A REPORT ON

PROJECT - 1

For
Topic
(Capital market)

Submitted to
INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)
CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY
(CHARUSAT)
CHANGA

Prepared by
Kishan Patel
ID No.: 14BBA035
Dual Degree B.B.A +M.B.A Programme, Semester-IV

Under the Guidance of

Mr Rajesh sadhwani

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM)

CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY
(CHARUSAT)
AT. & PO. CHANGA 388 421 TA: PETLAD DIST. ANAND, GUJARAT

July 2016
Introduction

Capital market is a market for long-term debt and equity shares. In this market, the capital
funds comprising of both equity and debt are issued and traded. This also includes private
placement sources of debt and equity as well as organized markets like stock exchanges.
Capital market includes financial instruments with more than one year maturity.

Secondary Market refers to a market where securities are traded after being initially offered
to the public in the primary market and/or listed on the Stock Exchange. The stock exchanges
along with a host of other intermediaries provide the necessary platform for trading in
secondary market and also for clearing and settlement. The securities are traded, cleared and
settled within the regulatory framework prescribed by the Exchanges and the SEBI. The
Exchange has laid down rules and guidelines for various intermediaries with regards to the
admission and Fee structure for Trading Members, listing criteria and listing fees for
companies. With the increased application of information technology, the trading platforms of
stock exchanges are accessible from anywhere in the country through their trading terminals.
The trading platforms are also accessible through internet. In a geographically widespread
country like India, this has significantly expanded the reach of the exchanges. Secondary
market comprises of equity markets and the debt markets. This chapter focuses on equity
markets, while debt markets are dealt with in chapter 5. The transactions in secondary market
pass through three distinct phases, viz., trading, clearing and settlement. While the stock
exchanges provide the platform for trading, the clearing corporation determines the funds and
securities obligations of the trading members and ensures that the trade is settled through
exchange of obligations. The clearing banks and the depositories provide the necessary
interface between the custodians/clearing members for settlement of funds and securities
obligations of trading members. Several entities, like the clearing corporation, clearing
members, custodians, clearing banks, depositories are involved in the process of clearing. The
role of each of these entities is explained below: 1) Clearing Corporation: The clearing
corporation is responsible for post-trade activities such as risk management and clearing and
settlement of trades executed on a stock exchange. The National Securities Clearing
Corporation Ltd. (NSCCL), a wholly owned subsidiary of NSE, was the first clearing
corporation to be established in the country and also the first clearing corporation in the
country to introduce settlement guarantee. The NSCCL was incorporated in August 1995. It
was set up with the objective of bringing and sustaining confidence in clearing and settlement
of securities; promoting and maintaining short and consistent settlement cycles; providing
counter-party risk guarantee and operating a tight risk containment system. 2) Clearing
Members: Clearing Members are responsible for settling their obligations as determined by
the clearing corporation. They do so by making available funds and/or securities in the
designated accounts with clearing bank/depositories on the date of settlement. 3) Custodians:
Custodians are clearing members but not trading members. They settle trades on behalf of
trading members, when a particular trade is assigned to them for settlement. The custodian is
required to confirm whether he is going to settle that trade or not. If he confirms to settle that
trade, then clearing corporation assigns that particular obligation to him. As on September 30,
2010, there are 15 custodians empanelled with NSCCL. They are Axis Bank Ltd., BNP
Paribas, Citibank N.A., DBS bank Ltd., Deutsche Bank A.G., HDFC Bank Ltd.,
www.nseindia.com ISMR Capital Market 96 Hongkong& Shanghai Banking Corporation
Ltd., ICICI Bank Ltd., Infrastructure leasing and Financial Services Ltd., JP Morgan Chase
Bank N.A., Kotak Mahindra Bank Ltd., Orbis Financial Corporation Ltd., SBI - SG Global
Securities Services, Standard Chartered Bank Ltd., and Stock Holding Corporation of India
Ltd. 4) Clearing Banks: Clearing banks are a key link between the clearing members and
Clearing Corporation to effect settlement of funds. Every clearing member is required to open
a dedicated clearing account with one of the designated clearing banks. Based on the clearing
members obligation as determined through clearing, the clearing member makes funds
available in the clearing account for the pay-in and receives funds in case of a pay-out. There
are 13 clearing banks of NSE, such as Axis Bank Ltd., Bank of India Ltd., Canara Bank Ltd.,
Citibank N.A, HDFC Bank Ltd., HSBC Ltd., ICICI Bank Ltd., IDBI Bank Ltd., IndusInd
Bank Ltd., Kotak Mahindra Bank, Standard Chartered Bank, State Bank of India and Union
Bank of India. 5) Depositories: Depository holds securities in dematerialized form for the
investors in their beneficiary accounts. Each clearing member is required to maintain a
clearing pool account with the depositories. He is required to make available the required
securities in the designated account on settlement day. The depository runs an electronic file
to transfer the securities from accounts of the custodians/clearing member to that of NSCCL
and visa-versa as per the schedule of allocation of securities. The two depositories in India
are the National Securities Depository Ltd. (NSDL) and Central Depository Services (India)
Ltd. (CDSL). 6) Professional Clearing Member: NSCCL admits special category of members
known as professional clearing members (PCMs). PCMs may clear and settle trades executed
for their clients (individuals, institutions etc.). In such cases, the functions and responsibilities
of the PCM are similar to that of the custodians. PCMs also undertake clearing and settlement
responsibilities of the trading members. The PCM in this case has no trading rights, but has
clearing rights i.e. he clears the trades of his associate trading members and institutional
clients capital market.
Overview of Indian Capital Market

The Indian capital market is more than a century old. Its history goes back to 1875, when 22
brokers formed the Bombay Stock Exchange (BSE). Over the period, the Indian securities
market has evolved continuously to become one o the most dynamic, modern, and efficient
securities markets in Asia. Today, Indian market confirms to best international practices and
standards both in terms of structure and in terms of operating efficiency. Indian securities
markets are mainly governed by a) The Companys Act1956, b) the Securities Contracts
(Regulation) Act 1956 (SCRA Act), and c) the Securities and Exchange Board of India
(SEBI) Act, 1992. A brief background of these above regulations are given below

a) The Companies Act 1956 deals with issue, allotment and transfer of securities and various
aspects relating to company management. It provides norms for disclosures in the public
issues, regulations for underwriting, and the issues pertaining to use of premium and discount
on various issues.

b) SCRA provides regulations for direct and indirect control of stock exchanges with an aim
to prevent undesirable transactions in securities. It provides regulatory jurisdiction to Central
Government over stock exchanges, contracts in securities and listing of securities on stock
exchanges.

On the growth front, it is important to ensure that credit requirements for productive purposes
are adequately met so as to support the growth momentum of the economy. However, the
global financial turmoil has had knock-on effects on our financial markets; this has reinforced
the importance of focusing on preserving financial stability. The Reserve Bank has reviewed
the current and evolving macroeconomic situation and liquidity conditions in the global and
domestic financial markets. Based on this review, RBI has taken slew of above measures,
including cut in CRR, SLR and repo rate. The total liquidity support provided through the
latest reductions in the CRR, SLR and temporary accommodation under the SLR is likely to
be in the order of Rs.1,40,481 crore. With RBI announcing slew of liquidity boosting
measures overall interest regime in the country is likely to ease in the near term. Some of the
banks have already announced interest rate reduction and more are likely to follow soon. The
reduction in SLR would release much needed liquidity into the system and signals reduction
in the interest rates.
Companies and governments can raise long-term funds. It is a market in which money is lent
for periods longer than a year. A nation's capital market includes such financial institutions as
banks, insurance companies, and stock exchanges that channel long-term investment funds to
commercial and industrial borrowers. Unlike the money market, on which lending is
ordinarily short term, the capital market typically finances fixed investments like those
in buildings and machinery.
Nature and Constituents: The capital market consists of number of individuals and
institutions (including the government) that canalize the supply and demand for long term
Capital and claims on capital. The stock exchange, commercial banks, co-operative banks,
saving banks, development banks, insurance companies, investment trust or companies, etc.,
are important constituents of the capital markets. The capital market, like the money market,
has three important Components, namely the suppliers of loan able funds, the borrowers and
the Intermediaries who deal with the leaders on the one hand and the Borrowers on the other.

The demand for capital comes mostly from agriculture, industry, trade The government. The
predominant form of industrial organization developed Capital Market becomes a necessary
infrastructure for fast industrialization. Capital market not concerned solely with the issue of
new claims on capital, But also with dealing in existing claims.
The capital market is classified in to two categories. They are the Primary market (New
Issues Market) and the Secondary market (Old (Existing) Issues Market). This classification
is done on the basis of the nature of the instrument brought in the market. However on the
basis of the types of institutions involved in capital market, it can be classified into various
categories such as the Government Securities market or Gilt-edged market, Industrial
Securities market, Development Financial Institutions (DFIs) and Financial intermediaries.
All of these components have specific features to mention. The structure of the Indian capital
market has its distinct features. These different segments of the capital market help to develop
the institution of capital market in many dimensions. The primary market helps to raise fresh
capital in the market. In the secondary market, the buying and selling (trading) of capital
market instruments takes place. The following chart will help us in understanding the
organizational structure of the Indian Capital market.
 GROWTH OF CAPITAL MARKET IN INDIA

After Independence capital market has shown a remarkable progress. The first organised
stock exchange was established in India at Bombay in 1875. When the Securities Contracts
(Regulation) Act 1956 was passed, only 7 Stock exchanges Viz. Mumbai, Ahmadabad,
Kolkata, Chennai, Delhi, Hyderabad and Indore were started.

Table 1: Chart Showing the Growth of Capital Market

End of December 1975-76 2014-15

i) Stock Exchanges (No.) 8 25
ii) Market Value of Capital ( in Crore) 3,273 16,98,428
iii) Capital Issues (Rs. in Crore) 98 60,502

iv) Capital raised as % of gross domestic

Saying (%) 0.7 7.0

Source: - Tata Services Ltd., statistical outline of India 2014-15.

Capital Market Growth:

The Intensive and Extensive Margins Capital markets have grown markedly since the early
1990s in both developed and emerging economies. The median developed countrys equity
market expanded from an average of 35% of GDP over the period 1991-1995 to an average
of 84% over 2006-2011. Even more pronounced growth patterns are observed in emerging
countries, where markets grew from 17% to 59% of GDP over the same period in the median
country. Corporate bond markets also grew, especially in emerging economies where they
increased more than 6-fold, albeit from a low base. In the median developed country,
corporate bond markets expanded from an average of 27% of GDP in 1991-1995 to 41% in
2006-2011. As a comparison, private credit by deposit money banks increased from 81% to
117% (27% to 36%) of GDP in the median developed (emerging) country during the same
period.
Government Securities Market

This is also known as the Gilt-edged market. This refers to the market for government and
semi-government securities backed by the Reserve Bank of India (RBI)

Industrial Securities Market

This is a market for industrial securities i.e. market for shares and debentures of the existing
and new corporate firms. Buying and selling of such instruments take place in this market.
This market is further classified into two types such as the New Issues Market (Primary) and
the Old (Existing) Issues Market (secondary). In primary market fresh capital is raised by
companies by issuing new shares, bonds, units of mutual funds and debentures. However in
the secondary market already existing i.e old shares and debentures are traded. This trading
takes place through the registered stock exchanges. In India we have three prominent stock
exchanges. They are the Bombay Stock Exchange (BSE), the National Stock Exchange
(NSE) and Over The Counter Exchange of India (OTCEI).

Development Financial Institutions (DFIs)

This is yet another important segment of Indian capital market. This comprises various
financial institutions. These can be special purpose institutions like IFCI, ICICI, SFCs, IDBI,
IIBI, UTI, etc. These financial institutions provide long term finance for those purposes for
which they are set up.

International Financial Institutes

Financial Intermediaries

The fourth important segment of the Indian capital market is the financial intermediaries.
This comprises various merchant banking institutions, mutual funds, leasing finance
companies, venture capital companies and other financial institutions.

SEBI Regulates Indian Capital Market

For the smooth functioning of the capital market a proper coordination among above
organizations and segments is a prerequisite. In order to regulate, promote and direct the
progress of the Indian Capital Market, the government has set up 'Securities and Exchange
Board of India' (SEBI). SEBI is the supreme authority governing and regulating the Capital
Market of India.
Recent Developments in Capital Market of India

The Indian capital market has witnessed major reforms in the decade of 1990s and
thereafter. It is on the verge of the growth.

Thus, the Government of India and SEBI has taken a number of measures in order to
improve the working of the Indian stock exchanges and to make it more progressive and
vibrant.

Reforms in Capital Market of India the major reforms undertaken in capital market of India
include:-

Establishment of SEBI: The Securities and Exchange Board of India (SEBI) was
established in 1988. It got a legal status in 1992. SEBI was primarily set up to regulate the
activities of the merchant banks, to control the operations of mutual funds, to work as a
promoter of the stock exchange activities and to act as a regulatory authority of new issue
activities of companies. The SEBI was set up with the fundamental objective, "to protect the
interest of investors in securities market and for matters connected therewith or incidental
thereto." The main functions of SEBI are:-To regulate the business of the stock market and
other securities market. To promote and regulate the self regulatory organizations. To
prohibit fraudulent and unfair trade practices in securities market. To promote awareness
among investors and training of intermediaries about safety of market. To prohibit insider
trading in securities market. To regulate huge acquisition of shares and takeover of
companies.

Establishment of Creditors Rating Agencies: Three creditors rating agencies viz. The
Credit Rating Information Services of India Limited (CRISIL - 1988), the Investment
Information and Credit Rating Agency of India Limited (ICRA - 1991) and Credit Analysis
and Research Limited (CARE) were set up in order to assess the financial health of different
financial institutions and agencies related to the stock market activities. It is a guide for the
investors also in evaluating the risk of their investments.

Increasing of Merchant Banking Activities: Many Indian and foreign commercial banks
have set up their merchant banking divisions in the last few years. These divisions provide
financial services such as underwriting facilities, issue organising, consultancy services, etc.
It has proved as a helping hand to factors related to the capital market
 Candid Performance of Indian Economy: In the last few years, Indian economy is
growing at a good speed. It has attracted a huge inflow of Foreign Institutional Investments
(FII). The massive entry of FIIs in the Indian capital market has given good appreciation for
the Indian investors in recent times. Similarly many new companies are emerging on the
horizon of the Indian capital market to raise capital for their expansions.

Rising Electronic Transactions: Due to technological development in the last few years.
The physical transaction with more paper work is reduced. Now paperless transactions are
increasing at a rapid rate. It saves money, time and energy of investors. Thus it has made
investing safer and hassle free encouraging more people to join the capital market

Growing Mutual Fund Industry : The growing of mutual funds in India has certainly
helped the capital market to grow. Public sector banks, foreign banks, financial institutions
and joint mutual funds between the Indian and foreign firms have launched many new funds.
A big diversification in terms of schemes, maturity, etc. has taken place in mutual funds in
India. It has given a wide choice for the common investors to enter the capital market.

Growing Stock Exchanges : The numbers of various Stock Exchanges in India are
increasing. Initially the BSE was the main exchange, but now after the setting up of the NSE
and the OTCEI, stock exchanges have spread across the country. Recently a new Inter-
connected Stock Exchange of India has joined the existing stock exchanges.

Investor's Protection: Under the purview of the SEBI the Central Government of India has
set up the Investors Education and Protection Fund (IEPF) in 2001. It works in educating and
guiding investors. It tries to protect the interest of the small investors from frauds and
malpractices in the capital market.

Growth of Derivative Transactions: Since June 2000, the NSE has introduced the
derivatives trading in the equities. In November 2001 it also introduced the future and options
transactions. These innovative products have given variety for the investment leading to the
expansion of the capital market.

Insurance Sector Reforms : Indian insurance sector has also witnessed massive reforms in
last few years. The Insurance Regulatory and Development Authority (IRDA) was set up in
2000. It paved the entry of the private insurance firms in India. As many insurance companies
invest their money in the capital market, it has expanded.
 Commodity Trading: Along with the trading of ordinary securities, the trading in
commodities is also recently encouraged. The Multi Commodity Exchange (MCX) is set up.
The volume of such transactions is growing at a splendid rate.

Data of securities market

To assess which firms issue securities, the comparative performance of issuing and non-
issuing firms, and the evolution of the size distribution of firms as they issue securities, we
assemble a comprehensive dataset covering firm bond and equity issuances in capital markets
around the world as well as balance sheet information on publicly listed firms. The data on
firm capital raising activity cover the period 1991-2011 and come from the Thomson Reuters
Security Data Corporation (SDC) Platinum database, which provides transaction-level
information on new issuances of common and preferred equity and publicly and privately
placed bonds with an original maturity of more than one year.2 Given that the SDC Platinum
database does not collect data on debt issuances with maturities shorter than one year, the
dataset does not cover commercial paper. For offerings in more than one market, we consider
each market a separate issuance. The dataset includes 532,423 security issuances: 138,968
equity issuances and 393,455 bond issuances. Security issuances are classified as domestic or
international based on the location of the main exchange where the issuances take place and
compared with the issuing firms nationality. The dataset includes 411,180 issuances in
domestic markets and 116,811 issuances in foreign markets (4,432 issuances are not possible
to be classified and have been assigned missing values).
Indian scenario (commodity)

In India, cotton is cultivated in three regions, Northern India (Punjab, Haryana and
Rajasthan), Central India (Maharashtra, Madhya Pradesh and Gujarat) and Southern India
(Andhra Pradesh, Karnataka and Tamil Nadu). The sowing season in India commences in
April when most of the irrigated cotton is planted in Northern and Central parts of the
country. In the rain fed parts of Central and Southern India, sowing commences with the
onset of southwest monsoon, i.e. June-July. The arrivals generally begin by September;
however, arrivals peak in October and continue beyond February. India's annual production
of cotton has been steadily increasing in the recent years supported by a rise in acreage, usage
of genetically modified seeds and improved farming practices. India produced 36.5 million
bales of cotton (170 kg each) from acreage of 12 million hectares in 2012-13, according to
the USDA. Gujarat, Maharashtra and Andhra Pradesh are the major producers of cotton,
accounting for about 75 per cent of the total domestic production. India, the second largest
exporter of cotton, is likely to export 7 million bales of cotton in 2013-14, according to a
USDA forecast. India mostly imports long and extra-long staple cotton from US, Egypt, and
West Africa.

Global scenario (commodity)

Cotton production and trade is widely spread across the world, with more than 80 nations
cultivating the crop. However, its production, consumption and trade are dominated by a few
nations. China, India, US and Pakistan (in that order) are the largest cotton producers,
contributing over 70 per cent to the world production (see chart). In 2012-13, global
production of cotton stood at 26.8 million metric tonnes, according to the USDA. US and
India are the top two exporters of cotton, contributing 27 and 18 per cent of the world exports
respectively, whereas China is the worlds largest importer with a share of 44 per cent in
2012-13. China, India, US and Pakistan have similar cotton seasons with arrivals starting
around September
Debt or Bond market

The bond market (also known as the debt, credit, or fixed income market) is a financial
market where participants buy and sell debt securities, usually in the form of bonds. As of
2009, the size of the worldwide bond market (total debt outstanding) is an estimated $82.2
trillion [1], of which the size of the outstanding U.S. bond market debt was $31.2 trillion
according to BIS (or alternatively $34.3 trillion according to SIFMA).

Nearly all of the $822 billion average daily trading volume in the U.S. bond market takes
place between broker-dealers and large institutions in a decentralized, over-the-counter
(OTC) market.

However, a small number of bonds, primarily corporate, are listed on exchanges.

References to the "bond market" usually refer to the government bond market, because of its
size, liquidity, lack of credit risk and, therefore, sensitivity to interest rates. Because of the
Inverse relationship between bond valuation and interest rates, the bond market is often used
to indicate changes in interest rates or the shape of the yield curve.
Contents

1 Market structure
2 Types of bond markets
3 Bond market participants
4 Bond market size
5 Bond market volatility
6 Bond market influence
7 Bond investments
8 Bond indices

Market structure

Bond markets in most countries remain decentralized and lack common exchanges like stock,
future and commodity markets. This has occurred, in part, because no two bond issues are
exactly alike, and the variety of bond securities outstanding greatly exceeds that of stocks.

However, the New York Stock Exchange (NYSE) is the largest centralized bond market,
representing mostly corporate bonds. The NYSE migrated from the Automated Bond System
(ABS) to the NYSE Bonds trading system in April 2007 and expects the number of traded
issues to increase from 1000 to 6000.

Types of bond markets

The Securities Industry and Financial Markets Association (SIFMA) classify the broader
bond market into five specific bond markets.

Corporate
Government & agency
Municipal
Mortgage backed, asset backed, and collateralized debt obligation
Funding
Bond market participants

Bond market participants are similar to participants in most financial markets and are
essentially either buyers (debt issuer) of funds or sellers (institution) of funds and often both.

Participants include:

Institutional investors
Governments
Traders
Individuals

Because of the specificity of individual bond issues, and the lack of liquidity in many smaller
issues, the majority of outstanding bonds are held by institutions like pension funds, banks
and mutual funds. In the United States, approximately 10% of the market is currently held by
private individuals.

Bond market size

Amounts outstanding on the global bond market increased 10% in 2009 to a record $91
trillion. Domestic bonds accounted for 70% of the total and international bonds for the
remainder. The US was the largest market with 39% of the total followed by Japan (18%).
Mortgage-backed bonds accounted for around a quarter of outstanding bonds in the US in
2009 or some $9.2 trillion. The sub-prime portion of this market is variously estimated at
between $500bn and $1.4 trillion. Treasury bonds and corporate bonds each accounted for a
fifth of US domestic bonds. In Europe, public sector debt is substantial in Italy (93% of
GDP), Belgium (63%) and France (63%). Concerns about the ability of some countries to
continue to finance their debt came to the forefront in late 2009. This was partly a result of
large debt taken on by some governments to reverse the economic downturn and finance bank
bailouts. The outstanding value of international bonds increased by 13% in 2009 to $27
trillion. The $2.3 trillion issued during the year was down 4% on the 2008 total, with activity
declining in the second half of the year.

Bond market volatility

For market participants who own a bond, collect the coupon and hold it to maturity, market
Volatility is irrelevant; principal and interest are received according to a pre-determined
schedule. But participants who buy and sell bonds before maturity are exposed to many risks,
most importantly changes in interest rates. When interest rates increase, the value of existing
bonds falls, since new issues pay a higher yield.

Market volatility: changes in bond prices are inverse to changes in interest rates. Fluctuating
interest rates are part of a country's monetary policy and bond market volatility is a response
to expected monetary policy and economic changes. Economists' views of economic
indicators versus actual released data contribute to market volatility. A tight consensus is
generally reflected in bond prices and there is little price movement in the market after the
release of "in-line" data. If the economic release differs from the consensus view the market
usually undergoes rapid price movement as participants interpret the data. Uncertainty (as
measured by a wide consensus) generally brings more volatility before and after an economic
release. Economic releases vary in importance and impact depending on where the economy
is in the business cycle.

Bond market influence

Bond markets determine the price in terms of yield that a borrower must pay in able to
receive funding. In one notable instance, when President Clinton attempted to increase the
US budget deficit in the 1990s, it led to such a sell-off (decreasing prices; increasing yields)
that he was forced to abandon the strategy and instead balance the budget.

Bond investments
Investment companies allow individual investors the ability to participate in the bond markets
through bond funds, closed-end funds and unit-investment trusts. In 2006 total bond fund net
inflows increased 97% from $30.8 billion in 2005 to $60.8 billion in 2006.Exchange- traded
funds (ETFs) are another alternative to trading or investing directly in a bond issue. These
Securities allow individual investors the ability to overcome large initial and incremental
trading sizes.

Bond indices
Main article: Bond market index A number of bond indices exist for the purposes of
managing portfolios and measuring performance, similar to the S&P 500 or Russell Indexes
for stocks. The most common American benchmarks are the Barclays Aggregate, Citigroup
BIG and Merrill Lynch Domestic Master. Most indices are parts of families of broader
indices that can be used to measure global bond portfolios, or may be further subdivided by
maturity and/or sector for managing specialized portfolios.

Market Turnover during October '16

(Rs. Crore)
DATE - CASH - - F&O - TOTAL

BSE NSE BSE NSE

13-Oct-16 3,945.28 23,622.24 4.70 624,226.81 651,799.03
10-Oct-16 2,502.09 15,091.93 2.36 208,899.59 226,495.97
07-Oct-16 3,337.19 19,352.51 2.07 251,660.76 274,352.53
06-Oct-16 3,674.61 22,278.94 6.52 551,359.31 577,319.38
05-Oct-16 3,914.82 21,251.86 5.48 382,033.62 407,205.78
04-Oct-16 4,258.42 22,142.98 3.61 324,182.75 350,587.76
03-Oct-16 3,841.40 20,433.10 7.23 280,027.67 304,309.40
TOTAL 25,473.81 144,173.56 31.9 2,622,390. 2,792,069.85
7 51

(Rs. Crore)
1. Government Securities Market : This is also known as the Gilt-edged market. This
refers to the market for government and semi-government securities backed by the Reserve
Bank of India (RBI).

2. Industrial Securities Market : This is a market for industrial securities i.e. market
for shares and debentures of the existing and new corporate firms. Buying and selling of
such instruments take place in this market.

3. Development Financial Institutions (DFIs) : This is yet another important segment

of Indian capital market. This comprises various financial institutions. These can be special
purpose institutions like IFCI, ICICI, SFCs, IDBI, IIBI, UTI, etc. These financial
institutions provide long term finance for those purposes for which they are set up.

4. Financial Intermediaries : The fourth important segment of the Indian capital

market is the financial intermediaries. This comprises various merchant banking
institutions, mutual funds, leasing finance companies, venture capital companies and other
financial institutions
Role/Functions of Capital Market

Capital market plays as significant role as money market in the national economy. A
developed, dynamic and vibrant capital market can immensely contribute for speedy
economic growth and development.

Functions of the capital market are:

Mobilization of Savings
Capital Formation
Provision of Investment Avenue
Speed up Economic Growth and Development
Proper Regulation of Funds
Service Provision

(Stock Exchange)
 PESTAL ANALYSIS

POLITICAL:

The capital market of India is very vulnerable. India has been politically instable in the past
but it is a little politically stable now-a-days.the political instability of the country has a very
strong impact on the capital market. The share market of India changes as the political
changes took place. The BSE Index, SENSEX goes up and down with any kind of small and
big political news, like, if there is news that a particular political party has withdrawn its
support from the ruling party, and then the capital market will go down with a bang. The
capital market of India is too weak and is based on speculations. The political stability of the
country is very important for the stability and growth of capital market in India. The political
imbalance or balance of the country is the major factor in deciding the capital market of
India. The political factors include:

employment laws
tax policy
trade restrictions and tariffs
political stability

ECONOMICAL:

The economical measures taken by the government of India has a very strong relationship
with the capital market. Whenever the annual budget is announced the capital market goes up
and down with the economical policies of the government .If the policies are supportive to
the companies then the capital market takes it positively and if there is any other policy that is
not supportive and it is not welcomed then the capital market goes down. Like, in the case of
allocation of 3-G spectrum, those companies that got the license for 3-G, they witnessed
sharp growth in their share values so the economic policies play a major part in the growth
and decline of the capital market and again if there is relaxation on any kind of taxes on items
of automobile industry then the share of automobile sector goes up and virtually strengthen
the capital market .The economical factors include:

inflation rate
 economic growth
exchange rates
interest rates

SOCIAL:

India is a country of unity in diversity .India is socially rich but the capital market is not very
attached with the social factors .Yes, there is some relation between the social factors with the
capital market. If there is any big social factor then to some extent it affects the capital market
but small social factors dont impact at all. Like, there was opposition of reliance fresh in
many cities and many stores were closed. The share prices of the reliance fresh went down
but the impact was on and individual firm there was not much impact on the capital market
on a whole the social factors have not much of impact on the capital market in India. The
social factors include:

emphasis on safety
career attitudes
population growth rate
age distribution
health consciousness

TECHNOLOGICAL:

The technological factors have not that much effect on the capital market. India is
technological backward country. Same as social factors, technological factor can have an
effect on an individual form but it cannot have a big impact on a whole of capital market. The
Bajaj got a patent on its dts-i technology, and launched it in its new bike but it does not effect
on capital market. The technological change in India is always on a lower basis and it doesnt
effect on country as a whole. The technological factors include:

R&D activity
technology incentives
rate of technological change
automation
ENVIORNMENTAL FACTORS:

Initially the environmental factors dont play a vital role in the capital market. But the time
has changed and people are more eco-friendly. This is really bothering them that if any firm
or industry is environment friendly or not. An increasing number of people investors,
corporate executives are paying importance to these facts, the capital markets still see the
environment as a liability. They belie that it is of no use for their strategy. The environmental
performance is even under-valued by the markets.

LEGAL FACTORS:

Legal factors play an important role in the development and sustain the capital market. Legal
issues relating to any industry or firm decides the fate of the capital market. If the govt. of
India or the parliament introduces a new law that can affect the running of the industry then
the industry will be demotivated and this demonization will lead to the demonization of the
investors and will result in the fall of capital market. Like after the Hardhat Mehta scam, new
rules and regulations were introduced like PAN card was made necessary for trading, if any
investor was investing too much money in a small firm, then the investors were
questioned,etc. These regulations were meant to maintain transparency in the capital market,
but at that time, investment was discouraged. Legal factors are necessary for the
improvement and stability of the capital market.
 SWOT analysis

Strengths

-experienced business units

-domestic market
-existing distribution and sales networks
-monetary assistance provided

Weaknesses

-competitive market
-future debt rating
-tax structure
-small business units

Opportunities

-growing economy
-growth rates and profitability
-growing demand
-income level is at a constant increase

Threats
-growing competition and lower profitability
-price changes
-external business risks
-technological problems
-rising cost of raw materials
-increasing rates of interest
-financial capacity