Securities Market in India

Definition Recognized exchange where trades of securities are conducted by licensed stock brokers. Meaning Any market in which securities are traded . Investors purchase securities in the capital markets in order to extract a return and earn profit on the securities.

Indian Securities Market

Financial Market Segments of Financial Market Types of Financial Market Participants in the Financial Market Primary Market New Issue Market

Types of Securities Markets Primary Markets Secondary Markets

Primary markets are where new financial assets are issued. There are two main types of primary-market issues. IPO Seasoned new issue

Secondary markets, or secondary financial markets, trade existing securities (previously owned shares of stocks, bonds, and other financial assets) Organized stock exchanges: Organized stock exchanges are markets that are used to facilitate the trading of financial instruments. The main organized stock exchanges are the New York Stock Exchange and the American Stock Exchange

Over-the-counter (OTC) market: The OTC market is an electronic network of dealers that allows investors to execute trades without going through specialists or intermediaries. National Association of Securities Dealer Automated Quotation System (NASDAQ)

Brokers and Investment Advisors

A stockbroker is a person who is employed by a commission house. An investment advisor is a person or organization that makes the necessary daily decisions regarding an investors portfolio.

Product & Participants

Need of securities market

Securities market provides channel for reallocation of savings to investments and entrepreneurship. Savers and investors are not constrained by individual abilities but by economys abilities to invest and save.
Issuers of securities Investors in securities Intermediaries

Categories of Participants

Products

Services of Intermediaries Securities

Types of Financial Markets Markets TypesFinancial Markets of Financial Types of Financial Markets Types of Types of Financial Markets

Types of Financial Markets

Capital Market
Equity Debt

Money Market
T-Bills Call Money CP,

Forex Market
Spots Forwards

Derivatives Market
Agriculture Produces, Metals, Financial futures like Interest rate, currency, indices etc

Retail Corporate Banks FI FIIs

Banks Corporate FI, FIIs

Banks Corporate FI, FIIs

Banks, FIs Corporate

Structure ofof Indian Financial Structure Indian Financial System: Markets

GOI Ministry of Finance

GOI Dept of Co. Affairs

SEBI

RBI

Registrar of Companies

Stock Exchanges

Clearing Corporations

Depositories

Mutual Funds

Banks

Companies

Broker Dealers

Merchant Bankers

Depository Participants

Registrar & Transfer Agents

Primary Dealers

Financial System Financial Institutions

Commercial Banks Insurance Companies Funds Mutual Funds Funds Provident/Pension Funds Deposits Non-banking Financial Companies Loans Shares Securities Funds Suppliers of Funds Individuals Businesses Governments Funds Demanders of Funds Individuals Businesses Securities Governments Funds

Private Placement

Funds Securities Financial Markets Money Market Capital Market

Securities

Primary Market

Introduction

Issuers of Securities Government and Corporate Issuers create and issue fresh Securities in exchange for funds Public/Private Issue Face Value/Premium/Discount Equity/Debt/Hybrid Domestic Market /International Market

Issues Norms

Entry Norm I (EN I): The company shall meet the following requirements: (a) Net Tangible Assets of at least Rs. 3 crores for 3 full years. (b) Distributable profits in at least three years (c) Net worth of at least Rs. 1 crore in three years (d) If change in name, at least 50% revenue for preceding 1 year should be from the new activity. (e) The issue size does not exceed 5 times the pre- issue net worth

Pricing of Issues

Free Pricing SEBI does not play any role in price fixation. Fixed Price/Book Building The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. Book Building

A process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built up and the price for the securities is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. This method provides an opportunity to the market to discover price for securities.

Difference between shares offered through book building and offer of shares through normal public issue

Features Pricing

Fixed Price Process

Price at which the securities are offered/allotted is known in advance to the investor

Book Building Process

Price at which securities will be offered/allotted is not known in advance to the investor. Only an indicative price range is known. Demand for the securities offered can be known everyday as the book is built. Payment only after allocation.

Demand

Demand for the securities offered is known only after the closure of the issue Payment if made at the time of subscription wherein refund is given after allocation.

Payment

Promoter

The promoter has been defined as a person or persons who are in over-all control of the company Promoters Contribution should not be less than 20% of post issue of capital in case of offers for sale and public issues by unlisted companies. To bring Full amount of promoter contribution including premium one day prior to issue opening date. Exceptions Public issue of securities listed on a stock exchange for at least 3 years with a dividend payment record of 3 immediate preceding years

No identifiable promoter or group exist Rights Issue