Capital Market

Capital Market Long term Industrial Govt. Securities loans Securities market Market market Primary market Secondary Market

Primary Market

 

New Issue Market Primary market provides opportunity to issuers of securities, government as well as corporates, to raise resources to meet their requirements of investment and/or discharge some obligation. There are three ways by which a company may raise capital in primary market. The most common method of raising capital by the new companies is through sale of securities to the public called “ Public Issue” Securities are first offered to the existing share holders on a pre-emptive basis is called as “ Right Issue ” “Private placement” is a way of selling securities privately to a small group of investors.

Secondary Market Indian Stock Market:

As business and industry expanded and the economy assumed more complex nature, the need for “permanent finance” arose. Entrepreneurs needed money for long term was as investors demanded liquidity. The answer was a ready market for investments and this was how the stock exchange came into being. The market where existing securities are traded is referred to as secondary market or stock market.

Functions or Services of Stock exchanges
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Liquidity and Marketability Safety of funds Supply of long term funds Flow of capital to profitable ventures Motivation for improved performance Promotion of investment Reflection of business cycle Marketing of New Issues Miscellaneous services

Regulatory frame work

A comprehensive legal frame work was provided by the Securities Contract Regulation Act, 1956 and the Securities Exchange Board of India, 1992. A three tire regulatory structure comprising of Ministry of Finance, SEBI and the Governing Boards of stock exchanges regulates the functioning of stock exchanges.

Regulatory frame work
Ministry of Finance - Application of the provision of the SCR act Supervisory powers over SEBI - power to grant recognition of stock exchanges - power to approve the appointments of executive chiefs and nominations of the public representatives in the Governing Board of stock exchanges - Responsibility of preventing undesirable speculation.

Regulatory frame work
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The Securities and Exchange Board of India The SEBI even though established in the year 1988, received statutory powers only on 30th January 1992. Under the SEBI act, wide variety of powers is vested in the hands of SEBI SEBI has the powers to regulate the business of stock exchanges, other security markets and mutual funds Responsibility to prohibit the fraudulent unfair trade practices Promoting healthy growth of capital markets and protecting investors interest

Regulatory frame work

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The Governing Body
Elected members, directors, government nominees and public representatives Rules bylaws and regulations of the stock exchange provide substantial powers to the executive director for maintaining efficient and smooth day to day functioning of the stock market Responsibility of maintaining orderly and well regulated market.

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