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Introduction to Financial Markets & Institutions

Part of Coursework of Financial Markets and Institutions

SIMSR

What does all this mean? Do I care about interest rates? What is “the Fed?” Will this impact my company’s listed ADR? Will it affect the market value of my stock investments? .The last few weeks news features a segment about interest rates. the Fed Chairman Ben Bernanke and his famous “ tapering the pace of bond purchase”.

.These are good questions. And this course will help you answer these questions by addressing a variety of topics ranging from the functioning of the bond and stock markets to the behavior of the interest rates and forex markets.

The Financial System Seekers of funds (mainly business firms and government) Flow of funds (savings) Suppliers of funds (mainly households) Flow of financial services Incomes and financial claims .

Channelize funds from -those who save to -those who needed -for productive purpose Liquidity Function Payment Function Risk Mitigations opportunities to various individuals and entities Price determination Provides class of .Functions of Financial Markets Savings Function .

. the behavior of business firms.  Market activity affects personal wealth.  These markets channel funds from savers to investors. and economy as a whole  Well functioning financial markets. and how we will examine them throughout this course. key statistics. stock market.  We will briefly examine each of these markets. thereby promoting economic efficiency. such as bond and stock markets. are key factors in producing high economic growth.Financial markets. and foreign exchange market. are crucial in our economy. such as the bond market.

The Financial System Funds Deposits / Shares Financial Institutions Commercial Banks Insurance Cos. Mutual funds Provident Funds NBFCs Funds Loans Demanders of Funds Suppliers of Funds Individuals Businesses Governments Individuals Businesses Governments Financial Markets Funds Securities Money Market Securities Capital Market Funds .

Classification of Financial Markets Debt Market Equity Market Money Market Maturity of Claim Seasoning of Claim Capital Market Primary Market Secondary Market Cash / Spot Market Derivatives Market Exchange Traded Market OTC Market Nature of Claim Timing of Delivery Organizational Structure .

India’s stock market has risen to great heights •By 1990.History of Indian Stock Market •From Scattered and small beginning in the 19th Century. later recognized by GoI in 1956 •The launch of SENSEX in 1986 was later followed by BSE National Index (Base: 1983-84 = 100) Jan – 1989 •BSE National Index was renamed as BSE-100 Index from Oct. National Stocks Exchange is currently the leading stock exchange in India in terms of total volume traded .1996 (taking into consideration only the prices of stocks listed at BSE) •The BSE has deployed an Online Trading system (BOLT) on March 14. 1995 •National Stock Exchange (NSE) got its recognition as a stock exchange in July 1993 under Securities Contracts (Regulation) Act. 1956 •NSE's leading index is Nifty 50 or popularly Nifty and is composed of 50 diversified benchmark Indian company stocks •Although late than BSE. we had 19 stock exchanges (national + regional) in the country •As a move towards integrated national level exchanges BSE & NSE became prominent by late 1990’s •BSE has the roots at Native shares and stock brokers association established in 1875.

6 50.7 44.9 137.9 37.9 118.4 74.4 31.3 34.9 13 237 296 327 .2 187.2 92.9 27.3 2011 188.3 Countrie s India USA Listed domestic companies .9 35 2005 162 63.3 28.2 11.5 38.7 109.1 48.7 2011 624.9 54.5 26 16.5 40.2 34.8 333 693 1020 1472 30.8 5.1 53.6 41.2 37.2 79.3 54.9 97 105.2 29.6 101.3 36.7 17.9 121.5 70.2 129.6 134.1 24.3 Japan China UK Hong Kong Malaysia German y Singapor e Indonesi a Brazil South Africa Russian Federati on 2107 14 1623 2416 853 2087 3279 1387 2759 3961 2342 2001 N.1 100.9 14.1 44.8 141.5 171.8 39.3 146 32 108.2 61.1 40.9 20.8 Malaysia Japan Hong Kong German y UK 19.2 69.4 21 1998 121. turnover ratio (%) 1991 164.9 32.5 2005 82.5 104.4 26.8 38.8 43.2 126.4 41.8 21.9 40 94.8 321 428 736 741 1020 648 941 670 2.3 85.3 74 29 73.A 3.9 0.9 61.8 Countrie s China Brazil Indonesi a USA India Singapor e Thailand South Africa Stocks traded.9 157.1 50.1 70.4 79.2 1998 130.6 56.4 17.Stock Markets – Global Snapshot Stocks traded as a % of GDP Countrie s Hong Kong German y 1991 43.4 19.6 8.1 39.3 181.4 150.5 166 141 570 688 321 288 527 668 685 335 381 388 462 440 366 355 42 52.9 39. Total 1991 2556 6742 1998 5860 8450 2005 4763 5143 2011 5112 4171 Brazil USA Malaysia Russian Federati on Thailand India Indonesi a Japan UK China Singapor e 3.2 40.4* 45.4 106.8 205.6 52 67.

co-op etc) Mutual Funds. Venture Funds.STRUCTURE OF FINANCIAL MARKETS IN INDIA Financial Markets in India Debt Market Primary / Secondary Forex Market Capital Market Primary / Secondary & Depository Insurance Life/General Banks (including RRBs. Investment Bonds RBI RBI SEBI IRDA RBI RBI/SEBI REGULATORY AUTHORITY 11 .