An overview of Indian capital market

The changes in economic scenario(after the liberalization) and the economic growth have raised the interest of Indian as well as Foreign Institutional Investors(FII’s) in the Indian capital market. The recent massive structural reforms on the economic and industry front in the form of de-licensing rupee convertibility, tapping of foreign funds, allowing foreign investors to come to India, have resulted, on one hand, in the quantum leap in activities/volume in the Indian capital market, and on the other hand and more importantly, that the Indian capital market has undergone a metamorphosis in terms of institutions, instruments, etc. The capital market in India is rightly termed as an emerging and promising capital market. During last 20 years or so, the Indian capital market has witnessed growth in volume of funds raised as well as of.

The buoyancy in the capital market has appeared as a result of increasing industrialisation, growing awareness globalisation of the capital market, etc. Several financial institutions, financial instruments and financial services have emerged as a result of economic liberalisation policy of the Government of India.

The capital market has two interdependent segments : the primary market and the secondary market. The primary market is the channel for creation of new securities. These securities are issued by public limited companies or by government agencies’ In the primary market, the resources are mobilized either through the public issue or through private placement route. It is a public issue if anybody and everybody can subscribe for it, whereas if the issue is made available to a selected group of persons it is termed as private placement. There are two major types of issuers of securities, the corporate entities who issue mainly debt and equity instruments and the Government (Central as well as State) who issue debt securities. These new securities issued in the primary market are traded in the secondary market. The secondary market enables participants who hold securities to adjust their holdings in response to changes in their assessment of risks and returns.

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