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Capital market of india vs usa

INDIAN ECONOMIC CLIMATE: MONEY AND CAPITAL MARKET IN INDIA:-

A money market is not really a market for the money but it is a market for close to 'money'; or it's the market for financing and borrowing of short-term cash. It is the market where the short-term surplus investible cash of banks & other financial institutions are demanded by borrowers comprising individual companies and government. Commercial finance institutions are both suppliers of cash in the amount of money market and borrowers.

The Indian money market contains two parts: the unorganized and the organized areas. The unorganized sector involves indigenous bankers who follow the banking business on traditional lines and non-banking financial institutions(NBFCs). the structured sector comprises the reserve standard bank, the state bank of India and its associates lenders, both Indian and international.

The prepared money market in India has lots of sub market segments like the treasury charges market, the commercial expenses market and the inter-bank call money market.

The Indian money market is not a sole homogenous market but comprises several sub-markets, every one of which discounts in a specific type of short term credit.

CALL MONEY MARKET:

The market is also called money at call and short notice. The market has actually two sections viz. (a) the decision market or over night market, and (b) brief notice market. The speed at which money are lent and lent in the forex market is call money rate.

Call money rates are market determined i. e. by demand for and offer of short-term funds. The general public sector banks for approximately 75 percent for the demand (that is, borrowings) and international bankers and Indian private sector banks accounts for the balance for the balance of 20 percent of borrowings. Non-banking financial Establishments such as IDBI, LIC, GIC, etc enter into the call money market as lenders and supply up to 80 percent of the short-term money. The balance of 20 percent of the cash comes by the banking system. while some banking companies operates both as lenders and borrowers, others are either's only borrowers or only borrowers or only lenders in the decision money market.

Bill Market in India:

The expenses market or the discount market is the main part of the money market where short-term bills-normally up to 90 days-are brought & sold. The invoice market is further subdivided into commercial charge market and Treasury charge market.

The market for commercial expenses has not recognition in India. Unlike in London & other international money markets where commercial bills are thoroughly bought and sold (i. e. discounted).

The 91 days and nights treasury bills are the most typical way the government of India increases cash for the short period. Some years ago, the government got presented the 182 day treasury bills which were later changed into 364-day treasury expenses; the government introduced the 14-day intermediate treasury expenses.

Features & defects of Indian money market:

  • Existence of unorganized money market
  • Absence of integration
  • Diversity in money rates of interest
  • Seasonal stringency of money
  • Absence of the charge market
  • Highly volatile call money market
  • Absence of any well organized banking system
  • Availability of credit device.

Composition of Indian capital market:

Capital market is the market for long-term funds, just like the amount of money market is the marketplace for short term funds. It identifies all the facilities and the institutional plans for borrowing and lending term funds (medium-term and long-term money). it generally does not offer in capital goods but is concerned with the bringing up of money capital for purposes of investment.

The demand for long-term memory space capital comes predominantly from private sector processing companies and agriculture and from the government largely for the purpose of financial development. As the central and talk about governments are spending not only on economic overheads like transportation, irrigation and vitality development but also on basic industries or even in consumer goods establishments, they require significant sums from the administrative centre market.

The supply of funds for the administrative centre market comes mainly from specific savers, corporate savings, banks, insurance firms specialized financing firms and the government. Among the institutions, we may involve the following:

  1. Commercial banks are essential traders, but are typically thinking about govt. securities and, to a small amount, debentures of companies;
  2. LIC and GIC are of growing importance in the Indian capital market, though their major interest is at federal government securities;
  3. Provident funds constitute a significant medium of savings but their investment too are generally in govt. securities; and
  4. Special institutions set up since self-reliance, viz, IFCI, ICICI, IDBI, UTI, etc. -generally called development financial institutions (DFIs) -target at supplying long-term capital to the private sector.
  5. There are financial intermediaries in the capital market, such as vendor bankers, mutual money leasing companies etc. that assist in mobilizing personal savings and supplying cash to investors.

Like all markets, the administrative centre market is also made up of those who demand cash (borrowers) and those who supply funds (lenders). a perfect capital endeavors to provide enough capital at reasonable rate of come back for just about any business that provides a prospective produce high enough to make borrowing worthwhile.

The capital market is broadly divided into two the gilt-edged market and the industrial securities market. The gilt-edged market identifies the marketplace for administration and semi govt. securities, backed by the RBI. The securities exchanged in this market are steady in value and are much popular by banking institutions and other organizations.

The professional securities market identifies the market for stocks and debentures of old and new companies. This market is further divided into the new issue market and old capital market meaning the stock exchange.

The new concern market -often referred to as primary market- refers to bringing up of new capital by means of shares and debentures whereas the old issue market -commonly known as stock exchange or stock market-deals with securities already given by the companies. It is also known as the supplementary market. Both markets are similarly important, but usually the issue market IS A LOT MORE IMPORTANT from the idea of view of monetary growth.

DFIs supply money for investment: financial intermediaries like merchant bankers help the organization sector to raise funds in the administrative centre market.

Soon after self-reliance, the govt. of India setup some financial institutions to be of special help the private sector industries. IFCI was the to begin these institutions (1948). it was followed by SFCs (setup by point out govt. with cooperation of RBI & other banking institutions) to provide long term money to small and medium industries.

ICICI (1955), IDBI (1964) & UTI (1964) followed soon after. LIC was setup in 1956 to mobilize individual savings and spend part of cost savings in the capital market.

Commercial banks & the administrative centre market:

The functions of commercial banks have so far been limited to the purchase and sell of govt. and other trust securities. Their holdings of commercial securities viz. shares and debentures are very small.

But in recent years, lenders have been significantly participating in term through subscribing to the stocks & debentures of special finance institutions. Also, they are establishing financial subsidiaries, known as merchant houses, mutual cash, venture capital companies, renting companies, etc. to mobilize funds.

Non bank financial companies (NBFCs):

In modern times, NBFCs, variously called as "finance corporation" "loan company", " money company " etc. have mushroomed from coast to coast. These companies, with an extremely little capital of their own have been increasing deposits from the public by offering attractive interest & other bonuses. They advance lending options to low cost and retail merchants, small scale companies and home- utilized person. Almost all their lending options is directed at celebrations which don't either approach commercial banking institutions or that happen to be refused credit facilities. The finance companies give loans which can be unsecured. Besides giving loans and developments to small sector, they run chit money, purchase and discount hundies and also have also adopted merchant banking, mutual funds, leasing etc.

Essentially, these finance cos. are banking companies, given that they perform the basic twin functions of appealing to deposits from the general public and making loans. RBI say "The rapid expansion of NBFC's especially in the nineties, has resulted in a steady blurring of dividing lines between bankers and NBFCs. "

Since NBFC are not regarded as bank companies they didn't come under the control of RBI. There is absolutely no minimum liquidity percentage or cash ratio between their own cash and debris.

The RBI has described 5 varieties of NBFCs

  1. Leasing Financing Companies
  2. Hire purchase finance companies
  3. Loan finance companies
  4. Investment funding companies
  5. Residuary non-banking companies (RNBCs)

Future of NBCs:

The NBFCs are actually emerging as a growing segment of the Indian economic climate & both authorities and RBI appreciate the need for their orderly and healthy development with appropriate prudential safeguards. It is to regulate NBFCs and to enhance their financial health that amendment to RBI act, 1934 was carried out.

Mutual Funds:

In modern times, mutual cash are the most important among newer capital market establishments. Several general public sector banks and financial institutions have set up mutual funds over a tax-exempt basis. Their main function is to mobilize the personal savings of basic people & invest them in stock market securities.

Growth of common fund:

In the 1990s. MFs found it hard to catch the attention of investors, your competition for cash was hotting up from finance institutions and the government was offering 14% interest on medium term securities, lenders-12%, HDFC-14%, IDBI-15. 75%.

Under these conditions, it was problematic for mutual cash to rival such high produces on debt devices. They also found it hard to meet high objectives of investors who were yet to use of the get-rich-quick syndrome. Appropriately, the first influx of mutual money failed.

During 1998-99 and 1999-00, however the mutual finance sector recorded significant growth. Economic conditions were good; stock exchanges were flourishing and the govt. acquired given duty concessions. Each one of these help in the go back of faith of people in mutual cash.

The revival of shared funds since 1995-96 was because of the entry of corporate majors-TATA, BIRLA, RELIANCE & SBI. A great many other followed with products made for investor specific need. Traders left the bank operating system and flocked to shared fund.

STOCK EXCHANGE IN INDIA:

In today's capitalist economy, virtually all commodities are produced on a big range; and large range creation means large level of capital. The general public firms issues shares and bonds and enable those with surplus funds to get them success in them.

The stock market is a place where securities and stocks & other permanent commitments or investment funds are bought and sold.

History of STOCK MARKET in India:

The first organized stock market in India was started in Bombay when the Native Share Stock Brokers' Association known as Bombay stock exchange (BSE) was created by the brokerages in Bombay. BSE was Asia's oldest stock market. In 1894 Ahmadabad stock exchange was began to offer in the stocks of textile a long way there the Calcutta stock market was were only available in 1908 to package in stocks of plantation and jute mls besides these there have been lots of unorganized and unrecognized exchanges known as KERB marketplaces. There were also illegal DABBA markets in which stock and shares also bought and sold

SEBI:

The performing of stock exchanges in India has shown many weaknesses, lack of transparency. to counter these problems and regulate capital market the government of India create the SECURITIES AND EXCHANGE Table OF INDIA in 1988. SEBI was a non statutory body but in January 1992 it was made a statutory body. SEBI, in discussion with govt. of India has taken a great deal of steps to create improved routines and increased transparency for the eye of the making an investment open public and healthy development of capital markets

SEBI has advised stock exchanges to amend the listing agreements to guarantee the stated companies furnishes total annual statements to the stock exchanges

All the guidelines and regulatory procedures of capital issues are designed to promote healthy and useful functioning of the issue market

In January 1995 the federal government amended SEBI Work 1992, to be able to arm SEBI with additional forces for ensuring the orderly development of capital market and also to enhance its capability to protect the interest of investors. It had been thought that SEBI has all necessary power to control the administrative centre market similarly and effectively protect interest of the shareholders on the other. Nonetheless it has failed miserably to avoid a little by scams like HARSHAD MEHTA scam.

Capital Market of USA:

USA has a very strong and developed capital market. Many other countries such as Germany employ a powerful and strong banking sector however the capital market of Germany is not strong. There's a very agile financial market that exists in USA and is playing very important part to make and applying the policies of the federal government. If agile market in financial instrument weren't present, the govt. will never be able to open market operations. The capital market covers a huge range of tools for borrowing and loaning. The borrowers are businesses properties, retail traders, and administration Institutes which have needs for financing. Lenders are businesses and Individuals with cost savings or excess money to invest. Financial institutions viz. commercial lenders, investment Businesses, and insurance companies, become both borrowers and lenders. In addition, a multitude of financial equipment have been developed that permit borrowers to market their own securities and their own securities and earn interest and income. The market in which the maturities and trading are for a short period is named a money market; the money market is market for short-term credit. The amount of money market helps the players to deal with usual financial uncertainties. Borrowers trade it for mollify or Short-term cash. Market segments that offer in instruments with maturities several time are known as capital markets, since credit for ventures for new enterprise will be needed for more than one year.

There is a difference between primary and secondary market. The "primary market" pertains to the original issuing of the credit market device. After a personal debt instrument has been released, the purchaser might be able to resell the device before its maturity in a "secondary market. These include different kinds of formal exchanges, and electronic digital trading through bids and will be offering.

NEW YORK STOCK MARKET:

The NY stock market is the greatest stock exchange in the world. It is controlled by NYSE Euro next (it's the company that is developed by all the companies detailed in the NYSE that had become in Apr 2007). the CEO of the company is Duncan L. Niederauer.

Its origin started out on may 1792, when 24 stock brokers agreed upon the Buttonwood arrangement. It was renamed NEWYORK STOCK AND EXCHANE Plank on March 1817. The first leader was Anthony Stockholm.

Its composite index was created with a base value of 50 items and base year as 1965. following a distance of 38 years the bottom value was 5000 tips and the bottom season was 2005.

The set of stock exchanges of USA are given below:

  • New York Stock Exchange
  • NASDAQ
  • Philadelphia
  • Boston Stock Exchange
  • National Stock Exchange
  • American Stock Exchange
  • Chicago Stock Exchange
  • New York Panel of Trade
  • NYSE Arca

U. S. Securities and Exchange Percentage:

It can be an firm of USA federal which regulates all the stock exchanges mentioned above. The principal responsibility of this commission rate is to enforce all the securities laws and regulations of shareholders and industries. It was created by SECURITIES EXCHANGE ACT; 1934. This act is also called FEDRAL SECURITIES Action.

The main motive of the commission is to increase public faith in the capital markets by disclosure of information about general public securities offerings.

This payment divided in a number of offices. They are simply:

  • The Office of Basic Counsel
  • The Office of the principle Accountant
  • The Office of Conformity, Inspections and Examinations
  • The Office of International Affairs

PESTEL Examination OF CAPITAL MARKET OF INDIA:

POLITICAL:

THE capital market of India is very susceptible. India has been politically instable before but it is a little politically stable now-a-days. the politics instability of the country has a very strong effect on the capital market. The show market of India changes as the politics changes took place.

The sensex goes up and down with any sort of small and big political news, like, when there is news a particular political party has withdrawn its support from the ruling party, and then your capital market will go down with a bang. The administrative centre market of India is too weakened and is dependant on speculations. The politics stability of the country is very important for the stability and growth of capital market in India. The politics imbalance or balance of the country is the major factor in deciding the capital market of India. The politics factors include:

  • employment laws
  • tax policy
  • trade restrictions and tariffs
  • political stability

ECONOMICAL:

THE economical methods taken by the federal government of India has a very strong romance with the administrative centre market. Whenever the total annual budget is declared the administrative centre market goes up and down with the economical policies of the government. If the guidelines are supportive to the companies then the capital market requires it positively and when there is any other plan that's not supportive and it is not welcomed then the capital market falls. Like, in the case of allocation of 3-G range, those companies that got the certificate for 3-G, they witnessed sharp development in their talk about values therefore the economic policies play a major part in the growth and drop of the capital market and again when there is relaxation on almost any taxes on components of automobile industry then your share of vehicle sector goes up and virtually fortify the capital market. The inexpensive factors include:

  • inflation rate
  • economic growth
  • exchange rates
  • interest rates

SOCIAL:

India is a country of unity in diversity. India is socially rich but the capital market is not very attached with the communal factors. Yes, there is some relation between the interpersonal factors with the administrative centre market. If there is any big social factor then to some extent it affects the administrative centre market but small cultural factors don't impact by any means.

Like, there was opposition of reliance fresh in many towns and many stores were closed down. The show prices of the reliance fresh transpired however the impact was on and individual firm there was not much effect on the capital market on a complete the public factors have not much of effect on the administrative centre market in India. The communal factors include:

  • emphasis on safety
  • career attitudes
  • population progress rate
  • age distribution
  • health consciousness

TECHNOLOGICAL:

The technological factors have not that much effect on the capital market. India is technical backward country. Same as social factors, technical factor can have an effect on an individual form but it cannot have a large impact on a complete of capital market. The Bajaj acquired a patent on its dts-i technology, and launched it in its new bike but it does not influence on capital market. The scientific change in India is actually on less basis and it generally does not effect on country as a whole. The technical factors include:

  • R&D activity
  • technology incentives
  • rate of technical change
  • automation

Environmental factors:

Initially The environmental factors don't play a essential role in the capital market. However the time has altered and people are more eco-friendly. This is actually bothering them that if any firm or industry is environment friendly or not. A growing number of people, investors, corporate professionals are paying importance to these facts, the administrative centre markets still start to see the environment as a liability. They belie that it is useless for his or her strategy. Environmentally friendly performance is even under-valued by the marketplaces.

Legal factors:

Legal factors play an important role in the development and support the administrative centre market. Legal issues relating to any industry or firm decides the destiny of the administrative centre market. In case the govt. of India or the parliament presents a new legislations that make a difference the going of the industry then your industry will be demotivated and this demotivation will lead to the demotivation of the traders and will cause nov capital market. Like following the Harshat Mehta fraud, new rules and regulations were created like PAN cards was made necessary for trading, if any entrepreneur was investing too much money in a small firm, then the shareholders were questioned, etc. These polices were meant to maintain transparency in the capital market, but at that time, investment was discouraged. Legal factors are essential for the improvement and stableness of the administrative centre market.

PESTEL Evaluation Of The capital market of USA:

Political factors:

The political express of USA is very secure as compared to the India and trading there is done not on speculations but on hard and proven facts. They don't really invest on feelings even as Indian buyers do. It really is a favorite fact that the politics factors play an important role in the administrative centre market, but in USA because of its strong democracy and almost 100% job the administrative centre market. The buyers there don't blend emotions using their professions so even if there is some type of political disturbance it doesn't show much effect on the capital market there.

ECONOMICAL:

The economical factors of any country are incredibly important for the administrative centre market of this country and USA is no exception. For example: the great major depression of 1931. the united areas currency markets crash on Oct 29, 1929. it is also known as Black colored Wednesday. This crash resulted in hugh reduction for investors and the capital market was on its legs. Thus the cost-effective factors are a very important and inevitable factor. it'll be suicidal to forget the various inexpensive factors like inflation, GDP, income tax framework etc.

SOCIAL:

Social factors almost don't affect the capital market in the USA. Because, the country is very rigid in its cultural roots. They are very less emotionally attached to each other especially in terms of business. The investors are least bothered about the sociable conditions that prevail in their environment. Their interpersonal system is of that kind that it is too difficult to disturb the administrative centre market there. Their sociable pattern is very much developed. Factors like emphasis on safety, health awareness, career attitudes, population growth rate, era distribution etc. doesn't influence them at all.

Technological factors:

USA is a technologically developed country and the companies spend lot of money on the R& D of any product. they don't really bother about the price incurring onto it. and the traders there are very active

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