Tag: meaning and functions of capital market

Some companies cannot afford a public issue and choose to use private placement because access to the primary market can be expensive on account of various mandatory and non-mandatory expenses. The process of listing company's shares in stock exchange involves huge expenses.

The term capital market refers to facilities and institutional arrangements through which long-term funds, both debt and equity are raised and invested. Capital market can be defined as a market for long and medium term funds. It refers to the organizations or institutions which provide funds for more than one year time period.

Secondary market helps existing investors to dis-invest and fresh investors to enter the market. The secondary market is also known as the stock market or stock exchange, which is the market for the purchase and sale of existing securities. In secondary market, securities are not directly issued by the company to investors. The securities are sold by existing investors to other investors.

The contents of the prospectus have to be in accordance with the provisions of the Companies Act and SEBI disclosure and investor protection guidelines- this is a true statement. Prospectus is required and to be filed up under Stock Exchange Board. It helps to give details about the company's background. It helps to protect the interests of the investors and provides security to the investment.

The company gets listed in a stock exchange on the platform known as the primary market. The primary market is also known as the new issues market, which deals with new securities being issued for the first time.  Primary market directly contributes in capital formation because in primary market company goes directly to investors and utilize the funds for investment purpose.Primary market does not include finance in the form of loan from financial institutions.

Prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines. Prospectus is regarded as a formal document. It is required to be filed with the Securities and Exchange Commission. It helps to provide details about an investment offering for sale to the public.

Index is a statistical measure of the changes in a portfolio of stocks representing a portion of the overall market. Index can be defined as a statistical measure of change in a securities market. In simple terms, index is an measure of something related to finance.

Primary procedure in trading on a Stock Exchange is selection of a registered broker. The buying and selling of securities can only be done through SEBI registered brokers who are members of the stock exchange . The broker can be individual, partnership firms or corporate bodies.

Settlement means actual transfer of securities. This is the last stage in the trading of securities done by the broker on behalf of their clients. Settlement can be done in two ways, namely, on-spot settlement and forward settlement.