Traditionally, banks have been a
prime source of finance for organizations all around the world. Banks are those
financial institutions, which accept deposits and extend loans to the companies
and during the entire course, make an effort to earn some profits so that
healthy returns could be offered to the investors. From years, banks have been
top most choice of financial managers to raise funds for their business enterprises,
but during past few years due to ongoing recession and financial crisis, people
are increasingly losing their faith in the banking system. Moreover there are
now quite a few other dynamic options than debt. Overtime risk appetites of
companies have increased and they have ventured into raising funds through the
equity route.
Emergence of Capital market in India
The last few years have seen the
emergence of alternatives to bank funding. These alternatives have offered
customized solutions to the funding needs of various corporate entities all
over the globe. Some of these are private equity, public offerings, private
placements etc. Out of these, instruments like public offerings, private
placements are classified into the category of capital market funding. This
channel uses the funds available with various market players like banks,
financial institutions, retail investors and various funds for fulfilment of
the needs of the corporate entities.
The development of capital market
has not been limited to the developed countries alone. Emerging markets have
also made significant progress in development of capital market channels for
the purpose of fund raising. One of the reasons for the same has been the
attractiveness of these markets in terms of the growth potential offered by
them to the investors.
India has been one of the leading
emerging market economies. It is one of the fastest growing economies in the
world. The growth in the economy has been accompanied by a rise in the
industrial and business activity in the country. The steep growth has brought
about a spurt in the fund raising requirements and in turn led to the
development of capital markets. Alongside the development in capital markets,
there has been a development in the capital market platforms. National Stock
Exchange (NSE) and Bombay Stock Exchange (BSE) are two of the leading platforms
in India.
Our Industry Visit
On the 12th of
December INBM students of INLEAD visited NSE housed in Jeevan Vihar, Sansad
Marg, New Delhi. We were apprised with the foundation of NSE, the growth that
the stock exchange has seen in a short span of two & a half decades and the
type of products that trade on NIFTY, as also how to conduct trade on a stock
market. The most important reason why
NSE has grown the way it has, has been primarily due to the fact that only AAA
rated companies can trade in its bourses. The session on financial instruments
followed by a virtual trading of some stocks left us immensely interested in
the capital market.
-Ranjeet Singh
Student, INBM, July 2015
INLEAD
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