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Structure of Capital Market in India

Published : August 28, 2017

Structure of Capital Market in India

The capital market is a significant part of a financial market. Capital Market is a place for long term financial assets which have long or indefinite maturity. The capital market provides long term debt and equity finance for the government and the corporate sector.

Further, Capital market divides into the Primary market and secondary market.

  • Primary Market: Primary market is one type of capital market where various companies issues their shares and bonds first time to raise funds from the public, it is called Initial Public Offering (IPO).
  • Secondary Market: A secondary market is a form of capital market where issued securities are bought and sold.Structure of Capital Market in India

Secondary Market is further divided into Cash Market and Derivative Market.

Capital Market Regulator:

SEBI (Securities and Exchange Board of India) is a regulator of Indian Capital Market. It was established in 1988. The basic function of SEBI is to protect the interest of investors.

SEBI is also the Regulator for Commodity Market, prior to this Forward Market Commission (FMC) used to be the regulator of the commodity market.

Exchanges of Capital Market in India:

Exchange provides an electronic and transparent platform to buy and sell the shares.  Stock exchange also provides the facility for issue and redemption of securities.

In India, there is two national Exchange of stock market i.e. NES and BSE and two national exchanges for commodity MCX & NCDEX.

A Brief History of Indian Exchanges:

The history of Exchanges of Indian Capital Market is way back to the 1800s.

1800s:

  • 1854: In 1854 Dalal Street has been fixed as a permanent location.
  • 1875: In 1875 BSE has established as “The Native Shares and Stock Brokers Association”

1900s:

  • 1956: In 1956 BSE became the first stock exchange to be recognized under the Securities Contract Act.
  • 1993: In 1993 NSE has recognized as a stock exchange.

2000s:

  • 2000: In the year 2000 internet trading has started at NSE.
  • 2000: Derivative Trading (Index Futures) has started at NSE.
  • 2001: Derivative Trading has started at BSE.

Broker:

The broker acts as a bridge between the exchange and traders (Buyers & Sellers). In order to invest or trade in a stock market or commodity market, one has the open Demat account with a registered broker.


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