IIBF | JAIIB | PPB NOTES CHAPTER – 4: CAPITAL MARKET
CAPITAL MARKET: It is a market where securities such as Shares, Bonds & Debentures are traded i.e. purchased and sold. While shares (Both Equity as well as Preference) are dealt in Equity Market while Debentures & Bonds are dealt with in the Debt Market. SEBI is regulator of Capital Market. The capital Market has been categorized into 2 types:
- PRIMARY MARKET: The market where the securities are sold by the Company directly under Public issue (IPO) or private placement is called as Primary Market.
- SECONDARY MARKET: The market where securities are traded though the Stock Exchanges is called as Secondary Market. Companies which are listed in Stock Exchange(s) & the sale is made through auction. It also includes OTC (Over the Counter market) though which Futures of securities are dealt through dealers.
Below is some of the information that is available in regard to the capital market which you must keep in your mind as a current update in regard to the capital market:
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| Stock Exchanges | There are currently 9 Stock Exchanges in India, namely:
National Stock Exchange, in short NSE, was started in year 1992 by banks and Financial Institutions. What is Sensex 30? It is Sensitive Index that has been launched by BSE which is market capitalization weighted index of 30 Stocks (Shares) that represents large & sound Indian Companies (the 30 companies get updated on quarterly basis) What is Nifty 50? It is Sensitive Index that has been launched by NSE which is market capitalization weighted index of 50 Stocks (Shares) representing large and sound Indian Co’s. |
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| Shares, Debentures & Bonds |
IPO: It is an initial public offer by the Company through which it invites public to subscribe for shares. FPO: It is called as Further public offer where an offer is made to subscribe for same class of shares. Right Issue: It means an Offer of shares made to the existing shareholders for purchase at a price for same class of share that has already been issued. Bonus Share: It is the type of share that are issued to existing shareholders without receiving their price i.e. free of cost. Preference Shares: The preference share owners are entitled to fixed dividend on their preference shares (if they are cumulative). Dividend is paid to them first. They also get priority over Equity shares in repayment of their dues at liquidation time. Preference Shares are of following types:
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| Debentures and Bonds | Debentures and Bonds are the constituents of Debt Market.
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| Commercial Papers & Certificates of Deposit | Commercial Papers (CPs):
Certificate of Deposit (CD):
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