CAPITAL MARKETS

CA. RAJNISH JAIN

 Financial System
 An institutional framework existing in a country to
enable financial transactions
 Three main parts
 Financial assets (loans, deposits, bonds, equities, etc.)
 Financial institutions (banks, mutual funds, insurance
companies, etc.)
 Financial markets (money market, capital market, forex
market, etc.)
 Regulation is another aspect of the financial system
(RBI, SEBI, IRDA, FMC)
 Financial Institutions
 Includes institutions and mechanisms which
 Affect generation of savings by the community
 Mobilisation of savings
 Effective distribution of savings
 Institutions are banks, insurance companies,
mutual funds- promote/mobilise savings
 Individual investors, industrial and trading
companies- borrowers
 Financial Markets
 Money Market- for short-term funds (less than a
year)
 Organised (Banks)
 Unorganised (money lenders, chit funds, etc.)

 Capital Market- for long-term funds

 Primary Issues Market
 Stock Market
 Bond Market
 The Indian Capital Market
 Market for long-term capital. Demand comes
from the industrial, service sector and
government
 Supply comes from individuals, corporates,
banks, financial institutions, etc.
 Can be classified into:
 Gilt-edged market
 Industrial securities market (new issues and stock
market)
Industrial Securities Market

 Refers to the market for shares and debentures of

old and new companies
 New Issues Market- also known as the primary
market- refers to raising of new capital in the form of
shares and debentures
 Stock Market- also known as the secondary market.
Deals with securities already issued by companies
Financial Intermediaries (1)
 Mutual Funds- Promote savings and mobilise funds
which are invested in the stock market and bond
market
 Indirect source of finance to companies
 Pool funds of savers and invest in the stock
market/bond market
 Their instruments at saver’s end are called units
 Offer many types of schemes: growth fund, income
fund, balanced fund
 Regulated by SEBI
Financial Intermediaries (2)
 Merchant banking- manage and underwrite new
issues, undertake syndication of credit, advise
corporate clients on fund raising
 Subject to regulation by SEBI and RBI
 SEBI regulates them on issue activity and portfolio
management of their business.
 RBI supervises those merchant banks which are
subsidiaries or affiliates of commercial banks
 Have to adopt stipulated capital adequacy norms
and abide by a code of conduct
India Stock markets
 India's stock markets have been on the rise
since May 2004.

 The benchmark Bombay Stock Exchange (BSE)

index, the Sensex, has shot up by over 100%
to cross 9,000 points for the first time in its
history.

 Buyers, like the aggressive foreign institutional

investors who have pumped in more than
$10bn this calendar year, are excited about
India's growing economic strength.
India Stock markets
 Others are convinced that
the economy is
fundamentally strong

 They believe that the

country's financial markets
are more mature than those
of other emerging
economies.
India Stock markets

 Many believe that the

Sensex is proof of India's
economic strength.

 Most global reports have

indicated that the Indian
economy will be larger
than the developed ones,
except China, in the next
few decades.
India Stock markets 4

 But this logic falls flat when one

realises that, unlike the Dow or
Footsie, less than 5% of Indian
companies are listed on Indian stock
exchanges.

 A better indication of the health of

India's economy would be the
collective movement of the 2,500
shares that are regularly traded,
rather than the Sensex.
What have you learned?
Summarise the key issues in
your own words
Order entry from Market Watch – F1 Buy

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Order entry from Market Watch – F2 Sell

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 Buy / Sell

Buy / Sell can be done

• From Market watch with Function keys F1 & F2

• Equities & Derivatives – Buy / Sell
• Markets Info – Stock Details

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From Market Watch

The security which you are intend to Buy / Sell should be added in the
Market watch with the Insert / Append menu which is provided at the top of
the Market watch.

Place the cursor on the security which you intend to Buy / Sell

For Buy order press Functional key F1 – The Background color of the order
entry screen will appear in Blue.

For Sell order press Functional key F2 – The Background color of the order
entry screen will appear in Red.

Select the Exchange NSE / BSE from the drop down menu

Select the instruments from the drop down menu

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Instruments available for NSE

EQUITY – Cash segment

FUTIDX – Index Futures
FUTSTK - Stock Futures
OPTIDX - Index options
OPTSTK - Stock Options

Instruments available for BSE

- EQUITY – Cash segment

Book Type: RL / SL

Book Type – RL (Regular Lot) The order with no special

condition.

For Normal order select the Book Type as RL.

Book Type: SL (Stop Loss) It is an order to Buy / Sell once the

stock reaches a certain price. Home Next
A stop loss is designed to limit loss on a security position.

This facility allows the user to release an order into the system, after the
market price of the security reaches or crosses a threshold price called
trigger price.

Trigger Price: Price at which an order gets triggered from the stop loss
book.

Stop Loss –Buy order – Limit price should be higher than the trigger price.
Stop Loss - Sell order – Limit price should be lesser than the trigger price.

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Order Type: Limit / Market

Limit: Limit orders are the order to buy the shares at stated price. If the price
conditions are not matched the orders will not be executed.

For Placing the limit orders select the order type, which is editable from the
single order entry as Limit.

Incase you are selecting the order type as Limit you have to specify the price
you want to buy.

Market: The Price is specified, as MKT.The system will determine the price.

For Placing the Market orders select the order type, which is editable from the
single order entry as Market.

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Qty: Enter the Qty you want to Buy / Sell

The system provides a facility for entering orders with quantity conditions:

DQ order allows the member to disclose only a part of the order quantity to the
market. DQ (Disclosed Quantity) should not be less that 10% of the Order
Quantity and at the same time should not be greater than or equal to the Order
Quantity.

Mprot: For Market orders on BSE enter the market protection %. This is the
maximum percentage deviation from the current price up to which the market
order can be executed. If no value is entered a default Mkt protection of 10 % is
considered.

An Immediate or Cancel (IOC) order allows the user to buy or sell a security as
soon as the order is released into the system, failing which the order is
cancelled from the system. Partial match is possible for the order and the
unmatched portion of the order is cancelled immediately.
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Mandatory fields for order entry – Book type, Order Type, Quantity
and Rate (If order type is Limit), Trigger price (If Book type is SL)

Non – Mandatory Fields - DQ Qty, Mprot, Valid till

After entering all the mandatory fields type the transaction password to
confirm the order. Initial validations (Clients status (Active / Suspend), Margin
requirements, security status etc) are validated internally before sending the
order to the exchange.

If all the initial validations are checked, the system will generate the reference
no that gives you the confirmation of the order. The status of the order can be
seen with the Functional keys – F3 (If pending) & F8 (Traded)

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