CAPITAL MARKETS OVERVIEW

- INDIA

RITESH NANDWANI

Faculty, NISM

May 24, 2018

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Disclaimer

This presentation constitutes an academic effort for a general

understanding of Indian Capital Markets

The views expressed in the slides, presentation content and

discussion are that of the presenter and need not represent the

views of the organization

No part of the presentation may be reproduced in any form in

print or digital copies or distributed through social media

applications in any manner

Since data and pictures have been put together from various

sources, the audience is advised to refer to the original and

authoritative sources of such content/ data which may or may

not have been mentioned in the presentationMay 24, 2018

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Agenda

Regulatory Framework

Role, Power & Functions of SEBI

Market Participants

Indian Securities Markets - Key Features

Market Segments

Primary Markets

Secondary Markets

Mutual Funds

Myths and Realities

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Regulatory Framework

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Regulators in Financial Sector

Securities

MarketBanking Insurance Pension

FINANCIAL MARKET

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Securities & Exchange Board of India (SEBI)

Formed as an administrative

body under Ministry of

Finance in 1988

Statutory status as an

Independent Regulator for

Securities Market through

the Act of Parliament on 04

April, 1992

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Preamble of the SEBI Act, 1992

Investor protection

Regulation of

securities market

Development of

securities market

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Legal framework

SEBI Act, 1992

Depositories Act, 1996

Companies Act, 2013 (limited provisions) Relating to issue & transfer of securities

Relating to listing requirements & minimum subscription

Relating to disclosure requirements in prospectus

Securities Contracts (Regulation) Act, 1956

Rules, Regulations, Guidelines, Circulars

Appellate Mechanism

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Intermediaries registered with SEBI

Listed Companies & Companies seeking Listing

Any person involved in fraudulent practices like insidertrading, manipulation etc in securities market

Jurisdiction of SEBI

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Powers

Legislative

Inspection / Investigation

Surveillance

Directions

Enquiry / Adjudication

Enforcement

Suspension or cancellation

Cease or desist

Monetary penalty

Prosecution

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Functions

Regulation of securities market which includes:

Registration of market participants

Supervision & Surveillance

Investigation & Enforcement

Vetting of offer documents for offers made to public, schemes

of mutual funds

Regulation of substantial acquisitions and takeovers

Investor complaints redressal

Promoting investor awareness and education

Research

Policy formulation, Global standards

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Regulations for Investors and Issuers

(Prohibition of Fraudulent and Unfair Trade Practices Relating To Securities Market) Regulations, 2003

(Substantial Acquisition of Shares and Takeovers) Regulations, 2011

(Buy Back of Securities) Regulations, 1998

(Issue of Capital and Disclosure Requirements), Regulations, 2009

(Issue of Sweat Equity) Regulations, 2002

(Prohibition of Insider Trading) Regulations, 1992

(Delisting of Equity Shares) Regulations, 2009

(Informal Guidance) Scheme, 2003

https://www.sebi.gov.in/sebiweb/home/HomeAction.do?doListing=yes&sid=1&ssid=3&smid=0 May 24, 2018

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Market Participants

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Market Participants

Issuers

Investors

Intermediaries

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Market Intermediaries

Stock Exchanges

Depositories

Stock Brokers

Depository Participants (DPs)

Custodians

Merchant Bankers

Underwriters

Registrar to Issue and Share Transfer Agents

Debenture Trustees

Credit Rating Agencies

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Market Intermediaries (Contd.)

Foreign Institutional Investors

Mutual Funds

Portfolio Managers

Alternate Investment Funds (AIFs)

Collective Investment Schemes

Real Estate Investment Trusts (REITs)

Infrastructure Investment Trusts (InvITs)

Investment Advisers (IAs)

Research Analysts (RAs)

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Summary & Details

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https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognised=yes

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Indian Securities Markets - Key Features

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Indian Markets - Key Features

Features State of the Market

Regulator SEBIAutonomous, Independent, Statutory bodyMandated to protect investors’ interest, develop andregulate securities market

Stock Exchanges As front line regulators – BSE / NSE / RSE’s

Intermediaries Intermediaries registered and regulated by SEBI undersection 12 of SEBI Act (brokers, merchant bankers, RTI, STAetc.)

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Features State of the Market

Access to Market Paradigm shift – Merit to disclosures based regime.

Access to InternationalMarket

Firms allowed to issue ADRs / GDRs and raise ECBs.ADRs/GDRs have two way fungibility.

FIIs allowed to invest in Indian market.

MFs allowed to invest overseas.

Retail investors allowed to invest in IDRs

Corporate Compliance Emphasis on disclosures accounting standards andcorporate governance.

Indian Markets - Key Features

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Features State of the Market

Pricing ofSecurities

Determined by market - Either by issuer through fixed priceor by investors through book building

Fair system of proportionate allotment to retail investors

TradingMechanism

On-line, Electronic,AnonymousFully-automated,order matching on a price/time priorityWide Reach with over 10000 terminals spread in over 400cities in India and abroadLow Transaction Cost

Indian Markets - Key Features

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Features State of the Market

Clearing and Settlement System

Clearing House/Corporation provides full novationCounterparty Risk is absent

Risk Management Comprehensive risk management system

Transfer of securities

Transfers are recorded electronically in book entry form bydepositories99% of Market Cap dematerialized

Mutual Funds Open to private sector. Variety of funds and products.

Indian Markets - Key Features

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Features State of the Market

Products Available at theExchanges

EquityDebtGovernment SecuritiesMutual FundsExchange Traded FundsStock Index Options & FuturesSingle Stock Options & FuturesInterest Rate DerivativesCurrency Futures

Regulatory Competence SEBI vested with powers and systems to detectmisconduct and impose deterrent penalties

Indian Markets - Key Features

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Market Segments

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Market Segments

Primary Markets

Secondary Markets

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Primary Markets

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Primary market

Market in which shares, debentures and other securities are

sold for the first time for collecting long-term capital

Usually known as “Initial Public Offer” (IPO) Market

Flow of funds is from savers to users/ borrowers

Helps in capital formation

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Primary Markets

New issues of financial instruments are offered for sale

Users of funds

(Corporate Issuers)

Intermediaries

(Merchant Bankers,

Underwriters,

Brokers, RTAs, etc.)

Suppliers

of funds

(Investors)

Financial Instruments

Funds

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Options for raising funds

Various types of instruments

HybridDebt Equity

In India

Outside India

From Banks & FIs

Public issue of

Bonds/Debentures

ECBs ADR/GDRs

IPOs

FPOs

Rights Issue

Pref. Issue

Various forms of

Convertibles

FCCBs & FCEBs

ECB: External Commercial Borrowing

ADR/ GDR: American/ Global Depository Receipts

FCCB: Foreign Currency Convertible Bonds

FCEB: Foreign Currency Exchangeable Bonds

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Fund raising - Life cycle

Seed

Capital

Shares

Own funds, Family,

Friends, Angel

Investors

IPO: Initial Public Offer

QIP: Qualified Institutions Placement

GDR: Global Depository Receipts

FCCB: Foreign Currency Convertible Bond

ADR: American Depository Receipts

Venture

Capital

Warrants /

Shares

Venture Capitalist

Private

Equity

Shares

PE Funds

IPO

Shares

FPIs, FI, Banks, Insurance

Cos, MF, HNI, Individuals

including NR

Private

Placement

Shares /

Warrants /

FCD / PCD

Promoters, Fis,

Strategic Investor

Follow-on

Public

Issue

Shares

FPIs, FI, Banks, Insurance Cos, MF,

HNI, Individuals including NR

Rights

Issue

Shares /

PCD / FCD

Existing Shareholders

QIP

Shares

QIBs

GDR

DRs with

underlying

being

Shares

FPIs

FCCB

Foreign

Currency

Bond

convertible

into Shares

Hedge Funds, FPIs

ADR

Depository

Receipts with

the underlying

being Shares

US QIB

Strategic

Investment

Shares

Customer,

Supplier,

Competitor

Investors and Instruments issued depend on the option and stage of lifecycle

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Primary Markets - Resource Mobilization

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Resource Mobilization - Equities

Type of Issuance

2015-2016 2016-2017 April-Jan 2018

No. of

issues

Amount

(INR cr)

No. of

issues

Amount

(INR cr)

No. of

issues

Amount

(INR cr)

Equity

Public 74 14,815 106 29,104 151 66,399

Rights 13 9,239 12 3,416 15 4,540

Total 87 24,054 118 32,520 166 70,939

QIP 24 14,588 21 13,371 41 58,520

Pref. 333 49,916 401 44,103 349 41,581

Total 357 64,504 422 57,474 390 1,00,101

Grand Total Equity 444 88,558 540 89,994 556 1,71,040

Source: SEBI

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Secondary Markets

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Secondary Markets

Financial instruments already issued are traded

Investor

Securities

Brokers Investor

Financial Instruments

Funds

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Secondary Market - Segments

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Cash Market

Derivatives

Debt Government Securities

Corporate Debt

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Clearing & Settlement Process

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Clearing & Settlement Process

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Settlement Cycle

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Secondary Market - Key Statistics

May 24, 2018Source: SEBI

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Secondary Market - Key Statistics

May 24, 2018Source: SEBI

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Thank You

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