Recent Development in Capital Market

Topics: Stock market, Stock exchange, Bond Pages: 13 (3903 words) Published: July 26, 2013
Significance of Capital Market in Economic Development.
Capital market has a crucial significance to capital formation. For a speedy economic development adequate capital formation is necessary. The significance of capital market in economic development is explained below :-

1. Mobilisation Of Savings And Acceleration Of Capital Formation :- In developing countries like India the importance of capital market is self evident. In this market, various types of securities helps to mobilise savings from various sectors of population. The twin features of reasonable return and liquidity in stock exchange are definite incentives to the people to invest in securities. This accelerates the capital formation in the country. 2. Raising Long - Term Capital :-

The existence of a stock exchange enables companies to raise permanent capital. The investors cannot commit their funds for a permanent period but companies require funds permanently. The stock exchange resolves this dash of interests by offering an opportunity to investors to buy or sell their securities, while permanent capital with the company remains unaffected. 4. Ready And Continuous Market :-

The stock exchange provides a central convenient place where buyers and sellers can easily purchase and sell securities. Easy marketability makes investment in securities more liquid as compared to other assets. 11. Easy Liquidity :-

With the help of secondary market investors can sell off their holdings and convert them into liquid cash. Commercial banks also allow investors to withdraw their deposits, as and when they are in need of funds. Growth of Capital Market in India.

|End of December |1975-76 |2004-05 | |i) Stock Exchanges (No.) |8 |23 | |ii) Market Value of Capital ( in Crore) |3,273 |16,98,428 | |iii) Capital Issues (Rs. in Crore) |98 |60,502 | |iv) Capital raised as % of gross domestic | | | |saying(%) |0.7 |7.0 |

Source: - Tata Services Ltd., statistiscal outline of India 2005-06.

After Independence capital market has shown a remarkable progress. The first organised stock exchange was established in India at Bombay in 1887. When the Securities Contracts (Regulation) Act 1956 was passed, only 7 Stock exchanges Viz. Mumbai, Ahmedabad, Kolkata, Chennai, Delhi, Hyderabad and Indore, received recognition. By end of March 2004, the number of stock exchanges increased to 23.

1)  Primary I New Issues Market :-
After liberalisation policy of 1991 and the abolition of capital issues control with effect from May 29,1992, the primary market got a tremendous , boost. This can be seen from following points :- a) New Capital Issues by Private Sector :-

The number of new capital issues by private sector was only 364 in 1990-91 and the amount raised by them was `.4,312 crore. The number of new capital issues rose to 1,678 in 1994-95 and the amount raised by them was `. 26,418 crore. Since 1995 the capital market was sluggish and the resources raised fell to `.. 10,409 crores in 1996-97. In 2003-04, the amount raised from new capital issues was only `.3,210 crores. In 2004 it increased again to `.33,475 crore and in 2005`.30,325 crore of resources were raised on this market. The primary issues of debt securities felt a low of around `. 66 crore in 2005.

b)Public Sector Bonds :-
The resources raised by issuing bonds by Public Sector undertakings rose from `.354 crores in 1985-86 to 7,491 crore in...

Bibliography: [1] Stock Exchange Official Directory, Vol.2 (9) (iii), Bombay Stock Exchange, Bombay
[4] RBI; National Stock Exchange of India Limited
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