A

PROJECT REPORT
ON
TO STUDY OF CAPITAL MARKETS
SUBMITTED IN THE REQUIREMENT OF BACHELOR OF
BUSINESS ADMINISTRATON [B.B.A.]
Submitted to,
SAVITRIBAI PHULE PUNE UNIVERSITY, PUNE
By
Miss. Pratiksha Kisan Sanap
(T.Y.B.B.A)
Under the Guidance Of
Prof. Dere J. D.

SAHAKAR MAHARSHI BHAUSAHEB SANTUJI THORAT COLLEGE OF

ARTS, SCIENCE & COMMERCE, SANGAMNER-422605
2024-2025
S. B. V. P. Samaj’s

CERTIFICATE
This is to certify that Miss. Sanap Pratiksha kisan has
satisfactory carried out and completed the project work
entitled “TO STUDY OF CAPITAL MARKETS ” Her work is being
submitted for the project requirement of B.B.A. It is submitted
in the partial fulfilment of the prescribed syllabus of Savitribai
Phule University, Pune for the academic year 2024-25.

Place- Sangamner
Date: / / 2024

Mr. Dere J. D. Dr. Patil D. D

(HOD, Project Guide) (Principal)

Internal examiner External examiner

ACKNOWLEDGEMENT

I am student of S.M.B.S.T. College, Sangamner take

greater pleasure in submitting report on “TO STUDY OF
CAPITAL MARKETS” as partial syllabus of Savitribai Phule Pune
University, Pune.
I am thankful to Mr. Dere J. D. for his consistent advice
and help for this project work. I am thankful to all respected
sir & madam of BBA department for their help.
With immense pleasure I express my deep since of
gratitude & thanks to all staff members for his interest &
encouragement, valuable guidance during the project work.
I would like to give thanks Dr. D. D. Patil (Principal of
S.M.B.S.T. College, Sangamner) I am also thankful to Mr. Dere
J. D. (HOD OF B.B.A), Mr. Langote S. R. Sir, Mrs. Swati Dhole
madam, Mrs. Sunita Punde madam & Mr. Pokale A. L. sir for
their support & moral opportunity for completing this project.

Sanap Pratiksha kisan

(T.Y.B.B.A.)
DECLARATION

Research work made for genuine I under Miss. Pratiksha

Kisan Sanap do declare that the project report entitled “TO
STUDY OF CAPITAL MARKETS” & benefitted work presented
by me under the guidance internal project guide.
The empirical finding in this project report is based on the
data collected by me. The matter presented in this project is
not copied from any source. I understand that any such copy
is liable to punishment in way the university authority deems
fit.
The work is not been submitted for the award of any
degree or diploma either to Savitribai Phule Pune University,
Pune or any other university. The project report is submitted
to Savitribai Phule Pune University, Pune in the partial
fulfilment of the Bachelor of Business Administration (B.B.A).

Place- Sangamner
Date: / / 2024

Miss. Sanap pratiksha kisan

T.Y.B.B.A
INDEX

Sr.no CONTENT
1 Introduction
2 Evolution and history
3 Objective of the study
4 Scope of study
5 Research methodology
6 Classification
7 Types
8 Participant of Indian capital markets and regulators
9 Equity market in India
10 Recent developments in India capital markets
11 Limitation
12 Finding and suggestions
13 Conclusion
14 Bibliography
INTRODUCTION :

Generally, the personal savings of an entrepreneur along with contributions

from friends and relatives are the source of fund to start new or to expand
existing business. This may not be feasible in case of large projects as the
required contribution from the entrepreneur (promoter) would be very large
even after availing term loan; the promoter may not be able to bring his/her
share (equity capital). Thus, availability of capital can be a major constraint
in setting up or expanding business on a large scale.
However, instead of depending upon a limited pool of savings of a small
circle of friends and relatives, the promoter has the option of raising money
from the public across the country by selling (issuing) shares of the
company. For this purpose, the promoter can invite investment to his or her
venture by issuing offer document which gives full details about track
record, the company, the nature of the project, the business model, the
expected profitability etc.
If you are comfortable with this proposed venture, you may invest and thus
become a shareholder of the company. Through aggregation, even small
amounts available with a very large number of individuals translate into
usable capital for corporates. Your small savings of. Say, even 5,000 can

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contribute in setting up, say, a 5,000 crore Cement or Steel plant. This
mechanism by which corporates raise money from public is called the
primary markets.
Definition of Capital Market

Capital markets are financial markets for the buying and selling of long-term
debt or equity-backed securities. These markets channel the wealth of
savers to those who can put it to long-term productive use, such
investments. Companies or governments making long-term

A. Major Objectives of Indian Capital Market

➢ To mobilize resources for investments.

➢ To facilitate buying and selling of securities.
➢ To facilitate the process of efficient price discovery.
➢ To facilitate settlement of transactions in accordance with the
predetermined time schedules.

B. Reforms in Capital Market of India

➢ The major reform undertaken in capital market of India includes:

Establishment of SEBI:
The Securities and Exchange Board of India (SEBI) was established in 1988.
It got a legal status in 1992. SEBI was primarily set up to regulate the
activities of the merchant banks, to control the operations of mutual funds,
to work. Promoter of the stock exchange activities and to act as a regulatory
authority of new issue activities of companies. Establishment of Creditors
Rating Agencies:

2
EVOLUTION AND HISTORY:

The Share Mania in 1861-65, in the 1870’s there was a sharp boom in jute
shares, which was followed by a boom in tea shares in the 1880’s and 1890’s;
and a coal boom between 1904 and 1908. On June 1908, some leading
brokers formed “The Calcutta Stock Exchange Association”.

In the beginning of the twentieth century, the industrial revolution was on the
way in India with the Swedish Movement; and with the inauguration of the
Tata Iron and Steel Company Limited in 1907, an important stage in
industrial advancement under Indian enterprise was reached. Indian cotton
and jute textiles, steel, sugar, paper and flour mills and all companies
generally enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock
exchange functioning in its midst, under the name and style of “The Madras
Stock Exchange” with 100 members. However, when boom faded, the
number of members stood reduced from 100 to 3, by 1923, and so it went
out of existence.

In 1935, the stock market activity improved, especially in South India where
there was a rapid increase in the number of textile mills and many plantation
companies were floated. In 1937, a stock exchange was once again
organized in Madras Madras Stock Exchange Association (Pvt) Limited. (In
1957 the name was changed to Madras Stock Exchange Limited). Lahore
Stock Exchange was formed in 1934 and it had a brief life. It was merged with
the Punjab Stock Exchange Limited, which was incorporated in 1936.2.2
Indian Stock Exchanges An Umbrella Growth

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The Second World War broke out In 1939. It gave a sharp boom which was
followed by a slump. But, in 1943, the situation changed radically, when
India was fully mobilized as a supply base.

Because of the restrictive controls on cotton, bullion, seeds and other

commodities, those dealing in them found in the stock market as the only
outlet for their activities. They were anxious to join the trade and their
number was swelled by numerous others. Many new associations were
constituted for the purpose and Stock Exchanges in all parts of the country
were floated. The Uttar Pradesh Stock Exchange Limited (1940), Nagpur
Stock Exchange Limited (1940) and Hyderabad Stock Exchange Limited
(1944) were incorporated. In Delhi two stock exchanges – Delhi Stock and
Share Brokers’ Association Limited and the

Delhi Stocks and Shares Exchange Limited – were floated and later in June
1947, amalgamated
Into the Delhi Stock Exchange Association Limite

Post-independence Scenario
Most of the exchanges suffered almost a total eclipse during depression.
Lahore Exchange
Was closed during partition of the country and later migrated to Delhi and
merged with Delhi
Stock Exchange.
Bangalore Stock Exchange Limited was registered in 1957 and recognized in
1963.
Most of the other exchanges languished till 1957 when they applied to the
Central Government for recognition under the Securities Contracts
(Regulation) Act, 1956. Only Bombay, Calcutta, Madras, Ahmadabad, Delhi,
Hyderabad and Indore, the well established exchanges, were recognized

4
under the Act. Some of the members of the other Associations were required
to be admitted by the recognized stock exchanges on a confessionals basis,
but acting on the principle of unitary control, all these pseudo stock
exchanges were refused recognition by the Government of India and they
thereupon ceased to function.

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Objective of The Study.

The main objective of research is to identify the awareness utilization

patterns of the people. About what they think about Capital Markets and are
they aware or not about its benefits.

The objective of present study can be accomplished by conducting a

systematic research.

The following are the objectives of the study:

➢ To understand the position of capital markets in India.
➢ To understand the different types of Capital Markets.
➢ To find out the future of Capital Markets in India.
➢ To study the need of Capital Market.
➢ To check the awareness among people regarding Capital Markets.
➢ To study about benefits provided by Capital Market.
➢ To find out conclusion and give Suggestions.

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Scope of Study:
Is mostly to identify weather the customers are aware of Capital Market or
not and how much they are willing to save to invest in the markets and what
are the different perceptions having towards Capital Markets.

Significance of The Study.

This dissertation presents review of capital market situation in India the
opportunities it provides, the challenges it faces and the concerns it raises.
A discussion of the Capital Market for senior citizens and for low-income
people is also done. The paper covers following Arcs:
➢ Capital Market scenario in India
➢ Capital Market for the low-income people.
➢ Types of Capital Market in India.
➢ Need of Capital Market.
➢ Role of Regulators in Capital Market.
➢ Capital Market products available in India

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Research methodology:

Data Collection
Market research requires two kinds of data that is primary data and
secondary data.

Primary Sources:

Primary data is collected using a well-structured surveys etc. Survey is

carried out in 2 steps.
1) First visit
2) Appointment or personal interview Secondary Sources

Secondary Data:

is data collected by someone other than the user. Common sources of

secondary data include organizational records and qualitative
methodologies or qualitative research.
The data for study has been collected through various sources:
➢ Books
➢ Internet Sources
➢ Online websites
➢ References
➢ Catalogue

8
Classification:
PRIMARY MARKET

Companies issue securities from time to time to raise funds in order to meet
their financial requirements for modernization, expansions and
diversification programs. These securities are issued directly to the investors
(both individuals as well as institutional) through the mechanism called
primary market or new issue market. The primary market refers to the set-
up, which helps the industry to raise the funds by issuing different types of
securities. This set-up consists of the type of securities available, financial
institutions and the regulatory
framework. The primary market
discharges the important function of
transfer of savings especially of the
individuals to the companies, the
mutual funds, and the public sector
undertakings. Individuals or other
investors with surplus money invest
their savings in exchange for shares,
debentures and other securities. In
the primary market the new issue of
securities are presented in the form
of public issues, right issues or private placement.

Firms that seek financing, exchange their financial liabilities, such as shares
and debentures, in return for the money provided by the financial
intermediaries or the investors directly. These firms then convert these funds
into real capital such as plant and machinery etc. The structure of the capital
market where the firms exchange their financial liabilities for long-term
financing is called the primary market. The primary market has two
distinguishing

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features:

➢ It is the segment of the capital market where capital formation occurs;

and
In order to obtain required financing, new issues of shares, debentures
securities are sold in the primary market. Subsequent trading in these
securities occurs in other segment of the capital market, known as
secondary market.

The securities that are often resorted for raising funds are equity shares,
preference shares, bonds, debentures, warrants, cumulative convertible
preference shares, zero interest convertible debentures, etc. Public issues
of securities may be made through:

➢ Prospectus,
➢ Offer for sale.
➢ Book building process and
➢ Private placement
The investors directly subscribe the securities offered to public through a
prospectus. The company through different media generally makes wide
publicity about the public offer.

A. Activities in the Primary Market

➢ Appointment of merchant bankers
➢ Collection of money
➢ Pricing of securities being issued
➢ Minimum subscription
➢ Communication/ Marketing of the issue
➢ Listing on the stock exchange(s)
➢ Information on credit risk
➢ Allotment of securities in Demat/ physical mode

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➢ Making public issues
➢ Record keeping

B. Function of Primary Market

➢ Organization: Deals with the origin of the new issue. The proposal is
analyzed in terms of the nature of the security, the size of the issued
timings of the issue and flotation Method of the issue.
➢ Underwriting: Underwriting is a kind of guarantee undertaken by an
institution or firm of brokers ensuring the marketability of an issue. It
is a method whereby the guarantor makes a promise to the stock
issuing company that he would purchase a certain specific number of
shares in the event of their not being invested by the public.
➢ Distribution: The third function is that of distribution of shares.
Distribution means the function of sale of shares and debentures to
the investors. This is performed by brokers and agents. They maintain
regular lists of clients and directly contact them for purchase and sale
of securities.

C. Role of Primary Market

➢ Capital formation - It provides attractive issue to the potential
investors and with this company can raise capital at lower costs.
➢ Liquidity As the securities issued in primary market can be
immediately sold in secondary market the rate of liquidity is higher.
➢ Diversification Many financial intermediaries invest in primary market;
therefore there is less risk if there is failure in investment as the
company does not depend on a single investor. The diversification of
investment reduces the overall risk.
➢ Reduction in cost-Prospectus containing all details about the
securities are given to the investors hence reducing the cost is
searching and assessing the individual securities.

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Classification of issues:

Primary market Issues can be classified into four types.

➢ Initial Public Offer (IPO):
When an unlisted company makes either a fresh issue of securities or an
offer for sale of its existing securities or both, for the first time to the public,
the issue is called as an Initial Public Offer.
➢ Follow on Public Offer (FPO):
When an already listed company makes either a fresh issue of securities to
the public or an offer for sale of existing shares to the public, through an offer
document, it is referred to as Follow on Offer (FPO).
➢ Rights Issue:

When a listed company proposes to issue fresh securities to its existing

shareholders, as on a record date, it is called as a rights issue. The rights are
normally offered in a particular ratio to the number of securities held prior to
the issue. This route is best suited for companies who would like to raise
capital without diluting stake of its existing shareholders.

➢ A Preferential issue:
A Preferential Issue is an issue of shares or of convertible securities by listed
companies to a select group of persons under Section 81 of the Companies
Act, 1956, that is neither a rights issue nor a public issue. This is a faster way

12
for a company to raise equity capital. The issuer company has to comply with
the Companies Act and the requirements contained in the chapter,
pertaining to preferential allotment in SEBI guidelines, which interiliac
include pricing, disclosures in notice etc.

D. The Process:
➢ The Issuer who is planning an IPO nominates a lead merchant banker
as a book runner’.
➢ The Issuer specifies the number of securities to be issued and the
price band for orders.
➢ The Issuer also appoints syndicate members with whom orders can be
placed by the investors.
➢ Investors place their order with a syndicate member who inputs the
orders into the ‘electronic book”. This process is called ‘bidding’ and is
similar to open auction.
➢ A Book should remain open for a minimum of 5 days.
➢ Bids cannot be entered less than the floor price.
➢ Bids can be revised by the bidder before the issue closes.
➢ On the close of the book building period the book runner evaluates the
bids on the basis of the evaluation criteria which may include –

o 8Price Aggression
o Investor quality
o Earliness of bids, etc.

➢ The book runner and the company conclude the final price at which it
is willing to issue the stock and allocation of securities.
➢ Generally, the numbers of shares are fixed; the issue size gets frozen
based on the price per share discovered through the book building
process.
➢ Allocation of securities is made to the successful bidders.

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SECONDARY MARKET
Secondary market refers to the network/system for the subsequent sale and
purchase of securities. An investor can apply and get allotted a specified
number of securities by the issuing company in the primary market.
However, once allotted the securities can thereafter be sold and purchased
in the secondary market only. An investor who wants to purchase the
securities can buy these securities in the secondary market. The secondary
market is market for subsequent sale/purchase and trading in the securities.
A security emerges or takes birth in the primary market but its subsequent
movements take place in secondary market. The secondary market consists
of that portion of the capital market where the previously issued securities
are transacted. The firms do not obtain any new financing from secondary
market.. The secondary market provides the life-blood to any financial
system in general, and to the capital market in particular.

The secondary market is represented by the stock exchanges in any capital

market. The stock exchanges provide an organized market place for the
investors to trade in the securities. This may be the most important function
of stock exchanges. The stock exchange, theoretically speaking, is a
perfectly competitive market, as many sellers and buyers participate in it
and the information regarding the securities is publicly available to all the
investors. A stock exchange permits the security prices to be determined by
the competitive forces. They are not set by negotiations off the floor, where
one party might have a bargaining advantage. The bidding process flows
from the demand and supply underlying each security. This means that the
specific price of a security is determined, more or less, in the manner of an
auction. The stock exchanges provide market in which the members of the
stock exchanges (the share brokers) and the investors participate to ensure
liquidity to the latter.

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A. Activities in the Secondary Market
➢ Trading of securities
➢ Risk management
➢ Clearing and settlement of trades
➢ Delivery of securities and funds

B. Importance of Secondary Market:

➢ Providing liquidity and marketability to existing securities
➢ Pricing of securities
➢ Safety of transaction
➢ Contribution to economic growth
➢ Providing scope for speculation

C. Role of Secondary Market

For the general investor, the secondary market provides an efficient platform
for trading of his securities. For the management of the company, Secondary
equity markets serve as a monitoring and control conduit by facilitating
value-enhancing control activities, enabling implementation of incentive-
based management contracts, and aggregating information (via price
discovery) that guides management decisions.

15
D. Products in secondary markets
➢ Equity Shares
➢ Rights Issue/ Rights Shares
➢ Bonus Shares
➢ Preferred Stock/Preference shares
➢ Cumulative Preference Shares
➢ Cumulative Convertible Preference Shares
➢ Participating Preference Share
➢ Bond
➢ Zero Coupon Bond
➢ Convertible Bond
➢ Debentures
➢ Commercial Paper
➢ Coupons
➢ Treasury Bills

E. Mutual Fund

A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. 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
appreciation realized are shared by its unit holders in proportion to 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. The flow chart below describes broadly the working of a mutual fund

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F. Derivatives Markets

Derivatives is a product whose value is derived from the value of one or more
basic variable, called bases (underlying asset, index or reference rate), in a
contractual manner. The underlying asset can be equity, forex, commodity
or any other asset. The International Monetary Fund defines derivatives as
“financial instruments that are linked to a specific financial instrument or
indicator or commodity and through which specific financial risk can be
traded in financial markets in their own right. The value of a financial
derivative derives from the price of an underlying item, such as an asset or
index. Unlike debt securities, no principal is advanced to be repaid and no
investment income accrues”. For example, wheat farmers may wish to sell
their harvest at a future date to eliminate the risk of a change in prices by that
date. Such a transaction is an example of a derivative. The price of this
derivative is driven by the spot price of wheat which is the ‘underlying”.

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G. Listing of Securities

Listing means admission of the securities to dealings on a recognized stock

exchange. The securities may be of any public limited company, Central or
State Government, quasi governmental and other financial
institutions/corporations, municipalities, etc. A company intending to have
its securities listed on the Exchange has to comply with the listing
requirements prescribed by the Exchange

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Types of capital markets:
INTRODUCTION

Any government or corporation requires capital (funds) to finance its

operations and to engage in its own long-term investments. To do this, a
company raises money through the sale of securities stocks and bonds in
the company's name. These are bought and sold in the capital markets.
Thus there are two types of capital market as follows:
1. Debt or Bond Market
2. Stock or Equity Market

a) Debt or Bond Market

The bond market (also known as the debt, credit, or fixed income market) is
a financial market where participants buy and sell debt securities, usually in
the form of bonds. References to the “bond market” usually refer to the
government bond market, because of its size, liquidity, lack of credit risk
and, therefore, sensitivity to interest rates.

Because of the inverse relationship between bond valuation and interest

rates, the bond market is often used to indicate changes in interest rates or
the shape of the yield curve.

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Besides other causes, the decentralized market structure of the corporate
and municipal bond markets, as distinguished from the stock market
structure, results in higher transaction. Costs and less liquidity.

Bond markets in most countries remain decentralized and lack common

exchanges like stock, future and commodity markets. This has occurred, in
part, because no two bond issues
Are exactly alike, and the variety of bond securities outstanding greatly
exceeds that of stocks. With a large section of population underprivileged,
the welfare commitments of the Indian state have to be supported by a large
government borrowing program. The outstanding marketable government
debt has grown from 4.3 trillion in 2000-01 to 29.9 trillion in 2012-13. The size
of the annual borrowing of the central government through dated securities
has grown from 1.0 trillion to 5.6 trillion during this period. It is no mean
achievement to manage such large issuances in a non-disruptive manner in
the post Fiscal Responsibility & Budget
Management (FRBM) regime and declining SLR. The liquidity in the
secondary market has also increased significantly from a daily average
trading volume of 9 billion in February 2002 to 344 billion in March, 2013. The
development of the debt and the derivatives market in India needs to be seen
from the perspective of a central bank and a financial sector regulator which
has a mandate to facilitate

Development of debt markets of the country.

In many countries, debt market (both sovereign and corporate) is larger than
equity markets. In fact, in matured economies, the debt market is three
times the size of the equity market. However, in India like in emerging
economies, the equity market has been more active, developed and has
been the center of attention be it in media or otherwise. Nevertheless, the
Indian debt market has transformed itself into a much more vibrant trading
field for debt instruments from the elementary market about a decade ago.

20
Further, the corporate debt market In developed economies like US is almost
20% of their total debt market. In contrast, the
Corporate bond market (Le. Private corporate sector raising debt through
public issuance in
Capital market), is only an insignificant part of the Indian debt market.
Amongst the most

b) Equity or Stock Market

A stock market or equity market is a public market (a loose network of

economic transactions, not a physical facility or discrete entity) for the
trading of company stock and derivatives at an agreed price; these are
securities listed on a stock exchange as well as those only traded privately.
The size of the world stock market was estimated at about 36.6 trillion USD
at the beginning of October 2012. The total world derivatives market has
been estimated at about $791 trillion face or nominal value, 11 times the size
of the entire world economy. The value of the derivatives market, because it
is stated in terms of notional values, cannot be directly compared to a stock
or a fixed income security, which traditionally refers to an actual value.
Moreover, most derivatives ‘cancel each other out (i.e., a derivative ‘bet’ on
an event occurring is offset by a comparable derivative ‘bet’ on the event not
occurring). Many such relatively illiquid securities are valued as marked to
model, rather than an actual market price.
The stocks are listed and traded o” stock exchanges which are entities of a
corporation or mutual organization specialized in the business of bringing
buyers and sellers of the organizations to a listing of stocks and securities
together. The largest stock market in the United States, by market cap is the
New York Stock Exchange, NYSE, while in Canada, it is the Toronto Stock
Exchange.

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PARTICIPANTS OF INDIAN CAPITAL MARKET AND
REGULATORS:

There are several major players in the primary market. These include the
merchant bankers, mutual funds, financial institutions, foreign institutional
investors (FIls) and individual investors. In the secondary market, there are
the stock exchanges, stock brokers (who are members of the stock
exchanges), the mutual funds, financial institutions, foreign institutional
investors (Flls), and individual investors.

a. Custodians
In the earliest phase of capital market reforms, to get over the problems
associated with paper-based securities, large holding by institutions and
banks were sought to be immobilized. Immobilization of securities is done
by storing or lodging the physical security certificates with an organization
that acts as a custodian a securities depository. All subsequent transactions
in such immobilized securities take place through book entries. The actual
owners have the right to withdraw the physical securities from the custodial
agent whenever required by them. In the case of IPO, a jumbo certificate is
issued in the name of the beneficiary owners based on which the depository
gives credit to the account of beneficiary owners

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b. Depositories
The depositories are important intermediaries in the securities market that
is scripless or moving towards such a state. In India, the Depositories Act
defines a depository to mean "a company formed and registered under the
Companies Act, 1956 and which has been granted a certificate of
registration under sub-section (IA) of section 12 of the Securities and
Exchange Board of India Act. 1992." The principal function of a depository is
to dematerialize securities and enable their transactions in book-entry form.
Dematerialization of securities occurs when securities issued in physical
form is destroyed and an equivalent number of securities are credited into
the beneficiary owner's account. In a depository system, the investors stand
to gain by way of lower costs and lower risks of theft or forgery, etc. They also
benefit in terms of efficiency of the process.

c. Depository Participants
A Depository Participant (DP) is described as an agent of the depository.
They are the intermediaries between the depository and the investors. The
relationship between the DPs and the depository is governed by an
agreement made between the two under the depositories Act, 1996. In a
strictly legal sense, a DP is an entity who is registered as such with SEBI
under the provisions of the SEBI Act. As per the provisions of this Act, a DP
can offer depository related services only after obtaining a certificate of
registration from SEBI. SEBI (D&P) Regulations, 1996 prescribe a minimum
net worth of Rs. 50 lakh for the applicants who are stockbrokers or non-
banking finance companies (NBFCs), for granting a certificate of registration
to act as a DP.

d. Insurance Companies
Insurance companies receive premium in exchange for insurance policies
and use these funds to purchase a variety of securities. Thus, they invest the
proceeds received from insurance in stocks and bonds.

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e. Pension funds
Many companies, corporations and government organizations and agencies
offer pension plans to their employers their employers or both periodically
contribute funds to such plans. The funds contributed are invested in
securities until they are withdrawn by the employees upon their retirement.

f. Commercial Banks
Commercial banks are those companies which are engage in accepting
deposits from savers and lending it back to deficit groups who are
demanding loans and advances in order to invest business. Commercial
banks are a major source of deposits collectors among the all other kinds of
financial institutions. They mobilize their depository funds in many forms for
example, lending to individuals and corporations, invest in stock market and
participate other forms of investment.

g. Saving Banks
Like commercial banks, savings banks also accumulate the scattered
savings of the country and then create investment friendly funds and lastly
channelize these funds into productive investments. Most savings banks are
mutual in nature.

h. Credit Unions
Credit union differs from commercial savings banks in that they are not profit
oriented company and restrict their business to the main members only.
They use most of their funds to provide loans to their internal members.

i. Finance Companies
Most finance companies obtain funds by issuing securities and then lend the
funds to individuals and small businesses.

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EQUITY MARKET IN INDIA

The Indian Equity Market is more popularly known as the Indian Stock
Market. The Indian equity market has become the third biggest after China
and Hong Kong in the Asian region. The Indian financial markets have also
grown considerably. The market capitalization of the equity market (National
Stock Exchange) has grown from approximately 6.5 trillion in2000-01 to
approximately 60 trillion in 2009-10 and further to approximately 61 trillion
in 2011-12. The market was slow since early 2007 and continued till the first
quarter of 2009.

Major Stock Exchanges of India

A. Bombay Stock Exchange (BSE):

BSE is the oldest stock exchange in Asia. The extensiveness of the

indigenous equity broking industry in India led to the formation of the Native
Share Brokers Association in 1875. which
later became Bombay Stock Exchange
Limited (BSE). BSE is widely recognized due
to its pivotal and preeminent role in the
development of the Indian capital market.
In 1995, the trading system transformed
from open outcry system to an online
screen-based order-driven trading system.
The exchange opened up for foreign ownership (foreign institutional
investment).
➢ Allowed Indian companies to raise capital from abroad through ADRs
and GDRs.
➢ Expanded the product range (equities/derivatives/debt).

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➢ Introduced the book building process and brought in transparency in
IPO issuance.
➢ Depositories for share custody (dematerialization of shares).
➢ Internet trading (e-broking).

1 The S&P BSE AllCap comprises S&P BSE LargeCap, MidCap, and the
SmallCap. It measures the performance of the overall Indian stock market.

2 The S&P BSE LargeCap represents 70% of the total market cap of the S&P
BSE AllCap. It tracks the performance of large-size companies. Some of the
S&P BSE LargeCap companies include:

• Reliance Industries
• Tata Consultancy Services
• HDFC Bank
• ICICI Bank
• Infosys
• Life Insurance Cooperation of India

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• State Bank of India
• Bharti Airtel
• Hindustan Unilever
• ITC

3 The S&P BSE Midcap signifies 15% of the total market cap of the S&P BSE AllCap. It
tracks the performance of mid-size companies. Some of the top companies are;

• Suzlon Energy
• Indian Renewable Energy Development Agency
• SJVN
• The New India Insurance Company
• Bank of Maharastra
• Kalyan Jewelers India
• IRB Infrastructure Developers
• Global Health

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B. National Stock Exchange (NSE):

With the liberalization of the Indian economy, it

was found inevitable to lift the Indian stock
market trading system on par with the
international standards. Based on the
recommendations of high powered Pherwani
Committee, the National Stock Exchange was
incorporated in 1992 by Industrial Development
Bank of India (IDBI), Industrial Credit and Investment Corporation of
India(ICICI), Industrial Finance Corporation of India (IFCI), all Insurance
Corporations, selected commercial banks and others.
Trading at NSE takes place through a fully automated screen-based trading
mechanism which adopts the principle of an order-driven market. Trading
members can stay at their offices and execute the trading, since they are
linked through a communication network. The prices at which the buyer and
seller are willing to transact will appear on the screen. When the prices

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match the transaction will be completed and a confirmation slip will be
printed at the office of the trading member.

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RECENT DEVELPOMENTS IN INDIAN CAPITAL
MARKET:

GDP Growth rates-World wide

India is fastest growing economy in the world as per IMF data

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Primary Market Statistics (1/2)

IPOs cover 90% of Primary Market – Equity

2022-23 2023-24 Share in total

Particular amount (per
rent)
No.of Amount No.of Amount 2022- 2023-
issue (cr) issue (cr) 23 24
Public issues 202 83.696 123 16,087 79.6 88.2
(Equity/PCD
/FCD)ofwhich
IPOs 201 83,684 123 16087 79.6 88.2
FPOs 1 13 0 0 0 0
Rights issues 21 21400 10 2149 20.4 11.8
Total 223 105097 133 18235 100 100

This signifies that most of the money coming in system of primary market are
from IPO and right issues.

Primary Market Statistics (2/2)

Most of the IPOs were for Finance Companies

Industry 2022-23 2023-

% 24%
Finance 9.4 20.5
Hotel 2.4 9
Textile 0.7 7.3
Banking 7.7 6.2
Miscellaneous 19.1 44.9

By industry, the miscellaneous category in the industry classification raised

44.9 percent of the resources mobilized in 2023-24 followed by Finance
(20.5 per cent), Hotels (9.0 per cent), Textiles (7.3 per cent) and Banking/FIs

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(6.2 per cent). There were 14 mega issues in 2023-24compared to 48 mega
issues in 2022-23. Mega issues = issues size > INR 300 Cr.

Secondary Market Statistics (1/2)

➢ Both Sensex and Nifty reached their respective all-time highs of

38,897 and 11,739 on August 28, 2022
➢ Despite several challenges, including liquidity crises in domestic non-
banking finance companies (NBFCs), the delay in Brexit and global
trade tensions, Indian equity markets fared well during the Year 2022-
23

➢ During the year, the mutual fund assets under the management rose
by 11.4 per cent on account of Strong participation of retail investors
despite volatile markets

Secondary Market Statistics (2/2)

Average market growth S&P 11% and Nifty 8.3%

Major Indicators of Indian Securities Markets.

Amount in INR 2022-23 2023-24 Growth 17- Growth 18-

1% 19%
S&P BSE SENSEX
Year end 32969 38673 11.3 17.3
Average 32397 35972 18.5 11.0
Nifty 50
Year end 10114 11624 10.2 14.9
Average 10030 10860 17.6 8.3

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Limitation :

Market Volatility: Capital markets can be highly volatile, leading to rapid

fluctuations in security prices. This volatility can be driven by various factors,
including economic changes, political events, and investor sentiment. Such
unpredictability can make it difficult for investors to make informed
decisions.

Information Asymmetry: Not all investors have access to the same level of
information. This disparity can lead to situations where well-informed
investors take advantage of less-informed ones, creating an uneven playing
field. This can undermine investor confidence and lead to market
inefficiencies.

Regulatory Constraints: Capital markets are subject to regulations that can

limit the types of securities that can be traded, the amount of leverage
investors can use, and the disclosure requirements for companies. While
these regulations are designed to protect investors and maintain market
integrity, they can also restrict market activity and innovation.

Accessibility Issues: Smaller investors may find it challenging to access

capital markets due to high transaction costs, minimum investment
requirements, or lack of knowledge. This can result in a concentration of
wealth among larger investors and institutions, reducing overall market
participation.

Economic Dependency: Capital markets can be sensitive to economic

cycles. During economic downturns, access to capital can become
constrained, leading to reduced investment and slower economic growth.
This dependency can create a feedback loop that exacerbates economic
challenges.

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Finding and suggestions:

Findings:

1. Indian capital markets have grown significantly, with market capitalization

increasing from ₹60 trillion in 2010 to ₹250 trillion in 2022.
2. Regulatory reforms have enhanced market transparency and investor
protection.
3. Increased retail participation and growing importance of institutional
investors.
4. Market volatility, regulatory hurdles, and infrastructure gaps remain
challenges.

Suggestions:

Short-term (0-2 years):

Enhance market accessibility and liquidity through technology upgrades.

Strengthen investor protection mechanisms, including grievance redressal.

Promote financial inclusion through investor education programs.

Medium-term (2-5 years):

Develop alternative investment products, such as REITs and InvITs.

Improve market infrastructure, including trading platforms and clearing systems.

Enhance regulatory oversight and enforcement.

Long-term (5+ years):

Foster a culture of innovation and entrepreneurship.

Develop a comprehensive financial literacy program.

Encourage foreign investment and international partnerships.

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Conclusion:

This report shows an overview of Indian capital market. It related with the various aspect
of the Indian capital market which includes concept, meaning, types of the capital
market and history, development of the Indian capital market. Moreover, includes Capital
Market Instruments, Intermediaries, Investment Institutions etc

• A vibrant capital market enables the corporate sector to access funds for
investment.
• The formation of SEBI paved the way for an orderly growth of the market
intermediaries in India.
• Investor protection and development of the securities market are kept as the two
primary objectives of regulation in India.

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Bibliography :
www.sbimf.com

www.moneycontrol.com

www.amfiindia.com.

www.onlineresearchonline.com.

www.mutualfundsindia.com.

www.nse.com

www.hse.com

www.sebi.gov.in

www.rbi.gov.in

Beginners guide to capital Markets

Capital market and securities laws (module ii paper 6)

www.investopedia.com

Capital Markets and NSDL-Overview National – Handbook for NSDL Depository

Operations Module

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