ppt cap mrkt

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Capital MarketsCapital Markets

Functions And InstrumentsFunctions And Instruments



IntroductionIntroduction

What is a capital market ?What is a capital market ? Market for securities (debt and equity)Market for securities (debt and equity)

Business Enterprises and governments can raise longBusiness Enterprises and governments can raise long

term loansterm loans

Money provided for more than a year Money provided for more than a year Eg. Stock market (equity), Bond market (debt)Eg. Stock market (equity), Bond market (debt)



Primary MarketsPrimary Markets

Deals with the issue of new securitiesDeals with the issue of new securities

Companies can obtain funds by sale of bondsCompanies can obtain funds by sale of bonds

This is the market for new long term equity capital. TheThis is the market for new long term equity capital. The

primary market is the market where the securities are sold for primary market is the market where the securities are sold for

the first time.the first time.

In a primary issue, the securities are issued by the companyIn a primary issue, the securities are issued by the companydirectly to investors.directly to investors.

The company receives the money and issues new securityThe company receives the money and issues new security

certificates to the investors.certificates to the investors.

Primary issues are used by companies for the purpose of Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing thesetting up new business or for expanding or modernizing the

existing business.existing business.

Facilitates capital formation in the economy.Facilitates capital formation in the economy.

The financial assets sold can only be redeemed by theThe financial assets sold can only be redeemed by theori inal holder.ori inal holder.



Advantages of Primary MarketAdvantages of Primary Market

It helps in mobilization of savings.It helps in mobilization of savings.

The mobilized savings is been utilized for productiveThe mobilized savings is been utilized for productivepurpose .purpose .

Huge money can be raised by floating new shares in theHuge money can be raised by floating new shares in the

market.market.

It helps in achieving rapid industrial growth of anIt helps in achieving rapid industrial growth of aneconomy.economy.

A primary market provides good avenues for investmentA primary market provides good avenues for investment

in financial assets.in financial assets.



Disadvantages of PrimaryDisadvantages of Primary

MarketMarket There are ample scope for attracting the investors byThere are ample scope for attracting the investors bygiving misleading information.giving misleading information.

There is lack of post issue seriousness.There is lack of post issue seriousness.

The merchant bank does not pay an adequate attentionThe merchant bank does not pay an adequate attentionto the technical, managerial and feasibility aspects whileto the technical, managerial and feasibility aspects whileappraising the project appraisal.appraising the project appraisal.

The market is subject to volatility based on numbers of The market is subject to volatility based on numbers of exogenous factors.exogenous factors.



Secondary MarketsSecondary Markets

It refers to a market where securities are traded after It refers to a market where securities are traded after

being initially offered to the public in the primary marketbeing initially offered to the public in the primary market

and/or listed in the Stock Exchangeand/or listed in the Stock Exchange

It is also known as After MarketIt is also known as After Market

It deals with those securities that are already issued inIt deals with those securities that are already issued in

an initial public offering in the primary marketan initial public offering in the primary market

It is an equity trading avenue in which alreadyIt is an equity trading avenue in which already

existing/preexisting/pre-- issued securities are traded amongstissued securities are traded amongstinvestors.investors.

The secondary market is quite healthy and there areThe secondary market is quite healthy and there are

flexible options for timing & pricing trades.flexible options for timing & pricing trades.



Types of Investors In SecondaryTypes of Investors In Secondary

MarketsMarkets Investors investing in stocks in the secondary market areInvestors investing in stocks in the secondary market are

either growth investors or value investors.either growth investors or value investors.

Growth investors are those that are investing in thoseGrowth investors are those that are investing in those

companies that have a revenue growth rate faster thancompanies that have a revenue growth rate faster thanthe industry growth rate.the industry growth rate.



Products in Secondary MarketProducts in Secondary Market

Equity SharesEquity Shares

Rights IssueRights Issue

Bonus SharesBonus Shares

Preference sharesPreference shares

Cumulative Preference SharesCumulative Preference Shares

Cumulative Convertible Preference SharesCumulative Convertible Preference Shares

Participating Preference ShareParticipating Preference Share

Security ReceiptsSecurity Receipts

Government securitiesGovernment securities

DebenturesDebentures

BondBond

Treasury BillsTreasury Bills



Functions of CapitalFunctions of Capital

marketmarket Allocation of riskAllocation of risk

Pooling of resourcesPooling of resources

Payment and settlement systemPayment and settlement system

Managing the incentive problemManaging the incentive problem

Providing informationProviding information

Transfer of resources across time andTransfer of resources across time and

spacespace



Capital market is one of the most important inventionsCapital market is one of the most important inventions

of the modern societyof the modern society Its primary task is to move scarce loanable funds fromIts primary task is to move scarce loanable funds from

those who save to those who borrow to buy goods andthose who save to those who borrow to buy goods and

services and to make investments in new equipment andservices and to make investments in new equipment and

facilities so that the overall economy can grow andfacilities so that the overall economy can grow andincrease the standard of living enjoyed by the citizens.increase the standard of living enjoyed by the citizens.

Without the Capital market and the funds it supplies,Without the Capital market and the funds it supplies,

each of us would lead a much less enjoyable life.each of us would lead a much less enjoyable life.



Capital market instrumentsCapital market instruments

Responsible for generating fundsResponsible for generating funds

Used by investors to make a profit out of the investmentUsed by investors to make a profit out of the investment

Capital market is also known as ³securities market´Capital market is also known as ³securities market´

Basic capital market instrumentsBasic capital market instruments

(a) Stocks(a) Stocks

(b) Bonds(b) Bonds



Capital Market InstrumentsCapital Market Instruments

StocksStocks

BondsBonds

DebenturesDebentures

Treasury billsTreasury bills

Foreign exchangeForeign exchange

Fixed depositsFixed deposits



Difference Between Capital MarketDifference Between Capital Market

&Money market&Money market

Money marketMoney market

Short term loansShort term loans

Financing for currentFinancing for current

business operationsbusiness operations Major institutionsMajor institutions

Do not have secondaryDo not have secondarymarketmarket

Transactions takes placeTransactions takes place

over phoneover phone There are no brokersThere are no brokers

involvedinvolved

Capital marketCapital market

Long term fundsLong term funds

Financing for fixed capitalFinancing for fixed capital

requirement of trade &requirement of trade &commercecommerce

Major institutionsMajor institutions

Have secondary marketsHave secondary markets

Transactions takes placeTransactions takes place

at a formal placeat a formal place Authorized dealers areAuthorized dealers are

there to carrythere to carrytransactionstransactions



Done by:Done by:--

Varun ShahVarun Shah

Kajal SavlaKajal Savla

Niren PatelNiren Patel

Pooja ShahPooja Shah

Dhwani ShahDhwani Shah



Thank You !!!Thank You !!!

ppt cap mrkt

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