1. 26 th Oct. ‘09 Duration: 1 hour 30 mins Capital Marketing

2. Introduction Capital market is the market for securities, where corporates and government can raise long term funds The major participants are o Government (Central and State) o Corporates (Reliance, Infosys) o Regulators (SEBI,RBI), o Institutions (LIC,FII)

3. Types of market Stock markets: Which provide financing through issue of new shares and subsequent trading thereof Bond markets: Which provides financing through issue of bond and subsequent trading thereof Commodity market: Which facilitates trading in commodities Money market: Which provides short term financing Derivatives market: Which facilitates trading in derivative securities

4. Stock markets Where new issued stock and existing stocks are traded Primary market: where funds are mobilized by issuing new shares. (IPO) Secondary markets: where existing listed shares are traded The main stock exchanges in India are: o National stock exchange (NSE) o Bombay stock exchange (BSE)

5. Primary market Primary markets are the markets for long term capital. Also called new issue markets. (NIM) Primary issues are used by companies for the purpose of setting up new business or expanding or modernizing existing business In primary markets securities are issued by companies directly to general public Primary markets performs crucial function of facilitating capital formation in the economy There are so many formalities to be performed before “going public” (MOA, AOA, registration of company etc)

6. Secondary market Secondary market is the financial market of trading the securities that have already been issued In the secondary market securities are traded between investors Indian stock markets are highly liquid, deep and well organized

7. Stock exchanges info. Major stock exchanges are NSE & BSE Number of companies listed at NSE are 1319 and BSE are 4000 The major index are NIFTY and SENSEX Both stock exchanges trade in following segments: o Equity o Retail debt market and wholesale debt market o Futures and options

8. Innovations at NSE Largest in terms of daily turnover and number of trades First national electronic limit order book (LOB) exchange in India Setting up first clearing corporation National securities Clearing Corporation Ltd. (NSCCL) Co-promoting and setting up of National Securities Depository Limited. (NSDL) Setting up S &P CNX Nifty, commencement of internet trading in Feb. 2000. First exchange to start Exchange traded derivatives (1996) and equity derivatives (2000) First exchange to start Gold ETF. (Exchange Trade Funds)

9. Bond market National stock exchange also has bond market where bonds are traded. It has two segments: Wholesale Debt market's segment provides trading facilities for a variety of debt instruments including Government Securities, Treasury Bills and Bonds issued by Public Sector Undertakings/ Corporate/ Banks. Large investors and a high average trade value characterize this segment Retail debt market: With a view to encourage wider participation of all classes of investors across the country (including retail investors) in government securities, the Government, RBI and SEBI have introduced trading in government securities for retail investors

10. Money market Money market is global short term borrowing and lending market which provides short term liquid funding The major players are Banks, financial institutions, mutual funds, central banks and corporates The main instruments in the money market are: o Treasury bill o Commercial paper o Certificate of deposit o Money market mutual funds

11. Commodities and Derivatives Commodities exchange is the exchange where commodities are traded The exchange of commodities in India is MCDX Derivatives are the instruments whose values are derived from any underlying like stock, index, commodities Futures are the contract where two parties agree to do trade at a fixed price and fixed terms but in the future Options: Option is the contract which gives its buyer a right but not the obligation to buy or sell certain instruments at predetermined price

12. Securities exchange board of India Securities exchange board of India (SEBI) is an autonomous body created by the Govt. of India in 1992. It is the regulator of securities markets in India The main functions of SEBI are: o Regulation of capital market o Monitoring trading and clearing o Regulation the brokers and investors o Promoting research and investigation o Drafting regulation, investigation and enforcement of laws

13. Responsibilities and requirements of SEBI SEBI has responsibility towards three groups: Investors, Issuers of securities and Market intermediaries Following are the major requirements laid down by SEBI All the brokers and sub-brokers have to get register with SEBI All underwriters have to deposits Rs. 20 lacs with SEBI All the mutual funds are covered under Mutual Fund Regulation Act 1993 All companies are free to decide their stock prices and share premium amounts