case study of financial market class 12

CBSE Class 12 Case Studies In Business Studies – Financial Markets

FINANCIAL MARKET Financial Market: Definition A financial market is a market for the creation (new issue of securities) and exchange (sale of existing securities) of financial assets.

Financial Markets: Purpose Financial market serves as an intermediary between the surplus sector (households which have savings) and deficit sector (business firms which needs funds).

Functions of Financial Market

• It performs the allocative function by mobilisation of savings and channelising them into the most productive avenues.
• It helps to determine the price for the financial asset in a particular financial market through the market forces of demand and supply.
• It provides liquidity to the financial assets by providing ready markets wherein the securities can be easily converted into cash or vice versa.
• It provides a common platform for exchange of securities thereby reducing the cost of transactions by saving time, effort and money spent by the buyers and sellers in locating each other.

Financial Intermediation: Definition Financial intermediation refers to the process through which allocation of funds is done by the savers in the household sectors through two main mechanisms; banks and financial markets. Types / Segments of Financial Market

• Capital Market
• Money Market

CAPITAL MARKET Capital Market: Definition Capital Market refers to facilities and institutional arrangements through which long term funds, both debt and equity, are raised and invested. Capital market is a segment of financial market.

Features of Capital Market

• It is a market for long term funds.
• The main participants in capital market are banks, financial institutions, corporate bodies, foreign investors and retail investors.
• Since the cost of securities may be low, investment can be made in the capital market with less capital.
• The securities in capital market enjoy good liquidity.
• The instruments in capital market carry high risk as the expected return on them is high.

Main Instruments in Capital Market

• Equity Shares
• Preference Shares

Types / Segments of Capital Market

• Primary Market
• Secondary Market

Constituents of the Capital Market

• Development Banks
• Commercial Banks
• Stock Exchanges

PRIMARY MARKET Primary Market: Definition Primary market is also known as new issue market as the securities are issued for the first time by the companies through this market. Primary Market is a segment of capital market.

Features of Primary Market

• It is the new issue market.
• Only buying of securities takes place.
• Prices of the securities are determined by the company.
• It involves dealings between the company and investors.
• There is no fixed location of primary market.

Instruments of Primary Market

Methods of Floatation in Primary Market

• Offer through Prospectus (The company approaches the members of the general public directly by issuing a prospectus)
• Offer For Sale (The company approaches members of the general public indirectly through intermediaries like issuing houses, stock brokers etc.)
• Private Placement (The company can raise finance by allotting securities to selective individuals and institutions only)
• e-IPOs (The investors may subscribe to the securities of a company online)
• Rights Issue (It is a pre-emptive right given only to the existing shareholders to subscribe to the securities of the company as per its terms and conditions)

SECONDARY MARKET Secondary Market: Definition It is a market for old or existing securities It is a segment of capital market.

Features of Secondary Market / Stock Exchanges

• It is the market for old/existing securities.
• Both buying and selling of securities takes place.
• Prices of the securities are determined by the forces of demand and supply.
• It involves dealings between two investors.
• Stock exchanges exist at fixed location.

MONEY MARKET The money market is a market for short term debt instruments whose period of maturity is upto one year. It is a segment of financial market.

Features of Money Market

• It is a market for short term funds.
• The main participants are institutional investors.
• Since the cost of securities may be high, investment in the money market may require huge capital outlay.
• The money market enjoys high liquidity as The Discount Finance House of India works as a compulsory market maker for it.
• The instruments in money market carry low risk as the expected return is low on

INSTRUMENTS IN MONEY MARKET

  STOCK EXCHANGE Stock Exchange: Definition According To Securities Contracts (Regulation) Act 1956, “Stock Exchange means any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying and selling or dealings in securities.”

Functions of Stock Exchange

• Ensures liquidity and marketability of existing securities by a providing a ready and continuous market for the sale and purchase of securities.
• Helps in determining the prices of the securities through the forces of demand and supply.
• It promotes the habit of saving and investment among the general public.
• It provides a legal framework for fair and safe dealings.
• It helps the companies in raising finance thus facilitating capital formation and economic growth.
• It provides scope for healthy speculation in a controlled and restricted way.

Dematerialisation: Definition Dematerialisation refers to the process of holding securities in electronic form.

Depository: Definition Depository is the organisation with which an investor has to open a D-Mat account to hold securities in electronic form. In India there are two depositories:

• National Secuities Depository Limited (NSDL)
• Central Depository Services Limited (CDSL)

The depository participant serves as a link between the investor and the depository i.e. either NSDL or CDSL.

Screen Based Trading: Definition Screen-based trading refers to the process of buying or selling securities on-line.

Advantages of Screen-based Trading

• As the investors get an access to the stock market during real time, there is complete transparency and in the dealings.
• It provides a common platform for exchange of securities thereby increasing the efficient transactions by saving time, effort and money.
• This virtual market has a very wide reach hence it increases its liquidity.

STEPS IN THE TRADING AND SETTLEMENT PROCEDURE

• The investor has to furnish certain details and information about himself including PAN number which is mandatory, date of birth, bank account details, income details etc.
• A broker acts as an intermediary between the buyers and sellers.
• After the completion of the above formalities, the broker opens a trading account in the name of the investor.
• The investor has to open a demat account with a depository participant and a bank account for trading transactions in cash.
• By giving clear instructions about the desired quantity and price.
• The broker will then make the investor aware about the feasibility of the order.
• The broker will issue an order confirmation slip to the investor.
• The broker will then execute the order through screen based trading by considering the best available deal.
• The broker will issue a trade confirmation slip to the investor.
• A contract note contains details about the deal i.e. the number of securities bought/sold, price, date and time of transaction etc. The contract note includes a unique order code generated by the stock exchange for that transaction.
• A contract note is a legal which may be used to settle the claims between the investor and the broker.
• Since the settlement cycle is T +2 therefore, within two days of receiving the Contract Note, the investor has to pay cash or deliver shares sold as the case may be. The broker can then forward it to the exchange. This is called pay-in-day.
• On the T+2 day, cash will be paid or shares will be delivered as the case may be by the exchange to the other broker. This is called pay-out-day. Then, in case of sale of shares, the broker has to make the payment to the investor within 24 hours.
• However, in the case of purchase of securities, the amount will be transferred electronically to the investor’s demat account.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India.

• It was established in the year 1988 by the Government of India. It was to function under the overall administrative control of Ministry of Finance of the Government of India.
• It was given statutory powers on 30th January 1992 through an ordinance.
• The ordinance was later on replaced by an Act of Parliament known as the SEBI Act, 1992.

The Organisation Structure of SEBI

• The various activities undertaken by SEBI are now divided into five operational departments.
• Each department is headed by an executive director.
• The head office of SEBI is located at Mumbai.
• Besides, regional offices have been set up in Kolkata, Chennai and Delhi to attend to consumers complaints and maintain liaison with the issuers, intermediaries and stock exchanges in the concerned regions.
• SEBI has also formed Primary Market Advisory Committee and Secondary Market Advisory Committee to assist in the process of SEBI’S policies formation.
• These two committees consist of the market players, the investor’s association recognised by SEBI and the eminent persons in the capital market.

Objectives of SEBI

• To prevent trading malpractice in thesecurities markets.
• To protect the rights and interest of investors, and to guide and educate them.
• To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers, etc. with a view to making them competitive and professional.
• To regulate stock exchanges and the securities market to promote their orderly functioning.

Purpose and Role of SEBI SEBI has to be responsive to the needs of three groups, which constitue the market namely:

• The issuers of securities so as to provide them a platform for raising capital in an easy, effective and efficient manner.
• The investors so as to protect their interests in securities by keeping them abreast about the developments through true and appropriate information.
• The market intermediaries in order to provide them a framework so as to enable them to perform their functions effectively and efficiently.

Objectives of Advisory Committees Formed by SEBI

• To advise SEBI on matters relating to regulation of intermediaries for ensuring investor protection in the primary market.
• To advise SEBI on issues related to development of primary market in India.
• To advise SEBi on matters required to be taken by for changes in legal framework to introduce simplification and transparency in the primary market.
• To advise SEBI on disclosure requirements for companies.
• To advise the board in matters relating to the development and regulation of secondary market in the country.

FUNCTIONS OF SEBI Protective Functions of SEBI

• SEBI prohibits fraudulent and unfair trade practices in the securities market
• Promotion of fair practices and code of conduct in securities market
• Undertaking steps for investor protection
• Controlling insider trading and imposing penalties for such malpractices.

The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as “…to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto”

Developmental Functions of SEBI

• Ensuring training of intermediaries of securities market
• Conducting research and publishing information useful to all market participants
• Facilitating flexibility in the working of capital markets.

Regulatory Functions of SEBI

• Registration and regulation of of brokers, sub-brokers and other players in the financial market.
• Registration of collective investment schemes and Mutual Funds.
• Conducting enquiries and audits of stock exchanges & intermediaries.
• Regulation portfolio exchanges, underwriters, merchant bankers and the dealings in the stock exchanges.
• Regulation of take over bids by the companies

LATEST CBSE QUESTIONS

Question 1. Meca Ltd. a reputed automobile manufacturer needs Rupees ten crores as additional capital to expand its business. Atul Jalan, the CEO of the company wanted to raise funds through equity. On the other hand the Finance Manager, Nimi Sahdev said that the public issue may be expensive on account of various mandatory and non-mandatory expenses. Therefore, it was decided to allot the securities to institutional investors. Name the method through which the company decided to raise additional capital. (CBSE, Delhi 2017) Answer: Private placement is method through which the company decided to raise additional capital.

Question 2. These days, the development of a country is also judged by its system of transferring finance from the sector where it is in surplus to the sector where it is needed most. To give strength to the economy, SEBI is undertaking measures to develop the capital market. In addition to this there is another market in which unsecured and short-term debt instruments are actively traded everyday. These markets together help the savers and investors in directing the available funds into their most productive investment opportunity.

• Name the function being performed by the market in the above case.
• Also, explain briefly three other functions performed by this market. (CBSE, Delhi 2017)
• Mobilisation of funds is the function being performed by the financial market in the above case. It performs the allocative function by mobilisation of savings and channelising them into the most productive avenues.

Question 3. These days, the development of a country is also judged by its system of transferring finance from the sector where it is in surplus to the sector where it is needed the most. To give strength to the economy, SEBI is undertaking measures to develop the capital market. In addition to this, there is another market in which unsecured and short-term debt instruments are actively traded every day. These markets together help the savers and investors in directing the available funds into their most productive investment opportunity.

• Name the market segment other than the capital market segment in which unsecured and short-term debt instrument are traded. Also, give any three points of difference between the two. (CBSE, OD 2017)

Question 4. ABC Ltd. issued prospectus for the subscription of its shares for Rs. 500 crores in 2008. The issue was oversubscribed by 20 times. The company issued shares to all the applicants on pro-rata basis. Later SEBI inspected the prospectus and found some misleading statement about the management of the company in it. SEBI imposed a penalty of Rs. 5 crores and banned its three executive directors for dealing in securities market for three years. Identify the function and its type performed by SEBI in the above case.  (CBSE, Sample Paper, 2017) Answer: Protective function has been performed by SEBI in the above case. And the type of Protective function is Prohibition of fraudulent and unfair trade practices.

Question 5. “Money market is essentially a market for short-term funds’. In the light of this statement state any three features of money market. (CBSE, Sample Paper, 2017) Answer: The three features of money market are described below:

• It is a market for short term funds whose maturity period is upto one year.
• Since the cost of securities may be high, investment in the money market requires huge capital outlay.

Question 6. “Unicon Securities Pvt. Ltd” was established to deal in securities. It was registered as a stock broker with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) to trade in securities listed at these exchanges. It is also a depository participant with CDSL and NSDL. In the first three years, it developed its business successfully. After that the composition of Board of Directors changed. Some customers complained to the customer care centre of the company that shares purchased by them and for which the payment has been duly made, were not transferred to their D’mat Accounts by “Unicon securities Pvt. Ltd” . The executive of customer care centre promised the aggrieved customers that their shares will be transferred to their respective D’mat Accounts very soon. But the company delayed the matter and didn’t transfer the shares of the customers to their D’mat Accounts. This eroded investors confidence and multiplied, their grievances.

• Identify the step of trading procedure in a stock exchange which has not been followed by “Unicon Securities Pvt. Ltd” .
• Name the Apex statutory body of capital market to whom customer can complain to redress their grievances.
• Write two values not followed by Unicon Security Pvt. Ltd.(CBSE, Sample Paper, 2017)
• The step of trading procedure in a stock exchange which has not been followed by “Unicon Securities Pvt. Ltd” is settlement i.e. the delivery of shares through the D’mat Account of the broker to D’mat account of the investors.
• The Securities and Exchange Board of India (SEBI) is the Apex statutory body of capital market to whom customer can complain to redress their grievances.
• Truthfulness
• Fair practices

Question 7. Reshu’s father has gifted her the shares of a large cement company with which he had been working. The securities were in physical form. She already has a bank account and does not possess any other forms of securities. She wished to sell the shares and approached a registered broker for the purpose. Mention one mandatory detail which she will have to provide with the broker. (CBSE, Sample Paper, 2016) Answer: Reshu will have to give her Permanent Account Number (PAN) to the broker as it is mandatory as per law.

Question 8. Squib Ltd. is a large creditworthy company operating in the Kashmir Valley. It is an export- oriented unit, dealing in exclusive embroidered shawls. The floods in the Valley have created many problems for the company. Many craftsmen and workers have been dislocated and raw material has been destroyed. The firm is therefore, unable to get an uninterrupted supply of raw materials and the duration of the production cycle has also increased. To add to the problems of the organisation, the suppliers of raw materials who were earlier selling on credit are asking the company for advance payment or cash payment on delivery. The company is facing a liquidity crisis. The CEO of the company feels that taking a bank loan is the only option with the company to meet its short-term shortage of cash. As a finance manager of the company, name and explain the alternative to bank borrowings that the company can use to resolve the crisis. (CBSE, Sample Paper 2016) Answer: Commercial Papers may be used by Squib Ltd. as it is a popular short term instrument which is issued by large and credit worthy companies. The instrument is an unsecured promissory note and is freely transferable by endorsement. Its maturity period may range from a fortnight to a year. It is sold at discount and redeemed at par.

Question 9. Mr. Sanjay Nehra was the Chairman of Taran Bank. The bank was earning good profits. Shareholders were happy as the bank was paying regular dividends. The market price of their shares was also steadily rising. The bank was about to announce taking over the ‘Vena Bank.’ Mr. Sanjay Nehra knew that the share price of Taran Bank would rise on this announcement. Being a part of the bank, he was not allowed to buy shares of the bank. He called one of his rich friends Sudhir and asked him to invest Rs.5 crores in shares of his bank promising him the capital gains. As expected, the share prices went up by 40% and the market price of Sudhir’s shares was now ? 7 crores. He earned a profit of Rs. 2 crores. He gave Rs. 1 crore to Mr. Sanjay Nehra and kept Rs. 1 crore with himself. On regular inspection and by conducting enquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity. The SEBI imposed a heavy penalty on Mr. Sanjay Nehra. By quoting the lines from the above paragraph, identify and state any two functions that were performed by SEBI in the above case Answer: The two functions performed by SEBI in the given case are stated below:

• Regulatory function is being performed by SEBI: “On regular inspection and by conducting inquires of the brokers involved.”
• Protective function is performed by SEBI: “The SEBI imposed a heavy penalty on Mr. Sanjay Nehra.”

Question 10. Mr. Vikas Mehra was the Chairman of IBM Bank. The bank was earning good profits. Shareholders were happy as the bank was paying regular dividends. The market price of their shares was also steadily rising. The bank was about to announce the taking over of ‘UK Bank’. Mr. Vikas Mehra knew that the share price of IBM Bank, would rise on this announcement. Being a part of the bank, he was not allowed to buy shares of the bank. He called one of his rich friends Mukand and asked him to invest Rs. 4 crores in the shares of his bank promising him the capital gains. As expected, after the announcement, the share prices went up by 50% and the market price of Mukand’s shares was now Rs. 6 crores. Mukand earned a profit of Rs. 2 crores. He gave Rs. 1 crore to Vikas Mehra and kept Rs. 1 crore with him. On regular inspection and by conducting enquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity. SEBI imposed a heavy penalty on Vikas Mehra. Quoting lines from the above paragraph, identify and state any two functions performed by the SEBI in the above case. (CBSE, OD 2016) Answer: The two functions performed by SEBI in the given case are stated below:

• Regulatory function is being performed by SEBI: “on regular inspection and conducting inquires of the brokers involved.”
• Protective function is performed by SEBI: “The SEBI imposed heavy penalty on Mr.Vikas Mehra.”

Question 11. Supriya’s grandmother who, was unwell, called her and gave her a gift packet. Supriya opened the packet and saw many crumpled share certificates inside. Her grandmother told her that they had been left behind by her late grandfather. As no trading is now done in physical form, Supriya wants to know the process by adopting which she is in a position to deal with these certificates.

• Identify and state the process.
• Also, give two reasons to Supriya why dealing with shares in physical form has been stopped. (CBSE, Sample Paper 2015)
• Dematerialisation refers to the process of holding securities in electronic form.
• When the shares certificates are held in physical form, there is danger of loss or theft.
• There is risk of forgery, as the buyer may be delivered fake certificates .

Question 12. Mission Coach Ltd. is a large creditworthy company that manufactures coaches for the Indian Railways. It now wants to export these coaches to other countries and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost, the company decides to tap the money market.

• Name and explain the money-market instrument the company can use for the above purpose.
• What is the duration for which the company can get funds through this instrument?
• State any other purpose for which this instrument can be used. (CBSE, OD 2015)
• Commercial Papers can be used for Bridge financing by Mission Coach Ltd. as it is issued by large and credit worthy companies. The instrument is in the form of an unsecured promissory note and is freely transferable by endorsement. It is sold at discount and redeemed at par.
• Its maturity period may range from a fortnight to a year.
• It is also used to meet the short term seasonal and working capital requirements of a business enterprise.

Question 13. Ganesh Steel Ltd. is a large and creditworthy company that manufactures steel for the Indian market. It now wants to cater to the Asian market and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost, the company decides to tap the money market.

• State any other purpose for which this instrument can be used. (CBSE, Delhi 2015)
• Commercial Papers can be used for Bridge financing by Ganesh Steel Ltd. as they are issued by large and credit worthy companies. The instrument is in the form of an unsecured promissory note and is freely transferable by endorsement. It is sold at discount and redeemed at par.

ADDITIONAL QUESTIONS

Question 1. Incorporated in 1990, Raju Dairy Ltd., is one of the leading manufacturers and marketers of dairy-based branded foods in India. In the initial years, its operations were restricted only to collection and distribution of milk. But, over the years it has gained a reasonable market share by offering a diverse range of dairy based products including fresh milk, flavoured yogurt, ice creams, butter milk, cheese, ghee, milk powders etc. In order to raise capital to finance its expansion plans, Raju Dairy Ltd. has decided to approach capital market through a mix of Offer for sale of Rs. 4 crore shares and a public issue of Rs. 2 crore shares. In context of the above case:

• Name and explain the segment of capital market being approached by the company.
• Identify the two methods of floatation used by the company to raise the required capital. Give one difference between them.
• Primary market is the segment of capital market being approached by the company. It is also known as the new issue market as the securities are issued for the first time by the companies through this market.
• The two methods of floatation used by the company to raise the required capital are – Issue through prospectus and Offer for sale. In case of issue through prospectus, the company approaches the members of the general public directly by issuing a prospectus whereas in case of Offer for sale, the company approaches members of the general public indirectly through intermediaries like issuing houses, stock brokers etc.

Question 2. The SEBI has imposed a penalty of Rs. 7,269.5 crore on Pearls Agrotech Corporation Limited (PACL) and its four directors — Tarlochan Singh, Sukhdev Singh, Gurmeet Singh and Subrata Bhattacharya who had mobilised funds from the general public through illegal collective investment schemes in the name of purchase and development of agriculture land. While imposing the penalty, the biggest in its history, Securities and Exchange Board of India (SEBI) said the company deserved “maximum penalty” for duping the common man. Its Prevention of Fraudulent and Unfair Trade Practices Regulations provides for “severe to severe penalties” for dealing with such violations. As per SEBI norms, it can impose a penalty of Rs. 25 crore or three times of the profit made by indulging in fraudulent and unfair trade practices and in the present case, the regulator has imposed a fine equivalent to three times of the illicit gains. In the context of the above case:

• State the objectives of setting up SEBI.
• Identify the type of function performed by SEBI by quoting lines from the paragraph.
• To prevent trading malpractice in the securities markets.
• Protective function is performed by SEBI: “The SEBI has imposed a penalty of Rs. 7,269.5 crore on Pearls Agrotech Corporation Limited.”

Question 3. Harsh works as a manager in a software company. He opened a Demat account with a broking house in order to trade in securities with the money he received as his first performance bonus. Since then he has been very active in stock trading under the guidance of a stock broker. However, when he was hospitalised for a few days this year, his wife received several calls from the his stock broker for permission to transact on Harsh’s behalf. Though she told him to wait till her husband had recovered, the stock broker went ahead and executed the transactions. When Harsh got home from hospital, he discovered that the unauthorised transactions had led to a loss for him. Harsh complained to the broking house, but they claimed he had authorised the transactions. Keeping in view, the guidelines issued by the National Stock Exchange that he had read in the national newspaper Harsh demanded proof and threatened to file a complain. Since, the broking house had no evidence that the deals had been authorised they made good the loss that Harsh had incurred due to the transactions. In the context of the above case:

• What is a Demat account?
• Who is acting as the depository participant for Harsh?
• Name the document that is legally enforceable and helps to settle the claims between the investor and the broker.
• A Demat account is an account used for holding securities in electronic form.
• The Broking house is acting as the depository participant for Harsh.
• A contract note is a legally enforceable document that helps to settle the claims between the investor and the broker.

Question 4. Make Good Technologies Ltd. is one of the top suppliers of security software products and solutions in India with a market share of over 20% in the retail segment. Its customers includes people all sections of the society i.e. both households and corporates. Its unique threat detection system works to detect security threats including virus attacks in real time to protect users’ IT assets across varied platforms and devices. The company has an established track record of growth and financial performance. At present the company operates only through its website. The company now intends to launch a range of computer accessories and plans to market it by opening its own retail outlets. So, the board of directors of the company have decided to only raise capital for the first time through an issue of shares, but at the same time they do not wish to get into the hassles of launching a public issue of shares. In context of the above case:

• Name and explain the way through which the company can raise finance by allotting securities to selective individuals and institutions only.
• Can the company also raise capital through a right issue? Why or why not? Give a reason to justify your answer.
• The company can raise finance by allotting securities to selective individuals and institutions only through Private Placement. It is a relatively economical way of raising money as it helps to save time, cost and money involved in the process of issuing securities.
• No, the company cannot raise capital through a right issue as it is issuing securities for the first time. A rights issue is a pre-emptive right given only to the existing shareholders to subscribe to the securities of the company as per its terms and conditions.

Question 5. After doing a course in online trading, Arsh started an online portal for stock trading under the name ‘Investment Guru’. He met his school friend Ajay after a long time in a bank where Ajay had come to open a D-Mat account. Arsh urged Ajay to invest in the forthcoming IPO of a blue chip companies whereas Ajay was inclined to buy existing securities of the other companies to build his investment portfolio. In context of the above case:

• Identify the two different types of capital market being referred to by quoting lines from the para.
• State any four differences between the two different types of capital markets as identified in part (1).
• Primary Market: “Arsh urged Ajay to invest in the forthcoming IPO of a blue chip companies.”
• Secondary Market: “Ajay was inclined to buy existing securities of the other companies to build his investment portfolio.”

Question 6. Ketan won a cash prize of Rs. 20,000 in the National level Robotics Competition. On the advise of his father, he visits a nearby bank to open a Fixed deposit account in his name with the prize money. His sister Suhasini accompanied him to the bank. On reaching the bank, he notices big banners which are placed within the premises containing information about the various arrangements through which corporates may raise their capital through the bank. Being a finance graduate, Suhasini explains to Ketan that banks play the role of the financial intermediary by helping in the process of channelizing the savings of the households into the most profitable business ventures. In context of the above case: .

• Name another financial intermediary that helps in the process of channelizing the savings of the households into the most productive use.
• Also, outline any two functions of another financial intermediary as identified in part (1).
• Financial markets is the other financial intermediary that helps in the process of channelizing the savings of the households into the most productive use.
• It provides liquidity to the financial assets by providing ready markets wherein the securities can be converted into cash or vice versa easily.

Question 7. Ragu works as a waiter in a five star hotel in Mumbai. While serving the customer he overhears him at the table saying that the he has made profits higher than expected by investing in securities market. So, Ragu also decides to make a nominal investment from his savings in the stock market in pursuit of higher gains. In context of the above case: As a financial consultant, apprise him of the steps involved in the working of a Demat system. Answer: Ragu will have to initiate the following steps for trading through a Demat system:

• He will have to first open a Demat account with a depository participant (DP) who may either be a bank, broker or financial services company by furnishing certain details and information about himself including PAN number, date of birth, bank account details, income details etc.
• If he plans to buy shares through a public offer he will have to give details of his Demat account, bank account etc. On allotment the shares will be directly credited to his account.
• If he decides to buy shares otherwise, he will have to instruct his broker with the details about the name of the company, number of shares, price etc. The transaction will be executed through the depository participant and he will have to make payment for them within T + 2 days.
• On contrary, whenever he decides to sell shares, he will have to instruct his broker with the details about the name of the company, number of shares, price etc. The transaction will be executed through the depository participant and his account will be debited accordingly. He will receive the payment in T + 2 days.

Question 8. The Bombay Stock Exchange (BSE) is Asia’s first stock exchange and the world’s 11th largest stock exchange. It became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. Its automated, screen-based trading platform called BSE On-Line Trading (BOLT) had a capacity of 8 million orders per day. The BSE has also introduced a centralized exchange-based internet trading system, BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE platform. In context of the above case:

• Name the organisation that regulates the working of stock exchanges in India.
• State any three functions performed by stock exchanges.
• Give any two advantages of screen-based trading.
• Securities And Exchange Board of India (SEBI) regulates the working of stock exchanges in India.
• As the investors get access to the stock market during real time, there is complete transparency in the dealings.

Question 9. Ragunath Ahuja is one of the Promoter-Director of Vishwas Ltd. The company is engaged in the real estate sector, which has recently witnessed a steady fall in its revenue and the value of its assets due to a downward trend persisting in the market in specific and the economy in general. The periodical financial results of the company were to be declared in a fortnight time. Ragunath Ahuja, being an insider, had access to unpublished price sensitive information related to it. Consequently, he sells a major portion of his holdings in an anticipation of a fall in the market price of the shares of the Company subsequent to the announcement of periodical financial results of the company. Moreover, he doesn’t inform The Securities and Exchange Commission (SEC) about the dealings. On conducting a probe, Securities and Exchange Board Of India (SEBI) finds Ragunath Ahuja guilty of insider trading. As per law, company directors, officials or any individual with a stake of 10% or more in the company are considered to be insiders and they are required to report their insider transactions within two business days of the date the transaction occurred. In context of the above case:

• State the purpose of setting up SEBI.
• The market intermediaries in order to provide them a framework so as to enable them perform their functions effectively and efficiently.
• Regulatory function is being performed by SEBI: “On conducting a probe Securities and Exchange Board of India (SEBI) finds Ragunath Ahuja guilty of insider trading.”

Question 10. Sumita is a professor in a reputed business institute. While explaining the procedure of stock exchange trading, she shared with her students that many years back she had bought 200 shares of a leading automobiles company. As per the settlement procedure she paid for the shares and received the share certificates in physical form. However, when she had sent those certificates to the company to get them endorsed in her name, she was informed by the company that those certificates were duplicate. Therefore, in order to protect the investors from many such malpractices, now only screen-based trading is done and dematerialisation is compulsory. In context of the above case:

• What is screen based trading?
• Give the meaning of ‘dematerialisation’. State any two of its advantages.
• Screen-based trading refers to the process of buying or selling securities online.
• The securities in the demat account can be offered as security to raise loans.
• Since the shares certificates are not held in physical form, there is no danger of loss, theft or forgery.

Question 11. Madhav’s is one of the India’s most trusted brands in Indian sweets and snacks segment. The company has manufacturing plants in Kota, Kanpur, New Delhi, and Mumbai. Madhav’s has its own retail chain stores and a range of restaurants in these cities. Now, the company plans to extend its business in 12 more cities in India. In order to raise the funds, its directors have decided to float a public issue through prospectus. Besides, it intends to raise money to meet the floatation costs in terms of brokerage, underwriting commission, advertising etc. In context of the above case:

• What is the other name used for the funds required to meet floatation costs?
• Describe briefly the short term instrument popularly used by the companies to raise for the funds required to meet floatation costs. Who can issue them?
• Distinguish between the two types of financial markets that the company intends to approach to meet its financial needs.
• Bridge financing is the other name used for the funds required to meet floatation costs.
• Commercial Papers issued by large and credit worthy companies. The instrument is in the form of an unsecured promissory note and is freely transferable by endorsement. It is sold at discount and redeemed at par. Its maturity period may range from a fortnight to a year. It is also used to meet the short term seasonal and working capital requirements of a business enterprise. For example it is used for the purpose of bridge financing.

Question 12. During navratras ,Varun finalises a deal to buy a new house. So, he visits a nearby branch of ‘Subh Bank’ to withdraw Rs. 10 lakhs from his account in order to pay the token money to the seller. In the bank he observes that a large number of customers are present to make cash with drawls, probably because it is an auspicious time to make purchases. After sometime, he overhearsone of the bank staff members telling his colleague that, “Today ‘Subh Bank’ is likely to fall short of cash and to make up for the deficit and maintain its cash reserve ratio it will have to approach another bank.” In context of the above case:

• Identify the instrument that ‘Subh Bank’ will use to meet its short term requirements of funds.
• State any three feature of the instrument as identified in part (1).
• Call money is the instrument used by ‘Subh Bank’ to meet its short term requirements of funds.
• Call money is an instrument through which one bank may borrow money from another bank to maintain the cash reserve ratio as per the guidelines of RBI.
• Its maturity period may be from a single day to a fortnight.
• The rate at which the interest is paid on call money is called call rate.

Question 13. The stock market regulator, Securities and Exchange Board of India (SEBI), has initiated a certification programme for all market intermediaries. Under this programme, people associated with stock markets in any way, will have to obtain a qualifying certificate from the regulator.The National Institute of Securities Market (NISM), a trust formed by SEBI, is tasked with the certification programme. In the context of the above case:

• Identify the type of function performed by SEBI.
• Outline any two reasons for setting up SEBI.
• Developmental function is being carried out by SEBI by starting a certification programme for all market intermediaries.
• To curb malpractices in the financial market.
• To enhance the confidence of the investors by ensuring fair, efficient and transparent dealings.

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Financial Markets Class 12 Business Studies Notes and Questions

Please refer to Financial Markets Class 12 Business Studies notes and questions with solutions below. These revision notes and important examination questions have been prepared based on the latest Business Studies books for  Class 12 . You can go through the questions and solutions below which will help you to get better marks in your examinations.

Class 12 Business Studies Financial Markets Notes and Questions

Q. 1. Supriya’s grandmother who was unwell, called her and gave her a gift packet. Supriya opened the packet and saw many crumpled share certificates inside. Her grandmother told her that they had been left behind by her late grandfather. As no trading is now done in physical form, Supriya wants to know the process by adopting which she is in a position to deal with these certificates. 1. Identify and state the process. 2. Also give two reasons to Supriya 3. why dealing with shares in physical form had been stopped.  Ans. 1. Dematerialization – It is a process where securities held by the investor in physical form are cancelled and the investor gives an electronic entry or number so that she/he can hold it as an electronic balance in an account 2. Problems with dealing in physical form – 1. Theft 2. Fake/forged transfers 3. Transfer delays 4. Paper work associated with share certificates or debentures held in physical form. Q. 2. The directors of a company want to modernize its plant and machinery by making a public issue of shares. They wish to approach the stock exchange, while the finance manager prefers to approach a consultant for the new public issue of shares. Advise the directors whether to approach the stock exchange or a consultant for new public issue of shares and why. Also advise them about different methods which the company may adopt for the new public issue of shares.  Ans.  The directors should approach a consultant for new public issue of shares. The stock exchanges deal with sale and purchase of existing securities only, not in new issue of securities. Different methods which the company may adopt for the new public issue of shares: 1. Offer through prospectus 2. Offer for sale 3. Private placement 4. Rights issue 5. E-IPOs. Q. 3. Reshu’s father has gifted her shares of a large cement company, with which he had been working. The securities were in physical form. She already has a bank account and does not possess any other forms of securities. She wished to sell the shares and approached a registered broker for the purpose. Mention one mandatory detail which she will have to provide with the broker.  Ans.  Permanent account Number (PAN) Q. 4. Saqib Ltd. is a large credit worthy company operating in the Kashmir Valley. It is an export oriented unit, dealing in exclusive embroidered shawls. The floods in the valley have created many problems for the company. Many craftsmen and workers have been dislocated and raw material has been destroyed. The firm is therefore, unable to get an uninterrupted supply or raw material, and the duration of the production cycle has also increased. To add to the problems of the organization, the suppliers of raw material who were earlier selling on credit are asking the company, for advance payment or cash payment on delivery. The company is facing a liquidity crisis. The CEO of the company feels that taking a bank loan is the only option with the company to meet its short term shortage of cash. As a finance manager of the company name and explain the alternative to bank borrowing that the company can use to resolve the crisis.  Ans.  Commercial Paper: It is a short term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued by large and creditworthy companies to raise short term funds at low companies tht are generally considered to be financially strong. Q. 5. ‘Ganesh Steel Ltd.’ is a large and credit-worthy company manufacturing steel for the Indian market. It now wants to cate to the Asian market and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost the company decides to tap the money market. 1. Name and explain the money-market instrument the company can use for the above purpose. 2. What is the duration for which the company can get funds through this instrument? 3. State any other purpose for which this instrument can be used.  Ans. 1. Commercial paper 2. 15 days to one year 3. It can also be used for seasonal and working capital needs. Q. 6. The Trading Procedure on Stock Exchange has been replaced by on-line screen based electronic trading system. This is mainly done to eliminate problems like theft, fake/forged transfers, transfer delays and paper work associated with share certificates or debentures in physical form. This is a process where securities held by the investor in the physical form are cancelled and the investor is given an electronic entry or number so that he/she can hold it as an electronic balance in an account. This has increased the equity cult among the people. 1. Identify and state the process mentioned above. 2. What is the most important requirement for the process identified in (a)? State. 3. State any two values which you think have enhanced the equity cult in the society. Ans. 1. Dematerialization – It is the process of holding securities in an electronic form. 2. For this, the investors has to open a ‘Demat account’ with a depository participant (DP) for holding and transferring securities in the demat form. He / She will also have to open a bank account for cash transactions in the securities market. 3. Values: ● Fair dealings (i.e., no danger of loss, theft or forgery of share certificates) ● Transparency (i.e., participants can see the prices of all securities during real time) ● Increased efficiency of information (i.e., computer screens displays information on prices) ● Increased efficiency of operations (i.e., reduction in time, cost and risk error) (any two) Q. 7. Sakshi Ltd, a well known real estate company has managed to carve a niche for itself in this sector. Recently, it was revealed that the directors of the company have used price sensitive information for their own personal interest Adequate public disclosures were also not made. SEBI is considering action against these directors. 1. Name the term used for trading malpractice done by the directors of this company. 2. Identify any two values that the company should have adhered to in order to gain the trust of its investors. Ans. 1. Insider trading 2. Values: ● Protection and promotion of investors’ interests ● Transparency ● Efficiency of information ● Efficiency of operations (any two) Q. 8. ‘R’ Limited is a real estate company which was formed in 1950. In about 56 years of its existence the company has managed out from a niche for itself in this sector. Lately this sector is witnessing a boom due to the fact that the Indian economy is on the rise. The income of middle class are rising. More people can afford to buy homes for themselves due to easy availability of loans and accompanying tax concession. To expand its business in India and abroad the company is weighing various options to raise money through equity offerings in India. Whether to tap equity or debt market whether to raise money from domestic market or international market or combination of both? Whether to raise the necessary finance from money market or capital market. It is also planning to list itself in New York Stock Exchange to raise money through ADR. To make its offering attractive it is planning to offer lots of financial plans, products to its stakeholders and investors and also explain its listing at NSE after complying with the regulations of SEBI. 1. What are the regulation so SEBI that company must comply with? Ans.  Explain regulatory functions, Q. 9. A company require Rs. 2 crore for inventory, payment of wages, salaries, maintaining bank balance, etc. 1. Suggest which financial market company may approach and why? 2. State the instruments to raise finance in that market. Ans. 1. Money market is the market from where it can raise money to fulfill its requirement. The reason is company require money for working capital i.e. maximum for 1 year and market for short-term is money market. 2. The instrument to raise money in money market are: 1. Call money 2. Treasury bill 3. Commercial bill 4. Commercial paper 5. Certificate of deposit. Q. 10. Few years ago, there were many malpractices, unfair trade practices and frauds and scams were taking place in stock Exchange. All these affected investor’s confidence, faith and trust in Stock Exchange. The Government of India decided to set up a separate body for this purpose who was given control of stock exchange. This separated ownership and control of stock exchange. 1. Name the concept which separate the ownership and control of stock exchange. 2. Name the body set up by the government of India to contract the stock exchange. 3. State the objectives of that regulating body. Ans. 1. The concept which separate ownership and control is called as demutualization. 2. The regulatory body set up by government of India is “SEBI” Securities Exchange Board of India. 3. The objectives of SEBI are: The overall objectives of SEBI are to protect the interest of investors and to promote the development of stock exchange and to regulate the activities of stock market.The objectives of SEBI are: Q. 11. Mr. Vikas Mehra was the Chairman of IBM Bank. The bank was earning good profits. Shareholders were happy as the bank was paying regular dividends. The market price of their shares was also steadily rising. The bank was about to announce the taking over of ‘UK Bank’. Mr. Vikas Mehra knew that the share price of IBM Bank would rise on this announcement. Being a part of the bank, he was not allowed to buy shares of the bank. He called one of his rich friends Mukand and asked him to invest Rs. 4 crores in the shares of his bank promising him the capital gains. As expected, after the announcement, the share prices went up by 50% and the market price of Mukand’s shares was now Rs. 6 crores. Mukand earned a profit of Rs. 2 crores. He gave Rs. 1 crore to Vikas Mehra and kept Rs. 1 crore with him. On regular inspection and by conducting enquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity. SEBI imposed a heavy penalty o Vikas Mehra. Quoting lines from the above paragraph, identify and state any two functions performed by the SEBI in the above case. Ans.  The two functions performed by SEBI in the given case are stated below: 1. Regulatory function is being performed by SEBI: “on regular inspection and conducting inquiries of the brokers involved.” 2. Protective function is performed by SEBI: “The SEBI imposed heavy penalty on Mr. Vikas Mehra. Q. 12. Mission Coach Ltd. is a large creditworthy company that manufactures coaches for the Indian Railways. It now wants to export these coaches to other countries and decides to invest in new hi-tech machines. Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves hugefloatation cost. To meet the expenses of floatation cost, the company decides to tap the money market. 1. Name the explain the money-market instrument the company can use for the above purpose. 2. What is the duration for which the company can get funds through this instrument? 3. State any other purpose for which this instrument can be used. Ans. 1. Commercial Papers can be used for Bridge financing by Mission coach Ltd. as it is issued by large and credit worthy companies. The instrument is in the form of an unsecured promissory note and it freely transferable by endorsement. It is sold at discount and redeemed at par. 2. It maturity period may range from a fortnight to a year. 3. It is also used to meet the short term seasonal and working capital requirements of a business enterprise. Q. 13. Incorporated in 1990. Raju Dairy Ltd., is one of the leading manufacturers and marketers of dairy-based branded foods in India. In the initial years, its operations were restricted only to collection and distribution of milk. But, over the years it has gained a reasonable market share by offering a diverse range of dairy based products including fresh milk, flavoured yogurt, ice creams, butter milk, cheese, ghee, milk powders etc. in order to raise capital to finance its expansion plans. Raju Dairy Ltd. has decided to approach capital market through a mix of Offer for sale of Rs. 4 crore shares and a public issue of Rs. 2 crore shares. In context of the above case: 1. Name and explain the segment of capital market being approached by the company. 2. Identify the two methods of floatation used by the company to raise the required capital. Give one difference between them. Ans. 1. Primary market is the segment of capital market being approached by the company. It is also known as the new issue market as the securities are issued for the first time by the companies through this market. 2. The two methods of floatation used by the company to raise the required capital are – Issue through prospectus and Offer for sale. In case of issue through prospectus, the company approaches the members of the general public directly by issuing a prospectus whereas in case of Offer for sale, the company approaches members of the general public indirectly through intermediaries like issuing houses, stock brokers etc. Q. 14. Harsh works as a manager in a software company. He opened a Demat account with a broking house in order to trade in securities with the money he received as his first performance bonus. Since then he has been very active in stock trading under the guidance of a stock broker. However, ,when he was hospitalized for a few days this year, his wife received several calls from the his stock broker for permission to transact on Harsh’s behalf. Though she told him to wait till her husband had recovered, the stock broker went ahead and executed the transactions. When Harsh got home from hospital, he discovered that the unauthorized transactions had led to a loss for him. Harsh complained to the broking house, but they claimed he had authorized the transactions. Keeping in new, the guidelines issued by the National Stock Exchange that he had read in the national newspaper Harsh demanded proof and threatened to file a complain. Since, the broking house had no evidence that the deals had been authorized they made good the loss that Harsh had incurred due to the transaction. In the context of the above case? 1. What is a Demat account? 2. Who is acting as the depository participant for Harsh? 3. Name the document that is illegally enforceable and helps to settle the claims between the investor and the broker. Ans. 1. A Demat account is an account used for holding securities in electronic form. 2. The Broking house is acting as the depository participant for Harsh. 3. A contract note is a legally enforceable document that helps to settle the claims between the investor and the broker. Q . 15. Ketan won a cash prize of Rs. 20,000 in the National level Robotics Competition. On the advise of his father, he visits a nearby bank to open a Fixed deposit account in his name with the prize money. His sister Suhasini accompanied him to the bank. On reaching the bank, he notice big banners which are placed within the premises containing informationabout the various arrangements through which corporates may raise their capital through the bank. Being a finance graduate, Suhasini explains to Ketan that banks play the role of the financial intermediary by helping in the process of channelizing the savings of the households into the most profitable business ventures. In context of the above case: 1. Name another financial intermediary that helps in the process of channelizing the savings of the households into the most productive use. 2. Also, outline any two functions of another financial intermediary as identified in part (a) Ans. 1. Financial markets is the other financial intermediary that helps in the process of channelizing the savings of the households into the most productive use. Q. 16. Ragu works as a waiter in a five star hotel in Mumbai. While serving the customer he overhears him at the table saying that the he has made profits higher than expected by investing in securities market. So, Ragu also decides to make a nominal investment from his savings in the stock market in pursuit of higher gains. In context of the above case: As a financial consultant, apprise him of the steps involved in the working of a Demat system. Ans.  Ragu will have to initiate the following steps for trading through a Demat system: Q.17. Sumita is a professor in a reputed business institute. While explaining the procedure of stock exchange trading, she shared with her students that many years back she had bought 200 shares of a leading automobiles company. As per the settlement procedure she paid for the shares and received the share certificates in physical form. However, when she had sent those certificates to the company to get them endorsed in her name, she was informed by the company that those certificates were duplicate. Therefore, in order to protect the investors from many such malpractices, now only screen – based trading is done and dematerialization is compulsory. In context of the above case: 1. What is screen based trading? 2. Give the meaning of ‘dematerialization’. State any two of its advantages. Ans. 1. Screen – based trading refers to the process of buying or selling securities online. Q. 18. Madhav’s is one of the India’s most trusted brands in Indian sweets and snacks segment. The company has manufacturing plants in Kota, Kanpur, New Delhi, and Mumbai. Madhav’s has its own retail chain stores and a range of restaurants in these cities. Now, the company plans to extend its business in 12 more cities in India. In order to raise the funds, its directors have decided to float a public issue through prospectus. Besides, it intends to raise money to meet the floatation cost in terms of brokerage, underwriting commission, advertising etc. In context of the above case: 1. What is the other name used for the funds required to meet floatation costs? 2. Describe briefly the short term instrument popularly used by the companies to raise for the funds required to meet floatation costs. Who can issue them? 3. Distinguish between the two types of financial markets that the company intends to approach to meet its financial needs. Ans. 1. Bridge financing is the other name used for the funds required to meet floatation costs. 2. Commercial Papers 3. Capital Market and Money Market. Q. 19. During navratras, Varun finalizes a deal to buy a new house. So, he visits a nearby branch of ‘Subh Bank’ top withdraw Rs. 10 lakhs from his account in order to pay the token money to the seller. In the bank he observes that a large number of customers are present to make cash with drawls, probably because it is an auspicious time to make purchases. After sometime, he overhears one of the bank staff members telling his colleague that, “Today ‘Shubh Bank’ is likely to fall short of cash and to make up for the deficit and maintain its cash reserve ratio it will have to approach another bank.” In context of the above case: 1. Identify the instrument that ‘Shubh Bank’ will use to meet its short term requirements of funds. 2. State any three feature of the instrument as identified in part (a). Ans. 1. Call money is the instrument used by ‘Subh Bank’ to meet its short term requirements of funds. 2. Three features of call money.

Important Notes for NCERT Class 12 Business Studies Chapter Financial Markets

Introduction : Financial Market is a market for creation and exchange of financial assets like share, bonds etc. It helps in mobilising savings and channelising them into the most productive uses. It helps to link the savers and the investors by mobilizing funds between them. The person / Institution by which allocation of funds is done is called financial intermediaries. Functions of Financial Market. 1. Mobilisation of Savings and challenging them into the most productive uses:  Financial market facilitates the transfer of savings from savers to investors and thus helps to channelise surplus funds into the most productive use. 2. Help in Price Determination:  Financial Market helps in interaction of savers and investors which in turn helps in the determination of prices of the financial assets such as shares, debentures etc. 3. Provide Liquidity to Financial Assets:  Financial market facilitate easy purchase and sale of financial assets. Thus, it provide liquidity to them so that they can be easily converted into cash whenever required. 4. Reduce cost of transactions :  Financial market provide valuable information about securities which helps in saving time, efforts and money and thus it reduces cost of transactions. Stock Exchange / Share Markets A stock Exchange is an institution which provides a platform for buying and selling of existing securities. It facilitates the exchange of a security i.e. share, debenture etc. into money and vice versa. Following are some of the important functions of a stock Exchange. 1. Providing liquidity and Marketability to Existing Securities:  Stock Exchange provide a ready and continuous market for the sale and purchase of securities. 2. Pricing of Securities:  Stock Exchange helps in constant valuation of securities which provide instant information to both buyers and sellers and thus helps in pricing of securities which is based on the forces of demand & supply. 3. Safety of transaction:  The members of a stock exchange are well regulated, who are required to work within the legal framework. This ensures safety of transactions. 4. Contributes to Economic Growth:  Stock exchange provide a platform by which saving get channelised into the most productive investment proposals, which leads to capital formation & economic growth. 5. Spreading of Equity cult:  Stock exchange helps in educating public about investments in securities which leads to spreading of Equity culture. Securities and Exchange Board of India (SEBI) SEBI was established by Government of India on 12 April 1988 as an interim administrative body to promote orderly and healthy growth of securities market and for investor protection. It was given a statutory status on 30 January 1992 through an ordinance, which was later replaced by an Act of Parliament known as the SEBI Act, 1992. Objectives of SEBI 1.  To regulate stock exchange and the securities market to promote their orderly functioning. 2.  To protect the rights and interests of investors and to guide & educate them. 3.  To prevent trade malpractices such as internal trading. 4.  To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers etc.

We hope the above  Financial Markets Class 12 Business Studies  are useful for you. If you have any questions then post them in the comments section below. Our teachers will provide you an answer. Also refer to  MCQ Questions for Class 12 Business Studies

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• Financial Markets Class 12 Notes CBSE Business Studies Chapter 10 (Free PDF Download)
• Revision Notes

Exam-Focused Revision Notes for CBSE Class 12 Business Studies Chapter 10 - Financial Markets

CBSE class 12 included in their syllabus a very important chapter – Financial Market. Students must not skip or take this chapter lightly, the revision material provided is for the benefit of the students to revise their daily study without any extra effort. Students are suggested to download the revision material provided by us which is inclusive of all the definitions and important content, yet a short revision capsule is created for the benefit.

The chapter ‘Financial Markets’ extends great width, from this chapter the students may expect various questions of all kinds, thus the revision of this chapter is mandatory.

Download CBSE Class 12 Business Studies Revision Notes 2024-25 PDF

Also, check CBSE Class 12 Business studies revision notes for other chapters:

Related Chapters

Mastering Class 12 Business Studies Chapter 10: Financial Markets - Notes, Practice Problems, and Tips for Success

Introduction: Financial Market

Financial market is a market which facilitates creation of assets and exchange of securities to provide short, medium and long term business finance.

It mobilizes funds between savers and investors.

It locates funds into the most productive investment opportunities.

There are two types of Financial Markets:

Money Market

Capital Market

Functions of Financial Market

Mobilisation of savings and channeling them into the most productive uses: A financial market performs the allocative function by linking the savers and investors, thus mobilising savings and channelising them to make the most use of these idle savings. 

Facilitating price discovery: The interaction between the households (supplier of funds) and business firms helps to establish a price for the traded financial asset in the market.

Providing liquidity to financial assets: Financial assets can be easily converted into cash as financial markets provide facility of purchase and sale of financial assets.

Reducing the cost of transactions: Financial markets provide information about the traded securities and save time, effort and money of both the buyers and sellers of a financial asset.

A. MONEY MARKET:  

It is a market which deals in short term securities and whose maturity period is less than one year.

Money Market Instruments

B. Capital Market:  

It is a market which deals in medium and long term securities with a maturity period of more than one year.

Distinction between Capital Market and Money Market

Capital market is of further two types:

Primary Market

Secondary Market

Primary market deals with the securities which are issued for the first time in the market and is also known as new issues market.

Banks, financial institutions, insurance companies, mutual funds and individuals are the main participants in the primary market.

Methods of Floatation

Offer through prospectus: The public companies issue prospectus to raise funds from the public by issuing financial instruments like shares, debentures, etc., through an advertisement in the newspaper and magazines.

Offer for sale: Public companies offer securities for sale to the brokers or issuing houses at an agreed price and in turn, these intermediaries resell them to the investors.

Private placement: Private placement means issue and allotment of shares to the selected individuals and companies privately and not to the general public through public issue.

Rights issue: Rights issue refers to issue of new shares to the existing shareholders in accordance to the terms and conditions of the company.

e-IPOs: A company can raise funds by issuing capital to the public through the online system of stock exchange and this is called an initial public offer (IPO).

Secondary market is a market which deals with the sale and purchase of existing securities. It is also called the stock market or stock exchange.

SEBI prescribes the framework within which all the securities are traded, cleared and settled.

It provides opportunities of disinvestment and reinvestment to investors by exchange of securities.

Difference between Primary and Secondary Market:

Stock Exchange

According to Securities Contract (Regulation) Act 1956, defines stock exchange as a body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.

Functions of a Stock Exchange

Providing liquidity and marketability to existing securities: Stock exchange provides a continuous market for sale and purchase of  existing securities.

Pricing of securities: The forces of demand and supply determine the share prices for securities in the stock exchange.

Safety of transaction: Trading within the regulatory framework of SEBI ensures safety of financial transactions.

Contributes to economic growth: Process of disinvestment and reinvestment channelizes savings into most productive investments contributing to capital formation and economic growth.

Spreading of equity cult: Providing constant information about securities traded through stock exchange educates investors.

Providing scope for speculation: Fluctuations in prices due to demand and supply forces allows for restricted and controlled speculations.

Trading and Settlement Procedure

In traditional time: Outcry or auction system.

In modern time: Electronic trading system for screen based trading. In this system transactions are carried on the computer screen and both the parties are able to see the prices of all shares going up and down all the time during business hours of the stock exchange.

Ensure transparency

Increases efficiency of operation and information.

Large number of participants, which improves liquidity.

Single trading platform.

Steps in trading and settlement procedure

Selection of broker: As a first step, an investor needs to select a broker who is registered with the stock exchange and sign a trading agreement with him/her. He also needs to provide information about his PAN number, Birth date, address, qualifications, occupation, residential status, bank account information

Opening Demat Account: It involves opening a demat account with a depository participant and a bank account for cash transactions.

Placing the order: As next step, the investor has to place an order with the appointed broker to trade in securities giving him clear instructions regarding number and price at which securities must be traded.

Executing the order: On receipt of order, the broker goes online and executes the order matching the price and securities needed by the client. On completion of the transaction he/she issues a contract note to the investor giving all the details of the transaction.

Settlement: After receipt of contract note and a day before the final settlement, the investor delivers the securities sold or makes payment for securities purchased, which is called pay in day. On T+2 day the broker delivers payment or securities to the exchange.

Dematerialisation and Depositories:

Dematerialisation

It refers to the process of cancelling the physical form of securities and converting them into electronic form. It was introduced under the Depositories Act 1966.

Working of Demat System

Identify depository participants either bank, broker or financial institution.

An account opening form and formalities related to other documentation like PAN card details, photograph, etc. is completed.

The physical certificate related to existing securities is given to the depository along with a dematerialisation form.

If investors plan to apply for shares in the IPO, then details of depository participant and demat account has to be provided in the application form. The allotted shares automatically get credited to the demat account.

If shares are sold through to a broker then the depository participant is to be instructed to debit the account with the number of shares the broker then gives instruction to his depository to deliver the shares to the stock exchange the broker receives payment from the buyer and paste them to the seller of securities.

The entire transaction is completed within a period of 2 days the delivery of shares and receipt of payment from the buyer is on T + 2 basis settlement period.

Depository:  

It is an organization which provides an electronic storage system to store electronic forms of securities.

There are two depositories:

NSDL: National Securities Depositories Limited.

CDSL: The Central Depository Services Limited.

Depository Participants: Depository participants are intermediaries electronically connected with the depository. They act as a connect point between the depository and the investor.

National Stock Exchange of India (NSE)

Incorporated in 1992, National Stock Exchange was recognised as a stock exchange in April 1993. It operates in the wholesale debt market segment and capital market segment.

Objectives of NSE

To provide a nationwide trading facility for securities.

To set up a communication network to provide equal access to investors.

To set up an electronic trading system to provide a fair, efficient and transparent securities market. 

To ensure that the settlement cycles are short.

To enable book entry settlements.

To meet international benchmarks and standards.

Market segments of NSE

Exchange provides trading in following segment:

Wholesale debt market segment

Capital market segment

Over the Counter Exchange of India (OTCEI)

It is the counter market where buyers and sellers seek each other to purchase/sell securities of small and medium companies as per terms and conditions. OTCEI was incorporated in 1992 under the Companies Act, 1956.

Advantages of OTC Market

Trading platform to small companies.

Cost effective method for businesses.

Trade in both primary and secondary markets.

Gives freedom of choice to investors.

Transparent system of trading.

Free flow of information.

BSE (Bombay Stock Exchange Limited)

It was Asia's first stock exchange and was established in 1875. It provides a platform for raising capital which has contributed to the growth of the corporate sector. Permanent recognition to BSE was granted as per the Securities Contract (Regulation) Act, 1956.

Objectives of BSE

Efficient and transparent market for trade.

Trading platform for equities.

Ensure active trade.

Services to capital market participants.

Conform to international standards.

Securities and Exchange Board of India (SEBI)

SEBI was established by the Government of India on 12th April, 1988 and given statutory powers in 1992 being passed by the Indian Parliament.

SEBI has its headquarters at the business district of Bandra-Kurla complex in Mumbai and it has regional offices in New Delhi (northern), Kolkata (eastern), Chennai (southern), and Ahmedabad (western).

SEBI works as an interim administrative body which aims to promote growth of the securities market as well as protect the interest of the investors.

Reasons for the Establishment of SEBI

To control unfair trade practices and malpractices in trading securities such as rigging of prices, violation of rules, unofficial private placements, etc.

To protect the interest of the investors.

Purpose and Role of SEBI

Issuers: To the issuers, it provides a market for raising finance in an easy, fair, cost effective and efficient manner.

Investors: To the investors, to protect the interest of the investors by disclosing accurate information on a continuous basis.

Intermediaries: To the intermediaries, to offer a competitive and professional market with efficient infrastructure.

Objectives of SEBI

To regulate the stock exchange and the securities industry in order to promote orderly functioning of capital markets.

To protect the rights as well as the interests of the investors.

To prevent and keep a check on any unfair trading malpractices 

To maintain and create a balance between self and statutory regulations.

To attend investor’s complaints, liaise with the issuers, intermediaries and other stock exchanges in the region through its regional offices.

Functions of SEBI 

SEBI performs the task of regulation and development of the securities market. The functions performed by SEBI are:

1. Regulatory Functions

Registration of brokers, sub-brokers and other intermediaries.

Registration of collective investment schemes.

Regulation of Stock Bankers, underwriters, portfolio exchanges, and merchant bankers.

Regulation of takeover bids by companies.

Undertakes inspection, conducts enquiries and audits of stock exchange and intermediaries.

Changing fee or other charges for carrying out the purposes and operations of the Act.

Performing and exercising powers under Securities Contracts (Regulation) Act 1956, delegated by the Government of India.

2. Development Functions

Educating and training investors and intermediaries of the securities market.

Conduct research and publish information related to trading of securities.

Taking measures for the development of the capital market through the adoption of a flexible approach.

3. Protective Functions

Prohibiting fraudulent and unfair trade practices.

Controlling insider trading and imposing penalties for malpractices.

Educate and protect the investors.

Promoting fair trade practices and a strict code of conduct in the securities market.

The Organisation Structure Of SEBI

SEBI has five operational departments headed by the Executive Director. It is advised or assisted in policy formation by two advisory committees – 

The primary market advisory committee 

The secondary market advisory committee

Objectives of Advisory Committees

To advise SEBI on matters related to regulations.

To advise SEBI on development and regulation of the primary market.

It advises SEBI on disclosure requirements for the companies as per the provisions mentioned in the Act.

To advise SEBI in the legal framework for making dealing in the primary market simple and transparent.

Financial Markets Class 12 Business Studies Revision Notes Chapter 10

Class 12 business studies chapter 10 revision notes.

Financial Market is a pivotal concept of the Business Market, from where the funds are acquired to where they are destined investments all are based in this market, hence the study of this chapter ‘Financial Market’ is mandatory. Students are advised to study this important chapter and then revise the chapter with these revision notes side by side. In order to secure high grades, the students cannot afford to get off track from their studies, and these revision notes will help the students to be in sync with the study.

Financial Markets are those markets where investments are routed. In the revision notes, we supplied – Concept of Financial Market, Function of Financial Market, Types of Financial, Distinction between Capital and Money Market, Methods of Floatation, Stock exchange, functions of the stock exchange, dematerialization and depositories, working of DEMAT system, depository, National Stock Exchange, BSE.

Our motive is to provide the students with a brief knowledge of the whole content keeping it short and crisp.

Important Concepts Financial Markets: Revision Notes

Rivision notes make the students equally ready for the exam and to have a strong foothold over the chapter, the important topics revised here as follows:

1. Concept of Financial Market:

The concept of the Financial Market should be clear in the minds of the students. They should know what they study, and what they need to know, hence the concept is vital.

2. Functions of Financial Market:

The functions of the Financial Market are needed to be known to the students, how the market functions, who have access to these markets are all taught in this chapter.

3. Dematerialization:

The new mode of formation that is Dematerialization needs to be introduced to the students, hence this concept is equally helpful.

4. NSE and BSE:

The NSE and BSE are the most popular and authentic financial markets where the investments are routed.

Why These Revision Notes?

Students are advised to follow the revising strategy as this will prepare the students for the HS exam, they should revise side by side of their new learning:

With the help of this revision material, the students regain their touch of the earlier studied lessons.

The theory is an important one likewise other sections as well hence to note it down in one place and to revise the whole chapter students can easily do it from here.

These notes are an ultimate guide for the students before the exam as it recapitulates the whole chapter in a capsule.

Students will never fall out from their studies following these revision notes.

This is an important chapter that needs frequent revision hence these notes are provided.

Review on NCERT Solutions Chapter 10 Class 12 Business Studies - Financial Markets

Financial Market Financial market is a connecting link between the surplus and deficit units, the financial market brings together the lenders and borrowers.

Functions of Financial Markets:

Mobilisation of savings and channelizing them into the most productive use.

Facilitates price discovery.

Provides liquidity to financial assets.

Reduces the cost of the transaction.

Classification of the Financial Market The two segments of the financial market are - Money Market and the Capital market.

Money Market is a market for short-term funds that are meant for dealing in the monetary assets whose period of maturity is less than one year.

(a) Features of Money Market

The market for short-term.

No fixed geographical location.

Major institutions involved in the money market are RBI Commercial Banks, LIC, GIC, etc.

Common instruments of the money market are call money, treasury bills, CP, CD, commercial bills, etc.

(b) Instruments of Money Market

Treasury bills (T Bills)

Commercial bills

Commercial Paper (CP)

Certificate of Deposits (CD)

(ii) Capital Market: Medium and long-term funds are made available in the market. It includes all the organizations, institutions, and instruments that provide long-term and medium-term funds.

VK Bhalla also talked about this type of market - The capital market is to be defined as the mechanism which channelizes saving into investment or productive use. The capital market distributes the capital resources among the other alternative uses. It acts as an intermediary in the flow of savings of those who save a part of their income to those who want to invest it in productive assets

(a) Features of Capital Market

Link between savers and investment opportunities.

Deals in long term investment.

Utilisés intermediaries.

Determinant of capital formation.

Government rules and regulations.

(b) Types of Capital Markets The main components of the capital markets are Primary Market and Secondary Market.

Chapter-wise Revision Notes on Class 12 Business Studies  

Chapter 1 - Nature and Significance of Management Notes

Chapter 2 - Principles of Management Notes

Chapter 3 - Business Environment Notes

Chapter 4 - Planning Notes

Chapter 5 - Organising Notes

Chapter 6 - Staffing Notes

Chapter 7 - Directing Notes

Chapter 8 - Controlling Notes

Chapter 9 - Financial Management Notes

Chapter 11 - Marketing Notes

Chapter 12 - Consumer Protection Notes

Chapter 13 - Entrepreneurship Development Notes

Class 12 Subject-wise Revision Notes

Class 12 Maths Revision Notes

Class 12 Physics Revision Notes

Class 12 Chemistry Revision Notes

Class 12 Biology Revision Notes

Class 12 Business Studies Revision Notes

Class 12 Economics Revision Notes

Subject-wise Solutions for Class 12

NCERT Solutions for Class 12 Maths

NCERT Solutions for Class 12 Physics

NCERT Solutions for Class 12 Chemistry

NCERT Solutions for Class 12 Biology

NCERT Solutions for Class 12 English

NCERT Solutions for Class 12 Business Studies

NCERT Solutions for Class 12 Economics

NCERT Solutions for Class 12 Accountancy

FAQs on Financial Markets Class 12 Notes CBSE Business Studies Chapter 10 (Free PDF Download)

1. What is the Importance of this Type of Market in Real Life?

Ans: The importance of these types of markets helps in the functioning of the business world, the big corporates run with the help of these markets, the investments are routed here and the funds are channelized here.

2. Will These Revision Notes Help Before the Exam?

Ans: Revision notes are made for the preparation purpose itself, the notes are for the students to revise their text before the exam, as the chapters are huge and revision time is limited these capsuled yet detailed notes will help them in the fast and effective revising process before the exam.

3. Will I Pass by Only Studying this NCERT Guide?

Ans: Yes, you will pass by reading this NCERT standard guide issued by the CBSE board itself.

4. How to study Chapter 10 of Class 12 Business Studies using Vedantu’s Revision Notes?

Ans: Here's a step-by-step guide on how to study Chapter 10 of Class 12 Business Studies using Vedantu's Revision Notes:

Start by downloading Vedantu's Revision Notes for Chapter 10 - Business Studies Chapter 10 Financial Markets. You can find the download link on the Vedantu website.

The Revision Notes are available at free of cost on the Vedantu website and on the Vedantu app.

Read through the notes carefully and make sure you understand all the key concepts and definitions. Take notes on any points you find difficult or want to remember.

Practice answering the questions at the end of each section to test your understanding of the material.

Make use of the real-world examples and case studies provided in the notes to gain a deeper understanding of how business ethics and corporate social responsibility apply in practice.

Use the notes to revise for tests and exams by reviewing key concepts and practicing answering questions.

For a more interactive learning experience, consider joining Vedantu's online classes for Class 12 Business Studies. Vedantu's expert teachers can help you understand the material and answer any questions you may have.

Lastly, don't forget to stay motivated and consistent in your studies. Set aside regular study time and make use of Vedantu's Revision Notes to help you achieve success in your Class 12 Business Studies exams.

5. Do Vedantu’s revision notes for Chapter 10 contain all the required information?

Ans: Chapter 10 "Financial Markets" contain loads of important information and concepts. The chapter defines the financial market and its various aspects, classifications, functions, and applications. It introduces the students to various new terms, differences between important concepts, and the working of various systems, markets, and Stock Exchange. All of these lengthy concepts are cautiously explained in Vedantu's Class 12 Revision Notes for Chapter 10. Extra care has been taken to ensure that every piece of information is explained shortly and crisply.

6. What is the objective of Chapter 10?

Ans: Chapter 10 "Financial Markets" aims to introduce the students to various aspects of the workings of a financial market. It also explains the Money market and its main instruments. It further teaches the students about various types of Capital markets. “Financial Markets'' explains the functions of the Stock Exchange and its definition. It also teaches the functions of NSE and OTCEI, and the role of SEBI in investor protection. Thus, if students understand this chapter well, they will be able to understand the working of the modern-day market well.

7. What happens when allocative functions perform well?

Ans: An allocative function is defined as the function performed by a financial market when it allocates a link between the savers (households) and the investors (business firms) by mobilizing funds between them. When this function performs well, it results in two main scenarios:

The rate of return which is offered to the savers (households) eventually becomes higher.

Scarce resources are then allocated to those firms which offer the highest productivity for the economy.

8. List various functions of financial markets.

Ans: The financial market performs important functions in any economy. It plays a significant part in allocating scarce resources by performing the following important functions:

Mobilization of Savings and Channeling them into its foremost Productive Uses.

Facilitating Price Discovery

Providing Liquidity to Financial Assets

Reducing the Cost of Transactions

All of these concepts and important information from this chapter are explained in Vedantu's Class 12 Revision Notes for Chapter 10. Hence, students must refer to those notes while preparing for their exams.

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CBSE class 12 Business Studies Financial Markets class 12 Notes Business Studies in PDF are available for free download in myCBSEguide mobile app. The best app for CBSE students now provides Financial Markets class 12 Notes Business Studies latest chapter wise notes for quick preparation of CBSE board exams and school based annual examinations. Class 12 Business Studies notes on chapter 10 Financial Markets are also available for download in CBSE Guide website.

CBSE Guide Financial Markets class 12 Notes Business Studies

CBSE guide notes are the comprehensive notes which covers the latest syllabus of CBSE and NCERT. It includes all the topics given in NCERT class 12 Business Studies text book. Users can download CBSE guide quick revision notes from myCBSEguide mobile app and my CBSE guide website.

12 Business Studies notes Chapter 10 Financial Markets

Download CBSE class 12th revision notes for chapter 10 Financial Markets in PDF format for free. Download revision notes for Financial Markets class 12 Notes Business Studies and score high in exams. These are the Financial Markets class 12 Notes prepared by team of expert teachers. The revision notes help you revise the whole chapter 10 in minutes. Revision notes in exam days is one of the best tips recommended by teachers during exam days.

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CBSE Class 12 Business Studies Revision Notes CHAPTER – 10 Financial Markets class 12 Notes Business Studies

Introduction

Financial Intermediation = process of allocating funds from saving surplus units (E.g. households) to saving deficit units (e.g. industries, government etc).

• Alternatives = Banks or Financial markets Financial Markets are the institutional arrangements by which savings generated in the economy are channelised into avenues of investment by industry, business and the government. It is a market for the creation and exchange of financial assets.

Functions of Financial Market

1.Mobilization of savings and channelising them into the most productive uses:

• Facilitates transfer of savings from the savers to the investors.

• Financial markets help people to invest their savings in various financial instruments and earn income and capital appreciation.

• Facilitate mobilization of savings of people and their channelisation into the most productive uses. 2. Facilitate Price Discovery:

• Price of anything depends upon the demand and supply factors.

• Demand and supply of financial assets and securities in financial markets help in deciding the prices of various financial securities; where business firms represent the demand and the households represent the supply. 3. Provide liquidity to financial assets:

• Financial markets provide liquidity to financial instruments by providing a ready market for the sale and purchase of financial assets.

• Whenever the investors want, they can invest their savings into long term investments and whenever they want, they can sell the investments/ instruments and convert them into cash. 4. Reduce the cost of transactions:

• By providing valuable information to buyers and sellers of financial assets, it helps to saves time, effort and money that would have been spent by them to find each other.

• Also investors can buy/sell securities through brokers who charge a nominal commission for their services. This way financial markets facilitate transactions at a very low cost.

Money Market

Market for financial securities with maturity period of less than one year.

• Mkt for low risk, unsecured and short term debt instruments that are highly liquid are traded everyday. • No plysical location bye conducted over the telephone and the internet. • Helps to:

o raise short term funds

o Temporary deployment of funds .

The main instruments of money market are as follows:

l. Treasure Bills: They are issued by the RBI on behalf of the Central Government to meet its short-term requirement of funds. They are issued at a price which is lower than their face value and arc repaid at par. They are available for a minimum amount of Rs.25000 and in multiples thereof. They are also known as Zero Coupon Bonds. They are negotiable instruments i.e. they are freely transferable.

2. Commercial Paper: It is a short term unsecured promissory note issued by large credit worthy companies to raise short term funds at lower rates of interest than market rates. They are negotiable instruments transferable by endorsement and delivery with a fixed maturity period of 15 days to one year.

3. Call Money: It is short term finance repayable on demand, with a maturity period of one day to 15 days, used for interbank transactions. Call Money is a method by which banks borrow from each other to be able to maintain the cash reserve ratio as per RBI. The interest rate paid on call money loans is known as the call rate.

4. Certificate of Deposit: It is an unsecured instrument issued in bearer form by Commercial Banks & Financial Institutions. They can be issued to individuals. Corporations and companies for raising money for a short period ranging from 91 days to one year.

5. Commercial Bill: It is a bill of exchange used to finance the working capital requirements of business firms. A seller of the goods draws the bill on the buyer when goods are sold on credit. When the bill is accepted by the buyer it becomes marketable instrument and is called a trade bill. These bills can be discounted with a bank if the seller needs funds before the bill maturity.

Capital Market

Facilities and institutional arrangements through which long term securities are raised and invested- both debt and equity. • Nature of Capital Markets: a. Important component of Financial markets b. Two segments(primary and secondary) c. 2 forms(organized and unorganized) d. long term securities e. Satisfies long term requirements of funds f. Performs trade-off functions g. Creates dispersion in business ownership h. Helps in capital formation i. Creates liquidity • Features Of Capital Market Instruments: a. Provide long term funds b. Lesser outlay required as unit value of instruments is low c. Duration more than 1 year d. Liquidity e. Lower safety f. Higher expected returns as compared to short term securities

The capital market can be divided into two parts:

1. Primary Market

2. Secondary Market

Primary Market • New issues markets • Transfers investible funds from savers to entrepreneurs. • Funds used for setting up new projects, expansion, diversification, modernization of existing projects, mergers and take overs etc.

Methods of Floatation of New Issues in Primary Market

1. Offer through Prospectus: It involves inviting subscription from the public through issue of prospectus. A prospectus makes a direct appeal to investors to raise capital through an advertisement in newspapers and magazines.

2. Offer for Sale: Under this method, securities are offered for sale through intermediaries like issuing houses or stock brokers. The company sells securities to intermediary/broker at an agreed price and the broker resells them to investors at a higher price.

3. Private Placements: It refers to the process in which securities are allotted to institutional investor and some selected individuals.

4. Rights Issue : It refers to the issue in which new shares are offered to the existing shareholders in proportion to the number of shares they already possess.

5. e-IPOs : It is a method of issuing securities through an on-line system of stock exchange. A company proposing to issue capital to the public through the on-line system of the stock exchange has to enter into an agreement with the stock exchange. This is called an e-initial public offer. SEBI’s registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company.

Secondary Market

1.Refers to a market where existing securities are bought and sold.

2.The company is not involved in the transaction at all. It is between two investors. Features of Secondary market are: 1) Creates liquidity 2) Fixed location 3) Comes after primary market 4) Encourages new investment

Difference between Primary Market and Secondary Market

Stock Exchange/Share Market

A Stock Exchange is an institution which provides a platform for buying and selling of existing securities. It facilitates the exchange of a security i.e. share, debenture etc. into money and vice versa. Following are some of the important functions of a Stock Exchange:

a. Gives liquidity and marketability to existing securities b. Pricing of securities(dd and ss) c. Safety of transactions(membership = regulated + dealings well defined) d. Contributes to economic growth (ensures that savings are channelized to most productive investment avenues) e. Spreading of equity cult(ensures wider share ownership) f. Provides scope for speculation (in a restricted and controlled environment)

Trading Procedure on a Stock Exchange

1. Selection of Broker: in order to trade on a Stock Exchange first a broker is selected who should be a member of stock exchange as they can only trade on the stock exchange.

2. Placing the order: After selecting a broker, the investors specify the type and number of securities they want to buy or sell.

3. Executing the order: The broker will buy or sell the securities as per the instructions of the investor.

4. Settlement: Transactions on a stock exchange may be carried out on either cash basis or carry over basis (i.e. badla). The time period for which the transactions are carried forward is referred to as accounts which vary from a fortnight to a month. All transactions made during one account are to be settled by payment for purchases and by delivery of share certificates, which is a proof of ownership of securities by an individual. Earlier trading on a stock exchange took place through a public outcry or auction system which is now replaced by an online screen based electronic trading system. Moreover, to eliminate, the problems of theft, forgery, transfer, delays etc. an electronic book entry from a holding and transferring securities has been introduced, which is called process of de materialisation of securities.

Difference between Capital and Money Market

Depository Services and DEMAT Accounts : Keeping in the mind the difficulties to transfer of shares in physical form, SEBI has developed a new system in which trading in shares is made compulsory in electronic form Depository services system and D-Mat Account are very basis of this system.

Depository Services: Just like a bank keeps money in safe custody for customers, a depository also is like a bank and keeps securities(e.g. shares, debentures, bonds, mutual funds etc.) in electronic form on behalf of the investor. In the depository a securities account can be opened, all shares can be deposited, they can be withdrawn/ sold at any time and instruction to deliver or receive shares on behalf of the investor can be given . At present there are two depositories in India: NSDL. (National Securities Depository Ltd.) and CDSL (Central Depository Services Ltd.). which are known as “Depository Participants”. (DPs)

Services provided by Depository

Dematerialisation (usually known as demat) is converting physical certificates to electronic form. Rematerialisation, known as remat, is reverse of demat, i.e getting physical certificates from the electronic securities.

Transfer of securities, change of beneficial ownership.

_ Settlement of trades done on exchange connected to the Depository. Now a days on-line paper-less trading in shares of the company is compulsory in India. Depository services is the name of that mechanism. In this system transfer of ownership in shares take place by means of book entry without the physical delivery of shares. When an investor wants to deal in shares of any company he has to open a Demat account. There

are four players who participate in this system.

1. The Depository: A depository is an institution which holds the shares of an investor in electronic form. There are two depository institutions in India these are NSDL and CDSL.

2. The Depository Participant: He opens the account of Investor and maintains securities records.

3 . The Investor: He is a person who wants to deal in shares whose name is recorded

4. The Issuing Company: That organization which issues the securities. This issuing company sends a list of the shareholders to the depositories.

Benefits of Depository Services

• Sale and Purchase of shares and stocks of any company on any stock Exchange. • Saves time. • Lower transaction costs • Ease in trading. • Transparency in transactions. • No counterfeiting of security certificate • Physical presence of investor is not required in stock exchange. • Risk of mutilation and loss of security certificate is eliminated.

Demat Account

Demat (Dematerialized) account refers to an account which an Indian citizen must open with the depository participant (banks, stockbrokers) to trade in listed securities in electronic form. The securities are held in the electronic form by a depository.

Benefits of Demat Account

1. Reduces paper work. 2. Elimination of problems on transfer of shares such as loss, theft and delay. 3. Exemption of stamp duty when transfer of shares. 4. The concept of odd lot stand abolished. 5. Increase liquidity through speedy settlement. 6. Attract foreign investors and promoting foreign investment. 7. A single demat account can hold investments in both equity and debt instruments. 8. Traders can work from anywhere. 9. Automatic credit into demat account for shares arising out of bonus/split/consolidation % merger. 10. Immediate transfers of securities. 11. Change in address recorded with a DP gets registered with all companies in which investor holds securities eliminating the need to correspond with each of them.

Opening of Demat Account

A Demat account is opened on the same lines as that of a bank account. Prescribed account opening forms available with the DP, need to be filled in. Standard agreement is to be signed by the client and the DP, which details the rights and obligation of both parties. Along with the form, the client is required to attach photograph, attested copies of residence proof and proof of identity need to be submitted.

Securities and Exchange Board of India (SEBI)

SEBI was established by Government of India on 12 April 1988 as an interim administrative body to promote orderly and healthy growth of securities market and for investor protection. It was given a statutory status on 30 January1992 through an ordinance which was later replaced by an Act of Parliament known as the SEBI Act, 1992. It seeks to protect the interest of investors in new and second hand securities.

Objectives of SEBI

1. To regulate stock exchange and the securities market to promote their orderly functioning.

2. To protect the rights and interests of investors and to guide & educate them.

3. To prevent trade mal practices such as internal trading.

4. To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers etc.

Functions of SEBI

1. Protective Functions :a) Prohibit fraudulent & unfair trade practices in secondary market (e.g. Price rigging & misleading statement) . b) Prohibit insider trading. c) Educate investors Promote fair practice & code of conduct in securities market

2.Development Functions : a) Promotes training of intermediaries of the securities market . b) Investor education c) Promotion of fair practices code of conduct of all SRO‘s. d) Conducting research & publish information useful to all market participants

3. Regulation Functions : a) Registration of brokers and sub brokers & other players in the mkt. b)) Registration of collective investment schemes & mutual funds. c) Regulation of stock bankers & portfolio exchanges & merchant bankers.

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CBSE Class-12 Revision Notes and Key Points

Financial Markets class 12 Notes Business Studies. CBSE quick revision note for class-12 Business Studies, Chemistry, Math’s, Biology and other subject are very helpful to revise the whole syllabus during exam days. The revision notes covers all important formulas and concepts given in the chapter. Even if you wish to have an overview of a chapter, quick revision notes are here to do if for you. These notes will certainly save your time during stressful exam days.

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• CBSE Class 12 Business Studies Chapter 10 – Financial Markets Class 12 Notes

Financial Markets Class 12 Revision Notes

In the financial markets class 12 notes, we will study the meaning or the concept of the Financial Market. We will understand why financial markets exist. Then, we will understand the classification of Financial Markets. Thus, we will get to know about the two types of Financial Market. These are Money Market and Capital Market. Furthermore, we will explain the meaning of the Money Market. Also, we will describe the Instruments of the Money Market. This would include acquiring knowledge of Treasury bill, Commercial Paper, Call Money, CD, and Commercial Bill. Moreover, we will explain the nature and types of Capital Market. Then, we will study the concept of Primary Market. Here, we will study various methods of floating new issues in the primary market. After this, we will discuss the Secondary Market. Also, we will understand the distinction between Capital Market and Money Market.

Furthermore, we will explain the meaning and functions of Stock Exchanges. Moreover, we will discuss the trading procedure on a stock exchange. Also, we will explain the functioning of NSEI and OTCEI. Then, we will describe the role of SEBI in investor protection. Thus, at the end of the chapter, we will study the objectives of SEBI. Also, we will understand the regulatory and development functions of SEBI.  The Organization Structure of SEBI will also be discussed.

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Sub-topics under Financial Markets:

• Concept of Financial Market : In this Sub-topic, we will study the meaning or the concept of the Financial Market.
• Money Market : In this Sub-topic, we will explain the meaning of the Money Market. Also, we will describe the Instruments of the Money Market.
• Capital Market :  In this Sub-topic, we will explain the nature and types of Capital Market.
• Stock Exchange : In this Sub-topic, we will explain the meaning and functions of Stock Exchanges.

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• Class 12th /

Financial Markets Class 12

• Updated on  
• Mar 4, 2021

The term finance may scare some of us as it requires practical knowledge and utmost dedication and sincerity to understand, especially for students with commerce subjects . The chapter on Business Studies on Financial Markets will let you know more about the financial market structure of India, the different types of the financial market, functions of SEBI , etc. so if you want to score more and revise this chapter on Financial Markets class 12, this blog will be of great help to you!

This Blog Includes:

What is a financial market , functions of financial markets, money market, capital market, important functions of stock exchange, types of operators in a stock exchange, trading procedure on a stock exchange, all india stock exchange, securities exchange board of india , functions of sebi.

Must-Read Business Studies Class 12 Case Studies  

According to the chapter of Business Studies on financial markets class 12, the term financial market or markets refer to a link between surplus and deficit units. In other words, a financial market is a place that brings lenders and borrowers together. 

According to the chapter of Financial Market class 12, the various functions of financial markets are listed down below: 

• Mobilisation and channelling of savings into most efficient uses
• Encourages and facilitates price discovery
• Creates liquidity for financial assets
• Decreases transaction costs

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Financial Market Classification 

On the basis of the chapter of Business Studies of financial markets class 12, there are 2 segments of the financial market namely:

This is a market for short-term funds which are meant for dealing in monetary assets and whose period of maturity is less than one year. The features of this market are:

• It is a market for short term funds requirements.
• There is no fixed geographical location. 
• The main institutions involved in the money market are RBI, commercial or private banks etc.  

Instruments of the Money Market

• Call money 
• Treasury bill 
• Commercial bills 
• Commercial paper 
• Certificate of deposits etc. 

The other type of market is called as capital market. This is a market for medium to long term funds and hence includes all the organisations and institutions that provide long term or/and medium-term funds to the business. The features of the capital market are: 

• It creates a link between savers and investment opportunities
• Helps to deal in long term investments
• Utilises intermediaries
• The determinant of capital formation for a business
• Government rules and regulation.

Types of Capital Market

• The public issue though the prospectus
• Offer for sale
• Private placement
• Right issue (for existing companies)
• Creates liquidity
• Has a fixed location
• Comes after the primary market
• Encourages new investment

Check Out Directing Class 12 Notes

As per the chapter of financial markets class 12, the important functions of the stock exchange include the following points: 

• Stock exchange gives liquidity and marketability to the existing securities and shares. 
• Economic barometer
• Pricing of securities
• Providing scope for speculation
• Safety of transactions
• Contributes to economic growth
• Spreading of the equity cult
• Better allocation of capital
• Promotes the habits of savings and investment

According to the chapter of financial markets class 12, here is a list of different types of operators in stock exchange: 

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There is a particular procedure for trading on a stock exchange as per the chapter on financial markets class 12. The entire procedure is mentioned below. 

• Selection of the broker : The first and the foremost step in the trading procedure on a stock exchange is selecting and choosing the right broker who must be a member of the stock exchange.
• Placing the order : After selecting a broker for the trading, the next step is to place the order. The investors may specify the number and type of securities that he/she wants to trade. 
• Executing the order : After the order has been placed to the broker by the investor, the broker will then buy or sell the securities as per the instructions and information given by the investor. 
• Settlement: After the execution of the order by the broker, the transactions are carried out accordingly. It can be carried out either on a cash basis or carryover basis. The amount of time during which transactions are carried forward is referred to as accounts ranging from one quarter to one month. All transactions made in the course of a single account shall be resolved by payment for sales and by the issuance of share certificates, which is evidence of the individual’s ownership of the securities.

As per the chapter on Financial Markets class 12, India has 2 all India stock exchanges namely:

• To provide securities for bot the market i.e., capital as well as the money market. 
• To make the payment and delivery in 15 days of the time period.
• Compulsory market makers to provide liquidity. 
• To make the complete settlement within one week’s time. 

The Securities Exchange Board of India also known as SEBI was set up in 1998 in order to regulate the functions of the securities in the market. It aims at promoting orderly and healthy development in the stock market. The main objectives of SEBI are: 

• To protect the interest of the investors 
• To promote and develop the stock exchange dealings 
• To regulate and facilitate dealings

As per the chapter of financial markets class 12, there are 3 broad categories of functions of SEBI namely:

• Protective Functions
• Developmental Functions
• Regulatory Functions

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With this, we have finished revising this chapter on Financial Markets class 12. We hope that this blog may prove helpful for you all for that extra last moment revision. Check out our other blogs and study notes of different subjects, and stay tuned with Leverage Edu . If you need help on to which course to choose after class 12th commerce , get in touch with our experts who will guide you every step of the way! Sign up for a free session today!

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Financial Markets Class 12 Notes PDF (Handwritten & Short Notes)

Students who have opted commerce stream, need to understand better and score well in questions regarding the chapter Financial Markets. Class 12 students can smoothly perform better with the help of Financial Markets Class 12 notes. Accordingly students can also understand other chapters of Class 12 Business Studies in a better way. 

Students can also practise some sort of questions from the Financial Markets Class 12 notes. Practising Financial Markets questions on a regular basis can help students to increase their accuracy level. Accordingly, students can also improve their inner confidence in attempting questions of the chapter Financial Markets. Inner confidence is a must for all students to decrease the level of stress while giving the Class 12 Business Studies board exam. Therefore, here we provide the Financial Markets Class 12 Notes in PDF file format.

Financial Markets Notes Class 12 PDF

The Financial Markets notes Class 12 PDF are one of the important study materials while preparing for the chapter. Students generally refer to the notes after completing the chapter Financial Markets. Class 12 notes is a collection of short summaries of sub-topics, topics and key points. With the help of these summaries, students can remember the important points on their fingertips. 

How to Download the Financial Markets Notes Class 12 in PDF?

All students studying in Class 12, need to have easy and free access to the Financial Markets notes Class 12 in PDF. Steps to download the Class 12 Business Studies Notes are:

• Open the Selfstudys website on any of the electronic devices. 
• Bring the arrow towards NCERT Books & Solutions which can be seen in the navigation bar. 
• Drop-up menu will appear, select NCERT notes from the list.

• A new page will appear, select Class 12th from the list of classes.

• Now select Business Studies from the list of subjects.

• Again a new page will appear, now select Financial Markets from the list of chapters. 

Features of the Financial Markets Notes Class 12

Features of Financial Markets notes Class 12 are considered to be an important and noticeable part. Those important features of Class 12 Business Studies notes are: 

• Number of the Unit is Given: Inside the Class 12 Financial Markets notes, the number of the unit is given. Accordingly students can easily identify the chapter name with the help of unit number of Class 12 Business Studies. 
• All Concepts are Completed: In the Class 12 Financial Markets notes, all the concepts are completed. Students can get a brief knowledge about the chapter Financial Markets. 
• Questions are Given: On the last page of the Class 12 Business Studies notes, different questions regarding the chapter Financial Markets are given to practise. Accordingly students can also improve their comprehensive skill for the chapter Financial Markets. 
• Chapter Name is Included: The chapter name of Financial Markets is mentioned inside the Class 12 Financial Markets notes. Through the notes, students can get a brief idea about the chapter Financial Markets. 
•  Provided in a Simple Language: The Financial Markets Class 12 notes are provided in a simpler language. Through this, students can easily understand all complex topics in a simpler manner. 
• For CBSE Board And State Boards: It is generally created for students studying in Class 12; thus, CBSE board as well as state board students can use the Financial Markets Class 12 Notes as it is suitable for them.

Benefits of Financial Markets Notes Class 12

The Financial Markets notes Class 12 has been associated with many benefits which includes helps to pay attention, helps in remembering the topics, etc. Through these students can easily score well in Class 12 Business Studies board exam papers. 

• Helps in Paying Attention: Class 12 Financial Markets notes can help students to pay attention and to stay alert throughout the preparation. Accordingly, Class 12 students can easily discover and cover different types of topics and concepts in a creative way. 
• Helps in Revising the Topics: With the help of Financial Markets notes Class 12, students can smoothly revise all the topics. According to which, students can boost their preparation for the chapter The Financial Markets and can perform well. 
• Can Attract Many Students as Eye-Catching Format of Notes is Given: The Class 12 notes of the chapter Financial Markets in the PDF have an eye-catching format. This format can attract many Class 12 students to complete the chapter The Financial Markets. 
•  Can Increase Comprehensive Skill: The Class 12 notes of the chapter The Financial Markets can aid students to increase their comprehensive skill. According to these skills, students can easily score well in the questions of the chapter The Financial Markets. 
• Helps Students to be Active During the Preparation: It is a must for all students to remain active and alert while preparing for the chapter The Financial Markets. Students can be active and alert with the help of Class 12 Financial Markets notes. Accordingly students can cover and revise each and every concept included in the Business Studies chapter The Financial Markets. 
• All Topics Are Covered: Inside the Class 12 Financial Markets notes, all topics are covered in a perfect manner so that students can easily complete the whole chapter. 

Strategy Tips to Cover the Chapter Financial Markets  

It is a must for Class 12 students to follow some strategy tips to cover The Financial Markets. Important strategy tips are: 

• Finish off the Chapter: First and foremost tip is to finish off the chapter The Financial Markets in a proper and accurate way. 
• Routine Practise of Questions: After completing the chapter Financial Markets, students need to have a routine practice of questions. Regular practice can help students to improve their accuracy level in attempting questions. 
• Jot Down The Mistakes: While analysing the questions, students can get to know their flaws. After identification, it is very important that students jot down their mistakes. Through this step, students can easily remove their earlier mistakes while attempting Financial Markets questions. 
• Try to Study During the Day: Many students prefer studying during the night but it is good to study during the day. As students would have a higher ability to concentrate in the chapter The Financial Markets. There are many benefits other than this, those are: natural daylight is better than artificial light, both friends and teachers are contactable to clear doubts. 
• Remain Focused: Throughout the preparation of the chapter Financial Markets, students are advised to remain focused. Accordingly, students can cover various topics whether it is easy, moderate, or difficult. 
• Revise Within a Day: After starting the revision process of Class 12 Financial Markets it is very important to complete the revision within a day otherwise the extension in revision will not aid much value in the preparation.
• Take Constant Breaks: It is a must to take constant breaks while preparing for the chapter Financial Markets. As students can lose their track of preparation if proper short breaks are not taken.  
• Try to Remain Calm: Class 12 students need to remain calm while preparing for the chapter Financial Markets in order to try to remove their exam stress and anxiety. 

Why Is It Important To Go Through The Financial Markets Class 12 Notes? 

It is a must to go through the Financial Markets Class 12 notes as it is considered as important study material. In this Class 12 Business Studies notes, topics and concepts are explained in a brief manner. Through this study material, students can understand all Financial Markets topics in an effective manner. These notes can be generally used during the last minute revision that help students memorise all topics of Financial Markets easily and help them solve questions in a better way. 

What Are Class 12 Financial Markets Notes and Why Is It Popular? 

The Class 12 Financial Markets notes are short and compressed content which includes all topics and concepts brief in an organised manner, better presentation and easier explanations. These notes help students to improve their grip for the chapter Financial Markets. Strong foundation for the chapter Financial Markets can help students to improve their score and because of these reasons the revision notes of Class 12 Financial Markets is popular among students.

Is Financial Markets Class 12 Notes Relevant to Exam Preparation?

Yes, the Financial Markets Class 12 notes are very much relevant during the preparation. The Class 12 Accountancy content is very accurate and contains relevant topics for students to study. Accordingly, students don’t need to search for various important topics here and there. Accordingly, students can easily study relevant content of the Class 12 Business Studies chapter Financial Markets if they refer to the NCERT Class 12 Business Studies Notes. 

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Chapter 10: Financial Markets

• CBSE Class 12
• Unit 2: Business Studies II
• Chapter 10: Financial Markets Notes
• Introduction
• BUSINESS STUDIES-XII
• Publication
• ABCD CLASSES
• Business Studies

CONCEPT & MEANING:

• Understand the concept of the financial market.
• Understand the capital market and money market as types of financial markets.
• Describe the various money market instruments.
• Differentiate between capital market and money market
• Explain primary and secondary markets as types of capital markets. Discuss the methods of floating new issues in the primary market.
• Distinguish between primary and secondary markets.
• Explain the functions of a stock exchange.
• Discuss the trading procedure in a stock exchange.
• Securities and Exchange Board of India (SEBI) - objectives and functions
• State the objectives of SEBI.
• Explain the functions of SEBI.

Financial Intermediation = process of allocating funds from saving surplus units (E.g. households) to saving deficit units (e.g. industries, government, etc). Alternatives = Banks or Financial markets.

Functions of financial market

FINANCIAL MARKET

Bring together borrowers and lenders together, for the creation and exchange of financial assets

In to the most productive investment opportunity

Classification of Financial Markets

• Capital markets
• Money markets

FUNCTIONS OF THE FINANCIAL MARKET

• The price of anything depends upon the demand and supply factors.
• Demand and supply of financial assets and securities in financial markets help in deciding the prices of various financial securities; where business firms represent the demand and the households represent the supply.
• By providing valuable information to buyers and sellers of financial assets, it helps to save time, effort, and money that would have been spent by them to find each other.
• Also, investors can buy/sell securities through brokers who charge a nominal commission for their services.
• This way financial market facilitates transactions at a very low cost.
• Financial markets provide liquidity to financial instruments by providing a ready market for the sale and purchase of financial assets.
• Whenever the investors want, they can invest their savings into long term investments and
• Whenever they want, they can sell the investments/ instruments and convert them into cash.
• Facilitates transfer of savings from the savers to the investors.
• Financial markets help people to invest their savings in various financial instruments and earn income and capital appreciation.

Types of Financial Markets

Money Market

MONEY MARKET

• Provides funds for meeting short term requirements of cash ( one year or less)
• Enables the raising of short-term funds for meeting the temporary shortages of cash .
• Involves Institutions include the reserve bank, the state bank of India, LIC, GIC, UTI

Money Market Instruments:

Capital market

CAPITAL MARKET:

• Market for medium and long term funds to obtain finances for long term investments, such as buying plant, machinery, buildings, etc
• Includes Equity shares or ownership securities; Debentures, preference shares.
• Components of the capital market are
• The Primary or new issue market
• The secondary market or the Stock Exchange ​​​​​​​

Primary market

PRIMARY MARKET

• It deals with the issue of new or fresh capital also referred to as the New Issue Market (NIM).
• Securities are issued by the company directly to investors.

Methods of Floatation

1. Offer through Prospectus:

• Most popular method of raising funds is by public companies.
• Company issues a prospectus to inform and attract the investing public.
• Prospectus contains the financial performance of the company to let the public know about the risk factor in the likely investment .

2. Offer for Sale:

• First step : - The company sells securities at an agreed price to brokers.
• Second step : - Resell to the investing public at a higher price.
• Benefit: - Avoid the difficult procedure and minimize the floating cost.

3. Private Placement:

• A private placement is the allotment of securities by a company to institutional investors and some selected individuals.
• Benefit:- Cost-effective method for small companies to avoid expenses like underwriter commission and printing of prospectus etc .

4. Rights Issue:

• To maintain the control of the existing shareholder are offered the ‘right ‘to buy new shares in proportion to the number of shares they already possess.
• Shareholders may accept this offer or reject it.
• A company proposing to issue capital to the public through the online system of the stock exchange has to enter into an agreement with the stock exchange.
• SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company.
• The issuer Company should also appoint a registrar to the issue having electronic connectivity with the exchange.

Secondary market and Stock Exchange

SECONDARY MARKET & STOCK EXCHANGE:

The market for the purchase and sale of existing securities within the regulatory framework prescribed by SEBI

Functions of a Stock Exchange

• Contributes to Economic Growth Instead of investing money in an unproductive sector like jewelry stock exchange provide avenues for investment in the securities market and help in capital formation and economic growth.
• Liquidity and Marketability to Existing Securities: By converting the securities into the cash stock exchange provide a ready market for the investors. This provides both liquidity and easy marketability to already existing securities in the market
• Allow Pricing of Securities: Share prices on a stock exchange are determined by the forces of demand and supply. Such a valuation provides important instant information to both buyers and sellers in the market.
• Scope for Speculation : Provides scope within the provisions of law for speculative activity in a restricted and controlled manner to ensure liquidity and price continuity in the stock market.
• Spreading of Equity Cult: Plays an essential role in ensuring wider share ownership by regulating new issues, better trading practices, and taking effective steps in educating the public about investments.
• Ensures better allocation of capital: - Reliable companies whose shares have high value can raise the additional fund in the capital market by gaining the faith of the investors
• Safety of Transaction: The membership of a stock exchange is well regulated and its dealings are well defined according to the existing legal framework. Investing public gets a safe and fair deal on the market.

DIFFERENCE:

Depository System

DEPOSITORY SYSTEM

Important terms related to the stock exchange

• Dematerialization : stocks are kept in electronic form instead of physical form (i.e. share certificates). It helps in overcoming the problem of theft, forgery, delays, misplaced certificates, and unnecessary paperwork.

Benefits of Demat Account

• Reduces paperwork.
•  Elimination of problems with the transfer of shares such as loss, theft and delay.
• Exemption of stamp duty when the transfer of shares.
• The concept of odd-lot stands abolished.
• Increase liquidity through speedy settlement.
• Attract foreign investors and promote foreign investment.

Working on the Demat System

•  A depository participant (DP), either a bank, broker or financial services company, may be identified.
•  An account opening form and documentation (PAN card details, photograph, and power of attorney) may be completed.
•  The physical certificate is to be given to the DP along with a dematerialization request form.
•  If shares are applied in a public offer, simple details of the DP and Demat accounts are to be given and the shares on allotment would automatically be credited to the DEMAT account.
•  If shares are to be sold through a broker, the DP is to be instructed to debit the account with the number of shares.
•  The broker then gives instructions to his DP for the delivery of the shares to the stock exchange.
•  The brokers then receive payment and pay the person for the shares sold.
•  All these transactions are to be completed within 2 days, i.e., delivery of shares and payment received from the buyer is on T+2 bases, settlement period.

Advantages of Electronic trading systems or screen-based trading has certain

• It allows participants to see the prices of all securities in the market while business is being transacted.
• They are able to see the full market in real-time.
• It increases the efficiency of operations since there is a reduction in time, cost, and risk of error.
• People from all over the country and even abroad who wish to participate in the stock market can brokers or members without knowing each other.
• This system has enabled a large number of participants to trade with each other, thereby improving the liquidity of the market.
• A single trading platform has been provided as a business is transacted at the same time in all the trading centers.

Now, screen-based trading or online trading is the only way in which you can buy or sell shares.

Important terms

• Demutualization : Process that separates the trading rights of members or brokers in a stock exchange from its ownership and control.
• Depository: - Organisation that holds securities (like shares, debentures, bonds, government securities, mutual fund units, etc.) of investors in electronic forms through a registered Depository Participant. Two Depositories viz. National Securities Depository Limited   (NSDL) and Central Depository Services (India) Limited (CDSL) are registered with SEBI 
• Depository Participant: - agent of the depository through which it interfaces with the investor and provides depository services. Commercial banks, foreign banks operating in India with the approval of the Reserve Bank of India.

TRADING PROCEDURE

The procedure for the purchase and sale of securities in a stock exchange involves the following steps:

• The first step is to select a broker who will buy/sell securities on behalf of the speculator/ investor.
• The investor has to sign a broker-client agreement and a client registration form before placing an order to buy or sell securities.
• He has also to provide certain other details and information such as PAN number (mandatory) , Bank account details, Depository account details, etc.
• The broker then opens a trading account in the name of the investor
• The investor has to open a Demat account or beneficial owner‘(BO) account with a depository participant (DP) for holding and transferring securities in the Dema t form.
• He will also have to open a bank account for cash transactions in the securities market.
• The order can be communicated to the broker and should specify the securities to be bought or sold and the price range within which the order is to be executed.
• The broker will then go ahead with the deal at the above-mentioned price or the best price available.
• An order confirmation slip is issued to the investor by the broker. Only the securities of listed companies can be traded on the stock exchange.
• The broker goes online and connects to the main stock exchange and matches the share and best price available.
• When the shares can be bought or sold at the price mentioned, it will be communicated to the broker‘s terminal and the order will be executed electronically.
• The broker will issue a trade confirmation slip to the investor.
• After the trade has been executed, within 24 hours the broker issues a Contract Note .
• A Unique Order Code number is assigned to each transaction and is printed on the contract note.
• This is the last stage in the trading of securities done by the brokers on behalf of their clients.
• The investor has to deliver the shares/or pay cash for the shares bought.

Cash in cash-out day

• Cash in day: - Cash is paid or securities are delivered on the pay-in day, which is before the T+2 day as the deal has to be settled and finalized on the T+2 day. The settlement cycle is on T+2 days on a rolling settlement basis.
• Cash-out day: - On the T+2 day, the exchange will deliver the share or make payment to the other broker. This is called the pay-out day. The broker then has to make payment to the investor within 24 hours of the payout day since he has already received payment from the exchange.

Contract note:-

• This note contains details of the number of shares bought or sold, the price, the date and time of the deal, and the brokerage charges.
• This is an important document as it is legally enforceable and helps to settle disputes/claims between the investor and the broker .

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India was established by the Government of India on 12 April 1988as an interim administrative body to Protect the interests of investors To promote the development of the securities market And regulate the securities market

Purpose and Role of SEBI

• To the issuers: To provide a market to raise the finances in an EasyFair Efficient manner.

• To the investors: Provide protection of their rights and interests through Adequate Accurate and Authentic information on a continuous basis.

• To the intermediaries: Offer a competitive professionalized with adequate and efficient infrastructure. So that they are able to deliver better service to the investors and issuers.

Objectives of SEBI

• Regulate stock exchanges and the securities industry to promote their orderly functioning.
• Protect the rights and interests of investors and guide and educate them.
• Prevent trading malpractices and achieve a balance between self-regulation by the securities industry and its statutory regulation.
• To regulate and develop a code of conduct and fair practices by intermediaries like brokers.

Functions of SEBI

Protective functions

• Controlling insider trading: It prevents insiders such as directors, and promoters who have access to price-sensitive information regarding securities of the company (which is not available to the public) to make individual profits through the trading of securities.
• Undertaking steps for investment or protection.
• Promotes fair practices and code of conduct in the securities market.
• Stops fraudulent and unfair trade practices in the security market: - like making misleading statements and price rigging. (Manipulating with the sole intention of inflating or deflating the market price of securities is termed as “price rigging)

Developmental functions

• C onducting research & publish information useful to all market participants.
• U ndertakes measures to develop the capital markets by adopting a flexible and adaptable approach.
• T raining of intermediaries of the securities market.

Regulatory functions

• Conducts inquiries and audits of the stock exchanges.
• Register and regulates the working of stockbrokers, sub-brokers, and share transfer agents.
• Registers and regulates the working of mutual funds etc.
• Regulation of stockbroker, portfolio exchanges, underwriters & merchant bankers
• Regulation of tasks over bids by companies.
• Levying fee or other charges as per the act.
• Performing and exercising such power under Securities Contracts (Regulation) Act 1956, as may be delegated by the Government of India.

Related Chapter Name

Chapter 9: financial management.

• Concept and objectives of financial management.
• Introduction and Role & Objectives of Financial Management
• Financial Decisions
• Investment Decisions
• Financing Decisions
• Dividend Decisions
• Financial Planning
• Capital Structure
• Financial Leverage
• Fixed Capital
• Working Capital

Chapter 11: Marketing Management

• Marketing management philosophies.
• Introduction and Marketing
• Marketing Management
• Marketing Mix
• Role of marketing
• Functions of Marketing
• Product Mix
• Channels of Distribution
• Promotion Mix

Chapter 12: Consumer Protection

• Introduction and Importance of Consumer protection
• legal protection to consumers
• Rights & Responsibilities of Consumer
• Legal Redressal Forum
• Remedies/Relief Available
• Role of Consumer Organisations & NGOs
• Redressal agencies
• Relief available
• Role of Consumer organisations & NGO's

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• Commerce Important Questions
• Class 12 Business Studies
• Chapter 10 Financial Markets

Important Questions for CBSE Class 12 Business Studies Chapter 10 - Financial Markets

Important Questions with Answers for CBSE Class 12 Business Studies Chapter 10- Financial Markets which is outlined by expert Business Studies teachers from the latest version of CBSE (NCERT) books

CBSE Class 12 Business Studies Chapter-10 Important Questions

Mention the kind of issue in which stock is offered to an existing stockholder.

Answer: Right Issue

Name to money market instruments

Answer: a) Treasury Bills b) Commercial Paper

Explain the four functions of ‘Secondary Market’.

Answer: The four functions of Secondary Market are mentioned below.

• The main function is to provide marketability and liquidity to the present securities and assets. It provides a platform for trading to present customers.
• It allows a constant estimate of the securities and helps in building demand and supply. This estimation helps in determining the price of the securities.
• It guarantees fairness and safety in a transaction.
• It gives a platform for channelising the saving to the most profitable way.

State the protective function of the Securities and Exchange Board of India.

Answer: The protective function of the Securities and Exchange Board of India is.

• It examines violations such as violation of rules and insider trading, and disobey to the companies act.
• It provides information about the companies needed by the client.
• It provides guidelines related to the investments in securities.
• It also provides a code of conduct for business practices

Write the difference between money market and capital market on the basis of participants, safety, instruments and expected return.

Answer: The difference between the money market and capital market are.

Also Check: Business Studies MCQs

Explain the functions and objectives of the Securities and Exchange Board of India (SEBI).

Answer: Function of Securities and Exchange Board of India (SEBI) is divided into two parts

• It helps in the registration of brokers and sub-broker and other associates of the market.
• It helps in the registration of collective schemes and mutual funds
• It regulates portfolio exchanges, share bankers, and merchant banker.
• Probation of unfair trade practices and fraud.
• Control insider trade and takeover bids.
• Educate investors.
• Training of intermediaries.
• Promotion of Code of Conduct and fair practices.
• Conduct research and public information, useful for market participants.

Objectives of the Securities and Exchange Board of India (SEBI).

• Regulate share exchange and securities used to promote orderly function.
• Protect interest and right of individual investors, investors, and guide and train them.
• To prevent fraud and accomplish a balance between self-regulation by the security industry and its statutory body.

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McKinsey Global Private Markets Review 2024: Private markets in a slower era

At a glance, macroeconomic challenges continued.

McKinsey Global Private Markets Review 2024: Private markets: A slower era

If 2022 was a tale of two halves, with robust fundraising and deal activity in the first six months followed by a slowdown in the second half, then 2023 might be considered a tale of one whole. Macroeconomic headwinds persisted throughout the year, with rising financing costs, and an uncertain growth outlook taking a toll on private markets. Full-year fundraising continued to decline from 2021’s lofty peak, weighed down by the “denominator effect” that persisted in part due to a less active deal market. Managers largely held onto assets to avoid selling in a lower-multiple environment, fueling an activity-dampening cycle in which distribution-starved limited partners (LPs) reined in new commitments.

About the authors

This article is a summary of a larger report, available as a PDF, that is a collaborative effort by Fredrik Dahlqvist , Alastair Green , Paul Maia, Alexandra Nee , David Quigley , Aditya Sanghvi , Connor Mangan, John Spivey, Rahel Schneider, and Brian Vickery , representing views from McKinsey’s Private Equity & Principal Investors Practice.

Performance in most private asset classes remained below historical averages for a second consecutive year. Decade-long tailwinds from low and falling interest rates and consistently expanding multiples seem to be things of the past. As private market managers look to boost performance in this new era of investing, a deeper focus on revenue growth and margin expansion will be needed now more than ever.

Perspectives on a slower era in private markets

Global fundraising contracted.

Fundraising fell 22 percent across private market asset classes globally to just over $1 trillion, as of year-end reported data—the lowest total since 2017. Fundraising in North America, a rare bright spot in 2022, declined in line with global totals, while in Europe, fundraising proved most resilient, falling just 3 percent. In Asia, fundraising fell precipitously and now sits 72 percent below the region’s 2018 peak.

Despite difficult fundraising conditions, headwinds did not affect all strategies or managers equally. Private equity (PE) buyout strategies posted their best fundraising year ever, and larger managers and vehicles also fared well, continuing the prior year’s trend toward greater fundraising concentration.

The numerator effect persisted

Despite a marked recovery in the denominator—the 1,000 largest US retirement funds grew 7 percent in the year ending September 2023, after falling 14 percent the prior year, for example 1 “U.S. retirement plans recover half of 2022 losses amid no-show recession,” Pensions and Investments , February 12, 2024. —many LPs remain overexposed to private markets relative to their target allocations. LPs started 2023 overweight: according to analysis from CEM Benchmarking, average allocations across PE, infrastructure, and real estate were at or above target allocations as of the beginning of the year. And the numerator grew throughout the year, as a lack of exits and rebounding valuations drove net asset values (NAVs) higher. While not all LPs strictly follow asset allocation targets, our analysis in partnership with global private markets firm StepStone Group suggests that an overallocation of just one percentage point can reduce planned commitments by as much as 10 to 12 percent per year for five years or more.

Despite these headwinds, recent surveys indicate that LPs remain broadly committed to private markets. In fact, the majority plan to maintain or increase allocations over the medium to long term.

Investors fled to known names and larger funds

Fundraising concentration reached its highest level in over a decade, as investors continued to shift new commitments in favor of the largest fund managers. The 25 most successful fundraisers collected 41 percent of aggregate commitments to closed-end funds (with the top five managers accounting for nearly half that total). Closed-end fundraising totals may understate the extent of concentration in the industry overall, as the largest managers also tend to be more successful in raising non-institutional capital.

While the largest funds grew even larger—the largest vehicles on record were raised in buyout, real estate, infrastructure, and private debt in 2023—smaller and newer funds struggled. Fewer than 1,700 funds of less than $1 billion were closed during the year, half as many as closed in 2022 and the fewest of any year since 2012. New manager formation also fell to the lowest level since 2012, with just 651 new firms launched in 2023.

Whether recent fundraising concentration and a spate of M&A activity signals the beginning of oft-rumored consolidation in the private markets remains uncertain, as a similar pattern developed in each of the last two fundraising downturns before giving way to renewed entrepreneurialism among general partners (GPs) and commitment diversification among LPs. Compared with how things played out in the last two downturns, perhaps this movie really is different, or perhaps we’re watching a trilogy reusing a familiar plotline.

Dry powder inventory spiked (again)

Private markets assets under management totaled $13.1 trillion as of June 30, 2023, and have grown nearly 20 percent per annum since 2018. Dry powder reserves—the amount of capital committed but not yet deployed—increased to $3.7 trillion, marking the ninth consecutive year of growth. Dry powder inventory—the amount of capital available to GPs expressed as a multiple of annual deployment—increased for the second consecutive year in PE, as new commitments continued to outpace deal activity. Inventory sat at 1.6 years in 2023, up markedly from the 0.9 years recorded at the end of 2021 but still within the historical range. NAV grew as well, largely driven by the reluctance of managers to exit positions and crystallize returns in a depressed multiple environment.

Private equity strategies diverged

Buyout and venture capital, the two largest PE sub-asset classes, charted wildly different courses over the past 18 months. Buyout notched its highest fundraising year ever in 2023, and its performance improved, with funds posting a (still paltry) 5 percent net internal rate of return through September 30. And although buyout deal volumes declined by 19 percent, 2023 was still the third-most-active year on record. In contrast, venture capital (VC) fundraising declined by nearly 60 percent, equaling its lowest total since 2015, and deal volume fell by 36 percent to the lowest level since 2019. VC funds returned –3 percent through September, posting negative returns for seven consecutive quarters. VC was the fastest-growing—as well as the highest-performing—PE strategy by a significant margin from 2010 to 2022, but investors appear to be reevaluating their approach in the current environment.

Private equity entry multiples contracted

PE buyout entry multiples declined by roughly one turn from 11.9 to 11.0 times EBITDA, slightly outpacing the decline in public market multiples (down from 12.1 to 11.3 times EBITDA), through the first nine months of 2023. For nearly a decade leading up to 2022, managers consistently sold assets into a higher-multiple environment than that in which they had bought those assets, providing a substantial performance tailwind for the industry. Nowhere has this been truer than in technology. After experiencing more than eight turns of multiple expansion from 2009 to 2021 (the most of any sector), technology multiples have declined by nearly three turns in the past two years, 50 percent more than in any other sector. Overall, roughly two-thirds of the total return for buyout deals that were entered in 2010 or later and exited in 2021 or before can be attributed to market multiple expansion and leverage. Now, with falling multiples and higher financing costs, revenue growth and margin expansion are taking center stage for GPs.

Real estate receded

Demand uncertainty, slowing rent growth, and elevated financing costs drove cap rates higher and made price discovery challenging, all of which weighed on deal volume, fundraising, and investment performance. Global closed-end fundraising declined 34 percent year over year, and funds returned −4 percent in the first nine months of the year, losing money for the first time since the 2007–08 global financial crisis. Capital shifted away from core and core-plus strategies as investors sought liquidity via redemptions in open-end vehicles, from which net outflows reached their highest level in at least two decades. Opportunistic strategies benefited from this shift, with investors focusing on capital appreciation over income generation in a market where alternative sources of yield have grown more attractive. Rising interest rates widened bid–ask spreads and impaired deal volume across food groups, including in what were formerly hot sectors: multifamily and industrial.

Private debt pays dividends

Debt again proved to be the most resilient private asset class against a turbulent market backdrop. Fundraising declined just 13 percent, largely driven by lower commitments to direct lending strategies, for which a slower PE deal environment has made capital deployment challenging. The asset class also posted the highest returns among all private asset classes through September 30. Many private debt securities are tied to floating rates, which enhance returns in a rising-rate environment. Thus far, managers appear to have successfully navigated the rising incidence of default and distress exhibited across the broader leveraged-lending market. Although direct lending deal volume declined from 2022, private lenders financed an all-time high 59 percent of leveraged buyout transactions last year and are now expanding into additional strategies to drive the next era of growth.

Infrastructure took a detour

After several years of robust growth and strong performance, infrastructure and natural resources fundraising declined by 53 percent to the lowest total since 2013. Supply-side timing is partially to blame: five of the seven largest infrastructure managers closed a flagship vehicle in 2021 or 2022, and none of those five held a final close last year. As in real estate, investors shied away from core and core-plus investments in a higher-yield environment. Yet there are reasons to believe infrastructure’s growth will bounce back. Limited partners (LPs) surveyed by McKinsey remain bullish on their deployment to the asset class, and at least a dozen vehicles targeting more than $10 billion were actively fundraising as of the end of 2023. Multiple recent acquisitions of large infrastructure GPs by global multi-asset-class managers also indicate marketwide conviction in the asset class’s potential.

Private markets still have work to do on diversity

Private markets firms are slowly improving their representation of females (up two percentage points over the prior year) and ethnic and racial minorities (up one percentage point). On some diversity metrics, including entry-level representation of women, private markets now compare favorably with corporate America. Yet broad-based parity remains elusive and too slow in the making. Ethnic, racial, and gender imbalances are particularly stark across more influential investing roles and senior positions. In fact, McKinsey’s research  reveals that at the current pace, it would take several decades for private markets firms to reach gender parity at senior levels. Increasing representation across all levels will require managers to take fresh approaches to hiring, retention, and promotion.

Artificial intelligence generating excitement

The transformative potential of generative AI was perhaps 2023’s hottest topic (beyond Taylor Swift). Private markets players are excited about the potential for the technology to optimize their approach to thesis generation, deal sourcing, investment due diligence, and portfolio performance, among other areas. While the technology is still nascent and few GPs can boast scaled implementations, pilot programs are already in flight across the industry, particularly within portfolio companies. Adoption seems nearly certain to accelerate throughout 2024.

Private markets in a slower era

If private markets investors entered 2023 hoping for a return to the heady days of 2021, they likely left the year disappointed. Many of the headwinds that emerged in the latter half of 2022 persisted throughout the year, pressuring fundraising, dealmaking, and performance. Inflation moderated somewhat over the course of the year but remained stubbornly elevated by recent historical standards. Interest rates started high and rose higher, increasing the cost of financing. A reinvigorated public equity market recovered most of 2022’s losses but did little to resolve the valuation uncertainty private market investors have faced for the past 18 months.

Within private markets, the denominator effect remained in play, despite the public market recovery, as the numerator continued to expand. An activity-dampening cycle emerged: higher cost of capital and lower multiples limited the ability or willingness of general partners (GPs) to exit positions; fewer exits, coupled with continuing capital calls, pushed LP allocations higher, thereby limiting their ability or willingness to make new commitments. These conditions weighed on managers’ ability to fundraise. Based on data reported as of year-end 2023, private markets fundraising fell 22 percent from the prior year to just over $1 trillion, the largest such drop since 2009 (Exhibit 1).

The impact of the fundraising environment was not felt equally among GPs. Continuing a trend that emerged in 2022, and consistent with prior downturns in fundraising, LPs favored larger vehicles and the scaled GPs that typically manage them. Smaller and newer managers struggled, and the number of sub–$1 billion vehicles and new firm launches each declined to its lowest level in more than a decade.

Despite the decline in fundraising, private markets assets under management (AUM) continued to grow, increasing 12 percent to $13.1 trillion as of June 30, 2023. 2023 fundraising was still the sixth-highest annual haul on record, pushing dry powder higher, while the slowdown in deal making limited distributions.

Investment performance across private market asset classes fell short of historical averages. Private equity (PE) got back in the black but generated the lowest annual performance in the past 15 years, excluding 2022. Closed-end real estate produced negative returns for the first time since 2009, as capitalization (cap) rates expanded across sectors and rent growth dissipated in formerly hot sectors, including multifamily and industrial. The performance of infrastructure funds was less than half of its long-term average and even further below the double-digit returns generated in 2021 and 2022. Private debt was the standout performer (if there was one), outperforming all other private asset classes and illustrating the asset class’s countercyclical appeal.

Private equity down but not out

Higher financing costs, lower multiples, and an uncertain macroeconomic environment created a challenging backdrop for private equity managers in 2023. Fundraising declined for the second year in a row, falling 15 percent to $649 billion, as LPs grappled with the denominator effect and a slowdown in distributions. Managers were on the fundraising trail longer to raise this capital: funds that closed in 2023 were open for a record-high average of 20.1 months, notably longer than 18.7 months in 2022 and 14.1 months in 2018. VC and growth equity strategies led the decline, dropping to their lowest level of cumulative capital raised since 2015. Fundraising in Asia fell for the fourth year of the last five, with the greatest decline in China.

Despite the difficult fundraising context, a subset of strategies and managers prevailed. Buyout managers collectively had their best fundraising year on record, raising more than $400 billion. Fundraising in Europe surged by more than 50 percent, resulting in the region’s biggest haul ever. The largest managers raised an outsized share of the total for a second consecutive year, making 2023 the most concentrated fundraising year of the last decade (Exhibit 2).

Despite the drop in aggregate fundraising, PE assets under management increased 8 percent to $8.2 trillion. Only a small part of this growth was performance driven: PE funds produced a net IRR of just 2.5 percent through September 30, 2023. Buyouts and growth equity generated positive returns, while VC lost money. PE performance, dating back to the beginning of 2022, remains negative, highlighting the difficulty of generating attractive investment returns in a higher interest rate and lower multiple environment. As PE managers devise value creation strategies to improve performance, their focus includes ensuring operating efficiency and profitability of their portfolio companies.

Deal activity volume and count fell sharply, by 21 percent and 24 percent, respectively, which continued the slower pace set in the second half of 2022. Sponsors largely opted to hold assets longer rather than lock in underwhelming returns. While higher financing costs and valuation mismatches weighed on overall deal activity, certain types of M&A gained share. Add-on deals, for example, accounted for a record 46 percent of total buyout deal volume last year.

Real estate recedes

For real estate, 2023 was a year of transition, characterized by a litany of new and familiar challenges. Pandemic-driven demand issues continued, while elevated financing costs, expanding cap rates, and valuation uncertainty weighed on commercial real estate deal volumes, fundraising, and investment performance.

Managers faced one of the toughest fundraising environments in many years. Global closed-end fundraising declined 34 percent to $125 billion. While fundraising challenges were widespread, they were not ubiquitous across strategies. Dollars continued to shift to large, multi-asset class platforms, with the top five managers accounting for 37 percent of aggregate closed-end real estate fundraising. In April, the largest real estate fund ever raised closed on a record $30 billion.

Capital shifted away from core and core-plus strategies as investors sought liquidity through redemptions in open-end vehicles and reduced gross contributions to the lowest level since 2009. Opportunistic strategies benefited from this shift, as investors turned their attention toward capital appreciation over income generation in a market where alternative sources of yield have grown more attractive.

In the United States, for instance, open-end funds, as represented by the National Council of Real Estate Investment Fiduciaries Fund Index—Open-End Equity (NFI-OE), recorded $13 billion in net outflows in 2023, reversing the trend of positive net inflows throughout the 2010s. The negative flows mainly reflected $9 billion in core outflows, with core-plus funds accounting for the remaining outflows, which reversed a 20-year run of net inflows.

As a result, the NAV in US open-end funds fell roughly 16 percent year over year. Meanwhile, global assets under management in closed-end funds reached a new peak of $1.7 trillion as of June 2023, growing 14 percent between June 2022 and June 2023.

Real estate underperformed historical averages in 2023, as previously high-performing multifamily and industrial sectors joined office in producing negative returns caused by slowing demand growth and cap rate expansion. Closed-end funds generated a pooled net IRR of −3.5 percent in the first nine months of 2023, losing money for the first time since the global financial crisis. The lone bright spot among major sectors was hospitality, which—thanks to a rush of postpandemic travel—returned 10.3 percent in 2023. 2 Based on NCREIFs NPI index. Hotels represent 1 percent of total properties in the index. As a whole, the average pooled lifetime net IRRs for closed-end real estate funds from 2011–20 vintages remained around historical levels (9.8 percent).

Global deal volume declined 47 percent in 2023 to reach a ten-year low of $650 billion, driven by widening bid–ask spreads amid valuation uncertainty and higher costs of financing (Exhibit 3). 3 CBRE, Real Capital Analytics Deal flow in the office sector remained depressed, partly as a result of continued uncertainty in the demand for space in a hybrid working world.

During a turbulent year for private markets, private debt was a relative bright spot, topping private markets asset classes in terms of fundraising growth, AUM growth, and performance.

Fundraising for private debt declined just 13 percent year over year, nearly ten percentage points less than the private markets overall. Despite the decline in fundraising, AUM surged 27 percent to $1.7 trillion. And private debt posted the highest investment returns of any private asset class through the first three quarters of 2023.

Private debt’s risk/return characteristics are well suited to the current environment. With interest rates at their highest in more than a decade, current yields in the asset class have grown more attractive on both an absolute and relative basis, particularly if higher rates sustain and put downward pressure on equity returns (Exhibit 4). The built-in security derived from debt’s privileged position in the capital structure, moreover, appeals to investors that are wary of market volatility and valuation uncertainty.

Direct lending continued to be the largest strategy in 2023, with fundraising for the mostly-senior-debt strategy accounting for almost half of the asset class’s total haul (despite declining from the previous year). Separately, mezzanine debt fundraising hit a new high, thanks to the closings of three of the largest funds ever raised in the strategy.

Over the longer term, growth in private debt has largely been driven by institutional investors rotating out of traditional fixed income in favor of private alternatives. Despite this growth in commitments, LPs remain underweight in this asset class relative to their targets. In fact, the allocation gap has only grown wider in recent years, a sharp contrast to other private asset classes, for which LPs’ current allocations exceed their targets on average. According to data from CEM Benchmarking, the private debt allocation gap now stands at 1.4 percent, which means that, in aggregate, investors must commit hundreds of billions in net new capital to the asset class just to reach current targets.

Private debt was not completely immune to the macroeconomic conditions last year, however. Fundraising declined for the second consecutive year and now sits 23 percent below 2021’s peak. Furthermore, though private lenders took share in 2023 from other capital sources, overall deal volumes also declined for the second year in a row. The drop was largely driven by a less active PE deal environment: private debt is predominantly used to finance PE-backed companies, though managers are increasingly diversifying their origination capabilities to include a broad new range of companies and asset types.

Infrastructure and natural resources take a detour

For infrastructure and natural resources fundraising, 2023 was an exceptionally challenging year. Aggregate capital raised declined 53 percent year over year to $82 billion, the lowest annual total since 2013. The size of the drop is particularly surprising in light of infrastructure’s recent momentum. The asset class had set fundraising records in four of the previous five years, and infrastructure is often considered an attractive investment in uncertain markets.

While there is little doubt that the broader fundraising headwinds discussed elsewhere in this report affected infrastructure and natural resources fundraising last year, dynamics specific to the asset class were at play as well. One issue was supply-side timing: nine of the ten largest infrastructure GPs did not close a flagship fund in 2023. Second was the migration of investor dollars away from core and core-plus investments, which have historically accounted for the bulk of infrastructure fundraising, in a higher rate environment.

The asset class had some notable bright spots last year. Fundraising for higher-returning opportunistic strategies more than doubled the prior year’s total (Exhibit 5). AUM grew 18 percent, reaching a new high of $1.5 trillion. Infrastructure funds returned a net IRR of 3.4 percent in 2023; this was below historical averages but still the second-best return among private asset classes. And as was the case in other asset classes, investors concentrated commitments in larger funds and managers in 2023, including in the largest infrastructure fund ever raised.

The outlook for the asset class, moreover, remains positive. Funds targeting a record amount of capital were in the market at year-end, providing a robust foundation for fundraising in 2024 and 2025. A recent spate of infrastructure GP acquisitions signal multi-asset managers’ long-term conviction in the asset class, despite short-term headwinds. Global megatrends like decarbonization and digitization, as well as revolutions in energy and mobility, have spurred new infrastructure investment opportunities around the world, particularly for value-oriented investors that are willing to take on more risk.

Private markets make measured progress in DEI

Diversity, equity, and inclusion (DEI) has become an important part of the fundraising, talent, and investing landscape for private market participants. Encouragingly, incremental progress has been made in recent years, including more diverse talent being brought to entry-level positions, investing roles, and investment committees. The scope of DEI metrics provided to institutional investors during fundraising has also increased in recent years: more than half of PE firms now provide data across investing teams, portfolio company boards, and portfolio company management (versus investment team data only). 4 “ The state of diversity in global private markets: 2023 ,” McKinsey, August 22, 2023.

In 2023, McKinsey surveyed 66 global private markets firms that collectively employ more than 60,000 people for the second annual State of diversity in global private markets report. 5 “ The state of diversity in global private markets: 2023 ,” McKinsey, August 22, 2023. The research offers insight into the representation of women and ethnic and racial minorities in private investing as of year-end 2022. In this chapter, we discuss where the numbers stand and how firms can bring a more diverse set of perspectives to the table.

The statistics indicate signs of modest advancement. Overall representation of women in private markets increased two percentage points to 35 percent, and ethnic and racial minorities increased one percentage point to 30 percent (Exhibit 6). Entry-level positions have nearly reached gender parity, with female representation at 48 percent. The share of women holding C-suite roles globally increased 3 percentage points, while the share of people from ethnic and racial minorities in investment committees increased 9 percentage points. There is growing evidence that external hiring is gradually helping close the diversity gap, especially at senior levels. For example, 33 percent of external hires at the managing director level were ethnic or racial minorities, higher than their existing representation level (19 percent).

Yet, the scope of the challenge remains substantial. Women and minorities continue to be underrepresented in senior positions and investing roles. They also experience uneven rates of progress due to lower promotion and higher attrition rates, particularly at smaller firms. Firms are also navigating an increasingly polarized workplace today, with additional scrutiny and a growing number of lawsuits against corporate diversity and inclusion programs, particularly in the US, which threatens to impact the industry’s pace of progress.

Fredrik Dahlqvist is a senior partner in McKinsey’s Stockholm office; Alastair Green  is a senior partner in the Washington, DC, office, where Paul Maia and Alexandra Nee  are partners; David Quigley  is a senior partner in the New York office, where Connor Mangan is an associate partner and Aditya Sanghvi  is a senior partner; Rahel Schneider is an associate partner in the Bay Area office; John Spivey is a partner in the Charlotte office; and Brian Vickery  is a partner in the Boston office.

The authors wish to thank Jonathan Christy, Louis Dufau, Vaibhav Gujral, Graham Healy-Day, Laura Johnson, Ryan Luby, Tripp Norton, Alastair Rami, Henri Torbey, and Alex Wolkomir for their contributions

The authors would also like to thank CEM Benchmarking and the StepStone Group for their partnership in this year's report.

This article was edited by Arshiya Khullar, an editor in the Gurugram office.

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The Duke and Duchess of Sussex's Archewell Foundation has been labelled "delinquent" in the US for failing to submit annual records.

A letter was sent to the charity on 3 May by by California's Registry of Charities and Fundraisers, saying it has been "listed as delinquent" for "failing to submit required annual report(s) and/or renewal fees".

The letter said an organisation listed as delinquent is banned from "soliciting or disbursing charitable funds" and its registration may be "suspended or revoked".

It is understood that a physical cheque was sent by Archewell Foundation but not received, and a new one has been sent to resolve the issue.

It is believed the charity was only made aware of this when the delinquency notice was published.

Read more on this story below...

Shares of US video game retailer GameStop have soared again today, fuelled by the return of online influencer "Roaring Kitty" to social media.

Real name Keith Gill, the influencer's first online post caused shares to jump yesterday, with another surge reported today.

The retailer's shares rallied 132% in pre-market trading before falling back to about 80% up as US markets opened. 

Mr Gill shared a meme and more than 10 clips from movies including The Avengers and Tombstone. Though the posts didn't mention any company names, GameStop and US cinema chain AMC were the most-traded stocks by investors yesterday and today, according to data from JP Morgan.

He is credited with helping to fuel the "meme stock" craze during the COVID pandemic, which saw GameStop shares rise more than 1,000%. They later collapsed as interest faded.

Tesco's managing director has seen his pay deal more than double to almost £10m. 

That's 431 times the wage of the average £23,010 salary for a Tesco worker. 

Ken Murphy received a pay packet worth £9.93m for the year to February, the supermarket's annual report revealed.

His pay deal came to £4.4m in the previous financial year. 

The rise was driven by £4.91m from his performance share plan (PSP) after he helped lead the company to higher profits in the face of challenging inflation.

This PSP payment will be paid out in Tesco shares and is based on the company's performance since 2021.

It comes on top of an annual salary of £1.64m and an annual bonus of £3.38m. 

The group's chief finance officer, Imran Nawaz, also saw his annual pay package more than double.

He received a total £4.95m for the year, jumping from £2.27m in the previous financial year.

The retailer was criticised for revealing a £2.83bn profit for the year to February when many customers had been impacted by rampant food and drink inflation. 

Alison Platt, chairwoman of the Tesco remuneration committee, said the pay boost reflects the fact "Tesco has delivered for all of its stakeholders over the last year".

She added: "Tesco remains committed to a competitive and fair reward package for all colleagues and over the last two years we have invested more than £800m in colleague pay, as well as significantly enhancing the range of wellbeing benefits we offer."

Sony's operating profit  has climbed 5% this business year - even as it forecasts lower PlayStation 5 sales. 

The Japanese entertainment and electronics company said its operating profit is expected to come in at 1.28 trillion yen (£6.5bn) in the year ending March.

Sony, a major supplier of image sensors for smartphones, said its chips business is expected to book a 40% rise in operating profit on higher sales and lower costs.

At its gaming unit, revenues are expected to fall with the PlayStation 5 in its fourth year, but Sony said user engagement and cost control could drive future profitability at the business.

It predicted PlayStation 5 sales will fall to 18 million units from last year's 20.8 million. 

Cheaper energy deals for new customers could potentially return in October, with the industry regulator announcing a review of their ban. 

Ofgem is consulting on removing the block on acquisition-only tariffs in an attempt to encourage competition between suppliers. 

The ban was introduced as a short-term measure in April 2022 to protect consumers during the energy crisis, and was due to be lifted in March next year.

Now, the regulator has said that it is the right time to consider removing it as the energy market continues to stabilise.

MoneySavingExpert Martin Lewis welcomed the consultation, saying: "We need anything possible right now to stimulate competition and bring prices down." 

"In normal times, I wouldn't call for firms to be allowed to offer new customers cheaper prices than existing, yet these aren't normal times." 

Melinda French Gates has left the charity she set up with her former husband, Microsoft billionaire Bill Gates, after the couple's divorce. 

In a statement, she said she would step down from her position at the Bill & Melinda Gates Foundation on 7 June. 

You can see her full statement below... 

The foundation was created in 2000 and it is one of the most influential charitable organisations in the world. 

It has spent billions working to tackle poverty and disease around the world. 

Bill and Melinda Gates announced they were divorcing three years ago after being married for 27 years. 

An AI-powered mortgage lender has cut rates for a second time this week. 

MPowered has reduced all its two and five year fixed deals, with rates starting at 4.37% down from 4.59%. 

"The swap markets are moving at pace at present, and it is important that as a responsible lender we are able to react and pass on any savings we can to borrowers," said Matt Surridge, sales director of MPowered Mortgages. 

"I'm therefore really pleased we are one of the first, if not the first, to cut rates this week, having already cut rates once in the past week." 

The company uses AI in its mortgage process and is a fully digital platform. 

McDonald's has decided to remove the iconic smile from its Happy Meal box in a bid to teach children about their emotions. 

Instead, a sheet of stickers depicting different moods will be placed inside, which children can use to express their feelings. 

A QR code for a mental health hub will also be placed on the red packaging to provide its younger customers with different resources about emotional wellbeing. 

The move comes as part of Mental Health Week, with research by the fast food chain finding nearly half of children feel pressure to be happy all the time. 

Football legend Rio Ferdinand has teamed up with the company to support the campaign, which runs until 19 May. 

The father-of-five said: "It's our job to empower our children to express themselves freely and support them every step of the way in understanding that it's okay to not be happy all the time." 

The Traitors' winner Harry Clark has revealed he's only spent some of his prize money so far, and it's gone towards clearing his relatives' debts. 

The 23-year-old won £95,150 after successfully convincing his fellow contestants that he was a faithful in the second season of the show. 

Speaking on the TV BAFTAs red carpet, the former British Army engineer said his dad has stopped him from spending the cash and has been looking after him. 

"He's got his head screwed on. He's been making sure I can get my first place," he told reporters.

"I've just given my family some dosh, just to pay off their debts and stuff like that, so they don't have to worry anymore. 

"That's all I've wanted to do in my life." 

Police are no longer interested in dealing with shoplifting and retailers are being forced to spend "a lot of money" on protecting themselves, the chairman of M&S has claimed. 

Archie Norman said stores have resorted to installing new camera systems and employing store detectives to try to keep crime rates down. 

"We get very little help from the police," he told LBC's Nick Ferrari at Breakfast.

"I think we have to accept that the police are not interested in this sort of crime any more. Whether we like it or not, that's the way it has gone." 

Shoplifting is at the highest levels since records began in 2003, according to the Office for National Statistics. 

It has risen by 37% since last year.

Mr Norman said thefts had surged since the pandemic, and the rising cost of living crisis was also causing problems. 

"When people are hard up, or particularly when there's a growth in other forms of crime, particularly drugs-related crime, then one way of financing it is to go and steal from shops… it's understandable given what we've been through in the last couple of years, we've seen more of that," he added.

A change to the law in 2014 now means shoplifting goods worth less than £200 is only a summary offence. 

This may have prompted police to pay less attention to it, and it has been on the rise since.

Home Office data also show the number of shoplifting charges has fallen in recent years. 

Taking further action wasn't considered to be "in the public interest" in most cases. 

Sky News has contacted the Home Office for comment.

By James Sillars , business news reporter 

The prospects for a Bank of England interest rate cut are almost 50/50.

That's according to the latest financial market expectations in reaction to this morning's employment figures.

They showed the pace of wage growth remaining stubbornly high - overshooting the expectations of economists.

Strong wage growth is not what the Bank wants to see, as it fears a surge in consumer spending power driving a new wave of inflation.

There is a further set of wage data before the Bank's next rate-setting meeting on 20 June.

That may not help those seeking a cut in borrowing costs, however, as it will reflect the impact of April's big rise in the National Living Wage.

Away from the interest rate cut speculation, the FTSE 100 has opened flat for a second day.

Currys is among stocks doing well on the wider stock market.

The electricals retailer saw its shares trading almost 8% higher in early deals after it raised its annual profit outlook.

Those of Greggs, however, were down almost 1% despite a leap in sales.

The bakery to fast food chain said its performance was in line with expectations and, as such, it had no impact on its forecasts for the full year.

Wages grew by 6% in the three months to March, excluding bonuses, according to the Office for National Statistics.

This is slightly above economists' expectations - bad news for the Bank of England, which wants to see wage growth fall to help ease inflation as it weighs when to cut 16-year-high interest rates.

The Bank is watching wages closely as it looks to bring inflation back to its 2% target, and cooling earnings growth is seen as being key to paving the way for it to begin cutting rates.

In real terms - taking Consumer Prices Index inflation into account - pay rose 2.4% across the period.

In March alone, that figure was 3% - the highest level of growth since July 2021, when it hit 3.9%.

"Earnings growth in cash terms remains high, with the recent falls in the rate now levelling off while, with inflation falling, real pay growth remains at its highest level in well over two years," said ONS director of economic statistics Liz McKeown.

Meanwhile, unemployment ticked up to 4.3% from January to March, compared to 4.2% in the previous three months, December to February. 

The number of job vacancies remains about pre-pandemic levels, but has been declining for 22 consecutive months, said Ms McKeown.

"With unemployment also increasing, the number of unemployed people per vacancy has continued to rise, approaching levels seen before the onset of COVID-19."

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CBSE Result 2024: How can I check my CBSE class 10th Result using roll number 

Here is how to check central board of secondary education (cbse) 10th results at the official website cbseresults.nic.in..

How to Check CBSE 10th Board Result 2024 by Roll no: The Central Board of Secondary Education (CBSE) announced Class10th results on Monday (May 13) on its official website. Students can check their scorecards on various links provided, including cbse.nic.in, cbse.gov.in, cbseresults.nic.in, results.cbse.nic.in, digilocker.gov.in, and results.gov.in.

cbse.nic.in CBSE 10th Results 2024 Live Updates (OUT)

In order to successfully complete the assessments, students must achieve a minimum score of 33% in each subject as well as maintain this threshold overall. To deter any unhealthy competition among students, the board has opted not to publish any merit lists.

This year, the CBSE conducted the exams from February to April. The Class 10 exams were held from February 15 to March 13, while the Class 12 exams took place between February 15 and April 2. Examinations were conducted in single shifts lasting two to three hours, depending on the subject, with timings between 10:30 am and 12:30 pm or 1:30 pm.

CBSE Class 10th Result 2024: How to check result using roll numbers

1. Visit the official website of CBSE at cbseresults.nic.in or results.cbse.nic.in .

2. Click on the link for CBSE Board Result 2024 on the homepage.

3. Log in using the required credentials – roll number or registration number.

4. Click on submit.

5. The CBSE Class 10 or Class 12 results will be displayed on the screen.

6. Download the result and take a printout for future reference.

Additionally, the DigiLocker application and website (digilocker.gov.in) provide access to CBSE scores. Results can also be obtained through the SMS facility, requiring essential credentials such as the school roll number, admit card ID, and board exam roll number for checking Class 12 results.

Get live Share Market updates, Stock Market Quotes , and the latest India News and business news on Financial Express. Download the Financial Express App for the latest finance news.

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