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It is very much important for the world economy to have a proper flow of finance in the market therefore in each and every country there is a financial market which is known as the tool allowing people to trade financial securities e.g. stocks and bonds and the commodities as well e.g. agriculture goods and metals. There are also many other items which is been trade at the lower transaction cost especially over the price which reflects the market hypothesis. These are the general market which commonly exists. Market also basically works in which having many buyers and the sellers at one place so that they will easily able to sell and purchase their shares and they can even find people easily who just want to buy their shares. It is also basically an economy which also generally there for the attracting the sellers and the buyers for the allocation of their resources which is also known as market economy
In this assignment we will generally discuss about financial market of one of the rapid developing nation of the world which is India and I will discuss about the behaviour and many other aspects of this financial market
Indian financial market
Indian financial market is one of the leading financial markets of the world. If we generally talk about primary market, foreign direct investment, investment options, banking and the insurance and other pension schemes. All these elements make the Indian financial market one of the oldest and the leading and fastest growing and also the best in the financial markets of the emerging economies. The Indian economy is running from 200 years back (i.e. 18TH century) since the time when India was ruled by the East India Company. The world leading capital market is specially developed in Mumbai which is also having the securities of 200 to 250 and also having the brokers which highly participative during the second half of the trade in 19th century.
Scope of Indian financial market
Indian financial market is said to be one of the most advance market then many other sectors which is also organised early during the 19th century with the name of SEBI (Security exchange board of India). During the 1960s there are eight security exchanges in India which has mainly three in Mumbai, Ahmadabad and Kolkata. In spite of these boards there are also boards in other cities also such as Madras, Kanpur, Delhi, Bangalore and Pune. Total number have jumped to 23 security exchange boards in India
Indian economy have remain stable because of the economical control and after 1991 generally when the liberalization has been started in India which makes Indian security market boom and helped Indian economy in their growth. There were also many new companies which revolving around many industries segment which also helping in flourishing the business.
After launching NSE(National stock exchange) and OTCIE(Over the counter exchange of India) specially in the mid 1990s which have also helped in the smooth trading and the transparency from the trading of the securities.
The main regulatory body of Indian capital market is the SEBI (Securities and Exchange Board of India). The market in India before has experienced a greater disaster after which the SEBI came into existence and helps in the development of the capital market.
Potential of Indian financial market
Now even Indian financial market helping for the promotion of saving in the economy – which therefore helps them for the adaptations channels which are effective in the different financial policies. It is not wrong to say now that financial sector India is well developed, competitive, efficient and even ready to face the shock in emergence case. The financial market having different type of financial product which is merely been determined by the number of buyers and the sellers in the market. The other main factor is the market forces regarding the demand and supply of the product and there are also other different functions helping India in their financial sector.
Features of financial market in india
Foreign investment – foreign debt database which is been composed by BIS, IMF, OCEO, World Bank and investment internationally.
National and international markets relation
Financial news markets
Fixed income in sectors – Corporate Bond Prices, Interest details, Money Market, Public sector debts, External debt services, etc
Currency indexes, etc.
Indian market capitalization has been moved to Rs 644.67 billion with daily Avg turnover of Rs 2,384 million. Indian market has been ranked 6 among the emerging markets all over the world in December 2005. There were total of 4,702 number of companies which is been listed in the BSE in the end of December 1994 which was quite more then the aggregate number of market which is been listed among the emerging market all over the world. The number of companied is even more then the developed markets of many countries like Japan, UK, Germany, France, Australia, Switzerland, Canada and Hong Kong.
The capital market of India has been in stable condition during the term of 1995-1996 and also gone through the phase which was there capital market in previous times which cause them to slow down the foreign institutional investment inflows and the liquidity conditions at that time were also very tight position. Between the period of April and December in 1995 the value of issues was quite higher as compared to the previous years even though they have a lower stock price and lower turnover in stock exchanges.
The reforms in the capital market in which they have also included money market have further strengthened the market. SEBI was there for the regulation for the market. This is there for addressing of the major announcement for lacunae in the financial market of India. As there was a rapid expansion in the stock exchanges which has also accelerated the use of modern technique in the market
India has one of the emerging economies in the world which have also gone through various levels of expansion in the economic territory with the different countries like china, Russia, Brazil and Mexico. One of the major advantages India is having is the cost effective and also a labour intensive economy which has also benefited from the outsourcing of work from many developed countries. They also having export oriented framework of industry and even strong manufacturing. The economic pace has been quickly picked and the comeback was even low and the trade healthy growth in the previous two years.
Economic prospects for 2010
It been seen that global economy is been recovering after the recession and economic shock. But as compared to the economy of other countries the Indian economy has only hit by its latter part of the recession and the economic growth have also witness the fall in the market with the lower exports. Capital outflow and also the corporate restructuring. There were also expectations that global market will go to be sustaining for the short term. Because they were having strong position in the liquidity market the other large co-operations having the access to the capital corporate market
Indian Economy in 2010
For the proper economic growth in the market especially during the world recession, there was an announcement in Indian government authorities regarding the different packages for the economic growth. With the help of the financial packages India has raised more than $100 within the last four quarters in the financial simulation packages. According to the RBI the country’s public debt have surged more than 50% among the total GDP.
Indian Financial market during shock
Like other financial market all over the world India have also faced the financial crises. The RBI later came to know the main reason of the financial crises and also discovers the three main channels which were – the trade, financial and confidence channel. The trade channel was one of the most important as it has discovered that decline in the export and recessionary abroad. The financial channel is been measured with the total transaction to GDP. Later on the ratio become more than double from 46.8% to 117.4 % in 2007-08. There were three main related ways of financial integration which were reducing the Indian companies for accessing the finance of overseas, cause of fall in stock price and lowering the domestic liquidity. The global crises have also implied in shuttering the confidence. As the result the producer and consumer were came in a situation to reduce their spending which has also resulted in a job loss to many of the people. The worst situation is for the bank in which to lend specially for the risk – venture. The presence of all these effect came into the existence in the recent past.
Indian economy has been slow down due to financial crises which have also affected the different sectors of the market like, GDP growth, banking sector and external sector and one of the most crucial thing which was employment.
The impact of financial crises in India was less as compared to the banking system in US and other parts of the world. The main reason was the crises which was there in india was quite different from elsewhere. In the banking system has also faced huge loses which has been collapsed by the flow of credit which was dragged down in real economy. But in Indian the real economy effect was quite different from other sectors and the Indian banking condition was in a position to face any adverse condition in the case of emergency. The main reason of their stabilization was their favourable factor which was created over the decade but it has been intensified the overall affect of that system due to the dynamic linkages. There was a time when the bank credit of india have increased during 2008 in which they were came to know that external source of liquidity were drying for the repartition of the portfolio investment by FII for waking up from the global financial crises. Later on the credit growth have declined in the later part of 2008-09 and the main reason behind it was the risk eversion in which the banks have extended their credit for droping the economic downturn.
Indian GDP have collapsed around 4 percent due to subsequent six quarter and then later on it has been revert for around 5 to 5.5 percent during the special medium term. There was also a GDP growth of 5.8 % during the second half also of the year 2008-09.during the first half of the 2008-09 India have also faced the proper growth of 7.8 % even though they were having a good deal of uncertainty of specially in the International commodity and also in the financial market.
Financial market of India in last 10 years.
It has been seen that financial market in India have made lots of progress in last few years which is also been said that it has changed the scenario of Indian market in last few years. For this progress Indian financial market has taken many steps which will be highlighted below.
It is known as the financial instrument which has changed the way trading is been done. It been introduced in 2000. There are even various reforms which is been made by government of India in 1996 and 1999 which has also changed the derivative in india.
Below is the table which shows the use of derivative and shift of risk and act as a form of insurance.
Average Daily Turnover (Rs. cr.)
Turnover (Rs. cr.)
Notional Turnover (Rs. cr.)
Notional Turnover (Rs.cr.)
The above also shows that stock future playing dominant role as compare to the stock option in the market.
India has also made wonderful progress in terms of technology, trading activity and transparency.
One of the most important reason to understand and study the regulatory change is to know the reason behind change of regulation in the last decade been made by the Indian financial market in the world. There are four main regulation which are has helped Indian market to make changes in the regulator which are as follows.
Road map of foreign banks
This is considered as one of the most important regulator change in the market to draw a roadmap for the presence of the foreign bank in India. There were two phase one was there in 2005 and another in 2009. The main motive of the first phase is to setting up the banking subsidiary and other was there for the dilution of the stake and permitting the mergers and acquisition also for the private with foreign banks
IFRS and GST Platform
In 2010 is was specially designed for pertinent the Indian companies to comply with the world standards through IFRS and also to simplify the tax structure. The research also shows that people were willing to invest more in the country in which the accounts which is been followed is as same as the one which is followed in their own home country which is also attracting more and more funds which is investible and also allow India to grow more and more. This is also one of the most important reasons for adopting this method.
M&A regulation changed
M&A has continuously been reviewed under the SEBI and as a result they have reached up as per the world standards. It has hiked the trigger to 25% from 15% even raised the size to 100% of the equity in the target company. It has also basically said that if company opens their mark then they can also open their offer to buy 100% of the companies share. There is a limit of 30% in the UK and 35% in the south Africa which will also make Indian financial standard up to an global standard.
The above studies will tell about the progress that Indian financial market have made in last decade and during the time when there was a financial crises in the economy Indian financial market was one of the market which was very less affected by it. Indian financial market can become the world leader if it progress like the way it is progressing.
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