Questions and Answers
In the secondary market, securities are sold by existing investors to other ______.
investors
The primary market is for new issues of shares, debentures, etc., of already listed companies or for companies going ______ for the first time.
public
The stock exchange provides safety of ______ when trading securities.
transactions
Depository services are the basis of the system where all trading in shares is done in ______ form.
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The depository act was passed in ______ to ensure the free transferability of securities.
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The capital market is a market for medium and long-term ______.
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The primary market is also known as the ______ issues market.
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A company invites the public to subscribe for its shares through the issue of a ______.
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Under the method of offer for sale, securities are sold to brokers at an agreed ______.
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In a rights issue, existing shareholders are offered the 'Right' to buy new shares in ______ to the number of shares they already possess.
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An e-IPO refers to an electronic Initial Public ______.
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The secondary market is also known as the stock ______.
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The capital market consists of development banks, commercial banks, and ______.
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Study Notes
Capital Market Overview
- Capital market facilitates medium to long-term funding through institutional arrangements for raising and investing both debt and equity.
- Comprises development banks, commercial banks, and stock exchanges.
Types of Capital Market
Primary Market
- Known as the new issues market, handling securities issued for the first time.
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Methods of flotation:
- Offer through Prospectus: Companies invite public to subscribe via a prospectus, compliant with Companies Act and SEBI guidelines. Must list on at least one stock exchange and may be underwritten.
- Offer for Sale: Securities sold through intermediaries, allowing companies to sell en bloc to brokers who resell to the public.
- Private Placement: Securities allotted to institutional investors or select individuals, facilitating quicker funds raising with reduced floatation costs.
- Rights Issue: Existing shareholders can subscribe to new shares proportionate to their current holdings, known as 'pre-emptive rights.'
- e-IPOs: Public issues conducted online, requiring agreements with stock exchanges, a registered broker, and electronic connectivity for applications.
Secondary Market / Stock Exchange
- Also referred to as stock markets, where existing securities are traded among investors, rather than issued by companies.
- Provides liquidity and marketability to existing securities.
Functions of Stock Exchange
- Liquidates and markets existing securities.
- Determines pricing of securities.
- Ensures safety of transactions.
- Contributes significantly to economic growth.
- Promotes equity culture.
- Offers opportunities for speculation.
Trading Procedures on Stock Exchange
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Steps for trading:
- Selection of a broker.
- Opening a demat account with a depository.
- Placing orders for securities.
- Executing trades.
- Settling transactions.
Depository System
- Established under the Depository Act of 1996, ensuring rapid, precise, and secure transferability of securities.
- Facilitates trading in an electronic form developed by SEBI, eliminating paperwork related to shares.
- A depository holds securities electronically, streamlining the trading process in a tech-driven environment.
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Description
This quiz covers the essentials of the capital market, focusing on its role in facilitating medium and long-term funding through institutional arrangements. Explore the different types of capital markets, including the primary market and its methods of floatation for new securities.
