The working capital alphabetic quality marketplace is 1 of the types of Financial Market. So, earlier going to larn well-nigh Capital Markets, let’s encounter what are Financial Markets.
The fiscal scheme of a province is a combination of fiscal markets. A financial market
is a marketplace that brings buyers in addition to sellers together to merchandise inwards fiscal assets such equally stocks, bonds, commodities, derivatives in addition to currencies. The purpose of a fiscal marketplace is to set prices for global trade, heighten capital, in addition to transfer liquidity in addition to risk
. Although at that topographic point are many components to a fiscal market, iii of the most commonly used are :
- Capital markets,
- Commodity markets and
- Money markets
Today nosotros shall larn well-nigh Capital Market.
Capital markets are markets for buying in addition to selling equity in addition to debt instruments. These markets are likewise known equally “Securities Market“. Capital marketplace refers to facilities & establishment arrangements through which long-term funds, both debt in addition to equity are raised in addition to invested. The working capital alphabetic quality marketplace consists of evolution banks, commercial banks, in addition to stock exchanges.
Capital marketplace tin hold upward divided into 2 types. They are :
- Primary Market
- Secondary Market
Primary Market :
It is likewise known equally the new issues market. It deals alongside the novel securities beingness issued for the get-go time. The functions of primary marketplace is to facilitate the transfer of investable funds savers to entrepreneurs seeking to constitute novel enterprise or to expand existing ones through the termination of securities for the get-go time.
- IPO (Initial Public Offering) : IPO or stock marketplace launch is a type of populace offering inwards which shares of a companionship are ordinarily sold to institutional investors that inwards term, sell to the full general public, on a securities exchange, for the get-go time. Through this process, a private companionship transforms into a populace company.
- Note : 1st modern IPO was issued yesteryear DUTCH EAST INDIA COMPANY inwards March 1602.
- FPO (Follow on Public Offer) : FPO is a procedure yesteryear which a companionship (listened on an exchange) issues novel shares to the investors or the existing shareholders, ordinarily to promoters. FPO is used to diversify the equity based, yesteryear the companies.
Secondary Market :
The secondary marketplace is likewise known equally the “Stock marketplace or Stock exchange“. It is a marketplace for the purchase in addition to sale of existing securities. It helps existing investors to disinvest in addition to fresh investors to acquire inwards the market. It likewise provides liquidity & marketability to existing securities.
Stock Market :
Stock marketplace or equity marketplace is the aggregation of buyers & sellers of stocks (also called shares)
Functions of Stock Market :
- Providing liquidity & marketplace mightiness to existing securities.
- Pricing of securities.
- Safety of transaction.
- Contribution to economical growth.
- Providing reach for speculation.
Stock Exchange :
It is an telephone commutation or stock marketplace where stock brokers in addition to traders tin purchase or sell stocks (also called shares), bonds & other securities.
Note : Bear & Bull terms are used inwards part market.
Stock Exchanges inwards Republic of Republic of India :
The major stock exchanges maintained yesteryear SEBI are :
- BSE (Bombay Stock Exchange)
- NSE (National Stock Exchange)
It is an Indian stock telephone commutation located inwards Mumbai, established inwards 1875. The BSE is considered to hold upward one of Asia’s fastest stock exchanges, alongside a speed of 200 microseconds in addition to 1 of India’s leading telephone commutation groups & the Oldest Stock telephone commutation inwards the South Asian region.
More than 5000 companies are listed on BSE.
Important Note : BSE is the world’s 11th largest stock market.
It is the leading stock telephone commutation of Republic of Republic of India located inwards Mumbai, established inwards 1992 equally the first demutualized electronic telephone commutation inwards the country to render a modern, fully automated screenbased electronic trading system.
NSE has a marketplace capitalization of to a greater extent than than U.S. $ 1.65 trillion.
Important Note : NSE is the world’s twelfth largest stock exchange.
BSE Sensex :
The south & P BSE Sensex (S & P Bombay Stock Exchange Sensitive Index) likewise called the BSE thirty or only the SENSEX, is a free-float market-weighted stock marketplace index of thirty well-established in addition to financially audio companies listed on Bombay Stock Exchange.
On 25th July 2001 BSE launched DOLLEX-30, a dollar linked version of south & P BSE SENSEX. The index is calculated based on a gratis float capitalization method.
CNX Nifty :
The CNS Nifty likewise called the NIFTY l or only the Nifty. is National Stock Exchange of India’s benchmark stock marketplace index for Indian equity market. This was launched on 21st Apr 1996. Nifty is owned in addition to managed yesteryear Republic of Republic of India Index Services in addition to products (IISL), which is a wholly owned subsidiary of hte NSE strategic investment corp ltd. IISL had a marketing in addition to licensing understanding alongside criterion & poors for co-branding equity indices until 2013.
The ‘CNX’ inwards the bring upward stands for ‘CRISIL NSE INDEX‘.
The CNS Nifty Index is a gratis float marketplace capitalization weighted Index. It is developed yesteryear Ajay Shah & Susan Thomas.
Capital Market Instruments inwards India
Shares are a unit of measurement of ownership inwards an organisation or corporation. It is a component of the company’s capital. Those individuals who are getting shares from whatever companionship are called shareholders. There are 2 types of shares. They are :
- Equity Shares
- Preference Shares
Company render net to their shareholders.
In finance, a bond is an musical instrument of indebtedness of the bond issuer to the holders. It is debt security, nether which the issuer owes the holders a debt & depending on the terms of the bond, is obliged to pay them involvement (the coupon) in addition to to repay the principal at a later on date, termed the maturity date.
Interest is ordinarily payable at fixed intervals (annual, semi-annual, sometimes monthly). Very oftentimes the bond is negotiable i.e., the ownership of the musical instrument tin hold upward transferred inwards the secondary market.
Important Notes :
- The holder of the bond is the lender (creditor)
- The issuer of the bond is the borrower (debtor)
The coupon is the interest
- US Treasuries : These are the safest bonds of all because the involvement & principal payments are guaranteed yesteryear U.S. govt.
- Interest is exempt from province in addition to local taxes, but non from federal tax.
- Note : First e’er bond issued yesteryear a national govt was issued yesteryear Bank of England inwards 1694.
In corporate finance, a debenture is a medium to long term debt musical instrument used yesteryear large companies to borrow coin at a fixed charge per unit of measurement of involvement from public.
There are 2 types of debentures :
- Convertible debentures
- Non – Convertible debentures
Convertible Debentures :
Which are convertible bonds or bonds that can hold upward converted into equity shares of the issuing companionship after a predetermined menses of time.
Non – Convertible Debentures :
Which are only regular debentures cannot hold upward converted into equity shares of the liable company.
It is that sort of depository fiscal establishment a/c, where the amount of deposits is fixed for specified menses of time. The principal purpose of trouble organisation human relationship holders to opened upward this a/c, is to earn involvement coin from their actual money, which to given yesteryear the banks during a specified menses of time.
FDI (Foreign Direct Investment)
In FDI a business enterprise of 1 county invests inwards around other country.
FDI is the total of equity capital, reinvestment of earnings, other long-term capital, in addition to short-term working capital alphabetic quality equally shown inwards the remainder of payments.
FDI is distinguished from portfolio unusual investment, a passive investment inwards the securities of around other province such equally populace stocks in addition to bonds, yesteryear the chemical element of “Control”.
FII (Foreign Institutional Investors)
Institutional Investors is a term for entities which puddle coin to purchase securities, existent belongings & other investment assets or originate loans. Institutional Investors include banks, insurance companies, pensions, hedge funds, investment advisors, endowment in addition to mutual funds.
When considered from a strictly local standpoint, institutional investors are sometimes called FIIs.
In countries similar India, statutory agencies similar the SEBI select prescribed norms to register FIIs & likewise to regulate such investments flowing inwards through FIIs. In 2008, FIIs represented the largest establishment investment category alongside equally estimated U.S. $ 751.14 billion.
P-Notes (Participatory Notes)
P-Notes are non used inside the country. They are used exterior Republic of Republic of India for making investments inwards shares listed inwards the Indian stock market. That is why they are likewise called offshore derivative instruments.
Participatory notes commonly known equally P-notes or PNs are instruments issued yesteryear registered unusual institutional investors (FII) to overseas investors, who wishing to invest inwards the Indian Stock Market without registering themselves alongside the marketplace regulator, the SEBI.
Important Note : SEBI permitted FII to register & participate inwards the Indian stock marketplace inwards 1992.
PNs are likewise known equally Overseas Derivative Instruments, Euity linked notes, capped render notes, Participating Return notes etc.
That’s all for at 1 time friends. In our adjacent Banking Awareness lesson, nosotros shall larn well-nigh Money Market. Happy Reading 🙂