Gr xii-bs-ch-10-s2
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The document discusses financial markets and capital markets. It defines the primary market as dealing with new securities being issued for the first time, while the secondary market is where existing securities are bought and sold, such as on a stock exchange. The primary market raises capital for companies through methods like rights issues, private placements, and prospectus offers. Major stock exchanges in India are BSE and NSE, which provide liquidity and pricing for securities as well as other functions that contribute to economic growth.
Gr xii-bs-ch-10-s2
- 2. Financial Markets Session 2 Grade XII Business Studies
- 3. Learning Objectives • To understand the concept of a capital market • To understand the difference between primary market and secondary market • To know the methods of floatation • To understand rights issue, private placement, sale and prospectus of shares
- 5. CAPITAL MARKET •The term capital market refers to facilities and institutional arrangements through which long-term funds, both debt and equity are raised and invested. •The Capital Market can be divided into two parts: a. Primary Market b. Secondary Market
- 6. Primary Market • The primary market is also known as the new issues market. It deals with new securities being issued for the first time. • The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals. • A company can raise capital through the primary market in the form of equity shares, preference shares, debentures, loans and deposits.
- 8. Offer through Prospectus A prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines. The issues may be underwritten and also are required to be listed on at least one stock exchange.
- 9. Offer for Sale Shares are offered for sale through intermediaries like issuing houses or stock brokers. A company sells securities enbloc at an agreed price to brokers who, in turn, resell them to the investing public.
- 10. Private Placement • Private placement is the allotment of securities by a company to institutional investors and some selected individuals. • It helps to raise capital more quickly than a public issue.
- 11. Rights Issue • This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. • The shareholders are offered the ‘right’ to buy new shares in proportion to the number of shares they already possess.
- 12. e-IPOs • A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock exchange. This is called an Initial Public Offer (IPO). • SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company. • The issuer company should also appoint a registrar to the issue having electronic connectivity with the exchange. • The issuer company can apply for listing of its securities on any exchange other than the exchange through which it has offered its securities. • The lead manager coordinates all the activities amongst intermediaries connected with the issue.
- 13. SECONDARY MARKET • The secondary market is also known as the stock market or stock exchange. • It is a market for the purchase and sale of existing securities.
- 15. Stock Exchanges in India BSE NSE
- 16. STOCK EXCHANGE • A stock exchange is an institution which provides a platform for buying and selling of existing securities. • As a market, the stock exchange facilitates the exchange of a security (share, debenture etc.) into money and vice versa. • According to Securities Contracts (Regulation) Act 1956, stock exchange means any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying and selling or dealing in securities.
- 17. Functions of a Stock Exchange 1. Providing Liquidity and Marketability to Existing Securities 2. Pricing of Securities 3. Safety of Transaction 4. Contributes to Economic Growth 5. Spreading of Equity Cult 6. Providing Scope for Speculation
- 18. Review • Distinguish between Capital Market and Money Market. • What are the functions of Stock Exchange? • What are the methods of floatation in Primary Market?
- 19. Recapitulation • Capital Market is a place where long-term funds are mobilised by the corporate undertakings and Government. • Capital Market may be devided into primary market and secondary market. • Primary market deals with new securities which were not previously tradable to the public. • Secondary market is a place where existing securities are bought and sold. • Stock Exchanges are the organisations which provide a platform for buying and selling of existing securities. • Stock exchanges provide continuous market for securities, helps in price discovery, widening shareownership and provide scope for speculation.