Capital Market and
By Deepika S R
GRG School of Management Studies
Identify this Personality
The dumbest reason in the world to buy a stock is because it's going up
Financial system is the system that allows the transfer of
money between savers (investors) and borrowers.
Financial systems are crucial to the allocation of resources in a
They channel household savings to the corporate sector and
allocate investment funds among firms; they enable households
and firms to share risks.
A capital market is a market for securities
(Debt or equity), where business enterprises and
governments can raise long-term funds.
The nature of capital market
It has two segments
It deals in long-term securities
It creates dispersion in business ownership
It helps in capital formation
It helps in creating liquidity
Primary and Secondary Market
The primary market is the market where the
securities are sold for the first time.
In a primary issue, the securities are issued by
the company directly to investors.
In secondary market investors purchase
securities or assets from other investors,
rather than from issuing companies themselves.
The national exchanges - such as the BSE and
NSE are secondary markets.
How many stock exchanges are there in India?
By what name is the building “phiroze jeejeebhoy
towers” better known as?
The three I’s of the capital market
Corporate Investors; DIIs
Foreign Venture Capital Investors
There are two main types of issuers namely
Corporate's issue both debt and equity securities
Government issue debt securities.
Depositories, depository participants
Bankers to the issue
Registrars to the issue
Credit rating agencies
CDSL & NSDL
National Securities Depository Limited (NSDL) and Central Depository
Services Limited (CDSL) are depositories.
Depositories hold various securities like shares in electronic form.
A DP (Depository Participant) is like an agent of these
Investors open their account with depositories via depository
participants. They don't deal directly with the depositories.
It is mandatory for all listed companies to have their securities admitted
for dematerialisation with both the depositories viz CDSL & NSDL.
Demat & Trading Account
Demat Account : Account where your Shares are stored in
electronic form .
Trading Account : An account which is used to place orders for
Buying and Selling of shares .
when you buy shares, amount is debited from your trading
Account and shares are stored in your Demat account .
When you Sell shares, amount is credited to your trading
account and shares are taken away from your Demat Account and
sold in the stock market.
Why open a Demat account?
Auto Credit - Shares arising out of bonus, split, consolidation, merger , IPO are
automatically credited into the Demat account of the investor.
Lower Charges - Transactions involving physical securities are costlier than those
involving dematerialised securities (just like the transactions through a bank teller are
costlier than ATM transactions).
Quick Transfer- Securities can be transferred at an instruction immediately.
Elimination of Risks - Risks like forgery, thefts, bad delivery, delays in transfer etc,
associated with physical certificates are eliminated.
Convenience-Any change in address or bank account details can be electronically
intimated to all companies in which investor holds any securities, without having to
inform each of them separately.
Reforms in Indian Securities Markets
Creation of Market Regulator - SEBI was established in 1992, with
the aim of protecting the interests of investors, promoting and
regulating the securities market.
Screen Based Trading - Open out-cry system replaced by on-line
fully automated screen based trading system (SBTS)
Reduction of Trading Cycle - settlement period was reduced
progressively from T+5 to T+3 days. From April 2003 onwards, T+2
days settlement cycle is being followed.
Reforms in Indian Securities Markets
Equity Derivatives Trading – To assist market participants in
managing risks better through hedging, speculation and arbitrage, the
market presently offers index futures, index options, single stock
futures and single stock options.
Clearing Corporation - National Securities Clearing Corporation
Ltd. (NSCCL), commenced its operations in April 1996.
Globalisation - Indian companies have been permitted to raise
resources overseas through issue of ADRs, GDRs and FCCBs.
FIIs have been permitted to invest in all types of securities,
including government securities and tap the domestic market.
Reforms in Indian Securities Markets
Direct Market Access - DMA allows brokers to offer their respective
clients, direct access to the Exchange trading system through the broker’s
infrastructure without manual intervention by the broker
Launch of Securities Lending & Borrowing Scheme - Allows
market participants to take short positions effectively with less cost.
Launch of Currency Futures
ASBA: Application Supported by Blocked Amount
Launch of Interest Rate Futures
Launch of mobile trading for all investors
World’s largest stock exchanges and their
New York Stock Exchange (Dow Jones) : $14.2 trillion
Tokyo Stock Exchange(NIKKEI) : $3.32 trillion
American stock exchange (NASDAQ) : $4.68 trillion
London Stock Exchange (FTSE) : $3.26 trillion
Shanghai Stock Exchange : $2.35 trillion
Hong Kong Stock Exchange (Hang Seng) : $2.25 trillion
Toronto Stock Exchange (TSX) : $1.912 trillion
Frankfurt Stock Exchange (DAX) : $1.18 trillion
Bombay Stock Exchange (Sensex) : $1.07 trillion
National Stock Exchange of India(NIFTY) :$0.98 trillion
Stock markets & the world economy
The performance of all the world’s stock markets is directly
responsible for a significant amount of the world’s economic
condition – whether it be healthy, ailing, or trending sideways.
In general, stock market growth is a leading indicator that the
state of an economy is flourishing, while declining trends
indicate of economic slowdown.
Commentators suggest that stock markets often predict what
will happen in the economy of that country around six months
Investments: What u cant believe, But true…
If one would have bought 100 Wipro shares of Face Value Rs 100 in 1980….
1981 , 1 : 1 bonus = 200 shares
1985 , 1 : 1 bonus = 400 Today’s rate is Rs. 450
1986 split to Rs 10 = 4000
Your portfolio would
have been Rs. 432 crore
1987 , 1 : 1 bonus = 8000
1989 , 1 : 1 bonus = 16000
1992 , 1 : 1 bonus = 32000
1995 , 1 : 1 bonus = 64000 Current year dividend
1997 , 2 : 1 bonus = 192000 Rs. 4 per share. i. e:
4*96,00,000 = 3.84 crore
1999 split to Rs 2 = 9,60,000
2004 , 2 : 1 bonus = 28,80,000
2005 , 1 ; 1 bonus = 57,60,000
2010 3 : 2 bonus = 96,00,000
Advantages of investing in shares
Inflation rate is higher than commercial banks interest rate
but lower than equity price appreciation.
You are protected from the eyes of the public. Nobody knows
your worth except you tell him/her. In other investments, people can
easily look at the assets of the business or your property (real estate)
and come up with approximate worth of it.
The rate of growth is far beyond the bank interest rate.
Dividend -This is cash reward given to share holders as part of the
profit made by the company at the end of each financial year.
Bonus issues -This is free shares given to existing shareholders.
How spot market is different from
Particulars Spot market Future
No. of shares 2000 2000
Market value of Tata Rs. 260 Rs.260
motors on 14/02/12
Investment Rs. 5,20,000 Rs. 82,000
MV of Tata motors Rs. 285 Rs. 285
ROI 9.6% 60%
Exposure to stocks is only a meagre 1.25 per cent as against 35-
40 per cent in developed economies. This is one of the lowest
in the world.
while India has over 75 crore mobile phone connections, the
country has less than 1.5 crore depository accounts.
India has got the highest percentage of savings in the world
with about 36 per cent. About 64 per cent of the savings in
India goes to banks in fixed deposits and 6 per cent to the
young person, by virtue of youth and the prospects of a
bright career ahead, has a higher risk-taking capacity, and
so can afford to invest larger amounts in assets that carry
higher risk but much better returns.
Compared with the returns from various assets like bank
deposits and company deposits, over long terms, equities
have consistently delivered higher returns.
What is the current value of
Sensex and Nifty?
How many of you are ready to
invest in stock market?
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