OVERVIEW OF

INDIAN SECURITIES MARKET

CHAPTER - 1
Securities – Meaning & Process flow

1 2
Issuer may be Govt / Offered through Primary
Non-govt entity Market

Security

3
4 Liquidity through
Issuer may Buy back also Secondary Market
activities
Securities – Meaning & Process flow

Company formation

Equity Capital Face Value

Primary Market Offering

IPO / FPO Others

Secondary Market activities

Listing agreement Trading

Equity vs. Preference shares

Equity shares Preference shares

▪ Dividend correlated to ▪ Dividend rate is fixed
profit, no fixed rate

▪ Enjoy Voting right ▪ Do not have voting right

▪ Last party to receive ▪ Priority to receive capital

capital during winding-up during winding-up
Primary Market

▪ Primary market provides an opportunity to

the issuers of securities, both Government
and corporations, to raise resources to meet
their requirements of investment.

▪ Securities, in the form of equity or debt, can

be issued in domestic /international markets
at face value, discount or premium.
Public Issue vs. Private Placement
▪ Under Companies Act, 1956, an issue is referred
as public if it results in allotment of securities to
50 investors or more.

▪ Revised to 200 investors in the Companies Act,

2013

▪ However, when the issuer makes an issue of

securities to a select group of persons not
exceeding 49 and which is neither a rights issue
nor a public issue it is called a private placement
Issuance methods of Primary Market

Public Issue

BONUS ISSUE
Private Placement

Right Issue

Primary Market
Parties involved in an IPO process
AD
AGENCY

LEAD REGISTRAR
BANKER
MANAGER [RTA]

UNDERWRITER
Secondary Market

▪ Secondary market refers to a market where

securities are traded after being offered to
the public in the primary market or listed on
the Stock Exchange.

▪ The secondary market is operated through

two mediums, namely, the Over-the-Counter
(OTC) market and the Exchange-Traded
market. OTC markets are informal markets
where trades are negotiated.
MARKET CAPITALISATION

= Market Price of 1 share * Total no. of outstanding shares

This gives the idea about valuation of a quoted company. On

it’s basis companies are classified in to
✓ LARGE CAP
✓ MID CAP
✓ SMALL CAP
✓GIANT CAP
MARKET CAPITALISATION RATIO
Market capitalisation of stocks
= --------------------------------------------
GDP of the country

Gives an idea about the stock market size of the country

TURNOVER OF A STOCK

=  all trades done in a day

This gives the idea about Liquidity of a quoted company.

TURNOVER RATIO
Turnover in a stock exchange
= -----------------------------------------------------------
Market Capitalisation of that stock exchange

Gives an idea about the trading activity and liquidity of that

particular stock exchange
 Participants of Secondary Market

ISSUER INTERMEDIARY INVESTOR

Some Important Intermediaries

▪ Trading Members [ Brokers] & Sub-Brokers

▪ FIIs
▪ Foreign Venture Capital Funds
▪ Portfolio Managers
▪ Lead Managers
▪ Underwriters
▪ RTAs
▪ Mutual Funds & CIS
 Regulators
▪ All such participants in the CAPITAL MARKET
are primarily regulated by SEBI
Other regulators are:-
➢ RBI
➢ Ministry of Corporate Affairs
➢ DEA
Divisions of Secondary Market

WHOLESALE DEBT MARKET

EQUITY MARKET

DERIVATIVE MARKET

CURRENCY DERIVATIVE MARKET

SEGMENT COMMENCEMENT TRADABLE IMP POINTS
OF OPERATION PRODUCTS TO
REMEMBER
WDM June, 1994 T-Bills, Bonds, CP, CD

CM November,1994 Eq. shares, warrants, Fully automated

Debentures NEAT System

F&O June 2000 Index and Stock futures & Settlement last
options Thursday of
month

CDS 29 August, 2008 Currency Pair futures, First launched

Interest rate futures USD-INR. Now
Euro-INR, Pound-
* Interest Rate futures INR, Yen-INR also
currently tradable on NSE available.
are “NBFII” futures based Int rate future
on G-Sec, and “91DTB” trading started in
based on 91 days T-Bill. 31Aug,2009
What are the two mediums
through which secondary
market operates?

OVER THE COUNTER MARKET

& EXCHANGE TRADED
MARKET
What is meant by the term
‘Market Capitalisation
Ratio”?

Market Capitalisation of Stocks /

GDP of the country
In which year F&O trading
started in India?

June, 2000.
With Nifty 50 Futures
Name the regulators of
Indian Capital market?

1. SEBI
2. RBI
3. DCA
4. DEA
 Turnover Ratio of NSE is
42.3% and that of BSE is
39.6%.
What inference you can draw
from this statement?

Turnover Ratio indicates

LIQUIDITY OF A STOCK
EXCHANGE.
Hence NSE is more liquid.