Capital Market and Indian Economy Delve

8/14/2019 Capital Market and Indian Economy Delve

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Deepak Agrawal, Reader, IIST, Indore 1

Capital Marketand Indian

Economy Delve:2010-2025.

.Mr Deepak Agrawal

,Reader IIST


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Contents Workshop Objectives

Basics of Companies Capital

Shares: Meaning Nature Types

Debentures: Meaning Nature

Types

Other Financial Instruments

Capital Market -- Historical developments in the International capital

market. -- Historical developments in the Indian capital market

(1875-2010).

Introduction to the Primary market


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Listing

Trading through Stock Exchanges

Contents


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WORKSHOP OBJECTIVES

The main aim is to understand the conceptof Indian Capital Market and their effecton the Indian economy.

To enhance student learning through

advance financial education andknowledge.

To provide a comprehensive and integratedperspective of Finance with the CapitalMarket.

To overcome the fear of investment in thecapital market.

To learn about its applications in businessand research.

To enable the participants on risk exposure.


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Basics of Companies

Meaning : An artificial person created by the law.

Characteristics:1.Artificial person2.Perpetual succession

3.Separate Legal Entity

4.Limited liability5.Transferable Wealth

6.Governed under Indian Companies Act 1956


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Capital

The Capital of the company is dividedin small denomations to be knownas Shares.


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Equity Share Capital

Share

* =5 5 2

5


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Types of Capital


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Owners Fund


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Preference Share Capital

Preference in respect of Dividends.

Preference in respect on winding acompany right of repayment .

Kinds:

Cumulative & Non Cumulative

Participating & Non Participating

Redeemable & Non Redeemable


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Real Owners of the Company .

Enjoy voting rights

Dividend in accordance

Management Control

Equity Share Capital


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Debentures

Derived from Latin word debere meansto owe.

Meaning : It is a bond , usually under the

common seal of the company andsecured by a charge on the companysproperty.

Characteristics:

A loan to the company Fully secured

Fixed interest charges

Contact of Repayment


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Kinds of Debentures

Registered- Records in the book ofthe Co.

Bearer- Payable to the bearer .

Secured-Charge on the assets. Simple or unsecured-No security is

given

Redeemable-Repayable Irredeemable- Not repayable duringlifetime

Right Existing shareholder has right

to first


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Other Financial Instruments

Bonds

Term Loans

GDR ADR

Government Securities

Etc.


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CAPITAL MARKET


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Introduction

The Capital Market is a market forfinancial assets with have a longterm maturity. Normally a period

one year.


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Historical developments in theCapital Market


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Braudal investigates the History of Stock Market that during the 11thcentury in Cairo, the Jewish and Muslim merchants already had the

notion of trade association and had set up all the methods of creditas well as payments.

In 12th century France originators of brokerage courratiers de in theHistory of Stock Market.

13th century the traders of Bruges commodity accumulated inside thehouse of a native named Van der Beurze as their primary place fortrading.

Followed by Germany in places like Ghent and Amsterdam.

14th century they came to be known as the Brugse Beurse. These peopleinstitutionalized their gathering, which was known to be an informalmeeting until then. This concept did spread at a rapid pace aroundthe European nations and neighboring countries.

1602 , Dutchs in the History of Stock Market inaugurated the concept ofjoint stock exchanges which led the people to buy share and becomeshare holders and invest money in various businesses and get their

Historical developments in theInternational Capital Market
http://en.wikipedia.org/wiki/Ghenthttp://en.wikipedia.org/wiki/Amsterdamhttp://en.wikipedia.org/wiki/Amsterdamhttp://en.wikipedia.org/wiki/Ghent


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Historical developments in theIndian capital market (1875-2010)

The History of the Indian Capital Markets can be traced back to 1861when the American Civil War began. The opening of the Suez canal

during the 1860s led to tremendous increase in exports by USA to UK& other European counterparts along with India. Several Companieswere formed during this period and many Banks came into force tohandle the finances related to the trades.. With many registeredunder British Companies Act, the Stock Exchange, Mumbai (Bombay)

came into existence in 1875. In the earlier days, stockbrokers kept scouting for 'natural' sites to

conduct their trading activities, shifting from one set of Banyan treesto another. As the number of brokers kept increasing and the streetskept overflowing, they simply had no choice but to relocate from oneplace to another.

Finally in 1854, trading in India found a permanent address, Sir PhirozJeejeebhoy dominated the Stock Market scene from1946-1980.

DalalStreet, now synonymous with the oldest stock Exchange in Asia,The Bombay Stock Exchange (BSE) 130 years old the first stock

exchange in the country. The exchange has played a pioneering rolein the development of the Indian Securities Market . After


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Introduction

The Capital Market is a market forfinancial assets with have a longterm maturity. Normally a period

one year. Classification

Primary Market Secondary Market


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INTRODUCTION TO THEPRIMARY MARKET


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Primary Market

It is basically known as new issuemarket.Types of Issues

Issues through Prospectus

Book-Building Offer for sale

Private Placement

Right issue

Stock Option

Sweat Equity


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IPO pricing and itsmethodology

Book Building Mechanism and Green ShoeOption

IPO pricing and its methodology - EPS: Pre issue for the last 3 years. - P/E ratio: Pre issue - Average return on Net worth in the last 3 years. - Minimum return on increased Net worth required

to be maintain pre issue EPS. - NAV: Per share based on last Balance Sheet. - NAV per share after the issue and comparison on

the rate with the issue price. - Comparison of al accounting ratios of the issuer

company as mentioned above with the industryavera e / eer rou .


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Listing of the Primary Issues

Fresh issues once made are listed onthe recognized stock exchanges fortrade.


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INTRODUCTION TO THESECONDARY MARKET


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Secondary Market

Once new securities have been sold in thePrimary Market, an efficient mechanismmust exist for their resale, if investors areto view securities as attractive

opportunities. Secondary Market transactions are referred

to those transactions where one investorbuys shares from another investor at the

prevailing market price or at whateverprice both the buyer and seller agreeupon.

The Secondary Markets are regulated by the

Security and Exchange Board of IndiaSEBI .


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Financial Intermediaries

Merchant Bankers Brokers Regulatory Bodies Government FIs FIIs Banks

Underwriters Stock Exchanges Discount Houses


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Trading with stock exchanges

Basic issues related to Trade Purchase

Sell

Short sell

Short cover

Settlement

Stop Loss.


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Q & Ans. Send your queries at

[email protected]
mailto:[email protected]:[email protected]

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Capital Market and Indian Economy Delve