Debentures
As against shareholders, debenture holders do not have any share in the ownership of a company. Debentures are merely loans that carry a fixed rate of interest and must be paid annually. Debentures can either be convertible into equity capital at a fixed date or after a specified period. Non-convertible debentures can be converted into equity capital at a fixed date or after a specified period. Non-convertible debentures do not carry any such rights. These days partly convertible debentures have become quite popular. These debentures have two parts – one convertible into equity shares at a fixed time and the other non-convertible. »
Debt Market
The Indian debt market is composed of government bonds and corporate bonds. The debt Market is however dominated by government bonds. Bonds issued by the Central government, i.e., the Government of India are the predominant and most liquid component of the bond market. Private placement of corporate bonds stood at Rs. 4,04,137 Crore in 2014-15..
Mutual Funds
A mutual fund is a special type of investment institution. It pools the savings of people (particularly small investors) and invests them in a widely diversified portfolio. Mutual funds issue securities (Known as units) to the investors (known as unit-holders). These units are issued in accordance with the money invested by the unit-holders. The profits and losses are shared by the investors in the proportion of their investments. In accordance with the risk appetite, of the investors and to meet their varied diversified needs, the mutual funds offer a large variety of schemes.
The first step in the field of the mutual funds’ industry in India was taken in 1963 when the Unit Trust of India (UTI) was set up at the initiative of the Government of India and Reserve Bank. The industry was opened to public sector entities such as government-owned banks, life insurance companies and GIC (General Insurance Corporation) between 1987 and 1993, and private players in 1993. At present, there are four types of mutual funds – Unit Trust of India, mutual funds sponsored by public sector banks, mutual funds sponsored by financial institutions, and private sector mutual funds. Resources mobilised by the MFs ( including UTI) under various schemes rose substantially from Rs. 2.309 crore in 1987-88 to Rs. 13,021 crore in 1992-93. In 1994-95, resources mobilised by MFs stood at Rs. 11,275 crore.
There was a reverse flow of funds from the mutual funds during 1995-96 and 1996-97. in view of the sluggishness in the capital market. During 1995-96 and 1996-97, the total funds raised by the MFs aggregated a negative amount of Rs. 5,833 crore and Rs. 2,037 crore respectively, mainly due to the high level of repurchases coupled with the inability on the part of mutual funds to float new schemes in a downward market. However, in 1997-98 and 1998-99, the mutual funds were able to mobilise Rs. 4.064 crore and Rs. 2,695 crore respectively. In 1999-2000 there was a spectacular increase in resource mobilisation by the mutual funds.
The total resources raised by the mutual funds under various schemes amounted to Rs. 22,113 crore. After registering a decline in the period 2002-04, mutual funds in the year 2007-08 recorded the highest ever resource mobilization of Rs. 1,48,845 crore. The years 2010-11 and 2011-12 were negative for the mutual fund Industry. In 2015-16, the resource mobilization by mutual funds stood at 1,31,758, crore.
Secondary Market
Secondary market refers to stock exchanges where existing securities can be regularly purchased and sold. These markets are an important element in the mobilisation of resources.
History of Stock Exchange in India
The organised stock exchange in India was started in Bombay when the Native Share Stock Brokers. An association known as the Bombay Stock Exchange (BSE) was formed by the brokers in Bombay. BSE was Asia’s oldest stock exchange. In 1894, the Ahmedabad Stock Exchange was started to facilitate dealings in the shares of textile mills there. The Calcutta Stock Exchange was started in 1908 to provide a market for shares of plantation and jute mills. The Second World War saw great speculative activity in the country and the number of stock exchanges rose from 7 in 1939 to 21 in 1945. Besides these organised exchanges, there were a number of un-organised and un-recognised exchanges known as kerb markets which functioned under a set of usages and conventions and did not have any set of rules which could be enforced in courts of law. There were also illegal “Dabba” markets in which stocks and shares were also bought and sold. Under the Securities Contract (Regulation Act of 1956, the Government of India has so far recognised 23 stock exchanges. The most important among them are the Bombay Stock Exchange and the National Stock Exchange.
National Stock Exchange of India
The biggest Stock Exchange of India is the National Stock Exchange of India (NSE) which was set up in November 1992. It started its trading operations in 1994. The NSE very soon attained a much greater volume than the Bombay Stock Exchange (which was the biggest stock exchange till NSE began its operations).
Bombay Stock Exchange
The Bombay Stock Exchange (BSE) is presently the second-largest stock exchange in India. The BSE ranked sixth in the world in terms of the number of transactions. Presently NSE and BSE account for almost the entire trading of scripts on Indian stock markets and most of the regional stock exchanges have been rendered redundant.