Capital Market Overview
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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.

<p>electronic</p> Signup and view all the answers

The depository act was passed in ______ to ensure the free transferability of securities.

<p>1996</p> Signup and view all the answers

The capital market is a market for medium and long-term ______.

<p>funds</p> Signup and view all the answers

The primary market is also known as the ______ issues market.

<p>new</p> Signup and view all the answers

A company invites the public to subscribe for its shares through the issue of a ______.

<p>prospectus</p> Signup and view all the answers

Under the method of offer for sale, securities are sold to brokers at an agreed ______.

<p>price</p> Signup and view all the answers

In a rights issue, existing shareholders are offered the 'Right' to buy new shares in ______ to the number of shares they already possess.

<p>proportion</p> Signup and view all the answers

An e-IPO refers to an electronic Initial Public ______.

<p>Offer</p> Signup and view all the answers

The secondary market is also known as the stock ______.

<p>exchange</p> Signup and view all the answers

The capital market consists of development banks, commercial banks, and ______.

<p>stock exchange</p> Signup and view all the answers

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.
  • 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

  • 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.

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