Recent Changes in Indian Capital Markets

Recent changes in Indian cracking securities industrys Introduction A great mart is a food grocery for securities (debt or rectitude), where business enterprises (companies) and governments can raise long-term funds. It is defined as a foodstuff in which money is provided for periods longer than a year, as the tiptop of short-term funds takes grade on other commercialises (e. g. , the money food market). The chapiter market includes the dividing line market ( candor securities) and the bond market (debt).Money markets and jacket markets ar move of financial markets. Financial regulators, such as the UKs Financial office Authority (FSA) or the U. S. Securities and fill in Commission (SEC), oversee the bang-up markets in their designated jurisdictions to ensure that investors be protected against fraud, among other duties. Capital markets may be classified as primary markets and thirdhand markets. In primary markets, impudent stock or bond issues be sold to inv estors via a weapon known as underwriting.In the secondary markets, existing securities be sold and bought among investors or traders, usu anyy on a securities exchange, over-the-counter, or elsewhere. The primary market is the railway line for creation of mod securities. These securities are issued by public limited companies or by government agencies In the primary market, the resources are mobilized either done the public issue or through private placement route. It is a public issue if anybody and everybody can subscribe for it, whereas if the issue is made lendable to a selected group of persons it is termed as private placement.There are two major types of issuers of securities, the corporate entities who issue mainly debt and equity instruments and the Government (Central as hearty as State) who issue debt securities. These new securities issued in the primary market are traded in the secondary market. The secondary market changes participants who hold securities to adjust their holdings in response to changes in their assessment of risks and returns. Industry raises pay from the Indian expectant market with the help of a number of instruments. Corporate have a choice of (1) Equity finance, and 2) Debt finance. Experience in the varied countries has varied. Substituting equity finance for debt finance defines municipal firms less vulnerable to fluctuations in net income or increases in interest rates. During the last decade, much than a one-third of the increase in net as deposits of large firms in Chile, South Korea, Malaysia, Mexico, mainland China and Thailand has been secured through equity issuance. This pattern contrasts sharply with that of the industrial countries, in which equity financing during the same period has accounted for less than 5 percent of the egression in net assets.The recent massive structural reforms on the sparing and industry front in the form of de-licensing rupee convertibility, tapping of contrasted f unds, allowing baseign investors to come to India, have resulted, on one get through, in the quantum leap in activities/volume in the Indian peachy market, and on the other hand and more importantly, that the Indian seat of government market has undergone a metamorphosis in terms of institutions, instruments, etc. The capital market in India is rightly termed as an emerging and promising capital market.The buoyancy in the capital market has appeared as a result of increasing industrialization, growing awareness globalisation of the capital market, etc. Several financial institutions, financial instruments and financial operate have emerged as a result of economic liberalization constitution of the Government of India. Future of the capital market In the liberalized economic environment, the capital market is all set to play a highly overcritical role in the process of economic development.The Indian capital market has to arrange funds to meet the financial needs of both dome stic and foreign resources. What is more critical is that the changed environment is characterized by cutthroat competition. big businessman of enterprises to mobilize funds at cheap cost will check up on their competitiveness vis-a-vis their rivals. Changes in the capital market Four sets of changes in the Indian capital market can be identified which set the market of the twenty-first century different from what obtained earlier.These can be categorized as follows Introduction of new institutions Introduction of new instruments Changes in administrative control and regulatory framework Some recent initiatives Introduction of raw(a) Institutions The composition of the Indian capital market has undergone a total change. till very recent times, Bombay Stock alternate dominated the capital market in India. The daily turnover on the Bombay Stock Exchange (BSE) simply exceeded the total turnover of all other exchanges put together.The BSE with the monopolistic claw like control ov er the market was posing a severe constraint on the spread and diversification of the capital market culture. It was content with practicing non-transparent time and resource consuming trading practices that failed to evoke trust among new investors, both in primary and secondary market. Its trading practices were enough somewhat totally out of tune with the ongoing communication diversity in India and worldwide. In response to this, the most important are the OTCEI and NSE.What is more important is that the NSE has worked as a catalyst of change for other exchanges, which are introducing on-line trading systems. Along with NSE, mutual funds have besides emerged in the country. Different types of mutual funds catering to the needs of different types of investors have been set up in the country. The increasing growth of the capital market has witnessed the mergence of foreign institutional investors (FIIs) as significant players. Their sale and procure decisions are already havi ng a significant impact on the market conditions.Along with these new players, a set of new supporting institutions have as well as emerged on the horizon such as the Discount and Finance kinfolk of India, Securities Trading Corporation of India, Stock Holding Corporation of India, settlement and alluviation systems, etc. Introduction of New Instruments Capital market instruments are liable for generating funds for companies, corporations and sometimes national governments. These are used by the investors to make a profit out of their respective markets. There are a number of capital market instruments used for market trade, including * Stocks Bonds * Debentures * Treasury-bills * Foreign Exchange * Fixed deposits, and others Along with new institutions, new instruments have emerged on the capital market. These encompass both the domestic instruments and foreign instruments. Many new instruments of finance have already been introduced in recent years. Still, the current intensi ty of the Indian financial market reveals that there is a tremendous scope to deploy new financing instruments connected to equity, debentures, bonds, add-on products and derivatives.This may require captivate changes in certain economic legislations and the will on the part of the Indian corporate enterprises to take risks and tune their decision-making to the investor psychology and market preferences. Changes in Rules and Regulations Responding to the changes in the environment, the administrative framework has also undergone a total overhaul. The earlier gyves have been totally removed. The Controller of Capital Issues has been done away with. The Indian capital market has been left free to find its own judgment and strength.However, it is a paradox of a free market economy that whenever handcuffs are removed effective watchdogs have to be employed. This latter function has now been entrusted to the Securities and Exchange Board of India. Under the Securities and Exchange Bo ard of India Act, 1992, the Securities and Exchange Board of India (SEBI) was formed as an autonomous body empowered to mold the stock exchanges, brokers, merchant bankers, mutual funds, underwriters and various other financial advisors and market intermediaries.The two pronged fundamental objectives of SEBI became investor protection and the orderly growth of the Indian Capital Market. The SEBI has been laying down guidelines to be followed by different players in the different segments of the market. Some Recent Initiatives Buy-back of shares by corporate has been permitted this will enable the promoters of Indian companies to consolidate their positions. Disclosure of end use of funds elevated in public issue in annual statements it will pass around transparency to the manner in which the funds raised from the public are deployed.This will also impose greater accountability on companies. One-time going of capital gains tax for corporatization of stock broking tickets this wil l result in stop number up the pace of professionalization of stock broking operations, which will benefit investors. planning of nomination facility in share certificates this will ease procedures for channelize of shares in the names of the nominee in case of death of the shareholder. In short, the capital market has witnessed metamorphic changes in recent past and is all set to meet the varied needs of the changed liberalized economic environment.Globalization and the Indian capital market With the gradual opening up of the Indian economy, increasing greatness of foreign portfolio investment in the Indian markets and drastic reduction in import tariffs that has exposed Indian companies to foreign competition, Indian capital market is acquiring a global image. Till recently, participants in the Indian capital market could largely afford to ignore what happened in other parts of the world. Share prices largely behaved as if the rest of the world just did not exist.At present, i n sharp contrast to recent past, Indian capital market responds to all types of external developments, like US bond yields, the value of the peso or for that matter of any other currency, the political situation in China, or new petrochemical capacity in South Korea, etc. In short, the Indian capital market is on threshold of a new era. Gradual globalization of the market will mean four things, as follows The market will be more sensitive to developments that take place abroad. There will be a power shift as domestic institutions are forced to compete with the FIIs who control the floating stock and are in control of the GDR market. Structural issues will come to the fore with a plain message reform or despair. The individual investor in his own interest will refrain from both primary and secondary market he will be better off investment in mutual funds. Reference http//en. wikipedia. org/wiki/Capital_market http//www. bostonapartments. com/loans/finance/indian-capital-market. html http//www. advancedtrading. com/infrastructure/227500220? pgno=1