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Empirical Study on
Capital Market and its role and Significance regarding SEBI and Corporate Social Responsibility

Acknowledgement This project entitled Empirical Study on CAPITAL MARKET is submitted in fulfilment of the requirement for the Project work for Corporate laws, DamoDaram Sanjeevaya National Law University. This research work is done by M.Anudeep Reddy, VII Semester , .This research work has been done only for LAW Project purpose only. The assistance and help during the execution of the project has been fully acknowledged. Very thankfulto Mr.Prof. Dayanand Murthy, our teacher, for contributing his efforts in building this wonderful piece.

Index 1.)Financial Markets:- --

2.)Types of Financial Markets:3.)Capital Markets:- 4.)History:-

5.)Types of Capital Markets:- 6.)Nature of Capital Markets:7.)Role of Capital Markets:- -

8.)Significance of Capital markets:- 9.)Why Capital Market exists:10.)Functions of capital market:11.)Capital market Risks:12.)Indian Capital Market 13.)Chronology -

14.)Factrors Affecting Capital Market in India-

15.)Factors Contributing Growth to Indian Capital Market-`16.)Concept of Mutual Funds-

17.)Law of Mutual Funds in Capital Market in India18.)Role of SEBI:19.)SEBI reforms-

20.)Limitations of SEBI-

21.)Role of Corporate Social Responsibility(C.S.R) in Capital Market22.)C.S.R in India:-

23.)C.S.R Philosophy:-

24.)Do Corporates have Responsibility towards Society :- -

25.)Various Responsibilities of Components:26.)Case Laws27.)Findings:- 28.)Conclusion:29.)Citations:- -

30.)Bibilography and References

Since ages, the dependency of humans on goods and services has increased day by day. Technology growth and necessity of products, goods etc have become daily part in human life. Understanding the demand and necessity, people have splited into the different business streams in producing the products and goods according to demand and necessity of individuals in the society. This had led to profit gaining and acquiring money bags simultaneously. Analaysing and understand the public demand privatization and Government sectors have entered into business streams in providing the public required goods and services with an competitive spirit. This led to the origin of conducting the business competion in open competitive markets in society with transperancy. This competive markets are nothing but financial markets which invites the public to invest their deposits in desired companies for financial support to companies and for also gain the profit when the company products goes in demand. The place where this entire system or procedure takes place and provides securities for their depositing in shares of public in company, is known as capital market.(financial markets).

SCOPE OF THE STUDY This study was mainly planned to evaluate the performance SEBI, relating to supervision of securities market of various intermediaries registered with SEBI., and to know what kind of Investor Protection measures taken by SEBI for the benefit/to safeguard the interest of investors in India in Capital Market. OBJECTIVES OF THE STUDY The objectives of the study are: To know the investor protection measures taken by SEBI since its inception; To know whether the SEBI has been acting as independent organization to regulate the securities markets properly or not; To know the powers and functions implementing prop1erly or not by SEBI; To Know about the Capiatl Market in Detailed way.and its empherical study. Finally to give findings and suggestions towards SEBI relating to its role in Indian Capital Markets.

1.Financial Markets:A financial market is a market in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods.1

Financial markets- Wikipedia(google)

In simple words, Financial market is a market where financial instruments are exchanged or traded and helps in determining the prices of the a2ssets that are traded in and is also called the price discovery process.2 . a).They are Organizations that facilitate the trade in financial products. For e.g. Stock exchanges (NYSE, Nasdaq) facilitate the trade in stocks, bonds and warrants. b.) Place where Coming together of buyer and sellers at a common platform to trade financial products is termed as financial markets, i.e. stocks and shares are traded between buyers and sellers in a number of ways including: the use of stock exchanges; directly between buyers and sellers etc. 2.Indian Financial Market consists of the following markets: Capital Market/ Securities Market Primary Market Secondary market Money Market Debt Market

3.Capital Market:The capital market is the market for securities, where Companies and governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. In simple words, The market where investment instruments like bonds, equities and mortgages are traded is known as the capital market. Capital market is a market for long-term debt and equity shares. In this market, the capital funds comprising of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as organized markets like stock exchanges. Capital market includes financial instruments with more than one year maturity.3 4. History of Capital Market:The history of the capital market in India dates back to the eighteenth century when East India Company securities were traded in the country. Until the end of the nineteenth century securities trading was unorganized and the main trading centers were Bombay (now Mumbai) and Calcutta (now Kolkata). Of the two, Bombay was the chief trading center wherein bank shares were the major trading stock During the American Civil War (1860-61). Bombay was an important source of supply for cotton. Hence, trading activities flourished during the period, resulting in a boom in share prices. This boom, the first in the history of the Indian capital market lasted for a half a decade. The bubble burst on July 1, 1865 when there was tremendous slump in share prices.
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Indian Capitam Market By-Nidi BOthra and Payal jain 3.Capital Market- By sheela Jumba, Punjab Law University

Trading was at that time limited to a dozen brokers; their trading place was under a banyan tree in front of the Town hall in Bombay. These stock brokers organized informal association in 1897 Native Shares and Stock Brokers Association, Bombay. The Stock exchanges in Calcutta ad Ahmedabad also industrial and trading centers, came up later. The Bombay Stock Exchange was recognized in May 1927 under the Bombay Securities Contracts Control Act, 1925. The capital market was not well organized and developed during the British rule because the British government was not interested in the economic growth of the country. As a result many foreign companies depended on the London capital market for funds rather than in the Indian capital market. In the post independence period also, the size the capital market remained small. During the first and second five year plans, the governments emphasis was on the development of the agricultural sector and public sector undertakings. The public sector undertakings were healthier than the private undertakings in terms of paid up capital but shares were not listed on the stock exchanges. Moreover, the Controller of Capital Issues (CI) closely supervised and controlled the timing, composition, interest rates pricing allotment and floatation consist of new issues. These strict regulations de-motivated many companies from going public for almost four and a half decades. In the 1950s,Century textiles, Tata Steel, Bombay Dyeing, National Rayon, Kohinoor mills were the favorite scripts of speculators. As speculation became rampant, the stock market came to be known as Satta Bazaar. Despite speculation non-payment or defaults were very frequent. The government enacted the Securities Contracts (regulation) Act in 1956 to regulate stock markets. The Companies Act, 1956 was also enacted. The decade of the 1950s was also characterized by the establishment of a network for the development of financial institutions and state financial corporations. The 1960s was characterized by the wars and droughts in the country which led bearish trends. These trends were aggravated by the ban in 1969 on forward trading and Badla technically called contracts for clearing Badla provided a mechanism for carrying forward positions as well as for borrowing funds. Financial institutions such as LIC and GIC helped to revive the sentiment by emerging as the most important group of investors. The first mutual fund of India, the Unit Trust of India (UTI) came into existence in 1964. In the 1970s Badla trading was resumed under the disguised forms of hand delivery contracts A group. This revived the market. However, the capital market received another severe setback on July 6, 1974, when the government promulgated the Dividend Restriction ordinance, restricting the payment of dividend by companies to 12 per cent of the face value or one-third of the profit of the companies that can be distributed as computed under section 369 of the Companies Act, whichever was lower. This lead to a slump in market capitalism at the BSE by about 20 per cent overnight and the stock market did not open for nearly a fortnight. Later came buoyancy in the stock markets when the multinational companies (MNCs) were forced to dilute their majority stocks in their Indian ventures in favor of the Indian public under FERA 1973. Several MNCs opted out of India. One hundred and twenty three MNCs offered shares worth Rs 150 crore, creating 1.8 million shareholders within four years. The offer prices of FERA shares

were lower than their intrinsic worth. Hence, for the first the FERA dilution created an equity cult in India. It was the spate of FERA issues that gave a real fillip to the Indian stock markets. For the first time, many investors got an opportunity to invest in the stocks of such MNCs as Colagte and Hindustan Liver Limited. Then in 1977, a little known entrepreneur, Dhirubhai Ambani tapped the capital market. The scrip Reliance Textiles is still a hot favorite and dominates trading at all stock exchanges.4

5.Types of Capital Markets: Primary market:It is that market in which shares, debentures and other securities are sold for the first time for collecting long-term capital. This market is concerned with new issues. Therefore, the primary market is also called NEW ISSUE MARKET. In this market, the flow of funds is from savers to borrowers (industries), hence, it helps directly in the capital formation of the country. The money3 collected from this market is generally used by the companies to modernize the plant, machinery and buildings, for extending business, and for setting up new business unit.

Features of Primary Market: It Is Related With New Issues It Has No Particular Place It Has Various Methods Of Float Capital: Following are the methods of raising capital in the primary market:a.)Public Issue b.) Offer For Sale c.) Private Placement d.) Initial Public Offer It comes before Secondary Market

Capital Market by aknsha singh-google 4.History- by Sree Rama Rao.

The Secondary Market:-

The secondary market is that market in which the buying and selling of the previously issued securities is done. The transactions of the secondary market are generally done through the

medium of stock exchange. Secondary market connects investors' favoritism for liquidity with the capital users' wish of using their capital for a longer period. For example, in a traditional partnership, a partner cannot access the other partner's investment but only his or her investment in that partnership, even on an emergency basis. Then if he or she may breaks the ownership of equity into parts and sell his or her respective proportion to another investor. This kind of trading is facilitated only by the secondary market. The chief purpose of the secondary market is to create liquidity in securities. The secondary market handles the trading of previously-issued securities, and must remain highly liquid in nature because most of the securities are sold by investors. A capital market with high liquidity and high transparency is predicated upon a secondary market with the same qualities.

Features of Secondary Market:a.)It creates Liquidity b.)It comes after primary market c)It encourages new investments

Difference between Primary and Secondary Markets:-6

4

Primary market Deals with new securities Provides additional capital to issuer Companies

Secondary Market Market for existing securities, which are already listed No additional capital generated. Provides liquidity to existing stock

Fininancial markets- Nivod Kothari

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6. Nature of Capital Markets:The nature of capital market is brought out by the following facts. It Has Two Segments It Deals In Long-Term Securities It Performs Trade-off Function It Creates Dispersion In Business Ownership It Helps In Capital Formation It Helps In Creating Liquidity.

7. Role of Capital Market: Mobilization of Savings & acceleration of Capital Formation Promotion of Industrial Growth Raising of long term Capital Ready & Continuous Markets Proper Channelisation of Funds Provision of a variety of Services.

Let us get acquainted with the important functions and role of the capital market.

Mobilization of Savings : Capital market is an important source for mobilizing idle savings from the economy. It mobilizes funds from people for further investments in the productive channels of an economy. In that sense it activate the ideal monetary resources and puts them in proper investments.

Capital Formation : Capital market helps in capital formation. Capital formation is net addition to the existing stock of capital in the economy. Through mobilization of ideal resources it generates savings; the mobilized savings are made available to vari5ous segments such as agriculture, industry, etc. This helps in increasing capital formation.

Provision of Investment Avenue :

Capital market raises resources for longer periods of time. Thus it provides an investment avenue for people who wish to invest resources for a long period of time. It provides suitable interest rate returns also to investors. Instruments such as bonds, equities, units of mutual funds, insurance policies, etc. definitely provides diverse investment avenue for the public.
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Role- Financial markets- Vinod Kothari

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Speed up Economic Growth and Development : Capital market enhances production and productivity in the national economy. As it makes funds available for long period of time, the financial requirements of business houses are met by the capital market. It helps in research and development. This helps in, increasing production and productivity in economy by generation of employment and development of infrastructure.

Proper Regulation of Funds :

Capital markets not only helps in fund mobilization, but it also helps in proper allocation of these resources. It can have regulation over the resources so that it can direct funds in a qualitative manner. Service Provision : As an important financial set up capital market provides various types of services. It includes long term and medium term loans to industry, underwriting services, consultancy services, export finance, etc. These services help the manufacturing sector in a large spectrum.

Continuous Availability of Funds : Capital market is place where the investment avenue is continuously available for long term investment. This is a liquid market as it makes fund available on continues basis. Both buyers and seller can easily buy and sell securities as they are continuously available. Basically capital market transactions are related to the stock exchanges. Thus marketability in the capital market becomes easy.

8. Significance of Capital Markets :A well functioning stock market may help the development process in an economy through the following channels,:a.) Growth of savings, b.) Efficient allocation of investment resources. c.) Better utilization of the existing resources. In market econom6y like India, financial market institutions provide the avenue by which longterm savings are mobilized and channelled into investments. Confidence of the investors in the market is imperative for the growth and development of the market. For any stock market, the market Indices is the barometer of its performance and reflects the prevailing sentiments of the entire economy. Stock index is created to provide investors with the information regarding the

Significance- Notes of Financial Market

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average share price in the stock market(capital market). The ups and downs in the index represent the movement of the equity market.(in Capital market).

9. Why Capital Market Exists: Capital markets facilitate the transfer of capital (i.e. financial) assets from one owner to another. They provide liquidity. Liquidity refers to how easily an asset can be transferred without loss of value. A side benefit of capital markets is that the transaction price provides a measure of the value of the asset.

10. Functions of Capital Markets: Disseminate information efficiently Enable quick valuation of financial instruments both equity and debt Provide insurance against market risk or price risk Enable wider participation Provide operational efficiency through -simplified transaction pro7cedure - lowering settlement timings and - lowering transaction costs Develop integration among -real sector and financial sector -equity and debt instruments -long term and short term funds -Private sector and government sector and -Domestic funds and external funds Direct the flow of funds into efficient channels through -investment -disinvestment -reinvestment 11. Capital Market Risks:Investment in long term financial instruments is accompanied by high capital market risks. Since there are two types of capital markets- the stock market and the bond market. So risks are present in both the market.

Functions- by Akansha singh 8.Risks- By Akansha Singh

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a.)Stock market:.

A stock market or equity market is a public entity (a loose network of economic transactions, not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as 11 those only traded privately.

Risk in Stock Market:Stock prices keep fluctuating over a wide range unlike the bank deposits or government bonds. The efficient market hypothesis shows the effect of fundamental factors in changing the price of the stock market. The Efficient Market Hypothesis shows that all price movements are random whereas there are plenty of studies that reflect the fact that there is a specific trend in the stock market prices over a period of time. Research has shown that there are certain psychological factors that shape the stock market prices. Sometimes the market behaves illogically to any economic news. The stock market prices can be diverted in any direction in response to press releases, rumors and mass panic. The stock market prices are also subject to speculation. In the short run the stock market prices may be very volatile due to the occurrences of the fast market changing events.

b.)Bond Market:The bond market11 (also known as the credit, or fixed income market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the Secondary market, usually in the form of bonds. The primary goal of the bond market is to provide a mechanism for long term funding of public and private expenditures. Traditionally, the bond market was largely dominated by the United States, but today the US is about 44% of the market.[1] As of 2009, the size of the worldwide bon d market (total debt outstanding) is an estimated $82.2 trillion,[2] of which the size of the outstanding U.S. bond market debt was $31.2 trillion according to Bank for International Settlements (BIS), or alternatively $35.2 trillion as of Q2 2011 according to Securities Industry and Financial Markets Association (SIFMA) Risk in the Bond Market:Capital market risk in the bond market arises due to interest rate changes. There is an inverse relationship existing between the interest rate and the price of the bond. Hence the bond prices are sensitive to the monetary policy of the country as well as economic changes.11

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12. Indian Capital Market:Since12 2003, Indian capital markets have been receiving global attention, especially from sound investors, due to the improving macroeconomic fundamentals. The presence of a great pool of skilled labour and the rapid integration with the world economy increased Indias global competitiveness. No wonder, the global ratings agencies Moodys and Fitch have awarded India with investment grade ratings, indicating comparatively lower sovereign risks. The Securities and Exchange Board of India (SEBI), the regulatory authority for Indian securities market, was established in 1992 to protect investors and improve the microstructure of capital markets. In the same year, Controller of Capital Issues (CCI) was abolished, removing its administrative controls over the pricing of new equity issues. In less than a decade later, the Indian financial markets acknowledged the use of technology (National Stock Exchange started online trading in 2000), increasing the trading volumes by many folds and leading to the emergence of new financial instruments. With this, market activity experienced a sharp surge and rapid progress was made in further strengthening and streamlining risk management, market regulation, and supervision.12 Broad Constituents in the Indian C8apital Markets Fund Raisers are companies that raise funds from domestic and foreign sources, both public and private. The following sources help companies raise funds: Fund Providers are the entities that invest in the capital markets. These can be categorized as domestic and foreign investors, institutional and retail investors. The list includes subscribers to primary market issues, investors who buy in the secondary market, traders, speculators, FIIs/ sub accounts, mutual funds, venture capital funds, NRIs, ADR/GDR investors, etc. Intermediaries are service providers in the market, including stock brokers, subbrokers, financiers, merchant bankers, underwriters, depository participants, registrar and transfer agents, FIIs/ sub accounts, mutual Funds, venture capital funds, portfolio managers, custodians, etc. Organizations include various entities such as BSE, NSE, other regional stock exchanges, and the two depositories National Securities Depository Limited (NSDL) and Central Securities Depository Limited (CSDL). Market Regulators include the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Department of Company Affairs (DCA). 13. Indian Capital markets Chronology The Indian Capital Market is one of the oldest capital markets in Asia which evolved around 200 years ago.13
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Indian Capital market-Knowledge of markets-google

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Chronology of the Indian capital markets14 1830s: Trading of corporate shares and stocks in Bank and cotton Presses in Bombay. 1850s: Sharp increase in the capital market brokers owing to the rapid development of commercial enterprise. 1860-61: Outbreak of the American Civil War and ' Share Mania ' in India. 1894: Formation of the Hamada Shares and Stock Brokers Association. 1994-Equity Trading commences on NSE14 1994-Equity Trading commences on NSE 1995-All Trading goes Electronic 1996- Depository comes in to existence 1908: Formation of the Calcutta Stock Exchange Association 1999- FIIs Participation- Globalisation 2000- over 80% trades in Demat form 2001- Major Stocks move to Rolling Set 2003 - Demutualisation of Exchanges

14.) Factors affecting Capital Market in India:The capital market is affected by a range of factors . Some of the factors which influence capital market are as follows: Performance of domestic companies:The performance of the companies or rather corporate earnings is one of the factors which has direct impact or effect on capital market in a country. Weak corporate earnings indicate that the demand for goods and services in the economy is less due to slow growth in per capita income of people . Because of slow growth in demand there is slow growth in

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employment which means slow growt9h in demand in the near future. Thus weak corporate earnings indicate average or not so good prospects for the economy as a whole in the near term.In such a scenario the investors ( both domestic as well as foreign would be vary to invest in the capital market and thus there is bear market like situation.15 The corporate earnings for the April June quarter for the current fiscal has been good. The companies like TCS, Infosys,Maruti Suzuki, Bharti Airtel, ACC, ITC, Wipro, HDFC, Binani cement, IDEA, Marico Canara Bank, Piramal Health, India cements , Ultra Tech, L&T, Coca-Cola, Yes Bank, Dr. Reddys Laboratories, Oriental Bank of Commerce, Ranbaxy, Fortis, Shree Cement ,etc have registered growth in net profit compared to the corresponding quarter a year ago. Thus we see companies from Infrastructure sector, Financial Services, Pharmaceutical sector, IT Sector, Automobile sector, etc. doing well . This across the sector growth indicates that the Indian economy is on the path of recovery which has been positively reflected in the stock market( rise in sensex & nifty) in the last two weeks. (July 13-July 24 ,2011) ,(Entrprenure magazine.)16.10 Environmental Factors:Environmental Factor in Indias context primarily means- Monsoon . In India around 60 % of agricultural production is dependent on monsoon. Thus there is heavy dependence on monsoon.The major chunk of agricultural production comes from the states of Punjab , Haryana & Uttar Pradesh. Thus deficient or delayed monsoon in this part of the country would directly affect the agricultural output in the country. Apart from monsoon other natural calamities like Floods, tsunami, drought, earthquake, etc. also have an impact on the capital market of a country. The Indian Met Department (IMD) on 24th June stated that India would receive only 93 % rainfall of Long Period Average (LPA). This piece of news directly had an impact on Indian capital market with BSE Sensex falling by 0.5 % on the 25th June of 2011 . The major losers were automakers and consumer goods firms since the below normal monsoon forecast triggered concerns that demand in the crucial rural heartland would take a hit. This is because a deficient monsoon could seriously squeeze rural incomes, reduce the demand for everything from motorbikes to soaps and worsen a slowing economy.16

Macro Economic Numbers:The Macro Economic numbers also influence the capital market. It includes Index of Industrial Production (IIP) which is released every month, annual Inflation number indicated by Whole sale Price Index (WPI) which is released every week, Export Import numbers
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13.By Akansha Sigh 14. By Aknsha Singh 15.google-Punjab Law University- by Sheela

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which are declared every month, Core Industries growth rate ( It includes Six Core infrastructure industries Coal, Crude oil, refining, power, cement and finished steel) which comes out every month, etc. 17 Global Cues :In this world of globalization various economies are interdependent and interconnected. An event in one part of the world is bound to affect other parts of the world , however the magnitude and intensity of impact would vary.Thus capital market in India is also affected by developments in other parts of the world i.e. U.S. , Europe, Japan , etc. Global cues includes corporate earnings of MNCs, consumer confidence index in developed countries, jobless claims in developed countries, global growth outlook given by various agencies like IMF, economic growth of major economies, price of crude oil, An obvious example at this point in time would be that of subprime crisis & recession. Recession started in U.S. and some parts of the Europe in early 2008 .Since then it has impacted all the countries of the world- developed, developing, less- developed and even emerging economics.18 Political Stability and Government Policies:-19 For any economy to achieve and sustain growth it has to have political stability and progrowth government policies. This is because when there is political stability there is stability and consistency in governments attitude which is communicated through various government policies. The vice- versa is the case when there is no political stability .So capital market also reacts to the nature of government, attitude of government, and various policies of the government. 15. Factors contributing to growth of Indian Capital Market:-20 Establishment of Development banks & Industrial financial institution. Legislative measures Growing public confidence Increasing awareness of investment opportunities Growth of underwriting business Setting up of SEBI Mutual Funds Credit Rating Agencies.

16. Concept of Mutual Funds:Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint

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ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.21

17. Law of Mutual Funds in Indian Capital Market: The mutual funds are externa11lly managed. They do not have employees of their own. Also there is no specific law to supervise the mutual funds in India. There are multiple regulations. While UTI is governed by its own regulations, the banks are supervised by Reserved Bank of India, the Central Government and insurance company mutual regulations funds are regulated by Central Government Many small companies did very well last year, by schemes without adequate imbalance in the market but mutual funds can not reap their benefits because they are not allowed to invest in smaller companies. Not only this, a mutual fund is allowed to hold only a fixed maximum percentage of shares in a particular industry.22 18. Role of SEBI in Indian Capital Market:-23
The securities market is regulated by various agencies, such as the Department of Economics Affairs (DEA), the Department of Company Affairs (DCA), the Reserve Bank of India (RBI) and the SEBI. The Activities of these agencies are coordinated by a high level committee on capital and financial markets. The SEBI got legal teeth through an ordinance issued on 30 January 1992. The ordinance conferred wide- ranging powers on the SEBI, including the authority to prohibit insider trading and regulate substantial acquisition of shares and takeover of business. The function of market development includes containing risk, board basing, maintaining market integrity and promoting long-term investment. The SEBI Act, 1992 which establishes the SEBI with four-fold objectives of protection of the interests of investors in securities, development of the securities market, regulation of the securities market and matters connected therewith and incidental thereto. The capital market, i.e., the market for equity and debt securities is regulated by the Securities and Exchange Board of India (SEBI). The SEBI has full autonomy and authority to regulate and develop the capital market.

21. Financia India- Vol march 1996 22.Mutual Fund IN India- by Nalini(google)

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19. SEBIS Capital Market Reforms:-

Clearly the most extensive set of capital market reforms in recent years, SEBI announced a series of measures following its board meeting last week. These are intended to boost the capital markets in India (both primary and secondary), and also to streamline various process. The principal recommendations have been divided into the following categories (in the words used in SEBIs board meeting press release):24
- steps to re-energise mutual fund industry; - reforms in the primary market; - regulations on investment advisors; and - amendment of SEBI (Issue and Listing of Debt Securities) Regulations, 2008.

20. Limitation of SEBI :Finally, in our observation as regulator SEBI has playing immense role for development of capital market from the last more than one and half decade as a genuine autonomous body. Though it has started as a watchdog in protecting investors interests, regulating the working of Stock Exch anges and promoting capital market, still it faces a number of problems/ limitations. Some of the these are as follows:25 The Centra12l Govt. has authorized SEBI to frame its rules and regulations for actifely monitoring capital markets. These rules and regulations will have to be approved by the government first. This will cause unnecessary delays and interference by the Ministry of Finance. The bureaucratic delays in clearing the rules will hamper the working of SEBI. The government should direct SEBI to frame or change the rules as per the demand of the situation so that it is able to achieve professional efficiency. Sometimes SEBI will have to get prior approval for filing criminal complaints for violations of the regulations. This will again cause delays at government level. The SEBI, as a regulator, proved to be ineffective in the series of scams that took place in the last decade. The SEBI has been accused of shutting the stable door after the horse had bolted. For instance, the SEBI had occasions to review the affairs of CRB capital markets but took a lenient view and as a result, huge investors lost crores of rupees.

23.,24, 25Guide lines Of SEBI- Google

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21. Role of Corporate Social responsibility in Capital Market:-( CSR ) Corporate social Responsibility:- Corporate Social Responsibility indirectly affects of Capital Markets. In my words, CSR is a concept that an Enterprise is accountable for its impact on all
relevant Stakeholders. It is a continuing commitment by Business to behave fairly and responsibly and contribute to Economic Development while improving the Quality of life of the workforce and their families as well as of the local community and society at large. It Plays a good role in attracting the Share and Stake holders in investing in the company shares not only with the intent of profit motto but also with an idea of social genuine responsibility in developing the company status in capital market. It is help ful to the company in capital markets. By Michael Hopkins CSR is concerned with treating the Stakeholders of the Firm Ethically or in a socially responsible manner. Consequently, behaving socially responsibly will increase the human development of Stakeholders both within and outside the Corporation. Broadly speaking, CSR has three key components: the basic values, ethics, policies, and practices of a companys business; the voluntary contributions made by a company to community development; The management of environmental and social issues within the value chain by the company and its business partnersfrom the acquisition and production of raw materials, through the welfare of staff, to product sale, use, and disposal.

Approaches of CSR There are two basic approaches to CSR: Traditional Approach and Modern Approach Traditional Approach, Under the traditional/classical operation of the corporate enterprises,

societys basic demands upon the business were to produce goods and services efficiently and the responsibility of business enterprises was to use resources and engage in activities designed to increase profits and size of enterprises. The Modern Approach, New social pressures have changed the objectives of business enterprises. There is growing public demand for corporate involvement in solving many social practices so that social responsibility becomes a standard by which business practices are evaluated. It is opined that business houses should formulate financial goals for the shareholders and social goals like pollution abatement, minority employment and related corporate activities.

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22. Corporate Social Responsibility in India:-

As I observe, Corporate Social Responsibility Practices in India sets a realistic agenda of grassroots development through alliances and partnerships with sustainable development approaches. At the heart of solution lies intrinsic coming together of all stakeholders in shaping up a distinct route for an equitable and just social order. According to Professor A. Quartz of Luxembourg University defined Corporate Social
Responsibility in India as a concept whereby companies voluntarily decide to respect and protect the interest of a broad range of stakeholders and share holders to contribute to a cleaner environment and a better society through active interaction.

23. CSR Philosophies in India.:Model ETHICAL

Focus
Voluntarily State commitment and by legal companies to public welfare

Philosopher
M K Gandhi

STATISTT

ownership

Jawaharlal Nehru

requirements

determine responsibilities to private R Edward Freeman Milton Friedman

corporate responsibilities

LIBERAL

Corporate limited

owners(Shareholders) STAKEHOLDER Companies respond to the needs of Stakeholdersemployees, Customers, communities etc.

24. Do Corporates have a responsibility towards society?

As we know that the traditional role of a corporation is to generate income, to employ people and to earn profit. Therefore traditional goals of corporation have been profits, sales and wealth maximization. Now, profit is still the main motive of the corporation but it is not the sole motive as the role of contemporary corporations has been to serve the society at large, since it uses societal resources, namely man power and raw material. Since a company operates within the society, it affects the society. Therefore there is a need to regulate the corporate power to get optimum societal benefits. Justice P. N. Bhagwati has aptly remarked in this connection that maximization of social welfare should be the legitimate goal of a company. Originally, a 26. corporate social Responsibility- Google

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company has been considered an artificial person, though having a legal entity apart from its members, yet could not enjoy rights like human beings. But with the advent of organic theory, a company or corporation is considered a living organism, is entitled to rights and also liable for duties, and the same has been declared by the Apex Court time and again. The corporation is viewed as a central institution within a dynamic economy. The term social responsibility emphasizes the intimacy of the relationship between the corporation and society. It is not a philosophy, but a goal. This goal is accepted by business in response to demands of the society for an improved standard of living. It means that business should oversee the operation of an economic system that fulfils the expectations of the public at large.

25. VARIOUS RESPONSIBILITIES OF CORPORATES Responsibility towards itself-

It is the duty of each corporate entity to do business and stay in the business. It has to work towards growth, expansion and stability and thus earn enough profits. If the corporation is to achieve social and economic ends, it has to give enough importance to the efficiency factor.

Responsibility towards shareholders-

The main responsibility of corporate entity is to secure an d safeguard the shareholders investment and endeavour to provide a reasonable return on their money. At the same time, a careful balance must be maintained between the long term needs of business enterprises and a need to pay current dividends. If the corporation behaves in a manner which is prejudicial to the interest of the shareholders, then the shareholders are free to take action against the corporation.

Responsibility towards state-

It has undoubtedly been settled that the business sector is the major source of income in every economy, whether capitalist or socialist. Thus, out of the profit available, the state is entitled to a definite to definite share as per the income tax laws and this commitment has therefore to be performed at priority.

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Responsibility towards consumers-

The company should maintain high quality standards at reasonable prices. It is the consumer who decides the fate of every business institution. Therefore it is imperative for every corporate entity to fulfill its contractual obligations to its customers.

26. Case Laws:-

Central Consumer Cooperation Stores Limited v Vipin Kumar and another

Allahabad High Court, 9 October 2012. In this case, court held that "Public sector corporation" means any corporation owned or

controlled by the Government and includes any company as defined in S. 3 of the Companies Act, 1956, in which not less than fifty percent of the paid up share capital is held by the Government." Subsequentlsy petition was dismissed.

CIT RAO Vs Rio Tinto Private Ltd company:-

The Allahabad court concluded as follows: The submissions of the assessee were considered. The assessee itself had submitted that such a heavy expenditure was incurred as the year under consideration is the first year of operations of the assessee and that the company had to prove in the market that it had sufficient infrastructure to provide services. From the reply of the assessee, it is inferred that such expenditure was incurred primary to kick start the business, hence, benefit of enduring nature was likely to be obtained. Therefore, such expenditure cannot be allowed as a revenue expenditure as such expenditure has been incurred by the assessee to create an infrastructure for facilitation of future business, hence, benefit of enduring nature was imposed to be derived. However, it cannot be denied that some expenses would be required under the stated heads for running the day to day business of the company. Therefore, 20% of these sums of (total Rs.3,77,15,537/ ) i.e. Rs.5,43,707/ is allowed while computing the total income of the assessee company. The balance amount of Rs.3,01,74,830/ is disallowed as expenses of capital nature.". The question of law is accordingly answered in favour of the assessee and against the revenue. The appeals are consequently dismissed. In Re : India Yamaha Motor Private limited

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By this petition, the petitioner company proposes as under:"The paid up Equity Share capital of the company be and is hereby reduced from Rs.1710,00,00,000/- divided into 171,00,00,000 Equity Shares of Rs.10/- each to Rs.660,00,00,000/- divided into 66,00,00,000 Equity shares of Rs.10/- each by cancelling 105,00,00,000 Equity Shares of Rs.10/- each . That the Deponent craves leave to submit that as per Art. 4.1 of Articles of Association of the Company permits that Company for Reduction of Capital. That the Deponent craves leave to submit that the proposed Reduction of Share Capital has been consented by the equity Shareholders of the Company by a Special Resolution duly passed at the AGM held on 20.7.2012". The petition is all14owed in the above terms. Appu Ghar Bulid Tech amd Infra structure Private Limited:It is pertinent to mention here that all the transferor companies are associate/group companies of International Amusement Limited, a subsidiary of "Appu Ghar Entertainment Private Limited", the ultimate Holding Company, which has established the first world class Amusement Park known as "APPU GHAR" and accordingly established its brand value in the market and among its customers. The prospective investors have subscribed to the equity share capital of the transferor companies at premium keeping in mind its brand value in the market apart from factors like net assets, reserve and surplus etc. The Petition is allowed in the above terms. Kapil Wadhwa and others vs Samsung Electronics Company Limited Delhi High Court, 3 October 2012:The grievance of the respondents is that the appellants are purchasing, from the foreign market, printers manufactured and sold by respondent No.1 under the Trade Mark 'SAMSUNG/Samsung' and after importing the same into India are selling the product in the Indian market under the Trade Mark 'SAMSUNG/Samsung' and are thereby infringing the registered Trade Mark of the respondents in India. Respondents allege that the appellants operate their website by meta-tagging the same to the website of the respondents. Respondents allege that not only this constitutes an infringement of their registered Trade Mark in India, but also allege injury caused to the consumer in India who may be paying less for the printers in question, but are misled to believe that they are purchasing an authorized Samsung product in India sold with the permission of the respondents, in ignorance of the fact that the printers imported and sold by the respondents are materially different to the ones which are sold in the Indian market by the respondents.
25,26,27Legal Sutra.com

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The rival version pleaded by the appellants is that the act of importation and sale of printers in India is authorized and the sale in the Indian market is legal and valid inasmuch as the appellants sell the product as it is. The respondents highlight that their act of import and sale is beneficial to the Indian public evidenced by the fact that the respondents are able to sell the product at prices less than 30% to 50% of the compatible product sold by the appellants in India. Parties shall bear their own costs all throughout. Appeal partly allowed.

Almondz Global Securities Limited, New Delhi v Securities and Exchange Board of India, Mumbai Securities Appellate Tribunal, 12 September 2012:The appeal has been filed against the ex-parte ad interim order passed by the whole time member of the Securities and Exchange Board of India (the Board) on December 28, 2011 whereby the appellant, alongwith some other entities, was prohibited from taking up any new assignment or involvement in any new issue of capital including IPO, follow on issue etc. from the securities market in any manner whatsoever from the date of the order till further directions. The said order was also treated as show cause notice to the appellant. The grievance of the appellant is that inspite of its reply to the show cause notice and later personal hearing on May 7, 2012, the Board has failed to pass any final order and the appellant is being deprived of carrying out its business activities. The appellant, therefore, prays that the impugned order be set aside. The miscellaneous application as well as the appeal are dismissed as infructuous. Appeal dismissed.

27. Findings:Throughout its eighteen-year existence as a statutory body, SEBI has sought to balance the two objectives by constantly reviewing and reappraising its existing policies and programmes, formulating new policies and crafting new regulations in areas hitherto unregulated, and implementing them to ensure growth of the market. From the above analysis and interpretation as well as other keen observation details, the researchers find out the following facts about SEBI, and its role also explained in our Indian capital market The SEBI has introduced an array of reforms in the primary and secondary markets and catalysed modernization of the market infrastructure to prepare the market for the twenty-first century .

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Dematerialisation has pushed the process further. SEBI has taken several steps for the smooth-cum-speedy development of both primary and secondary markets from time to time for the development of all areas. The SEBI is trying to bring down various forms of risk (structural, systematic and operational) that are there in the securities market. Capital Market Role and significance Its Importance in securities to the share holders Why Capital Market exists.? Factors affecting Capital market in India. Learning Mutual funds concept Corporate social responsibility in bringing demand to capital market CSR Contributions. Analyzing the capital market scenario from different case laws.

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28. Conclusion and Final Glance:-

Running a successful Capital market requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors. One must have proper awrness regarding to capital markets for securities of their investment in companies in form of shares. Capital Markets have spread its wings in every corner of dealing and transaction s of shares in individuals daily life. I also personally believe that The lack of an advanced and vibrant capital market can lead to underutilization of financial resources. SEBI has also contributed its role in development of Capital Markets with help new regulations and guide lines. Corporate Social Responsibility must also be followed by companies in capital market to maintain the statsics of capital markets at peak level. This could be one good way the good way to attract share holders to invest in the companies of capital market. The developed capital market also provides access to the foreign capital for domestic industry. Thus capital market definitely plays a constructive role in the over all development of an economy.

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29. More citation Case Laws: Plercy vs Millscsi & co (1920) 1 h 77 Kobian (p) lit vs Kobian India Ltd (2005) 64 CLA 281 Amison Foods ltd Vs Registrar of Companies (1999) ker 2001 103 Moseley VS Koffyfartein Mines (1910) 2 Ch 382. TonY francis Ginisses VS Indekka Soft Ware (p) ltd (2006) 73 I.T Cube India (p) ltd Vs I.T Cube Inc (2006) 69 s.c.c 319 JoHn Smith tad custer Brewry Co Ltd (1953) 1 AIR Mac Council Vs E.prill & Co lTd (1916) 2 ch Shree Gopal Paper Mills Ltd & Lit AIR !(&) S.C 17 50, 1950 Morrice vs alyerner (1875) Hc 717 Scottish Insurance corp Ltd Vs Wilson & Clyde Coul Ltd All ER (H.C) Mc lead & Co Vs Ganguy (1975) 45 cas 563 British & American trustee & finance Corporation vs Copper (1894)A.C 399. Shyampada Chakraborty vs Controller of Insurance A S.C IR 1962 1355.

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30.) BiBILOGRAPHY AND REFERENCES Links 1. http://en.wikipedia.org/wiki/Bond_market 2. http://www.linkedin.com/skills/skill/Capital_Raising 3. http://www.arbitragemagazine.com/topics/finance/is-the-stock-market-really-just-acasino 4. http://en.wikipedia.org/wiki/Financial_market 5. http://finance.mapsofworld.com/secondary-market/ 6. http://www.sebi.gov.in/cms/sebi_data/attachdocs/1347602019873.pdf 7. http://www.slideshare.net/dhavaldedhia3/financial-markets 8. http://www.digplanet.com/wiki/Bond_market 9. http://www.amfiindia.com/ 10. http://wiki.answers.com/Q/Why are financial markets important. 11. www.indian kanoon .com 12. Www. Westlaw.com References:1.Ramaya- on company law 2.Sethans- on Company Law 3.Bharats- on Company law 4.Nut shell on Shares 5.Lawmagazine 6.Avtar singh- corporate law

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Subject: Corporate Law

Submitted by:- M.Anudeep Reddy

Topic:-Empirical Study on Capital Markets

Roll No:- 200905,VII SEM