Securities Market

The Battlefield

Structure of Securities
Market

Equity

Govt.
securities
market

Debt

Corpora
te debt
market

Money
Market

Derivatives

Options
Market

Futures
Market

Participants

Regulators : The key agencies which have direct or indirect control over
securities market are as following:

1.

Companys Law Board : Responsible for the administration of the

Companies Act, 1956.

2.

The Reserve Bank of India : Responsible for supervision of banks,

money market and govt. securities market.

3.

Securities and Exchange Board of India (SEBI) : Responsible for the

regulation of the capital market.

4.

Department of Economics Affairs : An arm of government, which is

responsible for orderly functioning of financial markets as a whole

5.

Department of Companys Affair : Responsible for administration of

corporate bodies.

Participants

Stock Exchange : An institution where securities which have already been

issued are bought and sold

23 major stock exchanges like NSE and BSE.

Listed Securities :
Securities which are listed on various stock exchanges are eligible for being
traded
10,000 securities are listed on all stock exchanges in India.

Depositories : An institution which dematerialises physical certificates and

effects transfer of ownership by electronic book entries
National Security Depository Limited (NSDL) and Central Securities
Depositories Limited (CSDL).

Participants

Brokers : Registered members of stock exchange through whom investors

transact.
10,000 brokers in India. Eg. India Bull, Share Khan and CMS.

Foreign Institutional Investors: Institutional Investors from abroad are

registered with SEBI to operate in India are called FII.
For Eg. JP Morgan Chase (US Giant Institutional Investor who took
over Binani Cement 25% stake by investing 150 crores in 2005)

Participants

Merchant Banker : Firms that registered with RBI specialized in managing the issue
of securities

Primary Dealers : Appointed by RBI, serve as underwriters in the primary market and
market makers in the secondary market for govt. securities.

Mutual Funds : it is a vehicle for collective investment where funds of investors are
pooled and managed by professional portfolio managers.

Custodian : A custodian looks after the investment back office of a mutual fund. It
receives and delivers securities, collect income, distributes dividends, and segregate the
asset between different schemes.

Participants

Registrar and Transfer Agents : Agent who handle all investor related services.

Underwriters : An underwriter agrees to subscribe to a given number of shares in

the event when public subscription is inadequate. An underwriter guarantees for
public subscription.

Banker to an Issue : The banker to an issue collect money on behalf of the company
from the applicant.

Debenture Trustee : A debenture trustee is appointed to ensure that the company is

fulfilling all the obligation of the contract.

Participants

Venture Capital Funds : Type of financing by venture capital where private

equity capital is provided as seed funding to early-stage, high-potential,
growth companies and more often after the seed funding round as growth
funding round (also referred to as series A round) in the interest of
generating a return through an eventual realization event such as an IPO or
trade sale of the company.

Credit Rating Agencies : It is a company that assigns credit ratings, which

rate a debtor's ability to pay back debt by making timely interest payments
and the likelihood of default. An agency may rate the creditworthiness of
issuers of debt obligations, of debt instruments, and in some cases, of the
servicers of the underlying debt, but not of individual consumers.

CAPITAL MARKETS

PRIMARY MARKET
Equity Shares
Preferences Shares
Debentures/Bonds

FUND RAISING MECHANISM

Public Issue
Rights Issue
Private Placement
Public Issue through
Book Building
Buy-out Details

STOCK/SECONDARY
MARKET

Market in which
outstanding securities
of corporate houses
as well as the
government are
traded under a
regulated
environment.
Stock exchange is a regulated market plac
in which listed securities are bought and so
through the intervention of members
(brokers) of stock exchange, by following
an open system of two-way quotation.

Primary Market
The primary market came into its own pace in 90s, when a large
number of companies came out with public issues.
Companies raise funds in domestic market through:
Equity shares
Preference shares
Debenture/bonds

There are 3 ways company may raise equity capital in the

primary market:
Public issue
Rights issue
Preferential allotment

Public Issue
It is a system of issuing securities by a public limited
company, where the general public is invited to subscribe to
the capital of the company.
It is governed by the provisions of the Companies Act, 1956,
SEBI Guidelines on Investor Protection and the listing
agreement between issuing company and the stock exchanges.
General public includes individual investors, institutional
investors, mutual fund, NRIs, high networth individuals
(HNIs), qualified institutional buyers (QIBs), etc.

Private Placements
It is a system of issuing securities, in which mass media for
inviting the public is not used; instead issuing company
approaches the investors individually.
Private placements are placed with institutional investors,
mutual funds or other financial institutions. A formal issue of
prospectus and underwriting arrangements are not required and
the terms are negotiated between the company and the
investors.
This method is useful for small companies and are unlikely to
get good response from public issue.

Rights Issue
Whenever, an existing company issues shares to its existing
shareholders on proportionate basis, it is called as Rights
Issue.
This is required under Section 81 of the Companies Act,1956.
It is upto, shareholders whether they want to exercise this right
or not .
It is comparatively cheaper method of floatation of shares, if
existing shareholders forfeit their right then the company can
issue shares to public.

Thank You