It is the market of long-term i.e., more than one year funding. In other words companies go to Capital Market for raising long-term funds. Today in India it has been a very common phenomenon. Now it is interesting to know that how does it happens?

There are two main sources of raising capital:
1. Development Financial Institutions (DFIs)
2. Securities Market

A number of DFIs have been established on sectorial basis to meet the need of fund like IDBI, IFCI, IDFC & SIDBI etc.

On the othe hand Securities Market is the market of govt. & corporate securities like Bonds & Debentures, and Shares. Govt’s securities market is also known as “Gilt-Edged-Market” because of its low-risk.

Corporate Securities Market can be divided again into two categories:
1. Primary Market: It is the market of new security or new funds where Companies make direct contact with the public through IPOi.e., Initial Public Offer.
2. Secondary Market: It is the market of odld and existing securities and these are transacted through Stock Exchanges.

Stock Exchange in India

It provides smoth and paperless i.e. electronic transaction facility of securities in India, there are 24 recognised Stock Exchanges. Some of them are very active and popular like:
1. Bombay Stock Exchange (BSE), the oldest in Asia.
2. National Stock Exchange (NSE), established in 1992.
3. Over The Counter Stock Exchange of India (OTCEI), it is functioning on the pattern of NASDAQ of USA.
4. MCX-SX: Though it is a commodity exchange, but most recently in July, 2012 it has got permission for functioning also in securities.

Capital of a Company

Each and every company to be established under Company Act firstly has to prepare a detail document regarding the company, it is called “Memorandum” of Association (MOA)” of the company and it could be regarded as the ‘Constitution of the company’. On the basis MOA a get registered under Company Act, and to it is bound to abide by its regulations while internal matters of the company are controlled by a similar but small document called “Articles of Association”.

Apart from other details a company also announces its maximum capital in MOA. It is called Authorised Capital of the company and behalf of this capital it goes to capital market for raising more capital. For the purpose, shares are issued by the company which indicates and unit of its total issuing capital. At the end of the entire process of capital raising through IPO the capital raised by company is known as Paid-up-Capital.

Types of Shares

Shares could be of money types:
1. Oridinary Share: Issued for all.
2. Preference Share: Holder of such shares get dividend first.
3. Right Issue: Issued for existing shareholders.
4. Bonus Shate: Instead of cash dividend shares are given bearing equivalent amount.
5. Sweat Share: Issued for the employees of the company as an incentive.

Share Indices

To track the fast movement in the orices of shares index is used for the purpose various types of indices are prepared to make it more accessible to the public. But, some of them are much sensitive and become benchmark of the share market.

Examples:-
1. India - SENSEX, NIFTY, VIX, i.e. (BSE) (NSE) Volatility indices etc.
2. Japan - NIKKEI
3. Hongkong - HANGSENG
5. Singapore - SIMEX / Straits Times / SGX - Nifty etc.
6. London - FTSE - 100
7. New York - Dowjones
7. France - CAC
8. Germany - MIDDAX
9. Brazil - Bovespa
10. South Korea - KOSPI etc..

Important Topics:
1. SEBI
2. BULL
3. BEAR
4. Credit Rating  & Depositary
5. ADR / GDR
6. VCF
7. Hedging
8. Buyback
9. Commodity Exchange
10. Hedge Finds
11. Voucher Funds
12. Mutual Funds

Courtesy: Mr. LS Mishra