Is one of the important determining factors of the level of economic development.
Sound financial system induces the level of savings and investments.
Rapid economic development requires a sound financial system with adequate availability of finance and a strong system of associated financial and investment institutions.
Financial market is a place where financial transactions take place.
On the basis of short term and long term transactions markets are classified as –
Money market.
Deals with short term securities and loans.
Also deals with gold and foreign exchange.
Capital market.
Market for long term loan-able funds.
Loans are used by industry and commerce mainly for fixed investment.
Money has a time value and therefore the use of it is brought and sold against payment of interest. Short term money is brought and sold on the money market and long term money on the capital market.
Stock exchanges / Share market –
It plays a dominant role in mobilizing resources for corporate sector.
It is a market dealing in shares, debentures, and financial securities.
Shares and debentures are bought and sold for investment as well as speculative purposes.
Bombay stock exchange (BSE) is one of the oldest (since 1875) and the oldest in Asia.
The share sensex of BSE includes 30 listed companies.
It has indicies viz.
BSE 200.
BSE 100.
BSE 500.
SENSEX.
MIDCAP.
And SMLCAP.
National stock exchange (NSE) –
Was established in November 1922, on recommendation of Pherwani committee.
It became fully fledged stock exchange in 1933 and commenced operations in 1994.
In October 1955, it became biggest in India.
Its share sensex includes 50 listed companies.
Securities and exchange board of India (SEBI) –
Was initially constituted on 12th April 1988 as a non statutory body through a resolution by the government.
It was given statutory status and powers through an ordinance promulgated on 30th Jan 1992.
SEBI is managed by six members.
Chairman (nominated by central government).
2 members (officers of central ministries).
1 member (from RBI).
2 members (nominated by central government).
Office of SEBI is in Mumbai.
Regional offices are at Calcutta, Delhi and Chennai.
In 1988, initial capital was 7.5 Crore Rs, which was provided by its promoters (IDBI, ICICI, and IFCI).
This amount was invested and with its interest amount day to day expanses of SEBI were met.
All statutory powers for regulating Indian capital market are vested in SEBI itself.
Functions of SEBI –
Safeguard the interests of investors and to regulate capital market with suitable measures.
Regulate the business of stock exchanges and other security markets.
Regulate the working of stock brokers, sub brokers, share transfer agents, trustees, merchant bankers, under writers, portfolio managers, etc and also to make their registration.
Register and regulate collective investment plans of mutual funds.
Encourage self regulatory organizations.
Eliminate mal practices of security markets.
Supervise the working of various organizations trading in security market and also to ensure systematic dealings.
Train person associated with security markets and also to encourage investor’s education.