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CAPITAL MARKETS

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DEFINITION

CAPITAL MARKET

A capital market is a market for securities,

where business enterprises and governments

can raise long-term funds.

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INTRODUCTION

The primary role of this market is to make

investment from investors who have surplus

funds to the ones who are running a deficit.

The capital market offers both long term and

overnight funds.

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TYPES OF CAPITAL MARKETS

PRIMARYMARKET

SECONDARYMARKET CAPITALMARKETS

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PRIMARY MARKETS

It is that market in which shares, debentures

and other securities are sold for the first time

for collecting long-term capital.

This market is concerned with new issues.

Therefore, the primary market is also called

NEW ISSUE MARKET.

Flow of funds:-SAVERSBORROWERS.

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FEATURES OF PRIMARY MARKETS.

New issue.

Various methods of floating capital.

Comes before secondary market.

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SECONDARY MARKETS

The secondary market is that market in

which the buying and selling of thepreviously issued securities is done.

Consists of two markets.

Medium of transaction- STOCK EXCHANGE.

Purpose- Create Liquidity.

Equity Market

Debt Market

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FEATURES OF SECONDARY MARKETS

Comes after primary markets.

Creates liquidity.

Encourages new investments.

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FUNCTIONS OF CAPITAL MARKETS

Mobilization of Savings.

Provision of Investment

avenue.

Speed-up economy growth &

development.

Capital formation.

Readily available market.

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CAPITAL INSTRUMENTS

EQUITY SHARES.

BONDS.

PREFERENCE SHARES. DEBENTURES.

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EQUITY SHARES

An instrument that signifies an ownership

position (called equity) in a corporation, and

represents a claim on its proportional share in

the corporation's assets and profits.

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EQUITY SHARES..

MERITS

Permanent source

No legal obligation

to pay dividend

Right issue

DEMERITS

Higher cost

More risky

Dilution of control &

ownership

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BONDS

INFRASTRUCTURE BONDS

ZERO COUPON BOND

DEEP DISCOUNT BOND

OPTION BOND

FLOATING BOND

INFLATION BOND

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PREFERENCE SHARES

PARTICIPATION PARTICIPATINGNON-

PARTICIPATING

ACCUMLATION CUMULATIVE NON-CUMULATIVE

PERMANCE REDEEMBLENON-

REDEEMBLE

CONVERSION CONVERTIBLENON -

CONVERTIBLE

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PREFERENCE SHARES..

MERITS

No dilution of EPS.

Fixed dividend.

DEMERITS

Higher cost.

Cumulative nature ofdividend.

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DEBENTURES

Transferability Security Permanence Conversion

Redeemable

Registered

Secured

Unsecured

Bearer

Fully

Perpetual

Partly

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