Download
1 / 14
140 likes | 148 Views
Explore the intricacies of capital markets, from organised and unorganised markets to the role of SEBI in regulating investments. Learn about listing securities, dematerialisation, and the types of investors in the financial landscape.
E N D
Unit III – Capital Markets Financial Market:- -Every country has a network of financial markets. -There is no specific place or location to indicate a financial market. -It refers to arrangements which facilitate buying and selling of financial assets, claims and services. -It collectively refers to all organisations and institutions which lend funds to business enterprises and public authorities.
Classification of Financial Market:- Organised Market. Money Market. Capital Market. B. Unorganised Market.
Capital Market:- -It is an organised market for meeting long term financial needs of business enterprises. -It refers to all the facilities and institutional arrangements for borrowing and lending long term funds. -The demand for long term funds comes from private and public sector companies and the government. -The supply of funds comes from individual savers, corporate savings, banks, insurance companies, specialised financial institutions and the government. -The Indian capital market is fast developing due to the rapid expansion of corporate sector and public enterprises.
Types of Capital Market:- 1. Gilt-edged Securities Market. 2. Corporate/Industrial Securities Market. 3. Long Term Loans Market.
Functions of a Stock Exchange:- 1. Provides continuous and regular market for securities. 2. Facilitates evaluation of securities. 3. Encourages capital formation. 4. Provides safety and security in dealings. 5. Regulates company management. 6. Facilitates public borrowing. 7. Provides clearing house facility. 8. Facilitates speculation. 9. Serves as an economic barometer. 10. Facilitates bank lending.
Listing of Securities:- -A stock exchange selects certain companies for the purpose of trading of securities. -The company whose securities are included in the official list is called a listed company. -Listing gives official admission of the securities of a particular company to trading privileges in the stock exchange. -A company has to apply for listing to stock exchange authorities and once listed has to follow certain rules and regulations. -Listing is not compulsory in India but it ensures popularity and goodwill to the company. The government can make listing mandatory for certain public companies. -SEBI insists on listing for granting permission for a new issue by a public limited company.
Advantages of listing:- A. To companies. 1. Widens market. 2. Easy publicity. 3. Creates goodwill. 4. Better access to capital. B. To investors. 1. Safety. 2. Useful as collateral security. 3. Ready marketability. 4. Good returns.
Disadvantages of listing:- 1. Disclosure of information by listed companies. 2. Does not control speculation. 3. Does not check malpractices. 4. Companies suffer due to fluctuation in prices. 5. Limited supervision on listed companies. 6. Lengthy procedure.
Listing Procedure:- 1. Submission of application in the prescribed form. 2. Consideration of listing application by stock exchange. 3. Execution of listing agreement. 4. Honouring the conditions and obligations by the listed company. 5. Filing of appeal by the company, if necessary.
Introduction to SEBI:- -Securities and Exchange Board of India (SEBI) was set up on 12th April 1988. -It was set up to counter the shortcomings and weaknesses of stock exchanges and to regulate the capital market. -It was authorised to regulate all merchant banks on issue activity, lay guidelines and supervise the working of mutual funds and the functioning of stock exchanges in India. -It has taken a number of steps to introduce improved practices, and greater transparency in the capital markets in the interest of the investing public and the healthy growth of the capital markets.
Role of SEBI:- 1. Guidelines to issuing companies. 2. Regulation of portfolio management services. 3. Regulation of mutual funds. 4. Action for delays in transfers and refunds. 5. Guidelines on takeovers and mergers. 6. Special measures for protection of investors. 7. Education and guidance of investors. 8. Orderly functioning of stock exchanges. 9. Regulation of foreign institutional investors.
Classification of Investors:- A. Institutional investors. 1. Private institutional investors. 2. Public institutional investors. B. Individual investors.
Demat of Shares:- -Demat stands for Dematerialisation of securities or shares. -It is a process by which securities in physical form are converted into electronic form by following suitable procedure. -Shares were traditionally held in physical or paper form which were easily lost or stolen, there were forged transfers, etc. -In order to remove the weaknesses of traditional exchanges, depository system or paperless trading system is adopted in most of the developed countries. -Shareholders prefer to keep their securities in demat form to facilitate easy and safe transfers.
Procedure for Demat of Shares:- 1. Opening a demat account with a depository participant. 2. Securing client ID number from DP. 3. Submission/filing of demat request form (DRF) and share certificates to DP. 4. Forwarding/Sending DRF and Share certificates to concerned company. 5. Verification of share certificates and updating company’s records. 6. Recording/ giving credit to demat account holder by depository. 7. Confirmation of dematerialisation by depository to DP. 8. Updating records by DP. 9. Intimation to account holder and securing his confirmation. 10. Regular operation of demat account.
