INTRODUCTION TO CAPITAL MARKET

The Capital market is a market for financial assets which have a long or
indefinite maturity. Generally, it deals with long term securities which have a maturity period
of above one year. Capital market may be further divided into three types i.e., Industrial
securities market, Government securities market and Long term loans market. Industrial
securities market is further divided into two types i.e., primary market or new issue market
and secondary market or stock exchange. Government securities market is also called as
Gilt-Edged securities market. It is the market where Government securities are traded.
Long term loans market is divided into three types Term loans market, Mortgages market
and financial guarantees market.
Absence of capital market instruments acts as a deterrent to capital formation and
economic growth. Resources would remain idle if finances are not funneled through the
capital market.
a) The capital market instruments serves as an important source for the productive use of
the economy’s savings. It mobilizes the savings of the peoples for further investment
and thus avoids their wastage in unproductive uses.
b) It provides incentives to saving and facilitates capital formation by offering suitable
rates of interest as the price of capital.
c) It provides an avenue for investors, particularly the household sector to invest in
financial assets which are more productive than physical assets.
d) It facilitates increase in production and productivity in the economy and thus,
enhances the economic welfare of the society. Thus, it facilitates “the movement of
stream of command over capital to the point of highest yield.”
e) A healthy capital market instrument consisting of expert intermediaries promotes
stability in values of securities representing capital funds.
NEEDS FOR THE STUDY
Capital market deals with long term funds. These funds are subject to uncertainty and risk. It
supplies long term funds and medium term funds to the corporate sector. It provides the
mechanism for facilitating capital fund transactions. It deals with ordinary shares, debentures
and stocks and securities of the governments. In this market the funds flow will come from
savers. It converts financial assets in to productive physical assets. It provides incentives to
savers in the form of interest or dividend to the investors.
The following factors plays an important role in the growth of capital market:
 A strong and powerful government
 Financial dynamics
 Speedy industrialization
 Attracting foreign investments
 Investments from NRI’S
 Speedy implementation of policies
 Globalization
 Development of financial theories
 Sophisticated technological advices
OBJECTIVES OF THE STUDY

 To study about the Capital Market Instruments.

 To study about Dematerialization or Demit in the stock exchange for easy

Transfer and error prone system.

 Knowing about the latest and future developments is the stock exchange system.

 Recent development in derivatives market.

SCOPE OF THE STUDY

The current study involves a variety of work in economics, accounting and finance in this.
Valuation of stocks and functions of the stock markets, valuation of bonds convertible
debentures and market for debt, issue market and merchant banking, market efficiency,
dividends, bonus and right issues rates of return and regulations.
RESEARCH & METHODOLOGY

The data collection methods include both the Primary and Secondary Collection
methods.
1. Primary Collection Methods:
This method includes the data collected from the personal discussions with
the authorized clerks and members of the Exchange.
2. Secondary Collection Methods:
The Secondary Collection Methods includes the lectures of the superintend of
the Department of Market Operations, EDP etc, and also the data collected from the
News, Magazines of the NSE and different books issues of this study.

LIMITATIONS OF THE STUDY

 Forty five days were insufficient to go on with the study. since the time constraint
was not enough.

 Most of the implementation and strategies studied were not properly used.

 Improper communication channel with speculators.

 A small difference makes feel difficult about theory and practices.

 An improper absence of information about technology.