Class 12 FMM Chapter 1 notes | Capital market module | Class 12 Financial Markets Management

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Hello guys , These are the notes of chapter 1 of Financial Markets Management class 12  ( Capital Market Module) . 
Guys I have also made detailed video lecture on YouTube of class 12 Financial Markets Management. 
You can click on this Capital Market Module class 12 

Market segment

Two interdependent and inseparable segments:
Primary market and secondary market. 

Primary market 

Provides an opportunity to the issuer of securities to raise resources to meet the requirements of investment. 

In the form of equity or debt

Public Issue : allotment of securities to 50 investors or more. 

Private placement : issue of securities to a select group of persons not exceeding 49.

Secondary market

Where securities are traded after being offered to the public in primary market. 

Comprises : equity, derivatives and debt market

OTC (Over the counter) - informal 
Exchange Traded market - formal

Chapter -1 of class 12 FMM (Part -1)




Key indicators of securities market

Index

Gives info. about the average price movement of products in the financial markets. 

Captures overall behaviour of equity markets. 

The Blue chip index of NSE is CNX Nifty.


Market capitalisation :

Closing market price of share × number of outstanding shares

Market capitalisation ratio : 

Market capitalisation of stocks / GDP.

Turnover : traded quantity × price

Turnover ratio: 

Turnover at exchange / Market capitalization at exchange.

Products and Participants


Products under Securities Contracts [ Regulation ] Act [SC(R)A], 1956 

  1. Shares, bonds, scrips, stocks or other marketable securities. 
  2. Government securities
  3. Derivatives of securities
  4. Units of collective investment scheme
  5. Interest and rights in securities

Securities can be of 3 types. 
  1. Equity
  2. Debt securities 
  3. Derivatives

Participants

Issuer
Intermediaries
Investor

Regulatory bodies

  1. Securities and Exchange Board of India
  2. Reserve Bank of India 
  3. Ministry of Corporate Affairs
  4. Department of Economic Affairs of the Ministry of Finance

Wholesale Debt Market (WDM) Segment : 

Commenced : June 1994 
Provides wide range of debt securities which includes state and Central Government securities, T- bills, PSU Bonds, Corporate debentures.

Capital Market segment : 

Commenced in November 1994
Offers NEAT system
Equity shares ,warrants, debentures etc. can be traded here.

Futures and option (F&O) segment:

Commenced in June 2000
Provides trading in derivatives instruments like index options, index futures , stock options and stock futures.

Currency Derivatives Segment (CDS) 

Commenced on August 29, 2008 with the launch of currency futures trading in the US Dollar - Indian Rupee (USD- INR) . 

Trading in Euro, Pound Sterling and Japanese Yen started in February 2010.

Interest Rate Futures - August 31,2009.

Reforms in Indian securities market

Creation of market regulator:

Securities and exchange Board of India

Main objectives and responsibility of SEBI

  1. Protecting the interest of investors in securities. 
  2. Promoting the development of the securities market. 
  3. Regulating the securities market.

Screen based trading: NEAT 

Online fully auto mated Provides efficiency, liquidity and transparency. 
NEAT was introduced on the CM segment on November 3,1994.

Reduction of Trading Cycle : 

In December 2001, all scrips moved to rolling settlement and the settlement period was reduced from T +5 to T +3 days. 
From April 2003 onwards, T+2 days settlement cycle is being followed.

Equity Derivatives Trading 

Trading in derivatives took off in 2000 with index futures after suitable legal and regulatory framework was put in place. 
The market presently offers index futures, index options, single stock futures and single stock options. 

Demutualisation

Pure demutualized governance structure , having ownership , management and trading with 3 different types of people. 

Dematerialisation

Depositories Act, 1996 was passed to provide for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed and accuracy. 

NSDL - National Securities Depository Limited
CDSL - Central Depository Services Limited

The public listed companies making IPO of any security for ₹ 10 crore or more have to make the IPO only in dematerialised form. 

Clearing Corporation

NSE had set up the first clearing Corporation National Securities Clearing Corporation Limited (NSCCL) which commenced its operation in April 1996.

Objectives of NSCCL. 

  1. To bring and sustain confidence in Clearing and settlement in securities. 
  2. To promote and maintain short settlement cycle ( T+2 ) days for settlement. 
  3. To provide counterparty risk guarantee. 
  4. To operate a tight risk containment system. 

Investor protection

To protect the interest of investors. 
To promote awareness among investors. 

Central Government (Ministry of Corporate Affairs) established the Investor Education and Protection Fund (IEPF) in October 2001.

Globalisation

Indian companies have been permitted to raise resources overseas through issue of ADRs, GDRs, FCCBs and ECBs. 

Launch of India VIX²

Volatility index is a measure of market expectation of variations over the near term. 
India's first volatility index, India VIX was launched by NSE in April 2008.

Direct Market Access :

It (SEBI) allows trading members to provide direct trading terminals only to institutional clients (like Banks) through various connectivity modes. 

Launch of Securities Lending and Borrowing Scheme :

It allows short seller to borrow stock from nsccl for making delivery. Short selling means selling of stocks which the seller does not own at the time of trading. 

Launch of Currency Futures : 

On August 29,2008 NSE launched trading in USD- INR for the first time in India. 

ASBA : Application Supported by Blocked Amount

If an investor applying from ASBA, his application money shall  only be debited from bank account when his application is selected for allotment. 

Launch of Interest Rate Futures : 

On August 31 2009, futures on interest rate was launched on the National Stock Exchange. 

Issue of Capital and Disclosure Requirements (ICDR) Regulations 2009 :

In August 2009, SEBI issued this regulation. 
ICDR regulations 2009 would govern all disclosure norms regarding issue of securities. 

This is part 1 of the series of notes of Financial Markets Management of class 12 . 

More notes are coming. 
Thank you 
If you have any doubt regarding this please feel free to write here in the comments. 





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