PREPARED BY : MR.ROSHAN DHUNGEL

Capital Market and

Securities Analysis

CAPITAL MARKET It comprises of both New issue markets and Secondary

markets. Capital markets typically involve issuing instruments such as stocks and bonds for the medium-term and long-term.

The number of stock exchanges have raised to 23 till date in India.

All of these exchanges are regulated by SEBI.

New issue market also known as Primary market supplies fresh or additional capital to the companies.

The securities already issued on the new issue market are traded on the secondary market.

Capital Markets instruments

Ordinary Share

These shares are ownership shares of the company which carry fluctuating dividend.

They enjoy voting power, dividend and Capital appreciation if any.

They are highly liquid due to the availability of secondary market.

Ordinary shares without voting power are also popular now a days.

Preference Shares

These shares carry a fixed return in the form of dividend.

They have preference over equity shareholders on payment of dividend and on repayment of Capital.

Cumulative Vs Non Cumulative PS.

Convertible Vs Non Convertible PS.

Redeemable Vs Irredeemable PS.

Participating Vs Non Participating PS.

Debentures

Debenture or Bond is a creditor ship security with a fixed rate of return, fixed maturity period, perfect income certainty and low capital uncertainty.

Types of Debentures include: Registered, Bearer, Redeemable, Perpetual, Convertible, Non Convertible, Partially Convertible, Callable etc.

New Issue Market

It is the direct method of raising capital available for the company from the public.

The various methods of New issue market include:

a) Issue through Prospectus.

b) Offer for Sale.

c) Private Placing.

d) Right Issue.

Capital markets components and Features

It is a market specialized in transactions with medium and long term financial assets,unlike the monetary market which offers solutions for refinancing through short and medium term capitals;

It is a public, open and transparent market, in the sense that anyone can be a participant on this market, without there being notable entry or exit barriers, the transactions having a public character;

The dissemination of information on this market, through its volume or, quickness and with the possibility of equal reception by all participants, is probably the best one from the ones existing in the structures of a market economy;

The capital circulation vehicle is represented by securities, characterized through negotiability of the price and immediate transferability with very low transaction costs; Continue….

The transaction is made through intermediaries, who have an essential role in connecting the owners or issuers of securities with the owners of capitals;

It entails risks both for the issuer and for the investor, specific for each financial instrument in question, but at the same time it also offers complex solutions for minimizing and dispersing it, both the financial and the operational one;

It is an organized market, in the sense that the transactions are performed according to certain principles, norms and rules and accepted by participants. This does not mean the administration of the market, but its regulation with the purpose of creating or preserving the conditions for the unfolding of free competition, so a system for guaranteeing the free and open character of all transactions

Significance of Capital market

Mobilization of savings

Capital formation

Provision of Investment Avenues

Speed up Economic growth and development

Proper regulations of funds

Service provision

Continous availability of funds

Example of capital market transactions

A government raising money on the primary markets

A company raising money on the primary markets

Trading on the secondary market

SEBI (Securities and Exchange Board of India) is a centrally controlled body that is entrusted with the task of protecting the interest of investors in securities and promoting the growth of securities market by implementing suitable rules and norms.

It was officially established by The Government of India in the year of 1992 with SEBI Act 1992, being passed by the Indian Parliament.

Roles and Functions of SEBI

Regulating the business in stock exchanges and any other securities market.

Registering and regulating the working of intermediaries and player in the securities market.

Registering and regulating the working of collective investment schemes, e.g. –mutual funds.

Prohibiting fraudulent activities in the securities market.

Prohibiting insiders trading in securities.

Promoting investors education.

SEBI has regulated

Primary Market

Secondary Market

Mutual Funds and

Foreign Institutional Investments

Refrences

Investopedia,Wekipedia,Google pictures , Slide share,