Indian Financial Markets

Contents
Financial Markets Shares and Stocks Regulatory Environment in India
SEBI RBI

Financial Markets
A Market is a place where buyers and sellers come together to exchange something Financial Markets are where financial Instruments/products are exchanged. A Financial Market is known by type of product traded in it

Financial Market
Financial Market may be defined as a transmission mechanism between investors (or lenders) and the borrowers (or users) through which transfer of funds is facilitated

Different Financial Markets

FINANCIAL MARKET

Money Market

Debt Market

Forex Market

Capital Market

Money Market
Markets for short term
Borrowing Lending

Primarily used by Banks Typical Financial Instruments

Call Money Certificate of Deposit (CD) Treasury Bills Commercial Paper

Debt Market
Debt
Contract One Party lends to another Party Predetermined
Interest Rates and Term

Participants
Banks Financial Institutions Mutual Funds Insurance Companies etc.

Instruments
Government Securities (G-Secs) Public Sector Units Bonds Corporate Securities

Foreign Exchange Market

Foreign Goods
Payments in Foreign Currency Forex Market

Participants
Government
Payments for Imports Repayment of Loans

Importers

Exchange Rates One Currency in terms of other (Eg. 1 US Dollar = 53 Rupees)

Capital Market
Long Term Funds Raised by
Government Corporates

Trading Instruments used

Shares Derivatives Units of Mutual Funds

Financial Markets
Primary Market
Instruments issued for first time Used by
Government/Corporates/PSUs

IPO
Initial Public Offering

Secondary Market
Trading of already issued
Stocks Bonds

Stock Exchange

Investment Basics
Using savings to get returns in future is known as Investment Why should I invest??
I want to earn return on my idle money A good bank balance before I retire I intend to own a Mansion and Ferrari

When should I invest

As soon as possible

Where to invest???
Physical Assets
Real Estate ,Gold/jewellery Requires huge capital

Financial Assets
Savings Bank Account Fixed Deposits Post office Government Bonds Provident Funds

Liquidity
Liquid securities could be easily converted to cash without a loss in value Securities with less liquidity will have to offer a higher yield Securities with a short-term maturity or an active secondary market have greater liquidity

Organized exchanges and over-thecounter

Organized exchange most of stocks, bonds and derivatives are traded. Has a trading floor where floor traders execute transactions in the secondary market for their clients. Stocks not listed on the organized exchanges are traded in the over-the-counter (OTC) market. Facilitates secondary market transactions. Unlike the organized exchanges, the OTC market doesnt have a trading floor. The buy and sell orders are completed through a telecommunications network.

But .. All these are fixed return instruments Lets learn to take some risks and earn more Welcome to the Exciting world of Stocks !!

Stock and Shares

Stock
Capital raised by corporations Through issue and distribution of shares

Share
Signifies ownership in the company A company might have thousands of Shareholders

Which company issued shares for the first time in the world???
The Dutch East India Company in 1602

Stock Exchange
Place where the shares are traded
BSE NSE

BSE Bombay Stock Exchange

Oldest Stock Exchange in Asia Sensex Sensitive Index
Index of 30 Actively traded Companies

NSE National Stock Exchange

Incorporated in 1992 Nifty
Index of 50 Actively traded Companies

A Few Jargons!!!
Types of Shares
Common/Equity Preferred

Face Value Market Value Market Capitalization Dividend

Regulatory Environment in India

Pre 1991
Tight Control of Government

Post 1991
Liberalization Opening of the Economy Need for Supervision
Regulation

Regulatory Bodies

Regulatory Environment in India

RBI Reserve Bank of India
Established in 1935 Bankers Bank Regulates Indian Financial Markets

SEBI Securities and Exchange Board of India

Incorporated in 1992 Regulation of Securities Market Protecting the interests of Investors

Quick Quiz
What are the four basic areas of finance? What are the three types of financial management decisions, and what questions are they designed to answer? What are the three major forms of business organization? What is the goal of financial management?
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Sources
www.wikipedia.org www.rbi.org.in www.sebi.gov.in www.nseindia.com www.bseindia.com www.moneycontrol.com And, !!!

Thank you !!