project report on Capital market

Project Report on Capital Market
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PROJECT REPORT ON
CAPITAL MARKET
Submitted to: Mr. Shreyans Jain
(Practicing Company Secretary)
M/s Shreyans Jain & Co., Mumbai
Submitted By: Prateek Kumawat
Reg. No.:
Email: prateek1113097@gmail.com
Date: 15th February, 2021 Membership No.: FCS8519

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PREFACE
As per the Company Secretaryship Regulations, 1982, the management trainee is required to
prepare a Project Report in the final quarter of his training period. The said project report should
be prepared in consultation with the Company Secretary under whom he has been trained.
Keeping in view this requirement, I have prepared this project report in consultation with my
trainer, CS Shreyans Jain (Proprietor of M/s. Shreyans Jain & Co., Mumbai). I picked up
‘Capital Market’ as my project report topic because it has substantial impact on Company
Secretary profession.
The project report has been prepared after taking into consideration all the possible sources
available, including various books, various statutory legislations, expert’s guidance and
information available on Internet.
-: Prateek Kumawat

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ACKNOWLEDGEMENT
This project is a culmination of the constant endeavor to learn while training and pursuing a
professional course such as the Company Secretary. At the outset I would like to express my
sincere acknowledgement to my parents who have always encouraged me to pursue this course as
well as all my friends. Further, I would also like to thank my mentor Sir Shreyans Jain, who
trained me with great enthusiasm and sincerity.
Further, I would also like to express my gratitude to my professional colleagues at work who have
always helped me while I was pursuing my apprenticeship training, and last but not least to the
Almighty, who has given me the strength, courage, perseverance and the power to grasp
knowledge which are all essential attributes to pursue a professional course such as the Company
Secretaryship Course.

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TABLE OF CONTENTS
Sr. No Particulars Page No.
1. Introduction 5
2. History 6
3. Organisational Structure of Capital Market 7
4. Primary Market 9
5. Secondary Market 12
6. Role of Capital Market in economy 14
7. Legal Framework 16
8. Capital Market Intermediaries 17
9. Capital Market Instruments 19
10. Capital Market Investment Institutions 21
11. Role of Company Secretaries in Capital Market 22
12. Recent reforms in Indian Capital Market 23
13. Conclusion 25
14. Bibliography 26

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1. INTRODUCTION
Capital Market may be defined as a market for borrowing and lending long-term capital funds
required by the business enterprises. Capital Market is the market for financial assets that have
long or indefinite maturity period. Capital Market offers an ideal source of external finance. It
refers to all the facilities and the institutional arrangements for borrowing and lending medium-
term and long-term funds. Like any market, the Capital Market is also composed of whose who
demand funds (borrowers) and those who supply funds (lenders).
Transfer of resources from those with idle resources to the others who have a productive need for
them is perhaps most efficiently achieved through the Capital Markets. Stated formally, Capital
Markets provide channels for reallocation of savings to investments and entrepreneurship and
thereby decouple these two activities. As a result, the savers and investors are not constrained by
their individual abilities, but by the economy’s ability to invest and save respectively, which
inevitably enhances the savings and investment in the economy. Savings are linked to investments
by a variety of intermediaries through a range of complex financial products called “securities”.
There are a set of economic units who demand securities in lieu of funds and others who supply
securities for funds. These demand for and supply of securities and funds determine, under
competitive market conditions in both goods and Securities Market, the prices of securities which
reflect the present value of future prospects of the issuer, adjusted for risks and also prices of funds.
It is not that the users and suppliers of funds meet each other and exchange funds for securities. It
is difficult to accomplish such double coincidence of wants. The amount of funds supplied by the
supplier may not be the amount needed by the user. Similarly, the risk, liquidity and maturity
characteristics of the securities issued by the issuer may not match preference of the supplier. In
such cases, they incur substantial search costs to find each other. Search costs are minimised by
the intermediaries who match and bring the suppliers and users of funds together. These
intermediaries may act as agents to match the needs of users and suppliers of funds for a
commission.
The Capital Market, thus, has essentially three categories of participants, namely
(i) the issuers of securities,
(ii) investors in securities and
(iii) the intermediaries.
The issuers and investors are the consumers of services rendered by the intermediaries while the
investors are consumers of securities issued by issuers. In pursuit of providing a product to meet
the needs of each investor and issuer, the intermediaries churn out more and more complicated
products. They educate and guide them in their dealings and bring them together.
The market does not work in a vacuum; it requires services of a large variety of intermediaries.
The disintermediation in the Capital Market is in fact an intermediation with a difference; it is a
risk-less intermediation, where the ultimate risks are borne by the savers and not the
intermediaries.

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2. HISTORY
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years
ago. The earliest records of security dealings in India are meager and obscure. The East India
Company was the dominant institution in those days and business in its loan securities used to be
transacted towards the close of the eighteenth century. The history of the Indian capital markets
and the stock market, in particular can be traced back to 1861 when the American Civil War began.
The opening of the Suez Canal during the 1860s led to a tremendous increase in Exports to the
United Kingdom and United States, several companies were formed during this period and many
banks came to the fore to handle the finances relating to these trades. With many of these registered
under the British Companies Act, the Stock Exchange, Mumbai, came into existence in 1875.
It was an unincorporated body of stockbrokers, which started doing business in the city under a
banyan tree. Business was essentially confined to company owners and brokers, with very little
interest evinced by the general public. There had been much fluctuation in the stock market on
account of the American war and the battles in Europe. Sir Premchand Roychand remained a
kingpin for many years.
Indian Capital Market before Independence
The Indian capital market was not properly developed before Independence. The growth of the
industrial securities market was very much hampered since there were very few companies and
the number of securities traded in the stock exchanges was still smaller. Most of the British
enterprises in India looked to the London capital market for funds than to the Indian capital market.
A large part of the capital market consisted of the gilt-edged marker for government and semi-
government securities.
Indian Capital Market after Independence
Since Independence and particularly after 1951, the Indian capital market has been broadening
significantly and the volume of saving and investment has shown steady improvement. All types
of encouragement and tax relief exist in the country to promote savings. Besides, many steps have
been taken to protect the interests of investors. A very important indicator of the growth of the
capital market is the growth of joint stock companies or corporate enterprises. In 1951 there were
about 28,500 companies both public limited and private limited companies with a paid-up capital
of Rs. 775 crores.
It has been a drastic long journey for the Indian capital market. Recent time’s capital market is
performed very well, fairly integrated, mature, more globally. The Indian capital market is one of
the best in the world in terms of technology. There are many business news channels, newspaper,
magazines, are issued in India. Online trading is become a global phenomenon. Indian capital
market would be an integrated with international market. Capital markets will change completely
if they grow beyond the cities and stock exchange centers reach the Indian villages. Both SEBI
and retail participants should be active in spreading market wisdom and empowering investors in
planning their finances and understanding the markets.

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3. ORGANISATIONAL STRUCTURE OF CAPITAL
MARKET IN INDIA
Broadly speaking the CAPITAL MARKET is classified in to two categories:
• Primary market (New Issues Market) and
• Secondary market (Old (Existing) Issues Market)
This classification is done on the basis of the nature of the instrument brought in the market. The
primary market helps to raise fresh capital in the market. In the secondary market, the buying and
selling (trading) of capital market instruments takes place. However, on the basis of the types of
institutions involved in capital market, it can be classified into various categories. These different
segments of the capital market help to develop the institution of capital market in many
dimensions. The following chart will help us in understanding the organizational structure of the
Indian Capital Market.

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3.1 Government Securities:
This is also Known as Gilt-edged market. This refers to the market for government and semi-
government securities backed by Reserve Bank of India (RBI).
3.2 Industrial Securities Market:
This is a market for industrial securities i.e., market for shares and debentures of the existing and
new corporate firms. Buying and selling of such instruments take place in this market. This market
is further classified into two types such as the New Issues Market (Primary) and the Old (Existing)
Issues Market (secondary). In primary market fresh capital is raised by companies by issuing new
shares, bonds, units of mutual funds and debentures. However, in the secondary market already
existing i.e. old shares and debentures are traded. This trading takes place through the registered
stock exchanges.
In India we have three prominent stock exchanges. They are the Bombay Stock Exchange (BSE),
the National Stock Exchange (NSE) and Over the Counter Exchange of India (OTCEI).
3.3 Development Financial Institutions:
This is another important segment of Indian capital market. This comprises various financial
institutions. These can be special purpose institutions like IFCI, ICICI, SFCs, IDBI, IIBI, UTI, etc.
These financial institutions provide long term finance for those purposes for which they are set up.
3.4 Financial Intermediaries:
The fourth important segment of the Indian capital market is the financial intermediaries. This
comprises various merchant banking institutions, mutual funds, leasing finance companies,
venture capital companies and other financial institutions.

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4. PRIMARY MARKET
Primary Capital Market is a market for new or fresh issues. The issuer may be a brand-new
company or the one that has been in business for many years. The securities offered may be a new
type for the issuer of additional amounts of a security used frequently in the past. In primary market
funds are mobilized through prospectus, right issue, and private placement etc. Typically, a
company will hire an investment banker to underwrite the offering and a corporate lawyer to assist
in the drafting of the prospectus. The sale of stock is regulated by authorities of financial
supervision and where relevant by a stock exchange.
Primary Market
Company Announces IPO and Distributes Forms
Mr. A fills up form and submit Mr. B fills up form and submit
it to the Company it to the Company
ALLOTMENT OF SHARES
Mr. A is allotted some shares
@ Rs. 95 per share
Secondary Market
Mr. B is not allotted shares by the
Company as there were not enough
shares to offer
Mr. A sells some of his shares in the market
(at a higher price, say Rs. 105).
Mr. B buys some shares from the
stock market through a broker at this price

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4.1 ROLE OF PRIMARY MARKET
 The primary market provides the channel for sale of new securities.
 Primary market provides opportunity to issuers of securities; Government as well as
corporate, to raise resources to meet their requirements of investment and/or discharge
some obligation.
 They may issue the securities at face value, or at a discount/premium and these securities
may take a variety of forms such as equity, debt etc. They may issue the securities in
domestic market and/or international market.
4.2 METHODS OF ISSUING SECURITIES IN PRIMARY MARKET:
a) Public Issue:
 When an issue / offer of securities is made to new investors for becoming part of
shareholders family of the issuer it is called a public issue.
 Public issue can be further classified into Initial public offer (IPO) and Further public offer
(FPO).
i. Initial public offer (IPO):
 When an unlisted company makes either a fresh issue of securities or offers its existing
securities for sale or both for the first time to the public, it is called an IPO.
 This paves way for listing and trading of the issuer’s securities in the Stock Exchanges.
ii. Further public offer (FPO) or Follow-on offer:
 When an already listed company makes either a fresh issue of securities to the public or
an offer for sale to the public, it is called a FPO.
iii. Indian Depository Receipt:
 Any Instrument in the form of Depository Receipt created by Domestic depository bank
in India against the underlying shares of issuing company deposited with Overseas
custodian bank.
 An IDR is a mechanism that allows investors in India to invest in listed foreign
companies, including multinational companies, in Indian rupees.

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b) Right Issue:
 Right Issue’ means offering shares to existing members in proportion to their existing
shareholding as on a particular fixed date fixed by issuer (record date).
 The rights are offered in a particular ratio to the number of securities held as on the record
date.
c) Bonus Issue:
 A bonus issue is an offer of additional shares to existing shareholders without any
consideration from them. It is also known as capitalization of reserves.
 The shares are issued out of the Company’s free reserve or share premium account in a
particular ratio to the number of securities held on a record date.
d) Private Placement issue:
 A private placement is a sale of stock shares or bonds to pre-selected investors and
institutions rather than on the open market. It is an alternative to an initial
public offering (IPO) for a company seeking to raise capital for expansion.
 Private placement of shares can be of two types:
i. Preferential Allotment:
 When a listed issuer issues shares or convertible securities, to a select group of persons in
terms of provisions of Chapter XIII of SEBI (DIP) guidelines, it is called a preferential
allotment.
 The issuer is required to comply with various provisions which inter‐alia include pricing,
disclosures in the notice, lock‐in etc, in addition to the requirements specified in the
Companies Act
ii. Qualified institutions placement (QIP):
 A qualified institutional placement (QIP) is, a way for listed companies to raise capital
without having to submit legal paperwork to market regulators. It is common in India and
other Southeast Asian countries.
 Qualified institutional buyers (QIBs) are the only entities allowed to purchase QIPs.
 QIB includes Scheduled Commercial Banks, Foreign Institutional Investor, Mutual Funds,
Public Financial Institutions etc.

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5. SECONDARY MARKET
Secondary Market is the stock market where existing stocks are bought and sold by retail
investors through the brokers. Generally, when we speak about investing or trading at the stock
market, we mean trading at secondary stock market.
It is the secondary market that controls the price of the stock. The trading platform is accessible
by brokers and trading is confined to stock exchange. Stock Broker, sub-broker, portfolio
manager etc. are the intermediaries in secondary market.
5.1 FUNCTIONS OF SECONDARY MARKET:
 A stock exchange provides a platform to investors to enter into a trading transaction of
bonds, shares, debentures and such other financial instruments.
 Transactions can be entered into at any time, and the market allows for active trading so
that there can be immediate purchase or selling with little variation in price among different
transactions. Also, there is continuity in trading, which increases the liquidity of assets that
are traded in this market.
 Investors find a proper platform, such as an organised exchange to liquidate the holdings.
The securities that they hold can be sold in various stock exchanges.
 A secondary market acts as a medium of determining the pricing of assets in a transaction
consistent with the demand and supply. The information about transactions price is within
the public domain that enables investors to decide accordingly.
 It is indicative of a nation’s economy as well, and also serves as a link between savings
and investment. As in, savings are mobilised via investments by way of securities
5.2 TYPES OF SECONDARY MARKET:
Secondary markets are primarily of two types – Stock exchanges and over-the-counter markets.
 Stock exchange
Stock exchanges are centralised platforms where securities trading take place, sans any contact
between the buyer and the seller. National Stock Exchange (NSE) and Bombay Stock
Exchange (BSE) are examples of such platforms.
Transactions in stock exchanges are subjected to stringent regulations in securities trading. A stock
exchange itself acts as a guarantor, and the counterparty risk is almost non-existent. Such a safety

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net is obtained via a higher transaction cost being levied on investments in the form of commission
and exchange fees.
 Over-the-counter (OTC) market
Over-the-counter markets are decentralised, comprising participants engaging in trading among
themselves. OTC markets retain higher counterparty risks in the absence of regulatory oversight,
with the parties directly dealing with each other. Foreign exchange market (FOREX) is an example
of an over-the-counter market.
In an OTC market, there exists tremendous competition in acquiring higher volume. Due to this
factor, the securities’ price differs from one seller to another.
Apart from the stock exchange and OTC market, other types of secondary market include
auction market and dealer market.
The former is essentially a platform for buyers and sellers to arrive at an understanding of the rate
at which the securities are to be traded. The information related to pricing is put out in the public
domain, including the bidding price of the offer.
Dealer market is another type of secondary market in which various dealers indicate prices of
specific securities for a transaction. Foreign exchange trade and bonds are traded primarily in a
dealer market.

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6. ROLE OF CAPITAL MARKET IN ECONOMY
Capital market plays an extremely important role in promoting and sustaining the growth of an
economy. It is an important and efficient conduit to channel and mobilize funds to enterprises, and
provide an effective source of investment in the economy. It plays a critical role in mobilizing
savings for investment in productive assets, with a view to enhancing a country’s long-term growth
prospects. It thus acts as a major catalyst in transforming the economy into a more efficient,
innovative and competitive marketplace within the global arena.
Capital market has played a crucial role in supporting periods of technological progress and
economic development throughout history. Among other things, liquid markets make it possible
to obtain financing for capital-intensive projects with long gestation periods. This certainly held
true during the industrial revolution in the 18th century and continues to apply even as we have
moved towards the so-called “New Economy”.
The existence of deep and broad capital market is absolutely crucial and critical in spurring the
growth of our country. An essential imperative for India has been to develop its capital market to
provide alternative sources of funding for companies and in doing so, achieve more effective
mobilization of investors’ savings. Capital market also provides a valuable source of external
finance.
For a long time, the Indian market was considered too small to warrant much attention. However,
this view has changed rapidly as vast amounts of international investment have poured into our
markets over the last decade. The Indian market is no longer viewed as a static universe but as a
constantly evolving market providing attractive opportunities to the global investing community.
 Mobilize resources for investment
The capital market promotes capital formation in the country. Rate of capital formation depends
upon savings in the country. Though the banks mobilize savings, they are not adequate to match
the requirements of the industrial sector. The capital market mobilizes savings of households and
of the industrial concern. Such savings are then invested for productive purposes. Thus, savings
and investment lead to capital arrangement in country.
 Economic growth
Capital market smooths the progress of the growth of the industrial sector as well as other sectors
of the economy. The main purpose of the capital market is to transfer resources from masses to the
industrial sector. The capital market makes it possible to lend funds to various projects, both in the
private as well as public sector.
 Development of backward areas
The capital markets provide funds for the projects in backward areas. This facilitates the economic
development of backward areas.

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 Generates employment
Capital market generates employment in the country:
i) Direct employment in the capital markets such as stock markets, financial institutions etc.
ii) Indirect employment in all sectors of the economy, because of the funds provided for
developmental projects.
 Long term capital to industrial sector
The capital market provides a stable long-term capital for the companies. Once, the funds are
collected through issues, the money remains with the company. The company is left free with the
funds while investors exchange securities among themselves.
 Developing role of financial institutions
The various agencies of capital market such as industrial financial corporation of India (IFCI),
state finance corporations (SFC), industrial development bank of India (IDBI), industrial credit
and investment corporation of India (ICICI), unit trust of India (UTI), life insurance corporation
of India (LIC), etc. there have been rendering useful services to the growth of industries. They
have been financing, promoting and underwriting the functions of the capital market.
 Investment opportunities
Capital markets provide excellent investment opportunities to the members of the public. The
public can have alternative source of investment i.e. In bonds, shares and debentures etc.

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7. LEGAL FRAMEWORK
The Securities Market operations promote the economic growth
of the country. More efficient is the Securities Market, the greater
is the promotion effect on economic growth. It is, therefore,
necessary to ensure that Securities Market operations are more
efficient, transparent and safe. In this context, the investors need
protection from the various malpractices and unfair practices
carried out by the corporate and intermediaries. Securities
Market, in general, is to be regulated to improve the market
operations in fair dealings and provide an easy to access market
by corporates and investors.
Successive Corporate scams also have prompted Governments around the world, including India,
to develop a strong legal and regulatory framework to governs and regulates business and
corporate transactions
At present, following agencies and bodies have a significant regulatory influence, directly or
indirectly, over the Securities Markets in India. These are:
 Department of Economic Affairs (DEA) which is responsible for the economic management
of the country and is an autonomous body of the Government of India that is concerned with
the orderly functioning of the financial markets as a whole.
 Ministry of Corporate Affairs (MCA) which is at the apex of the three-tier structure that has
the responsibility for the registration and oversight of incorporated entities which fall under
the regulatory purview of the Companies Act.
 The Company Law Board (CLB) which is a quasi-judicial body that exercises some of the
quasi-judicial as well as some judicial powers under the Act whichever previously exercised
by the High Court and the Central Government. At present NCLT and NCLAT has also been
established under section 408 of Companies Act, 2013 to adjudicate issues relating to
companies in India.
 The Reserve Bank of India (RBI) which is primarily responsible, inter alia, for the
supervision of banks and Money Markets.
 Securities and Exchange Board of India (SEBI) which is responsible for the regulation of
Capital Markets and various participants and activities therein; and
Of all the above, the agency which is directly charged with the mandate of supervision of the
Capital Market in India is SEBI.

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8. CAPITAL MARKET INTERMEDIARIES
Capital Market Intermediaries can be classified into two categories Primary Market
Intermediaries and Secondary Market Intermediaries:
8.1 Primary Market Intermediaries:
 Merchant Bankers:
Merchant Banker’ means any person engaged in the business of issue management by making
arrangements regarding selling, buying or subscribing to securities or acting as
manager/consultant/advisor or rendering corporate advisory services in relation to such issue
management.
 Registrar to an Issue and Share Transfer Agent:
The Registrars to an Issue and Share Transfer Agents constitute an important category of
intermediaries in the primary market. They render very useful services in mobilising new capital
and facilitating proper records of the details of the investors, so that the basis for allotment could
be decided and allotment ensured as per SEBI Regulations.
 Underwriters
Underwriters represent one of the key elements among the capital market intermediaries. They
facilitate raising of capital by assuring to take up the unsubscribed portion upto a specified limit.
 Banker to an Issue:
Banker to an Issue means a scheduled bank carrying on activities of Acceptance of application and
application monies, acceptance of allotment or call monies, refund of application monies, payment
of dividend or interest warrants. EG
8.2 Secondary Market Intermediaries:
 Stock Brokers & Sub Brokers:
Stock broker means a member of a stock exchange. A stock-broker plays a very important role in
the secondary market helping both the seller and the buyer of the securities to enter into a
transaction.
A sub-broker means any person not being a member of stock exchange who acts on behalf of the
stock broker as an agent or otherwise for assisting the investors in buying, selling or dealing in
securities through such stock brokers.

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No stock broker or sub-broker shall buy, sell or deal in securities unless he holds a certificate of
registration granted by SEBI under the Regulations made by SEBI in relation to them.
 Portfolio Manager:
A person who advises, directs and manages portfolio of securities or funds of the client is known
as Portfolio manager. Portfolio manager means any person who pursuant to contract or
arrangement with the client, advises or directs or undertakes on behalf of the client (whether as a
discretionary portfolio manager or otherwise) the management or administration of a portfolio of
securities or the funds of the clients as the case may be.
Portfolio Manager has the professional experience and expertise and is capable enough to
understand the market and make necessary changes in the portfolio of client to ensure modest
returns with subsequesnt safety against market risk.
 Investment Advisor:
“Investment Adviser” means any person, who for consideration, is engaged in the business of
providing investment advice to clients or other persons or group of persons and includes any person
who holds out himself as an investment adviser, by whatever name called.
 Custodian:
Custodian of securities means any person who carries on or proposes to carry on the business of
providing custodial services which includes maintaining accounts of securities of a client,
undertaking activities as a Domestic Depository, collecting the benefits or rights accruing to the
client in respect of securities, keeping the client informed of the actions taken or to be taken by the
issuer of securities.
 Credit Rating Agencies:
Credit rating Agency (CRA) is one of the capital market Intermediaries. It is a body corporate
which is engaged in the business of rating securities offered by way of public issue or right issue.
Rating is just an opinion regarding the securities expressed in form of standard symbols as
mentioned by CRA. The main Credit rating Agencies are; CRISIL, ICRA, CARE, Standard and
Poor, Moody’s Investor Services.
 Qualified Foreign Investor:
Qualified Foreign Investors are allowed directly to access Indian Stock Market under a strategic
decision to enhance the foreign inflow in the country. QFI is a large set of diversified individual
foreign nationals who are desirous of investing in Indian equity market and do not have direct
access to Indian equity market.

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9. CAPITAL MARKET INSTRUMENTS
Financial instruments that are used for raising capital resources in the capital market are known
as Capital Market Instruments. Capital Market Instruments are responsible for generating funds
for companies, corporations and sometimes governments. These are used by the investors to make
a profit out of their respective markets.
The different types of Capital Market Instruments are explained below:
 Equity Shares:
Equity shares, commonly referred to as ordinary share also represents the form of fractional
ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial
risk associated with a business venture. The holder of such shares is the member of the company
and has voting rights.
 Preference Shares:
‘‘preference share capital’’, with reference to any company limited by shares, means that part of
the issued share capital of the company which carries or would carry a preferential right with
respect to—
i. payment of dividend
ii. repayment, in the case of a winding up
There are Various types of Preference Shares namely Cumulative Preference Shares, Convertible
Preference Shares, Redeemable Preference Shares, Participating Preference Shares etc.
 Debentures:
Section 2(30) of the Companies Act, 2013 defines debenture which includes debenture stock,
bonds or any other instrument of a company evidencing a debt, whether constituting a charge on
the assets of the company or not;
Debenture is a document evidencing a debt or acknowledging it and any document which fulfills
either of these conditions is a debenture.
 Warrant:
Warrant means an option issued by a company whereby the buyer is granted the right to purchase
a number of shares (usually one) of its equity share capital at a given exercise price during a given
period.

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 Foreign Currency Convertible Bonds:
It is an instrument that is issued in a currency different from Issuer’s domestic currency with the
option to either redeem at maturity or convert it into issuing company’s stock. It gives two options:
i. One is to get the regular interest & principal
ii. Other is to convert the bond into equities
 Derivative:
A derivative is a financial instrument that derives its value from an underlying asset. This
underlying asset can be stocks, bonds, currency, commodities, metals and even intangible, assets
like stock indices. The most popular derivative instruments are futures and options.
Futures: Future refers to a future contract which means an exchange traded forward
contract to buy or sell a predetermined quantity of an asset on a predetermined future date
at a predetermined price.
Options: Options Contract give its holder the right, but not the obligation, take or make
delivery on or before a specified date at a stated price. But this option is given to only one
party in the transaction while the other party has an obligation to take or make delivery.
FUTURE
 Exchange Traded Funds:
Exchange Traded Fund is a security that tracks an index, a commodity or a sector like an index
fund or a sectoral fund but trades like a stock on an exchange. There are different types of ETFs
Equity ETF’s, Gold ETFs, Exchange ETFs.
 Indian Depository Receipt:
IDR means any instrument in the form of depository receipt created by domestic depository bank
in India against the underlying shares of issuing company deposited with overseas custodian bank
In an IDR, foreign companies would issue shares, to a domestic (Indian) depository, which would
in turn issue depository receipts to investors in India.
 Global Depository Receipt:
GDRs have access usually to Euro market and US market. The US portion of GDRs to be listed
on US exchanges to comply with SEC requirements and the European portion are to be complied
with EU directive. Listing of GDR may take place in international stock exchanges such as London
Stock Exchange, New York Stock Exchange, American Stock Exchange, NASDAQ, Luxemburg
Stock Exchange etc.

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10. CAPITAL MARKET INVESTMENT INSTITUTIONS
Financial Institutions play an important role because all the financial dealings and matters are
handled and monitored by such Institutions. These institutions provide a variety of financial
products and services to fulfil the varied needs of the commercial sector.
 Qualified Institutional Buyer:
QIBs are investment institutions who buy the shares of a company on a large scale. Qualified
Institutional Buyers are those Institutional investors who are generally perceived to possess
expertise and the financial proficiency to evaluate and to invest in the Capital Markets.
 Angel Funds:
An angel investor or angel (also known as a business angel, informal investor, angel funder, private
investor, or seed investor) is an affluent individual who provides capital for a business start-up,
usually in exchange for convertible debt or ownership equity. A small but increasing number of
angel investors invest online through equity crowdfunding or organize themselves into angel
groups or angel networks to share research and pool their investment capital, as well as to provide
advice to their portfolio companies.
 Mutual Funds:
Mutual funds have been created with the major objective that the house hold savings should get
benefit from capital market. Mutual funds refers to a trust that pools the savings of investors who
share a common financial goal is known as mutual fund. The money collected is then invested in
financial instruments such as shares, debentures and other securities the income and capital
appreciation realized are shared by its unit holders in proportion to the number of units owned by
them.
 Pension Funds:
Pension Fund means a fund established by an employer to facilitate and organize the investment
of employees' retirement funds which is contributed by the employer and employees. The pension
fund is a common asset pool meant to generate stable growth over the long term, and provide
pensions for employees when they reach the end of their working years and commence retirement.
 Hedge Funds:
Hedge funds, are unregistered private investment partnerships funds or pools that may invest and
trade in many different markets, strategies and instruments (including securities, non-securities
and derivatives) and are not subject to the same regulatory requirements as mutual funds.
Hedge funds are a riskier variant of mutual funds. Hedge funds are aimed at high net worth
investors. They operate with high fee structures and are less closely monitored by the regulatory
authorities.

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11. ROLE OF COMPANY SECRETARIES IN CAPITAL
MARKET
Company Secretary, over a period of time, has developed themselves as professional having core
competence in compliances and corporate governance, moving from their traditional role of
Secretary of the Company. They are now popularly known as governance professionals in capital
markets and are more frequently called upon to guide the Corporate Board on various strategic,
governance and compliance issues related to capital markets.
The disclosures, transparency, accountability and investor protection are the back bone of the
orderly development and growth of the capital markets. This requires companies listed on the
Stock Exchanges and various capital market intermediaries to comply with requirements under
various Regulations and Guidelines issued by SEBI and Stock Exchanges. The companies
accessing the capital markets for raising funds, to listing their securities and thereafter post-listing
requirements, need to have a professional who is expert in capital market and corporate governance
in ensuring compliances. A Company Secretary has the necessary competence to handle all issues
concerning corporate governance and capital markets in ensuring compliances.
The Company Secretaries Act, 1980 recognizes the role of a Company Secretary in Practice in the
matters relating to capital markets and securities laws. Section 2(2) of the Company Secretaries
Act, 1980 authorizes a Company Secretary in Practice to perform the services as a share transfer
agent, an issue house, a share and stock broker, a secretarial auditor or consultant. This section
also authorizes a Company Secretary in Practice to act as advisor to a company on management,
including any legal and procedural matters.
The various services provided by Company Secretaries (both in employment and practice) in
Capital Markets are as under:
 Advising companies on Compliance of legal and procedural aspects under various acts;
 Representing on behalf of a company and other persons before Securities Appellate
Tribunal;
 Public Issue, Listing and Securities Management
 Compliance with rules and regulations in securities market particularly Internal Audit of
Depository Participants, Internal Audit of Stock Brokers/Trading Members/Clearing
Members, Internal Audit of Portfolio Managers and Internal Audit of Credit Rating
Agencies etc.

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12.RECENT REFORMS IN INDIAN CAPITAL MARKET
 Economic Liberalization due to Indian Capital Market:
The economic liberalization has led to more deregulation, liberalization and privatization of some
of the public sector undertakings in India. This has resulted in the shares of some of the public
sector undertakings being made available to the public. The Industrial policy adopted by the
government earlier did not allow investment in core sector by either individuals or private sector.
But, with the privatization of some of the public sector undertakings, the shares are now available
to the public for contribution
 Promotion of Mutual Funds:
The promotion of mutual funds by nationalized as well as non-nationalized banks has also
improved the Indian capital market. They were helpful to the public by way of tax saving schemes.
Example: UTI’s monthly income scheme. Mutual Funds promoted by nationalized banks have
increased investments.
 Direct Foreign Investment:
The Foreign Investment Promotion Board, consisting of the Secretaries of industries, finance and
foreign affairs, have allowed more direct foreign investment in core sector, especially in power
sector.
 Transparency through Online trading:
The online trading through computer has brought in transparency to the transactions in the market.
People are able to know prices prevailing in the market at any time and as such the brokers cannot
deprive their clients of their profits. The manipulation in the opening and closing prices of shares
by the brokers in the market is no longer possible.
 Demating of shares in Indian Capital Market:
The introduction of demating has resulted in improving transactions further. Demating is a system
under which physical delivery of shares is no more adopted. It is called “scripless trade”.
This has prevented blank transfer and speculation. Every transaction in the market is not only
recorded but it brings revenue to the Government in the form of registration and stamp charges.
 Securities and Exchange Board of India:
The creation of Securities and Exchange Board of India (SEBI) is an important development in
Indian capital market of India. SEBI has not only replaced the Controller of Capital issues, but has
brought in uniformity in the transactions in all stock exchanges.

24 | P a g e
 PAN Made Mandatory:
In order to strengthen the “Know your client" norms and to have sound audit trail of transactions
in securities market, PAN has been made mandatory with effect from January 1, 2007
 Penalty for insider trading in Indian Capital Market:
In 2002, SEBI Act was amended to make insider trading punishable as a serious offense. The
penalty rate has been enhanced to Rs. 1 lakh per day and the maximum penalty can go up to Rs.
25 crores.
 Educating Public:
Press and media have contributed a lot in popularizing the Indian capital market and they are
highlighting the prices of securities everyday. The mutual funds and merchant banks have been
asked to set apart a portion of their funds towards educating the public on the developments in the
Indian capital market.
 Investor Protection:
The Central Government notified the establishment of Investor Education and Protection Fund
(IEPF) with effect from 1st Oct. 2001: The IEPF shall be credited with amounts in unpaid dividend
accounts of companies, application moneys received by companies for allotment of any securities
and due for refund, matured deposits and debentures with companies and interest accrued there
on, if they have remained unclaimed and unpaid for a period of seven years from the due date of
payment. The IEPF will be utilised for promotion of awareness amongst investors and protection
of their interests

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13. CONCLUSION
We have the deepest and most liquid capital market in the world economy.
This report shows an overview of Indian capital market. It related with the various aspect of the
Indian capital market which includes concept, meaning, types of the capital market and history,
development of the Indian capital market. Moreover, includes Capital Market Instruments,
Intermediaries, Investment Institutions etc
The issues of instability of Indian stock market have become gradually more vital matter India is
fast becoming engines for future growth. Indian having a most excellent economy in the world in
spite of that market performance always highly volatile, so, India is facing problems of its own
like the 2G spectrum scam, ISRO Scam, Financial scams, Fiscal Deficits, rising commodity prices
etc. Another problem is the confidence of serious investors which has weakened because of issues
like Corporate Governance and such investors are not easy to convince.
Any issues related to the corporate governance, investors simply dump those stocks and such
stocks may see insane share prices. After all the governance makes or breaks a corporate and
investors trust is bound to lose. In the long-term future of Indian stock exchange is undoubtedly
very bright and rising but at the same time Chinese stock exchange is also soaring high and
unarguably US market is on the top and India can reach these heights only when the above-
mentioned problems is solved. There are many factors influenced on Indian capital market like as
macro-economic factors, global stock market performance, foreign investments, government and
politic interferences, behavior of investors etc.

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BIBLIOGRAPHY
-Books
 Capital Commodity and Money Market, ICSI Module
-Websites
 www.investopedia.com
 www.icsi.edu
 www.slideshare.net
 www.google.com
www.bseindia.com

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