Ndian Apital Arket: 25-1 Excel Books Business Environment Suresh Bedi

Indian Capital Market
Chapter
25
Copyright 2004, Suresh Bedi
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Business Environment
Suresh Bedi
Excel Books

As distinct from the money market, which deals in short-term funds, capital market deals in long-term loanable funds. Its funds are used by industry and trade for making fixed investments. Capital market has two principal segments (a) the primary or the new issues market and (b) secondary market including predominantly the stock market.
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Excel Books
THE PRIMARY OR NEW ISSUES MARKET

The primary market deals with new securities issued by corporate organisations that are offered to individual and institutional investors for the first time. Main Activities Origination refers to the preliminary work relating to the assessment and formulation of new proposals. Underwriting it eliminates uncertainty with regard to the public response to a new issue of securities.
Contd Copyright 2004, Suresh Bedi
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Suresh Bedi
Excel Books
Major Intermediaries Merchant banks provide a range of specialised financial services to their client companies like:
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Pre-investment studies for companies planning new projects; Developing and assisting comprehensive package for project funding; Determining the composition of the securities to be issued and arranging of securities; Drafting of issue prospectus. listing
Arranging underwriting services and loan syndication including foreign currency finance; Placing of issues; Selection of brokers, bankers to the issue, advertising agencies etc.; and Appointment of registrars to deal with share application and transfers.
Business Environment Suresh Bedi
Excel Books
Underwriters Underwriters are appointed on the basis of their financial strength and ability to meet obligation by the issuing companies on the advice of their merchant bankers or lead managers.
Bankers to the Issue The basic function of the bankers to the issue is to accept applications from the investors for the issue of securities and to refund the same if the need arises.
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Excel Books
Brokers to the Issue are involved in the distribution process for securities. They intermediate between the issuing company and are prospective investors and engaged in procurement of subscription to securities issued from the latter.
Registrars and Share Transfer Agents Registrars to an issue deal with the procedural matters relating to the issue. Portfolio Managers These intermediaries manage the portfolio of securities on behalf of the clients and provide various portfolio management services.
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Excel Books
THE ISSUE MECHANISM IN THE PRIMARY MARKET

1. Public Issue through Prospectus is the most common method for the issue of securities by any corporate organisation. In this method, ordinary shares are issued to the general public for subscription by issuing a prospectus. That contains the necessary information about the company. 2. Sale Offer In this method, the issuing company offers shares to the public not directly but indirectly through some intermediary like a merchant bank, or an issuing house or stockbrokers. 3. Placement In this method, a capital market intermediary, like an issuing house acquires securities from an issuing company but sells these securities to his own clients rather than the general public.
Contd. Copyright 2004, Suresh Bedi
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Excel Books
4.
Rights Issue Rights issue is the offer of new shares to existing share-holders, generally in a particular proportion to the existing share holding.
5.
Book Building Method In this method, the lead manager to a new issue estimates market demand for the securities and accordingly sets the offer price.
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Excel Books
The Secondary Market
It is the market for long-term securities, which are
already issued, and functions principally through various stock exchanges of the country. Its main role is to provide liquidity to the securities. Stockbrokers and Sub-brokers A stockbroker is a member of a stock exchange who buys or sells securities on his own account or for non-member clients in return for a commission on the price of the securities traded.
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Excel Books
Bombay Stock Exchange

Bombay Stock Exchange (BSE) is the leading stock exchange of the country which was established as far back as in 1875. It is the oldest in Asia, even older than Tokyo Stock Exchange which has established in 1878. It has a governing body which determines the policies and regulates the working of the stock exchange. The membership is available to both individuals (subject to qualifications) and companies formed in compliance with the provisions of Section 12 or Section 322 of the Companies Act 1956.
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Excel Books
BSEs On-Line Trading System (BOLT)

The exchange introduced on-line trading system on March 14, 1995. The major advantages of the system are the following: It means trading system available and accessible at all the places all the Its communication facilities ensure fast response. The system provides facility to create new system and products. It provides global connectivity. times.
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Excel Books
Bad Deliveries Bad delivery refers to a situation when the shares sent by buyers in physical form are rejected by the companies for registration. Basket Trading System In this system, the investors are allowed to buy or sell all 30 scripts of Sensex in one go in the proportion of their respective weights in the Sensex.
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Suresh Bedi
Excel Books

Ndian Apital Arket: 25-1 Excel Books Business Environment Suresh Bedi

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Indian Capital Market

Indian Capital Market

Copyright 2004, Suresh Bedi

Indian Capital Market

Indian Capital Market

Copyright 2004, Suresh Bedi

Indian Capital Market

THE PRIMARY OR NEW ISSUES MARKET

Contd Copyright 2004, Suresh Bedi

Indian Capital Market

Indian Capital Market

Contd Copyright 2004, Suresh Bedi

Indian Capital Market

Copyright 2004, Suresh Bedi

Indian Capital Market

THE ISSUE MECHANISM IN THE PRIMARY MARKET

Contd. Copyright 2004, Suresh Bedi

Indian Capital Market

Copyright 2004, Suresh Bedi

Indian Capital Market

The Secondary Market

It is the market for long-term securities, which are

Copyright 2004, Suresh Bedi

Indian Capital Market

Bombay Stock Exchange

Copyright 2004, Suresh Bedi

Indian Capital Market

BSEs On-Line Trading System (BOLT)

Contd Copyright 2004, Suresh Bedi

Indian Capital Market

Copyright 2004, Suresh Bedi

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