The Components of Indian Financial Market are
Money Market:
It is utilized by a wide exhibit of members from an organization raising money by offering
business paper into the market to a financial specialist obtaining CDs as a protected place to park money in the short-term.
Capital Market:
Markets for purchasing and selling equity and debt instruments.
Capital markets channel savings and investments between suppliers of capital, for example, retail speculators and institutional financial investors and users of capital like organizations, government, and people.
Commodity Market:
It is a market that exchanges essential instead of made items.
Soft commodities are agricultural for example, wheat, espresso, cocoa, and sugar.
Derivatives Market:
It is the
financial market for derivatives, financial instruments like future contracts or options, which are derived from other forms of assets.
Insurance Market:
The equitable transfer of the risk of a loss from one entity to another, in exchange for payment in
insurance market.
Foreign Exchange Market:
The foreign exchange market is a worldwide decentralized market for the exchanging of the currencies.
Securities Exchange Board of India(SEBI):
It is the administrative power set up under the
SEBI Act, 1992 keeping in mind the end goal to ensure the premiums of the financial specialists in securities and additionally advance the improvement of the capital market. It includes managing the business in the stock trades administering the working of stock specialists, share exchange operators, vendor investors, financiers.
The main functions of SEBI are as follows
- To regulate the business of the stock market and the other securities market
- To promote and regulate the self-regulatory organisations.
- To prohibit insider trading in securities market.
- To regulate huge acquisition of shares and take over of companies.
Indian Capital Market:
The capital market in India is a market for securities where companies and government can raise long term funds. It is a market designed for
selling and buying of stocks and bonds.
Major Capital Markets:
Bond Market:
It is defined as the environment in which the issuance and exchanging of obligation securities occur. The
bond market primarily includes government-provided securities and corporate debt securities and encourages the exchange of capital from servers to the guarantors requiring capital for government ventures, business developments, and continuous operations.
Types of Bond Markets:
The security industry and financial markets association(
SIFMA) is classified into five bond markets. They are
- Corporate
- Government and Agency
- Municipal
- Fund
Stock Market:
An equity market or stock market is the aggregation of
buyers and sellers of stocks, these are securities listed on stock exchange as well as those only traded privately.
Share Market:
A Share is one unit into which the total share capital is divided. The share capital of the company can be explained as a fund or sum with which a company is formed to carry on the business and which is raised by the
issue of shares.
Types of Shares:
The shares which are issued by the companies are of two types.
Equity Shares:
These shares are issued and are traded every day in the stock market. The returns on the equity shares are not at all fixed. It depends on the number of profits made by the company. The Board of Directors decides on how much of the dividends will be given to equity shareholders.
Preference Shares:
These are the other type of shares. The Preference shares are a market instrument issued by the companies to raise the capital. Preference shares have the characteristics of both equity shares and debentures.
Debentures:
Debentures are creditor-ship securities representing long-term indebtedness of a company. A debenture is an instrument executed by the company under its common seal acknowledging indebtedness to some person or persons to secure the sum in advanced.
Types of Debentures:
The major types of debentures are as follows.
On the Basis of Record point of view:
Registered Debentures:
These are the debentures that are registered with the company. The amount of such debentures is payable only to those
debenture holders.
Bearer Debentures:
These are the debentures which are not recorded in a register of the company. Such debentures are transferable merely by delivery.
On the basis of Security:
Secured Debentures:
These are the debentures that are secured by a charge on the assets of the company. These are also called
mortgage debentures.
Unsecured Debentures:
Debentures which do not carry any security with rgard to the principal amount or unpaid interest are unsecured debentures.
On the Basis of Redemption:
Redeemable Debentures:
These are the debentures which are issued for a fixed period. The Principal amount of such debentures is paid off to the holders on the expiry of such period.
Non-Redeemable Debentures:
These are the debentures which are not redeemable in the life time of the company. Such debentures are paid back only when the company goes to liquidation.
On the Basis of Convertibility:
Convertible Debentures:
These are the debentures that are converted into shares of the company on the expiry of pre-decided period.
Non-Convertible Debentures:
The holders of such debentures cannot convert their debentures into the shares of the company.
On the Basis of Priority:
First Debentures:
These debentures are redeemed before other debentures.
Second Debentures:
These debentures are redeemed after the redemption of first debentures.
Stock Exchanges in India:
Bombay Stock Exchange, the oldest stock exchange in Asia, was established in 1875. BSE was corporatised and renamed
BSE Limited in 2005. In 1894 Ahmedabad stock exchange was started to facilitate dealing in the shares of the textile mills. In 1908, Calcutta stock exchange was started to facilitate market for shares of plantations and jute mills. At present there are 21 stock exchanges in the country. Two types of transactions take place on stock exchanges. These are as follows
Investment Transactions:
Sale/Purchase of securities undertaken with the long-term prospect relating to their yield and price.
Speculative Transactions:
Sale/Purchase of securities undertaken with short-term gain from differences in yield and price.
National Stock Exchange(NSE):
NSE was promoted by leading financial institutions at the behest of the government of India and was incorporated in November,
1992 as a tax paying company unlike other stock exchanges in the country.
- Indices of NSE:
- S and P CNX Nifty
- CNX Nifty Junior
- CNX 100
- Nifty Midcap 50
- S and P CNX Defty
- S and P CNX Nifty Dividend
Bombay Stock Exchange(BSE):
It was established in
1875,
BSE Limited is
Asia’s first stock exchange and one of India’s leading exchange groups.
Indices of BSE:
- Sensex
- Midcap
- SMLCAP
- BSE-100
- BSE-200
- BSE-500
MCX Stock Exchange:
It is a private stock exchange headquartered in
Mumbai, which was founded in
2008. Now it is a
MCX-SX full-fledged stock exchange. Securities and Exchange Board of India(SEBI) on 10th July, 2012 granted permission to MCX Stock exchange to operate as full-fledged stock exchange.
Commodity Exchange:
- Multi Commodity Exchange of India Limited (MCX).
- National Commodity and Derivatives Exchange limited (NCDEX).
- Indian National Multi-Commodity Exchange(NMCE).
- Commodity Exchange Limited (ICEX).
- MCX Stock Exchange (MCX-SX)
International Cultivar Registration Authorities (ICRA):
It is an Indian independent and Professional investment information and credit rating agency. It was established in 1991 and was originally named Investment Information and credit rating agency of India Limited
(IICRA, India). It is the second largest Indian rating company in terms of customer base.
Credit Rating Information Services of India limited(CRISIL):
It is a global analytical company providing ratings, risk and policy advisory services. CRISILs majority shareholder is standard and Poor’s, a division of
McGraw Hill financial and provider of financial market intelligence.
CRISILs business can be divided into three broad categories Rating, Research and Advisory.
Insurance:
Insurance industry includes two sectors Life Insurance and General Insurance. Life Insurance in India was introduced by Britishers. A British firm in
1818 established the Oriental Life Insurance Company at Kolkata. Since the opening up, the participants in the insurance industry has gone up from
7 insurers in 2000 to 49 insurers as on 30th September, 2011.
Insurance Regulatory and Development Authority (IRDA):
This was established in the year 1999 by the Indian Government, for two significant reasons to safeguard the interest of the policy holders. The organisation was set up under the guide lines of the
Insurance Regulatory and Development Authority Act, 1999.
Scope of IRDA:
IRDA has been authorised to register the new insurance companies in India. The list of new insurance companies also includes the collaboration of the renowned insurance companies overseas with the existing companies.
Functions of Insurance Regulatory and Development Authority:
The following are the functions of the IRDA
- Nomination by policy holders
- Settlement of insurance claim.
- Practical training for insurance agents and other intermediaries.
- Code of conduct of insurance intermediaries.
- Surrender value of policy holders.
- Promotion of self-regulation within the insurance sector.
Life Insurance Corporation of India (LIC):
LIC was established on
1st September, 1956 which set the pace of nationalization of the insurance sector under the stewardship of CD Deshmukh. It has a head office in Mumbai and has 8 zonal offices. LIC is also operating internationally through branch offices in
Fiji, Mauritius and UK and through joint venture insurance companies in Bahrain, Nepal, Sri Lanka, Kenya and Saudi Arabia.
General Insurance Corporation (GIC):
GIC was established on
1st January, 1973 with Subsidiaries.
- National Insurance Company Limited, Kolkata.
- The New India Insurance Company Limited, Mumbai.
- United India General Insurance Company Limited, Chennai
- The Oriental Fire and General Insurance Company Limited, New Delhi.
Mutual Funds
It is a body corporate registered with
SEBI that pools money from individuals or corporate investors and invests the same in a variety of different
financial instruments or
securities such as equity shares, government securities, bonds, debentures etc.
Types of Mutual Funds:
According to the time of closure, schemes are classified as follows.
- Open-ended Schemes
- Close-ended Schemes
Open-ended Schemes:
These are allowed to issue and redeem units any time during the life of the scheme. unit capital of
open-ended funds can fluctuate on daily basis.
Close-ended Schemes:
New Investors can buy the units only from
secondary markets.
Mutual Funds in India:
The first Indian mutual fund was set up in
1963, when the government of India created the
Unit Trust of India. Until
1987, UTI enjoyed a monopoly in the Indian mutual fund market and sold a range of mutual funds through a network of financial intermediaries.
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