An Overview of the Indian Securities Market:

An Overview of the Indian Securities Market:

Securities markets provide a channel for allocation of savings to those who have a
productive need for them. As a result, the savers and investors are not constrained
by their individual abilities, but by the economy’s abilities to invest and save
respectively, which inevitably enhances savings and investment in the economy.

Market Segments:

The securities market has two interdependent and inseparable segments: the
primary and the secondary market. The primary market provides the channel for
creation of new securities through issuance of financial instruments by public
companies as well as Governments and Government agencies and bodies whereas
the secondary market helps the holders of these financial instruments to sale for
exiting from the investment. The price signals, which subsume all information
about the issuer and his business including associated risk, generated in the
secondary market, help the primary market in allocation of funds.

The primary market issuance is done either through public issues or private placement. A public issue does not limit any entity in investing while in private placement, the issuance is done to select people. In terms of the Companies Act, 1956, an issue becomes public if it results in allotment to more than 50 persons. This means an issue resulting in allotment to less than 50 persons is private placement.

There are two major types of issuers who issue securities. The corporate entities issue mainly debt and equity instruments (shares, debentures, etc.), while the governments (central and state governments) issue debt securities (dated securities, treasury bills).

The secondary market enables participants who hold securities to adjust their
holdings in response to changes in their assessment of risk and return. They also
sell securities for cash to meet their liquidity needs.

The exchanges do not provide facility for spot trades in a strict sense. Closest to spot market is the cash market in exchanges where settlement takes place after some time. Trades taking place over a trading cycle (one day under rolling settlement) are settled together after a certain
time.