IntroductionIndian Capital market has been in existences even before Independence. It dates back nearly 200 years ago. However in recent times Indian capital market has experienced a change according to the market situations. Indian Capital market has major faces like Bombay Stock Exchange which was established in the year 1899 by few brokers. There after many stock exchanges were established. Like National Stock Exchange, Calcutta Stock Exchange and many other regional stock exchanges. The Indian Equity market is popularly known as Indian stock market. Indian stock market has become third largest after China and Hong Kong in Asian region. Recent market reports say that Indian Capital Market has capitalization of nearly $600 billion, which makes up to 30 lakh million of rupees, which is one-tenth of the combined valuation of the Asia region.However Indian Capital Market is still Developing and faces many crucial challenges, which are hindering the growth of the market. Many preventive measures are taken by government and even by SEBI, but the yields are not so satisfactory enough. The following study covers the challenges faced by capital markets and the measures to overcome them.

Importance of Indian Capital Marketa. Capital Markets Efficiently Direct Capital to Productive Uses.Capital market directs the stagnated capital or the funds with the savers or investors to the productive channels. Instead of retaining the funds in the bank accounts and earning nominal rate of returns, capital markets can even give returns more than 50%.b. Facilitates capital formation.Capital markets make use of funds efficiently. The money invested in capital markets is used by companies, which in turn try and earn profit and give good returns to the investors, which facilitates capital formation.c. Facilitates availability of funds for the companies and Government. Capital markets make funds available to the companies and government. Either these users use these funds either to expand or diverse business or, government uses these funds to develop infrastructure or promote any developmental scheme. d. Can be an effective tool against inflation.Capital markets can act as an effective tool against inflation, as in inflation prices of goods keep on increasing and the value of money is degrading. Capital market helps in growth of money much faster than bank accounts. Leading to the availability of the funds with the public.

Challenges faced by Indian Capital Market1. Inadequate infrastructureIndian capital market is still in the stage of development. Excluding few stock exchanges in India, others Indian stock exchanges lack with infrastructural facilities.2. Concentrated restructuringIt is observed that the development of Indian capital market is concentrated in few areas of the country, like Delhi, Mumbai, Calcutta, Gujarat etc. Rest all places have less of exposure to the capital market.3. New regulatory reformsNew regulatory reforms by SEBI have made it difficult for the small companies to make it onto the capital market. Small companies fail to get an entry in the stock exchange in the early stages of their existences.4. Reliance on Initial Public Offering.Indian capital market up to some extent depends on Initial Public Offering. However in last four to five years with new technology and online trading systems secondary market has developed to some extent. 5. No adherence to the government framework.Another challenge faced by Indian capital market is that of malpractices. It is seen that many brokers do not follow the government norms regarding transactions and other dealings.6. Technology LimitationsIndian Capital market faces a lot of technical limitations. Even though few stock exchanges are well equipped with the technology required but most of them lack in technology.7. Hacking of systemsEven after all the preventive measures which are taken by SEBI, hacking of computer systems continues. Sites of many stock exchanges are hacked by the hackers and some malpractices occur8. Influence of other marketsIndian capital market is heavily influenced by other markets in the world economy. This results in dependence on the markets in the world economy.9. False Identities.Many brokers create some false identities. By doing this they try and get two trading counter from the SEBI, which is not allowed according to law. And of such a broker commits any crime or scam than he cannot be caught as the identity itself is fake.

10. Political And Economic PoliciesMany times political and economic policies framed at government level are incorrect. They are non competitive or are framed without undertaking the proper research.11. Low Savings Rate.Most of the people in India have low saving rate. Due to which they are left behind. They do not have enough money to invest in the capital market.12. Lack Of public Awareness.People of India lack in the proper knowledge of capital markets. Due to which they invest in wrong companies and lose their money. Due to which new investors are also not attracted toward the capital market.13. ScamsScams are the biggest reason why investors hesitate to invest their money in the capital markets. Scams create a sense of insecurity in the minds of investors. They are afraid that they might lose their money.14. High Trading CostIndian capital market is featured with high cost of transaction and other costs and taxes. In India cost of transaction is very high, where many taxes and services charges need to be paid by the investors.15. Lack of Product Innovation.Lack of product innovation in the sense there are no new products launched in the capital markets. Same shares, same companies and same practices are followed. Very rarely a new product comes in the markets. RecommendationIt is recommended by many of the brokers that the capital market subject should be included in regular syllabus from the college level itself. So that awareness can be created within the future investors.Also that potential investors should try and acquire knowledge of capital market and than invest, so that the funds are utilized efficiently with good returns. It was also found that participation from semi urban and rural areas was just 9%, where more than 60% of the people live in small towns and villages.

Conclusion Indian Capital market is still going through the process of development and needs some more time for its widespread. However many a times due to false economic decisions at the political level has hit capital market badly. Besides the tax structure and inflationary effects have made it difficult for the people to take any investment decisions. It is also observed that potential investors take a back step from investing in the capital market just due to some rumors, without taking a expert advice. Besides many investors invest in the capital market without having proper knowledge of it, and ultimately losing money and getting discouraged.

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