Capital Market

A capital market is a market for securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money market). The capital market includes the stock market (equity securities) and the bond market (debt). Or Penguin Dictionary of Economics defined capital market in this way, It is the market for long term funds as distinct from the money market which deals in short term ones. In principle capital market loans are used by industry and commerce for fixed investment. The capital market is not one institution but all those institutions that channelise the supply and demand for long term capital. Capital Market is the backbone of any countrys economy. It facilitates conversion of savings to investment. In India the common investors participating in the equity market is massive. The number of companies offering equity through primary markets increased continuously in the postindependence period. The capital market is actually reflecting what is happening in the economy and what is expected to happen in the next few years.

Capital Markets are of two types a) Primary market which deals with new securities provides additional capital to issuer companies. b) Secondary market which is the market for existing securities, which are already listed and no additional capital generated. It also provides liquidity to existing stock.

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Background Of Indian Capital Market:

The securities market in India witnessed several policy initiatives since the year 2000, which further refined the market micro-structure, modernized operations and broadened investment choices for the investors. The irregularities in the securities transaction in the last quarter of the previous financial years hastened the introduction and implementation of several reforms. While a Joint Parliamentary Committee was constituted to go into the irregularities and manipulations in all their ramifications in all transactions relating to securities, decisions were taken to complete the process of demutualization and corporatisation of stock exchanges to implement the decision to separate ownership, management and operation of stock exchanges and to effect legislative changes for investor protection, and to enhance the effectiveness of SEBI as the capital market regulator. The mainly event is described with date below: Date 1876 27 Jun 1969 Jan 1983 2 Jan 1986 12 Apr 1988 1992 30 Jun 1994 3 Nov 1994 25 Jan 1995 14 Mar 1995 3 Jul 1995 5 Oct 1995 Apr 1996 Event Birth of Bombay Stock Exchange (BSE) Notification issued by government under SC(R) A prohibiting forward or futures trading. Regulatory permissions obtained for badla trading, a mechanism to carry forward positions. Computation of BSE sensitive index commenced. SEBI created. Fixed income and equity markets scandal. Start of electronic debt trading at National Stock Exchange (NSE). Start of electronic equity trading at NSE. SC(R) A amended to lift the ban on options trading. Start of electronic trading on a few stocks at BSE. Electronic trading of all stocks on BSE. Ban on badla reversed. National Securities Clearing Corporation (NSCC) commenced operations.

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8 Nov 1996 1999 12 Jun 2000 4 Jun 2001 2 Jul 2001 January 2002 October 2002 June 2005 August 2008

National Securities Depository Ltd (NSDL) commenced operations. Securities law modified to enable derivatives trading. Start of equity index futures trading. Start of equity index options trading. Major stocks moved to rolling settlement; start of stock options market. Launch of Exchange Traded Funds (ETFs) Government Securities Index Launch of NSE Launch of Futures & options in BANK Nifty Index Launch of Currency Derivatives

The summary of the Indian Capital Market can be given as follows: Under British rule: Not organised and developed Post-independence: Small size and supervised by CCI

In 1950s: Rampant speculation; Government enacted Securities Contract (Regulations) Act and Companies Act, 1956; Development of Financial Institutions. In 1960s: Ban on badla, UTI set up in 1964 In 1970s: Badla resumed; Promulgation of the Dividend, Restriction Ordinance slump in BSE Sensex; FERA issues revive stock markets In 1980s: Small investor participation; Introduction of PSU bonds; popularity of convertible debentures. In 1990s: Capital Issues (Control) Act repealed. Emergence of SEBI; Free pricing; entry of new players and new trading Mechanism; Capital market scams In 2000s: The stock exchange reached its highest mark at 21078 points at the Bombay Stock Exchange in 2008. It also suffered its highest loss of 1048 points on 21st Jan 2008.Introduction of several new policies and indexs.

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Need of Capital Market

Capital Market plays an important role in the development of industry, trade and commerce of any country. According to S.C. Kuchal, it consists of a series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities. So the need of capital market is immense in economic development. Such as: 1. Help to Establishment and Expansion of Industry and Commerce: Fixed Capital is required for establishment, expansion and continuity of industrial and commercial institutions, capital market supplies necessary money for these requirements. But nature of the constituents of capital market being different, their functions are also different types. For example, stock exchange of capital market does not supply capital directly; it creates scope for capital investment in trade and commerce by creating scope of transaction of share, debenture, government securities. So contribution of capital market is undeniable for industrial development and progress of trade and commerce. 2. Motivation to savings: As capital market is an organised market for long term investment, both corporate sector and investment sector has great confidence in it. This market encourages in savings by creating scope for investment in securities. 3. Supply of Loan Capital: Capital market supplies loan capital for establishing, running and expanding industrial, trading and commercial undertakings of both private and government sectors. 4. Proper Utilisation of Resource: Capital markets help to combination of the big industries. Big industries utilise the countries resource efficiently. 5. Create Ready Market: Transactions of securities are regularly held in the capital market. If the investors fail to collect money by selling securities in their need, they will not be encouraged to invest. On the other hand investors get discouraged if there is no scope of purchasing securities in right time. It provides scope for underwriting shares, for this capital market creates ready of securities and fulfil desires of both lenders and borrowers. These needs are not exclusive; some other needs are Advisory Functions, Help to National Growth, Mobility of Savings, Capital Formation, Generation of Foreign Capital. The standard of development of a country can be realised form the importance of capital market. Development of any country depends on the formation of capital. So importance of capital is immense for economic development of the country.

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Objective of the study:

The sole effort behind carrying out this study is to provide an idea of Indian Capital Market and an in depth study of its different aspects and growth and trading patterns. A. To understand the practical & theoretical aspects of the CAPITAL MARKET OF INDIA. B. To get the general idea of investment sectors or segments of different peoples through questionnaires.

C. To understand the relation between stock market and Indian econ0omy in comparison with the worlds economy. D. To create an idea about the stock exchanges of India and their conceptual framework.

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Methodology:
1) Primary data: data collected from investors by questionnaires data collected from stock exchange. 2) Secondary data: a) CAPITAL MARKETS, Dr S Guruswamy b) Indian Financial System and Financial Market Operations, Nayak & Sana c) Research on the Indian Capital Market: A Review, Samir K. Barua, V. Raghunathan Jayanth, R. Varma Indian Institute of Management d) The Indian Capital Market: Growth with Governance, Price Waterhouse Coopers. e) www.bseindia.com f) www.nse-india.com

Method of Analysis: Fundamental Analysis: We have analysed different historical performances, questions
and data collected from various sources to get a wide and varied idea about the Indian Capital Market.

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Findings of the Study:

After extensive study of the different data collected through different sources we get different results about the Indian Capital Market. We Find that The Indian Capital Market has evolved leaps and bounds in recent time specifically the past two decades. It is only second to China among the developing countries. The foreign investment in the Indian Capital Market is slowly increasing along with the integration with global markets. The age group that invests in the stock market is almost evenly distributed. Although there is huge number of investor in the age group of 30-50. The most preferred type of investment is in Equity and Mutual Funds. The most preferred sector of investment is IT, FM, CG and Petroleum. Although there are more than 20 stock markets in India the countrys most prominent and sought after are the Sensex or Bombay Stock Exchange and Nifty or National Stock Exchange.

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Limitations of the study:

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