A brief introduction about financial markets and knowledge about SEBI, NSE, BSE, NIFTY, SENSEX, FPI, Hedging, Arbitrage and tools for Foreign Investment.

1. FINANCIAL MARKETS
A project by
Sampad Dey
MBA-Finance
Department of MBA
Acharya Institute ofTechnology
Soldevanahalli, Hesaraghatta Main Road, Bengaluru-560107

2. INTRODUCTION
The financial market is a broad term describing any
marketplace where creation and trading of financial assets,
such as shares, debentures, bonds, derivatives, currencies, etc.
takes place. It plays a crucial role in allocating limited
resources, in the country’s economy. It acts as a intermediary
between the savers and the investors by mobilizing funds
between them.

3. TABLE OF CONTENTS
1. Meaning and definition of Financial Markets.
2. Functions of Financial Markets.
3. Types of Financial Markets.
4. SEBI
5. NSE
6. BSE
7. NIFTY
8. SENSEX
9. FPI
10.Hedging
11.Arbitrage
12.Tools for Foreign Investment.
13.How can Indians invest in Foreign Market?

4. MEANING DEFINITION AND ROLE OF FINANCIAL
MARKET
Meaning: A Financial Market is an institution that facilitates
exchange of financial instruments including deposits, loans,
corporates stocks, government bonds, etc.
Definition: Brigham Eugene F. “ The place where people and
organizations wanting to borrow money, are brought together, with
those having surplus funds is called a Financial Market.”
Role of Financial Market:
1. Saving Mobilization
2. Investments
3. National Growth
4. Entrepreneurship Growth
5. Industrial Development

5. FUNCTIONS OF FINANCIAL MARKET
1. It facilitates mobilization of savings and puts it to the most productive
uses.
2. It helps in the determining the price of the securities. The frequent
interaction between investors helps in fixing the price of securities, on
the basis of their demand and supply in the market.
3. It provides liquidity to tradable assets, by facilitating the exchange, as
the investors can readily sell their securities and convert assets into
cash.
4. It saves the time, money and efforts of the parties, as they don’t have to
waste resources to find probable buyers or sellers of securities.

6. TYPES OF FINANCIAL MARKET
Different types of Financial Markets:
1. Capital Market: Capital Market consists of primary market and secondary market.
In primary market newly issued bonds and stocks are exchanged and in secondary
market buying and selling of already existing bonds and stocks takes place. It is
also known as bond market and stock market.
2. Money Market: Money market facilitates short term debt financing and capital.
3. Derivatives Market: Derivatives market provides instruments which help in
controlling financial risks.
4. Foreign Exchange Market: Foreign exchange market facilitates the foreign
exchange trading.
5. Insurance Market: Insurance market helps in relocation of various risks.
6. Commodity Market: Commodity Market organizes trading of commodities.

7. SEBI (SECURITIES AND EXCHANGE BOARD
OF INDIA)
The Securities and Exchange Board of India(SEBI) is the
regulator for the securities market in India. It was
established in 1998 and given statutory powers on 30th
January 1992 through SEBI Act 1992.
It was formed in 12th April 1992
Its headquarters is in Mumbai, Maharashtra
Its chairman is Mr. Ajay Tyagi and Executive Director is Mr.
Anand Rajeshwar Baiwar.

8. FUNCTIONS AND RESPONSIBILITIES AND
POWERS OF SEBI
Functions and Responsibilities
The Preamble of the Securities and
Exchange Board of India describes the
basic functions of the Securities and
Exchange Board of India as “ to protect the
interests of investors in securities and to
promote the development of, and to
regulate the securities market and for
matters connected there with or incidental
there to.”
SEBI has to be responsive to the needs of
three groups, which constitute the market:
1. Issuers of securities
2. Investors
3. Market intermediaries
Power
For the discharge of its functions efficiently,
SEBI has been vested with the following
powers:
1.To approve by-laws of Securities
Exchange.
2.To require the Securities Exchange to
amend their by-laws.
3.Inspect the books of accounts and call for
periodical returns from recognized
Securities Exchange.
4.Inspect the books of accounts of financial
intermediaries.
5.Compel certain companies to list their
shares in one or more Securities exchange.

9. NSE (NATIONAL STOCK EXCHANGE)
The National Stock Exchange of India Limited (NSE) is the
leading stock exchange of India, located in Mumbai. The NSE
was established in 1992 as the first demutualized electronic
exchange in the country. NSE was the first exchange in the
country to provide modern, fully automated screen-based
electronic trading system which offered easy trading facility to
the investors spread across the length and breadth of the
country.
It is located in Mumbai, Maharashtra.
It was founded in 1992
Its chairman is Mr. Ashok Chawla and MD & CEO is Mr. Vikram
Limaye
Its market capital is US$2.27 trillion (April 2018)
Its volume is Rs 28,692 billion(US$400 billion)(June 2014)
Indices: NIFTY 50

10. BSE ( BOMBAY STOCK EXCHANGE)
The Bombay Stock Exchange (BSE) is Asia’s first stock
exchange. It claims to be the worlds fastest stock exchange,
with a median trade speed of 6 microseconds. The BSE is the
world’s 10th largest stock exchange with an overall market
capitalization of more than $2.3 trillion on as of April 2018.
BSE is located in Dalal Street, Mumbai, Maharashtra.
It was founded on 9th July 1875
Its founder is Mr. Premchand Roychand , Chairman is Shri S
Ravi and MD & CEO is Mr. Ashishkumar Chauhan.
Total number of listings is 5439
Its market cap is: Rs 150,184.87 billion (US$ 2.1
trillion)(April 2018)
Indices: BSE SENSEX

11. NIFTY 50( NATIONAL STOCK EXCHANGE
FIFTY)
12th October, 3.30 PMIST
10,472.50 237.85 (2.32%)
The NIFTY 50 index is National Stock Exchange of India’s
benchmark broad based stock market index for the Indian
equity market. It represents the weighted average of 50
Indian company stocks in 12 sectors and is one of the two
main stock indices used in India.
Operator: India Index Services and Products
It was launched in 1st April 1996
Constituents: 50
Market Capital: US$2.27 trillion (April 2018)
Nifty is owned and managed by India Index Services and
Products (IISL), which is a wholly owned subsidiary of the
NSE Strategic Investment Corporation Limited.

12. BSE SENSEX (BOMBAY STOCK
EXCHANGE SENSITIVE INDEX)
12th October, 3.40 PMIST
34,733.58 732.43 (2.15%)
The S&P BSE SENSEX (S&P Bombay Stock Exchange
Sensitive Index), also called the BSE 30 or simply the
SENSEX, is a free-float market-weighted stock
market index of 30 well established and financially
sound companies which are some of the largest and
most actively traded stocks .
It was published on 1st January 1986
It is located in Mumbai, Maharashtra.
As of 25th September 2017, the full market
capitalization of S&P BSE SENSEX was about Rs
54,637.0878 billion (US$ 761 billion) (37% of GDP)
while its free-float market capitalization was Rs
30,094.2286 billion (US$ 419 billion).

13. FPI ( FOREIGN PORTFOLIO INVESTMENT)
Foreign Portfolio Investments (FPI) is investment by non-residents
in Indian securities including shares, government bonds, corporate
bonds, convertible securities, infrastructure securities, etc. The
class of investors who make investment in these securities are
known as Foreign Portfolio Investors.
FPI is induced by differences in equity price scenario, bond yield,
growth prospects, interest rate, dividends or rate of return on
capital in India’s financial assets.
As per the recent stipulation by SEBI:
1. Any equity investment by non residents which is less than or
equal to 10% of capital in a company is portfolio investment.
While above this the investment will be counted as Foreign
Direct Investment (FDI).
2. All FPI taken together cannot acquire more than 24% of the
paid up capital of an Indian company.

14. DIFFERENCES BETWEEN FPI and FDI
FPI (Foreign Portfolio Investment)
FPI lets an investor purchase stocks,
bonds or other financial assets in a
foreign country. Because the investor
does not actively manage the
investments or the companies that
issues the investments, he does not
have control over the securities or the
business. However, since the investor’s
goal is to create a quick return on his
money, FPI is more liquid and less risky
than FDI.
FDI ( Foreign Direct Investment)
FDI lets an investor purchase a direct business
interest in a foreign country. The investor’s goal is
to create a long term income stream while helping
the company increase its profits.
The investor controls his monetary investments
and actively manages the company into which he
puts money. He helps build the business and waits
to see his return on investments(ROI). However,
because the investor’s money is tied up in a
company, he faces less liquidity and more risk
when trying to sell his interest.
The investor may also face currency exchange
risks, which may decrease the value of his
investment.

15. HEDGING
1. A hedge is an investment that protects our finances from a risky situation.
2. Hedging is done to minimize or offset the chances that our assets will lose value.
3. It also limits our loss to a known amount if the assets does lose value. Its similar to
home insurance. We pay a fixed amount each month. If a fire wipes out all the value
of home, the loss is only known amount of the deductible.
Hedging Strategies
1. Most investors who hedge use derivatives. These are financial contracts that derive
their value from an underlying real asset, such as a stock. An option is the most
commonly used derivative. It hives us the right to buy or sell a stock at a specified
price within a window of time.
2. Diversification is another hedging strategy. We own as assortment of assets that
don’t rise and fall together. If one asset collapses, we don’t lose everything.

16. ARBITRAGE
Arbitrage is basically buying a security in one
market and simultaneously selling it in another
market at a higher price, profiting from the
temporary differences in prices. This is considered
risk-free profit for the investor or trader.
In the context of the stock market, traders often try
to exploit arbitrage opportunities. For example, a
trader may buy a stock on a foreign exchange
where the price is not yet adjusted for the
constantly fluctuating exchange rate. The price of
the stock on the foreign exchange is therefore
undervalued compared to the price on the local
exchange, and the trader can make a profit from the
difference.

17. TOOLS FOR FOREIGN INVESTMENTS
1.Promotion as a tool for attracting foreign investments: Using
marketing tools and techniques to attract foreign investors is
a common practice for many countries. But finding the right
mix of techniques and organizations to do the promotion is
the key to successful marketing programs.
2.Investment policy and promotion diagnostics: Maximizing the
potential benefits of foreign direct investments for
competitiveness and development.

18. HOW CAN INDIANS INVEST IN FOREIGN
MARKET ?
1. Liberalized Remittance Scheme (LRS)- Under LRS, domestic investors
are allowed to remit a certain amount of money during a financial year
to another country. This money can be used to buy foreign stocks and
debt instruments in overseas market. Apart from this, the remitted
amount a=can also be used to pay expenses related to travelling,
medical treatment or studying.
2. Process of investing in Foreign Stocks helps in investment in foreign
market.
3. Global Mutual Funds/Exchange Traded Funds: People can also buy
international mutual funds. These funds are denominated in local
currency and there is not limit in investing to these funds unlike direct
investments.
4. Open an account with Indian broker with a tie-up with a foreign broker.

19. CONCLUSION
Financial market efficiency is an important topic in the world of
finance. The financial markets are a mixture of both; sometimes
the market will provide fair returns on the investment for
everyone, while at other times certain investors will generate
above average returns on their investments.

20. THANK YOU