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    Introduction To Financial Markets & Institutions

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    Rasesh Shah
    This document provides an introduction to financial markets and institutions. It discusses key topics that will be covered, such as the roles of the bond market, stock market, and foreign exchange market. It also explains the basic functions of financial markets, including channeling funds from savers to investors, facilitating payments, and enabling risk mitigation. Finally, it outlines the structure of financial markets in India, identifying the primary regulators for different market segments like debt, capital, insurance, and banking.

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    Introduction To Financial Markets & Institutions

    Uploaded by

    Rasesh Shah
    61 views11 pages
    This document provides an introduction to financial markets and institutions. It discusses key topics that will be covered, such as the roles of the bond market, stock market, and foreign exchange market. It also explains the basic functions of financial markets, including channeling funds from savers to investors, facilitating payments, and enabling risk mitigation. Finally, it outlines the structure of financial markets in India, identifying the primary regulators for different market segments like debt, capital, insurance, and banking.

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    Intro to FMI

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    This document provides an introduction to financial markets and institutions. It discusses key topics that will be covered, such as the roles of the bond market, stock market, and foreign exchange market. It also explains the basic functions of financial markets, including channeling funds from savers to investors, facilitating payments, and enabling risk mitigation. Finally, it outlines the structure of financial markets in India, identifying the primary regulators for different market segments like debt, capital, insurance, and banking.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    61 views11 pages

    Introduction To Financial Markets & Institutions

    Uploaded by

    Rasesh Shah
    This document provides an introduction to financial markets and institutions. It discusses key topics that will be covered, such as the roles of the bond market, stock market, and foreign exchange market. It also explains the basic functions of financial markets, including channeling funds from savers to investors, facilitating payments, and enabling risk mitigation. Finally, it outlines the structure of financial markets in India, identifying the primary regulators for different market segments like debt, capital, insurance, and banking.

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    Introduction to Financial Markets & Institutions

    Part of Coursework of Financial Markets and Institutions

    SIMSR

    The last few weeks news features a segment about interest rates, the Fed Chairman Ben Bernanke and his famous tapering the pace of bond purchase.

    What does all this mean? Do I care about interest rates? What is the Fed? Will this impact my companys listed ADR? Will it affect the market value of my stock investments?

    These are good questions.


    And this course will help you answer these questions by addressing a variety of topics ranging from the functioning of the bond and stock markets to the behavior of the interest rates and forex markets.

    The Financial System


    Seekers of funds (mainly business firms and government) Flow of funds (savings) Suppliers of funds (mainly households)

    Flow of financial services


    Incomes and financial claims

    Functions of Financial Markets


    Savings Function - Channelize funds from -those who save to -those who needed -for productive purpose Liquidity Function Payment Function Risk Mitigations opportunities to various individuals and entities Price determination Provides class of

    Financial markets, such as bond and stock markets, are crucial in our economy. These markets channel funds from savers to investors, thereby promoting economic efficiency. Market activity affects personal wealth, the behavior of business firms, and economy as a whole Well functioning financial markets, such as the bond market, stock market, and foreign exchange market, are key factors in producing high economic growth. We will briefly examine each of these markets, key statistics, and how we will examine them throughout this course.

    The Financial System


    Funds Deposits / Shares Financial Institutions
    Commercial Banks Insurance Cos. Mutual funds Provident Funds NBFCs

    Funds Loans

    Demanders of Funds Suppliers of Funds


    Individuals Businesses Governments Individuals Businesses Governments

    Financial Markets Funds Securities Money Market Securities Capital Market

    Funds

    Classification of Financial Markets


    Debt Market Equity Market Money Market Maturity of Claim Seasoning of Claim Capital Market Primary Market Secondary Market Cash / Spot Market Derivatives Market Exchange Traded Market OTC Market

    Nature of Claim

    Timing of Delivery Organizational Structure

    History of Indian Stock Market


    From Scattered and small beginning in the 19th Century, Indias stock market has risen to great heights
    By 1990, we had 19 stock exchanges (national + regional) in the country As a move towards integrated national level exchanges BSE & NSE became prominent by late 1990s BSE has the roots at Native shares and stock brokers association established in 1875, later recognized by GoI in 1956 The launch of SENSEX in 1986 was later followed by BSE National Index (Base: 1983-84 = 100) Jan 1989 BSE National Index was renamed as BSE-100 Index from Oct- 1996 (taking into consideration only the prices of stocks listed at BSE) The BSE has deployed an Online Trading system (BOLT) on March 14, 1995

    National Stock Exchange (NSE) got its recognition as a stock exchange in July 1993 under Securities Contracts (Regulation) Act, 1956
    NSE's leading index is Nifty 50 or popularly Nifty and is composed of 50 diversified benchmark Indian company stocks

    Although late than BSE, National Stocks Exchange is currently the leading stock exchange in India in terms of total volume traded

    Stock Markets Global Snapshot


    Stocks traded as a % of GDP
    Countrie s Hong Kong German y 1991 43.4 21 1998 121.9 35 2005 162 63.7 2011 624.1 48.8 Countrie s China Brazil Indonesi a USA India Singapor e Thailand South Africa

    Stocks traded, turnover ratio (%)


    1991 164.4* 45.2 1998 130.1 70.5 2005 82.5 38.3 2011 188.2 69.3 Countrie s India USA

    Listed domestic companies , Total


    1991 2556 6742 1998 5860 8450 2005 4763 5143 2011 5112 4171

    Brazil
    USA Malaysia Russian Federati on Thailand India Indonesi a Japan UK China Singapor e

    3.3
    36.8 21.7

    17.4
    150.4 41.4

    17.5
    171.2 34.8

    38.8
    205.1 44.8

    39.2
    61.1 53.6

    41.4
    106.2 126.9

    54.2
    129.2 92.2

    37.2
    187.6 56.3

    Japan
    China UK Hong Kong Malaysia German y Singapor e Indonesi a Brazil South Africa Russian Federati on

    2107
    14 1623

    2416
    853 2087

    3279
    1387 2759

    3961
    2342 2001

    N.A

    3.9

    20.9

    61.7

    44.1

    50.5

    40.4

    74.8

    333

    693

    1020

    1472

    30.6 8.4

    19.3 34.6

    50.6 52

    67.2 40.1

    100.8 5.3

    74 29

    73.9 39.3

    85.1 39.8

    321 428

    736 741

    1020 648

    941 670

    2.3
    28.2 29.9 0.2

    11.1
    24.2 79.9 27.9

    14.7
    109.3 181.5 26

    16.5
    70.9 121.5 104.8

    Malaysia
    Japan Hong Kong German y UK

    19.9
    32.9 37.6 101.4

    31.1
    40.3 54.4 79.4

    26.9
    118.8 43.3 146

    32
    108.9 157.6 134.5

    166
    141 570 688

    321
    288 527 668

    685
    335 381 388

    462
    440 366 355

    42

    52.9

    97

    105.9

    40

    94.8

    141.9

    137.9

    13

    237

    296

    327

    STRUCTURE OF FINANCIAL MARKETS IN INDIA


    Financial Markets in India

    Debt Market Primary / Secondary

    Forex Market

    Capital Market Primary / Secondary & Depository

    Insurance Life/General

    Banks (including RRBs, co-op etc)

    Mutual Funds, Venture Funds, Investment Bonds

    RBI

    RBI

    SEBI

    IRDA

    RBI

    RBI/SEBI

    REGULATORY AUTHORITY

    11

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