The capital market is the market for securities, where companies and governments can raise longterm funds. Selling stock and selling bonds are two ways to generate capital and long term funds. Thus bond markets and stock markets are considered capital markets. The capital markets consist of the primary market, where new issues are distributed to investors, and the secondary market, where existing securities are traded.The Indian Equity Markets and the Indian Debt markets together form the Indian Capital markets
The Indian Equity Market depends mainly on monsoons, global funds flowing into equities and the performance of various companies. The Indian Equity Market is almost wholly dominated by two major stock exchanges -National Stock Exchange of India Ltd. (NSE) and The Bombay Stock Exchange (BSE). The benchmark indices of the two exchanges – Nifty of NSE and Sensex of BSE are closely followed. The two exchanges also have an F&O (Futures and options) segment for trading in equity derivatives including the indices. The major players in the Indian Equity Market are Mutual Funds, Financial Institutions and FIIs representing mainly Venture Capital Funds and Private Equity Funds.
Indian Equity Market at present is a lucrative field for investors. Indian stocks are profitable not only for long and medium-term investors but also the position traders, short-term swing traders and also very short term intra-day traders. In India as on December 30 2007, market capitalisation (BSE 500) at US$ 1638 billion was 150 per cent of GDP, matching well with other emerging economies and selected matured markets.
For a developing economy like India, debt markets are crucial sources of capital funds. The debt market in India is amongst the largest in Asia. It includes government securities, public sector undertakings, other government bodies, financial institutions, banks and companies.
How do the debt markets impact the economy?
- Increased funds for implementation of government development plans. The government can raise funds at lower costs by issuing government securities.
- Conducive to implementation of a monetary policy.
- Less risk compared to the equity markets, encouraging low-risk investments. This leads to inflow of funds into the economy.
- Higher liquidity and control over credit.
- Opportunity for investors to diversify their investment portfolio.
- Better corporate governance.
- Improved transparency because of stringent disclosure norms and auditing requirements.
SBI DFHI Limited is trading in equities and equity derivatives after RBI allowed stand-alone PDs to diversify their activities in 2006. It remains an active participant in the Indian debt market . Through SBI DFHI Invest Plus, investors can purchase investment grade Corporate Bonds for their portfolio (details available on the website).