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CAPITAL MARKETS OVERVIEW
- INDIA
RITESH NANDWANI
Faculty, NISM
May 24, 2018
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Disclaimer
This presentation constitutes an academic effort for a general
understanding of Indian Capital Markets
The views expressed in the slides, presentation content and
discussion are that of the presenter and need not represent the
views of the organization
No part of the presentation may be reproduced in any form in
print or digital copies or distributed through social media
applications in any manner
Since data and pictures have been put together from various
sources, the audience is advised to refer to the original and
authoritative sources of such content/ data which may or may
not have been mentioned in the presentationMay 24, 2018
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Agenda
Regulatory Framework
Role, Power & Functions of SEBI
Market Participants
Indian Securities Markets - Key Features
Market Segments
Primary Markets
Secondary Markets
Mutual Funds
Myths and Realities
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Regulatory Framework
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Regulators in Financial Sector
Securities
MarketBanking Insurance Pension
FINANCIAL MARKET
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Securities & Exchange Board of India (SEBI)
Formed as an administrative
body under Ministry of
Finance in 1988
Statutory status as an
Independent Regulator for
Securities Market through
the Act of Parliament on 04
April, 1992
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Preamble of the SEBI Act, 1992
Investor protection
Regulation of
securities market
Development of
securities market
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Legal framework
SEBI Act, 1992
Depositories Act, 1996
Companies Act, 2013 (limited provisions) Relating to issue & transfer of securities
Relating to listing requirements & minimum subscription
Relating to disclosure requirements in prospectus
Securities Contracts (Regulation) Act, 1956
Rules, Regulations, Guidelines, Circulars
Appellate Mechanism
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Intermediaries registered with SEBI
Listed Companies & Companies seeking Listing
Any person involved in fraudulent practices like insidertrading, manipulation etc in securities market
Jurisdiction of SEBI
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Powers
Legislative
Inspection / Investigation
Surveillance
Directions
Enquiry / Adjudication
Enforcement
Suspension or cancellation
Cease or desist
Monetary penalty
Prosecution
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Functions
Regulation of securities market which includes:
Registration of market participants
Supervision & Surveillance
Investigation & Enforcement
Vetting of offer documents for offers made to public, schemes
of mutual funds
Regulation of substantial acquisitions and takeovers
Investor complaints redressal
Promoting investor awareness and education
Research
Policy formulation, Global standards
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Regulations for Investors and Issuers
(Prohibition of Fraudulent and Unfair Trade Practices Relating To Securities Market) Regulations, 2003
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011
(Buy Back of Securities) Regulations, 1998
(Issue of Capital and Disclosure Requirements), Regulations, 2009
(Issue of Sweat Equity) Regulations, 2002
(Prohibition of Insider Trading) Regulations, 1992
(Delisting of Equity Shares) Regulations, 2009
(Informal Guidance) Scheme, 2003
https://www.sebi.gov.in/sebiweb/home/HomeAction.do?doListing=yes&sid=1&ssid=3&smid=0 May 24, 2018
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Market Participants
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Market Participants
Issuers
Investors
Intermediaries
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Market Intermediaries
Stock Exchanges
Depositories
Stock Brokers
Depository Participants (DPs)
Custodians
Merchant Bankers
Underwriters
Registrar to Issue and Share Transfer Agents
Debenture Trustees
Credit Rating Agencies
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Market Intermediaries (Contd.)
Foreign Institutional Investors
Mutual Funds
Portfolio Managers
Alternate Investment Funds (AIFs)
Collective Investment Schemes
Real Estate Investment Trusts (REITs)
Infrastructure Investment Trusts (InvITs)
Investment Advisers (IAs)
Research Analysts (RAs)
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Summary & Details
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https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognised=yes
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Indian Securities Markets - Key Features
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Indian Markets - Key Features
Features State of the Market
Regulator SEBIAutonomous, Independent, Statutory bodyMandated to protect investors’ interest, develop andregulate securities market
Stock Exchanges As front line regulators – BSE / NSE / RSE’s
Intermediaries Intermediaries registered and regulated by SEBI undersection 12 of SEBI Act (brokers, merchant bankers, RTI, STAetc.)
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Features State of the Market
Access to Market Paradigm shift – Merit to disclosures based regime.
Access to InternationalMarket
Firms allowed to issue ADRs / GDRs and raise ECBs.ADRs/GDRs have two way fungibility.
FIIs allowed to invest in Indian market.
MFs allowed to invest overseas.
Retail investors allowed to invest in IDRs
Corporate Compliance Emphasis on disclosures accounting standards andcorporate governance.
Indian Markets - Key Features
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Features State of the Market
Pricing ofSecurities
Determined by market - Either by issuer through fixed priceor by investors through book building
Fair system of proportionate allotment to retail investors
TradingMechanism
On-line, Electronic,AnonymousFully-automated,order matching on a price/time priorityWide Reach with over 10000 terminals spread in over 400cities in India and abroadLow Transaction Cost
Indian Markets - Key Features
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Features State of the Market
Clearing and Settlement System
Clearing House/Corporation provides full novationCounterparty Risk is absent
Risk Management Comprehensive risk management system
Transfer of securities
Transfers are recorded electronically in book entry form bydepositories99% of Market Cap dematerialized
Mutual Funds Open to private sector. Variety of funds and products.
Indian Markets - Key Features
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Features State of the Market
Products Available at theExchanges
EquityDebtGovernment SecuritiesMutual FundsExchange Traded FundsStock Index Options & FuturesSingle Stock Options & FuturesInterest Rate DerivativesCurrency Futures
Regulatory Competence SEBI vested with powers and systems to detectmisconduct and impose deterrent penalties
Indian Markets - Key Features
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Market Segments
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Market Segments
Primary Markets
Secondary Markets
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Primary Markets
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Primary market
Market in which shares, debentures and other securities are
sold for the first time for collecting long-term capital
Usually known as “Initial Public Offer” (IPO) Market
Flow of funds is from savers to users/ borrowers
Helps in capital formation
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Primary Markets
New issues of financial instruments are offered for sale
Users of funds
(Corporate Issuers)
Intermediaries
(Merchant Bankers,
Underwriters,
Brokers, RTAs, etc.)
Suppliers
of funds
(Investors)
Financial Instruments
Funds
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Options for raising funds
Various types of instruments
HybridDebt Equity
In India
Outside India
From Banks & FIs
Public issue of
Bonds/Debentures
ECBs ADR/GDRs
IPOs
FPOs
Rights Issue
Pref. Issue
Various forms of
Convertibles
FCCBs & FCEBs
ECB: External Commercial Borrowing
ADR/ GDR: American/ Global Depository Receipts
FCCB: Foreign Currency Convertible Bonds
FCEB: Foreign Currency Exchangeable Bonds
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Fund raising - Life cycle
Seed
Capital
Shares
Own funds, Family,
Friends, Angel
Investors
IPO: Initial Public Offer
QIP: Qualified Institutions Placement
GDR: Global Depository Receipts
FCCB: Foreign Currency Convertible Bond
ADR: American Depository Receipts
Venture
Capital
Warrants /
Shares
Venture Capitalist
Private
Equity
Shares
PE Funds
IPO
Shares
FPIs, FI, Banks, Insurance
Cos, MF, HNI, Individuals
including NR
Private
Placement
Shares /
Warrants /
FCD / PCD
Promoters, Fis,
Strategic Investor
Follow-on
Public
Issue
Shares
FPIs, FI, Banks, Insurance Cos, MF,
HNI, Individuals including NR
Rights
Issue
Shares /
PCD / FCD
Existing Shareholders
QIP
Shares
QIBs
GDR
DRs with
underlying
being
Shares
FPIs
FCCB
Foreign
Currency
Bond
convertible
into Shares
Hedge Funds, FPIs
ADR
Depository
Receipts with
the underlying
being Shares
US QIB
Strategic
Investment
Shares
Customer,
Supplier,
Competitor
Investors and Instruments issued depend on the option and stage of lifecycle
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Primary Markets - Resource Mobilization
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Resource Mobilization - Equities
Type of Issuance
2015-2016 2016-2017 April-Jan 2018
No. of
issues
Amount
(INR cr)
No. of
issues
Amount
(INR cr)
No. of
issues
Amount
(INR cr)
Equity
Public 74 14,815 106 29,104 151 66,399
Rights 13 9,239 12 3,416 15 4,540
Total 87 24,054 118 32,520 166 70,939
QIP 24 14,588 21 13,371 41 58,520
Pref. 333 49,916 401 44,103 349 41,581
Total 357 64,504 422 57,474 390 1,00,101
Grand Total Equity 444 88,558 540 89,994 556 1,71,040
Source: SEBI
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Secondary Markets
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Secondary Markets
Financial instruments already issued are traded
Investor
Securities
Brokers Investor
Financial Instruments
Funds
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Secondary Market - Segments
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Cash Market
Derivatives
Debt Government Securities
Corporate Debt
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Clearing & Settlement Process
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Clearing & Settlement Process
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Settlement Cycle
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Secondary Market - Key Statistics
May 24, 2018Source: SEBI
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Secondary Market - Key Statistics
May 24, 2018Source: SEBI
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Thank You
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