Capital Market BAF
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Transcript of Capital Market BAF
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By: Prof Amarpreet Singh
Capital Market
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Introduction
Capital Market
Definition:
Capital market is a market for long-term debt and equity shares.
In this market, the capital funds comprising of both equity anddebt are issued and traded. This also includes private placement
sources of debt and equity as well as organized markets like
stock exchanges. Capital market can be further divided into
primary and secondary markets.
Example
Stock Market, Bond Market etc
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Need of Capital Market
Long Term Capital
Proper Channelization of funds
Promotion of industrial growth
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Significance, Role or Functions
of Capital Market Mobilization of Savings
Capital Formation
Provision of Investment Avenue
Speed up Economic Growth and Development
Proper Regulation of Funds
Service Provision
Continuous Availability of Fund
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CAPITAL MARKET
MAIN ELEMENTS
OF
CAPITAL MARMET
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CAPITAL MARKET
THREE ELEMENTS OF CAPITAL
MARKET
FINANCIAL ASSETS/INSTRUMENTS/SECURITIES
FINANCIAL INTERMEDIARIES
FINANCIAL MARKETS
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Features of Secondary markets are:
Secondary Market refers to a market where securitiesare traded after being initially offered to the public in
the primary market and/or listed on the Stock
Exchange.
Comprises of equity markets and the debt markets.
Secondary market provides an efficient platform for
trading of his securities.
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Secondary Market Products
Equity Shares
Preferred Stock / Preference shares
Government securities (G-Secs)
Debentures
Bond
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The gilt -Edged securities
Risk free
Securities guaranteed by government principal as
well as interest.
The issue market - RBI does all the issues of centralas well as of the state governments .
Secondary market : Large stockbrokers deals in old
issues and the RBI keeps securities of various
maturities and interest rates to meet the demand
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The gilt Edged securities
The dealers in gilt edged market are mainlyinstitutions who have the statutoryrequirements to invest their funds in thegovernment securities like LIC, GIC
Provident funds . These institutions mobilizesavings and invest in these securities. Theseare called captive market.
Discriminatory auctions : The process of
auctioning a single unit to the highest bidderand also the multiple units to the highestbidder till the stock exhaust.
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Corporate Security Market
Primary market
secondary market.
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INITIAL PUBLIC OFFER(IPO)
What is IPO?
Reasons for going public- Raising funds to finance capital
expenditure
- Financing working capital
- Debt refinancing- Exit route for existing investors
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ADVANTAGES OFGOING PUBLIC
Facilitates future funding.
Valuation of company.
Provides liquidity.
Increases visibility.
Commands better pricing.
Enables exchange of shares.
DISADVANTAGES OFGOING PUBLIC
Dilution of ownership
Involves substantial expenses.
Continuous disclosure.
Increased monitoring.
Listing fees.
Cost of maintaining investors.
Takes substantial amount of time
& efforts.
INITIAL PUBLIC OFFER(IPO) (contd)..
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SECONDARY MARKET
Stock Exchanges provide a platform to trade
The securities are traded, cleared and settled
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