COMPANIES

4. SEBI

5. COMMERCIAL BANKS

6. OTHER SPECIALISED INSTITUTIONS LIKE SHAREHOLDING CORPORATION OF INDIA,

CREDIT RATING AGENCIES, ASSET MANAGEMENT COMPANIES, NSE , BSE & OTCEI
 STOCK EXCHANGES OF INDIA
BOMBAY STOCK EXCHANGE
www.bseindia.com

 STOCK EXCHANGES ARE THE TRADING PLACES FOR SECURITIES. SECURITIES ARE
DEFINED IN THE SECURITIES CONTRACTS (REGULATION) ACT,1956 AS SHARES,
STOCKS,BONDS, DEBENTURES ETC.
 HISTORICALLY BSE WAS AN OPEN OUTCRY FLOOR TRADING EXCHANGE. IT SWITCHED TO
AN ELECTRONIC TRADING SYSTEM CALLED BSE ON-LINE TRADING (BOLT) IN 1995.
 IN 1999, BSE PROMOTED CDSL- CENTRAL DEPOSITORY SERVICES LIMITED- AS A
DEPOSITORY FOR DEMAT SECURITIES FOR ENABLING TRADING IN DEMAT SECURITIES.
 SENSEX INDEX REFLECTS THE SHARES OF 30 LEADING COMPANIES LISTED ON BSE THAT
REPRESENT ABOUT 45% OF THE MARKET CAPITALISATION OF ALL THE LISTED COMPANIES
WITH BSE.
 BSE LAUNCHED INDIA INX, INDIA'S 1st. INTERNATIONAL EXCHANGE, LOCATED AT GIFT
CITY IFSC (INTERNATIONAL FINANCIAL SERVICES CENTRE) IN AHMEDABAD.
 NATIONAL STOCK EXCHANGE
www.nseindia.com
 NSE PROVIDES THE TRADING AND PAYMENT SETTLEMENTS IN EQUITIES,
DERIVATIVES AND DEBT INSTRUMENTS LIKE THE BSE.
 NIFTY INDEX IS BASED ON 50 SHARES OF LEADING COMPANIES, FROM
VARIOUS INDUSTRIES TO GIVE IT A GOOD MIX, LISTED WITH NSE.
 NIFTY BANK , LAUNCHED IN 2003 REPRESENTS 12 MOST LIQUID AND
LARGE CAPITALISED STOCKS FROM THE BANKING SECTOR, WHICH
TRADE ON NSE. IT PROVIDES INVESTORS AND MARKET INTERMEDIARIES
A BENCHMARK THAT CAPTURES THE CAPITAL MARKET PERFORMANCE
OF INDIAN BANKING SECTOR.
 NSE WAS INSTRUMENTAL IN CREATING THE NSDL-NATIONAL
SECURITIES DEPOSITORY LIMITED- IN AUGUST 1996.
 CAPITAL MARKET INSTRUMENTS

CAPITAL MARKET INSTRUMENTS,USED FOR RAISING

RESOURCES, ARE EQUITY SHARES, PREFERENCE
SHARES, BONDS,CUMULATIVE CONVERTIBLE
PREFERENCE SHARES (CCPS),COMPANY FIXED
DEPOSITS, WARRANTS,DEBENTURES, GLOBAL
DEPOSITORY RECEIPTS,EURO CONVERTIBLE BONDS,
SECURED PREMIUM NOTES & NON-VOTING EQUITY
SHARES
 MONEY MARKET

 MONEY MARKET IS THE FULCRUM OF MONETARY OPERATIONS

CONDUCTED BY THE CENTRAL BANK ( RBI) IN ITS PURSUIT OF
MONETARY POLICY OBJECTIVE.

 MONEY MARKET DOES NOT REFER TO A PARTICULAR PLACE

WHERE SHORT TERM FUNDS ARE DEALT WITH.

 IT INCLUDES ALL INDIVIDUALS, INSTITUTIONS AND

INTERMEDIARIES WHO DEAL WITH SHORT TERM FUNDS.
 MONEY MARKET

 THE TRANSACTIONS TAKE PLACE THROUGH DIFFERENT MODES OF

COMMUNICATIONS AND THROUGH AGENTS.

 A GEOGRAPHICAL NAME MAY BE GIVEN TO A MONEY MARKET ACCORDING

TO ITS LOCATION LIKE MUMBAI MONEY MARKET IS THE CENTRE FOR
SHORT TERM LOANABLE FUNDS OF NOT ONLY MUMBAI, BUT ALSO THE
WHOLE OF INDIA.
ROLE & FUNCTIONS OF MONEY MARKET

MONEY MARKET PROVIDES AN AVENUE FOR EQUILIBRATING THE SURPLUS FUNDS OF LENDERS
AND THE REQUIREMENT OF BORROWERS FOR SHORT PERIODS SAY FROM OVERNIGHT UP TO 1
YEAR.

1. IT SERVES AS A FOCAL POINT FOR THE CENTRAL BANK OF A COUNTRY FOR ITS
INTERVENTION FOR INFLUENCING BOTH QUANTUM & COST OF THE LIQUIDITY IN THE
FINANCIAL SYSTEM.

2. IT PROVIDES EQUILIBRATING MECHANISM FOR DEMAND AND SUPPLY OF SHORT TERM

FUNDS.

3. IT ENABLES BORROWERS AND LENDERS TO FULFILL THEIR REQUIREMENTS AT AN

EFFICIENT MARKET CLEARING PRICE.
 MONEY MARKET INSTRUMENTS

1. TREASURY BILLS
2. MONEY AT CALL & SHORT NOTICE
3. COMMERCIAL BILLS, PROMISSORY NOTES
4. COMMERCIAL PAPERS
5. CERTIFICATE OF DEPOSITS
6. INTER-BANK PARTICIPATION CERTIFICATES
7. REPO INSTRUMENTS
ROLE OF RBI IN INDIAN MONEY MARKET

RBI HAS BEEN PLAYING A PROACTIVE ROLE IN DEVELOPING MONEY MARKET

FOR FOLLOWING PURPOSES:

1. ENSURING STABILITY

2. AVOIDING VOLATILITY

3. MINIMIZING DEFAULT RISK

AND ACHIEVED A BALANCED DEVELOPMENT OF VARIOUS SEGMENTS IN THE

PROCESS.
THANK YOU