1.

1 INTRODUCTION TO CAPITAL MARKET

The Capital market is a market for financial assets which have a long or indefinite
maturity. Generally, it deals with long term securities which have a maturity period of above one
year. Capital market may be further divided into three types i.e., Industrial securities market,
Government securities market and Long term loans market. Industrial securities market is
further divided into two types i.e., primary market or new issue market and secondary
market or stock exchange. Government securities market is also called as Gilt-Edged
securities market. It is the market where Government securities are traded. Long term loans
market is divided into three types Term loans market, Mortgages market and financial
guarantees market.
Absence of capital market instruments acts as a deterrent to capital formation and
economic growth. Resources would remain idle if finances are not funneled through the capital
market.

a) The capital market instruments serves as an important source for the productive use of the
economy’s savings. It mobilizes the savings of the peoples for further investment and
thus avoids their wastage in unproductive uses.
b) It provides incentives to saving and facilitates capital formation by offering suitable rates
of interest as the price of capital.
c) It provides an avenue for investors, particularly the household sector to invest in financial
assets which are more productive than physical assets.
d) It facilitates increase in production and productivity in the economy and thus, enhances
the economic welfare of the society. Thus, it facilitates “the movement of stream of
command over capital to the point of highest yield.”
e) A healthy capital market instrument consisting of expert intermediaries promotes stability
in values of securities representing capital funds.
1.2 OBJECTIVES OF THE STUDY
 To study about the Capital Market Instruments.
 To study about Dematerialization or Demit in the stock exchange for easy
Transfer and error prone system.
 To Know about the latest and future developments is the stock exchange system.
 To be updated with the Recent development in derivatives market.

NEED & IMPORTANCE

Capital market deals with long term funds. These funds are subject to uncertainty and risk.
It supplies long term funds and medium term funds to the corporate sector. It provides the
mechanism for facilitating capital fund transactions. It deals with ordinary shares, debentures and
stocks and securities of the governments. In this market the funds flow will come from savers. It
converts financial assets in to productive physical assets. It provides incentives to savers in the
form of interest or dividend to the investors.

The following factors play an important role in the growth of capital market:

 A strong and powerful government

 Financial dynamics
 Speedy industrialization
 Attracting foreign investments
 Investments from NRI’S
 Speedy implementation of policies
 Globalization
 Development of financial theories
 Sophisticated technological advices
1.3 SCOPE OF THE STUDY

The current study involves a variety of work in economics, accounting and finance in this.
Valuation of stocks and functions of the stock markets, valuation of bonds convertible
debentures and market for debt, issue market and merchant banking, market efficiency,
dividends, bonus and right issues rates of return and regulations.

1.4 RESEARCH & METHODOLOGY

The data collection methods include both the Primary and Secondary Collection
methods.

1. Primary Collection Methods:

This method includes the data collected from the personal discussions with the
authorized clerks and members of the Exchange.

2. Secondary Collection Methods:

The Secondary Collection Methods includes the lectures of the superintend of the
Department of Market Operations, EDP etc, and also the data collected from the News,
Magazines of the NSE and different books issues of this study.
1.5 LIMITATIONS OF THE PROJECT

 Forty five days were insufficient to go on with the study. Since the time constraint was
not enough.

 Most of the implementation and strategies studied were not properly used.

 Improper communication channel with speculators.

 A small difference makes feel difficult about theory and practices.

 An improper absence of information about technology.