Thursday, 21 November 2019

Unit 4: Indian Capital Market

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                                                 Unit 4: Indian Capital Market    



A capital market is a market for securities (debt or equity), where business enterprises and government can raise long-term funds.

It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money market).

The capital market is characterized by a large variety of financial instruments: equity and preference shares, fully convertible debentures (FCDs), non-convertible debentures (NCDs) and partly convertible debentures (PCDs) currently dominate the capital market, however new instruments are being introduced such as debentures bundled with warrants, participating preference shares, zero-coupon bonds, secured premium notes, etc.

The gsecurities market is at the core of financial markets in most countries.

The earliest securities markets in the globe were markets for government securities and relatively more prominent.

The g-securities market is distinct from other market because of its immanent features, such as size, turnover, liquidity and security.

Central banks play a significant role in managing public debt of their respective countries.

The g-securities market plays crucial role in overall economic development of a country.

For effective functioning of the market, certain fundamental principles and strategies need to be factored in while designing and developing the market  The lack of an advanced and vibrant capital market can lead to underutilisation of financial resources.

The developed capital market also provides access to the foreign capital for domestic industry.

Thus capital market definitely plays a constructive role in the overall development of an economy. Deep discount bonds: A bond that sells at a significant discount from par value and has no coupon rate or lower coupon rate than the prevailing rates of fixed-income securities with a similar risk profile.

Equity shares with detachable warrants: A warrant is a security issued by company entitling the holder to buy a given number of shares of stock at a stipulated price during a specified period.

Fund Raisers: Are companies that raise funds from domestic and foreign sources, both public and private.

Government securities market: Deals with tradable debt instruments issued by the government for meeting its financing requirements.

Intermediaries: Are service providers in the market, including stock brokers, sub-brokers, financiers, merchant bankers etc.

Market Regulators: Include the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Department of Company Affairs (DCA).

NASDAQ: Is an American stock exchange.

It is an electronic screen-based equity securities trading market in the US.

Primary market: Is that part of the capital markets that deals with the issue of new securities.

Secondary market: It facilitates the original investor in new government debt securities to sell his securities before maturity, and to do so with ease and without undue cost.

SPN: Is a secured debenture redeemable at premium issued along with a detachable warrant, redeemable after a notice period, say four to seven years.

Sweat equity: Refers to equity shares given to the company’s employees on favorable terms, in recognition of their work.

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