COM COMPUTERS, GENERAL Growth before Independence:

Indian capital market was not properly developed in this period because of the following reasons.

(i) Agriculture was the main occupation and there was very little organized long term lending to this sector.

(ii) There was a very little growth of security market, because most of the English enterprises in India looked to the London Market.

(iii) The industrial sector in India was also not developed.

(iv) The government had placed many restrictions on the market.

(v) The specialized financial institutions were not yet developed.

(vi) The individual investors were very few which were limited only to urban areas.

(vii) There was very little scope for the private sector.

(viii) There was lack of banking habits among the people and banks were limited only to urban areas.

(ix) As people are poor their savings are less which results in less investments in the capital market.

(x) There was lack of encouragement from the government.

Growth after Independence:

Since independence particularly after 1951 the capital market in India has been growing significantly because of the following reasons.

(i) Steady growth of savings and investments:- The volume of savings and investment in the country has been growing only after independence. Because Govt. provided all encouragements to boost savings which result is increased investment. Such as relief, cheap loans, tax exemption etc.,

(ii) Role of Commercial Banks:- Commercial banks are the important constituents of Indian Capital market. These banks were increasingly participating to increase the supply of funds into the capital market. To accumulate more funds these commercial banks started many branches even into the rural areas.

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(iii) Growth of Specialised Financial Institutions:- Soon after independence the Govt. of India started a series of financial institutions to assist private sector industries. These institutions are such as IFCI-1948, ICICI-1956, IDBI-1964, LIC-1956 etc.,

(iv) Merchant Banking: Merchant Banking in India was originally started by separate divisions. Now, ever commercial banks have also started separate subsidiaries of merchant banking. It help in issuing shares and under write the new issues and also help the companies in other financial matters.

(v) Lease and hire purchase companies:- A number of companies, banks and NBFCs provide lease finance and hire purchase finance. Leasing means the firm can acquire the economic use of assets without owning them. Whereas under hire purchase scheme, loans are provided to purchase the goods on installment basis.

Other than this mutual fund is the new entrant into the capital market as it provides less risk and high returns and useful for encouraging the small savings. Therefore, mutual funds are very popular now a days in the capital market.

7Q Explain the differences b/w Primary & Secondary Market:

or

Explain the reforms of Indian Capital Market

Ans: Capital market reforms to the institutional arrangements for long term lendings and borrowings with a view to increase number of service to introduce improved practices the Government had various reforms of capital market in the post reforms era (1992) few of those are discussed

below:-General

Reforms:-i) Statutory Status to SEBI:- With an act of parliament, statutory status was given to SEBI from March 31, 1992. It was provided with the necessary power to control regulate and supervise stock market.

ii) Permission to foreign institutional investors:- Investment norms for NRIs have been liberalized so as to attract more funds into the capital market. The foreign institutional investors can invest into the Indian Capital Market on registration with SEBI.

iii) Permission to Indian Companies:- Indian companies have been permitted to raise capital for modernization and raise capital from the international capital market.

Reforms of Primary

Market:-The important reforms of Indian primary market are as under:-1. Merchant banking has been brought under the regulation act of SEBI.

B.COM COMPUTERS, GENERAL

2. It companies are required to disclose all material facts and specific risk factors, which are associated with their project while making public issues.

3. Stock exchanges are required to ensure that the companies should have a valid acknowledgement card issued by SEBI. In other words the companies should fulfill all the requirements to be listed in the stock market as per SEBI guidelines.

4. SEBI has also introduced a code of advertisement for public issue to ensure fair and truthful disclosures.

Reforms of Secondary Market:

• Unit Trust of India has been brought under the regulatory jurisdiction of SEBI.

• Private Mutual Funds have been permitted and all Mutual Funds are allowed to apply for firm allotment in public issues.

• Fresh guidelines were issued for advertising mutual funds.

• SEBI has also introduced capital adequacy norms for brokers and main rules for marking client broker relationship more transparent.

• SEBI also issued guidelines to make the governing body of stock exchange more broad based. It should have 5 elected members not more than 4 members are nominated by SEBI and 3 or 4 members are nominated as public representatives further an Executive Director will also be there

8Q What are the functions of SEBI ? (Securities & Exchange board of India) Or

Explain the role of SEBI in regulating Indian Capital Market.

Ans: On the recommendations of Narasimham Committee as well as other committees pointed out a number of short comings in the functioning of stock market to overcome from these defects securities in 1988. SEBI was given a statutory status in 1992 by an act of the parliament.

Objectives of

SEBI:-(i) Regulating the working of stock market and securities market.

(ii) Dealing with all matters relating to regulate and develop stock market.

(iii) Registering and regulating the working of stock brokers and other intermediaries.

(iv) Providing protection of the investors.

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(v) Regulating the working of investment schemes and mutual funds.

(vi) Prohibiting fraudulent and unfair trade practices.

(vii) Promoting investors education and training for intermediaries in stock market.

Role of SEBI (or) Functions of SEBI

(i) SEBI has introduced a programme for inspecting stock exchanges. Under this programme, inspections of some stock exchange was carried out. The basic objective of this scheme is improving the functioning of stock market.

(ii) The process of registration of intermediaries had been provided under the provisions of SEBI act. The broker for the purpose of buying and selling securities can be possible only if he holds a certificate granted by SEBI.

(iii) SEBI can direct the stock exchanges to set up clearing houses.

(iv) SEBI has authorized to conduct inspections of various mutual funds, and can take the corrective measures.

(v) Merchant banking has been statutorily brought under the regulatory frame work of SEBI.

These merchant bankers should also be authorized by SEBI.

(vi) Guidelines for tightening the entry norms was issued by SEBI on April 16th 1996.

Accordingly a company should have a track record of dividend payment for minimum 3 years in the immediate passed can access to the capital market. Otherwise if a company projects are not approved by commercial banks can also access to the capital market.

(vii) In July 2002, SEBI launched a centralized internet based filing system for listed companies, which is called EDIFAR (Electronic Data Information Filing And Retrieval System)

(viii) SEBI also launched a provision to buy back for their own securities under the companies act 1999.

(ix) With the view to explain the dematerialization process of securities and settlement of transactions in the depository was made compulsory for banks in 1997.

9Q Define Stock Exchange ?

Ans: Stock Exchange is a market where stocks, shares, and other securities are brought and sold. It is a market where the owners of securities can dispose them of as and when they desire.

Stock exchange or stock market has both primary and secondary market segments.

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A stock exchange is an organization for systematic buying and selling of listed or approved existing securities. An organized stock exchange requires:

(a) An association of persons (or) firms to regulate and supervise the transaction.

(b) Rules, regulations and standard practices to govern the transactions.

(c) Authorised stock brokers;

(d) The exchange floor or a hall where the stock brokers or their agents transact during fixed business hours.

Marketing of securities on the stock market can be done only through members of the stock exchange. The stock exchange members act in one or more capacities as:

(a) Commission Broker (b) Floor Broker

(c) Tarvaniwala (d) Jobber or Dealer

(e) Badliwala or Financer (f) Arbitrageur