CAPITAL MARKET

INTRODUCTION

The tone of the capital market depends on the available savings and investment in the
economy on the one hand and the performance of the industry and the economy in
general, on the other. Among others, the monsoon and agriculture, industrial growth and
performance of the corporate sector in particular, reflecting the fundamentals in the
economy would influence the tone of capital and stock markets. In particular, the
government policy, the psychological expectations and a host of other factors play a role
in influencing the capital market.

CHARACTERISTICS

1. Greater reliance on debt instruments as against equity and in particular, borrowing

from financial institutions.
2. Issue of debentures, particularly convertible debentures with automatic or
compulsory conversion into equity without the normal option given to investors.
3. Floatation of Mega issues for the purpose of takeover, amalgamation etc.

INTERMEDIARIES

Stock brokers, Sub-brokers, Share transfer agents, Bankers to an issue, Trustees of a trust
deed, Registrars to an issue, Merchant bankers, Underwriters, Portfolio managers,
Investment advisors.

INSTRUMENTS

Innovative financial instruments are introduced like convertible preference shares,

secured premium notes, warrants, zero-coupon bonds, deep discount bonds, discount
bonds, flexi bonds, loyalty coupons etc.

In the foreign capital markets the Indian companies have issued global depository
receipts, listed and traded abroad, foreign currency bonds, convertible bonds, foreign
currency notes, Euro currency bonds etc.

RULES AND REGULATIONS

In-order to meet exigencies of the market and to provide flexibility to regulators, they
have been delegated substantial powers of subordinate legislation. The government has
framed rules under the SCRA, SEBI Act and the Depositories Act. SEBI has framed
regulations under the SEBI Act and the Depositories Act for registration and regulation
of all market intermediaries, and for prevention of unfair trade practices, insider trading
etc. Under the Acts, government and SEBI issue notifications, guidelines and circulars
which need to complied with by market participants. The SROs like stock exchanges
have also laid down their rules and regulations.
FUNCTIONING

Trading in Indian Stock Exchanges is limited to listed securities of public limited

companies. The exchanges provide an online fully automated screen based trading system
(SBTS) where a member can punch into the computer quantities of securities and the
prices of securities and at which at prices he wishes to transact and the transaction is
executed as soon as he finds the matching order from a counter party.

Synopsis submitted by:

IMK Alappuzha Batch 1, IIIrd Semester Group 1

Anila P.N
Anusree.C
Navin.V
Keerthi.T
Anoop J.B
Ajith.N
Simi.K.K