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Capital market

Capital market is a market where buyers andsellers engage in trade of


financialsecuritieslike bonds, stocks, etc.,
Capital markets are vital to the functioning of an economy, since
capital is a critical component for generating economic output.
The capital market is a market which deals in long-term loans. It supplies industry with fixed and
working capital and finances medium-term and long-term borrowings .
Importance or Functions of Capital Market:
The capital market plays an important role immobilizing saving and channel is in
them into productive investments for the development of commerce and industry.

New issue market


New issue market
A reference to a security that has been registered issued and is being sold on a market
to the public for the first time. New issues are sometimes referred to as primary shares
or new offerings. The term does not necessarily refer to newly issued stocks, although
initial public offerings are the most commonly known new issues. Securities that can be
newly issued include both debt and equity.
The primary market is the part of the capital market that deals with issuing of new
securities. Companies, governments or public sector institutions can obtain funds
through the sale of a new stock or bond issues through primary market. This is typically
done through an investment bank or finance syndicate of securities dealers.

Functions of New issue market


Functions of New issue market
The main function of a new issue market is to facilitate
transfer of resources from savers to the users. The savers
are individuals, commercial banks, insurance companies
etc. The users are public limited companies and the
government. It is not only a platform for raising finance to
establish new enterprises but also for
expansion/diversification/modernizationof existing units.
In this basis the new issue market can be classified as: Market where firms go to the public for the first time
through initial public offering (IPO).
Market where firms which are already trading raise
additional capital through seasoned equity offering (SEO).

Kinds of Issues
1. Public Issues
Underthis method, this issuing company
directly offers to the general public/ institutions
a fixed number of shares at a stated price
through a document called prospectus.
2. Offer for Sale
Thismethod of offer of sale consists in outright
sale of securities through the intermediary of
Issue Houses orshare-brokers. Inother words,
the shares are not offered to the public directly.

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3. Placement
Underthis method, the issue houses or brokers
buy the securities outright with the intention of
placing them with their clients afterwards. Here
the brokers act as almost wholesalers selling
them in retail to the public.
4. Rights Issue
Itis a method of raising funds in the market by
an existing company. A right means an option to
buy certain securities at a certain privileged
pricewithina certain specified period. Shares,

Advantages & Disadvantages of Primary Market


Advantages:1. Mobilization of savings
2.Channelising savings for productive use
3.Source of large supply of funds
4.Rapid Industrial growth due to increase in production and productivity in the economy.

Disadvantages:1. Possibility of deceiving investors


2.No fixed norms for project
appraisal
3.Lack of post issue seriousness eg.
Facebook IPO
4.Ineffective rold of merchant
bankers