Capital Market is a market for long-term funds. It requires a well-structured market to enhance the financial capability of the country. The market consists of a number of players. They are categorised as:
1. Companies
Generally every public company can access the capital market. The companies which are in need of finance for their projects can approach the market. The capital market provides funds from the savers of the community. The companies can mobilise the resources for their long-term needs such as project cost, expansion and diversification of projects and other expenditure items. In India, the companies should get the prior permission from the SEBI (Securities Exchange Board of India) to raise the capital from the market. The SEBI is the most powerful organisation to monitor, control and guide the capital market. It classifies the companies for the issue of share capital as new companies, existing, and unlisted existing listed companies.
According to its guidelines a company is a new company, if it satisfies all the following conditions:
a. The company shall not have completed 12 months of commercial operations.
b. Its audited operative results are not available.
c. The company may set-up by entrepreneurs with or without track record.
A company can be treated as existing listed company, if its shares are listed in any recognised stock exchange in India. A company is said to be an existing listed company if it is a closely held or private company.
2. Financial Intermediaries
Financial intermediaries are those who assist in the process of converting savings into capital formation in the country. A strong capital formation process is the oxygen to the corporate sector. Therefore, the intermediaries occupy a dominant role in the capital formation which ultimately leads to the growth of prospering to the community. Their role in this situation cannot be neglected. The government should encourage these intermediaries to build a strong financial empire for the country. They can also be called as
financial architectures of the Indian digital economy. Their network cannot be ignored. Their financial capability cannot be measured. They take active role in the capital market. The major intermediaries in the capital market are:
a. Brokers
b. Stock-brokers and sub-brokers
c. Merchant Bankers
d. Underwriters
e. Registrars
f. Mutual Funds
g. Collecting agents
h. Depositories
I. Agents
j. Advertising agencies
3. Investors
The capital market consists of many number of investors. All types of investor's basic objectives are to get good returns on their investment. Investment means, just parking one's idle fund in a right parking place for a stipulated period of time. Every parked vehicle shall be taken away by its owners from parking place after a specific period. The same process may be applicable to the investment. Every fund owner may desire to take away the fund after a specific period. Therefore, safety is the most important factor while considering the investment proposal. The investors comprise the financial and investment companies and the general public companies. Usually, the individual savers are also treated as investors. Return is the reward to the investors. Risk is the punishment to the investors who wrongly made investment decision. Return is always chased by the risk. An intelligent investor must always try to escape the risk and capture the return. All rational investors prefer return, but most investors are risk averse. They attempt to get maximum capital gain. The return can be made available to the investors in two types and they are in the form of revenue or capital appreciation. Some investors will prefer for revenue receipt and others prefer capital appreciation. It depends upon their economic status and the effect of tax implications. The institutions and companies raise the resources from the market by designing various schemes to meet the needs and convenience of the investors. They schemes can be framed to attract all types of investors, who are selling in the capital market. The main objective of any type of investor are safety, profitability, liquidity and capital appreciation.
Give your comments and share your views in the comment section below. Follow me on Twitter @sulthankhan
