Indian Economy
General Knowledge

Indian Capital Market



Indian Capital Market

» The Indian capital market is the market for long-term capital; it refers to all the facilities and institutional arrangements for borrowing and lending "term funds" — medium term and long term funds.
» The Capital Market in India includes :
  (i) Government Securities (Gilt- edged market)
  (ii) Industrial Securities Market
  (iii) Development financial institutions like IFCI, IDBI, ICICI, SFCs, IIBI, UTI etc.
  (iv) Financial Intermediaries like Merchant banks.

» Individuals who invest directly on their own in securities are also supplier of fund to capital market. The trend in the capital market is basically affected by two important factors : (i) operations of the institutional investors in the market and (ii) the excellent results flowing in from the corporate sector.

» The capital market in India can be classified into :
  ★ Gilt-edged market or market for Government and semi-government securities;
  ★ Industrial securities market;
  ★ Development financial institutions; and
  ★ Non-banking financial companies.

» The gilt-edged securities market is the market for Government and semi government securities which carry fixed interest rates.

» The industrial securities market is the market for equities and debentures of companies of the corporate sector. This market is further classified into —
(a) new issue markets for raising fresh capital in the form of shares and debentures, (commonly referred to as primary market) and
(b) old issues market (or secondary market) for buying or selling shares and debentures of existing companies— this market is commonly referred to as the stock market or stock exchange.

» If shares or debentures of private corporations, primary sureties of government companies or new sureties and issue of bonds of public sector are sold or purchased in the capital market, then the market is called Primary Capital Market.
» Secondary Market includes transactions in the stock exchange and gilt- edged market.
» Merchant Bank, Mutual Fund, Leasing Companies, Risk Capital Companies etc. collect and invest public money into the capital market.
» Unit Trust of India (UTI) is the biggest Mutual Fund Institution of India.