INTRODUCTION

The capital market is the backbone of every country

as it can affect the financial position of the country
and regulate the economy. The heart of economic
growth lies in the capital market which helps in
providing the allocation of funds and mobilization of
resources. The major understanding and regulation
of the capital market have been an important
requirement for the industrial and commercial
development of the country. The capital markets
cater to the need for a long-term fund that is
required for the development of the industrial and
commercial sectors.
CAPITAL MARKET IN INDIA : A
BRIEF OVERVIEW

The capital market is the place that acts as the

platform between the suppliers and the buyers. The
savings and investments are channelized between
the persons who have capital and the person who
needs capital. The capital market is generally for
the raising of long-term funds.
The major regulatory body is the RBI(Reserve bank
of India) assisted by the Ministry of Finance and the
SEBI(Security Exchange Board of India).
 BACKGROUND
 The capital markets of India have a golden history
of approximately 200 years or more than 2
centuries. It dates back to the year 1875 when
India was under the direct control of the British
Government and the Queen of England, the first
time the Bombay Stock Exchange was set up and
led to the introduction of capital markets in India
among the local people.
 Itstarted flourishing in the early nineties with the
introduction of liberalization, globalization, and
privatization and Sensex touched more than 4,000
points from hardly a thousand.
FUNCTIONS OF CAPITAL MARKET
1.Many such functions depict the need for the capital market as they have
primary functions such as mobilizing resources of investments, helps in the
facilitation of buying and selling of securities, and formulation of effective
and efficient price discovery.
2. To settle the transactions as per the due date or within the given time
frame.
3. The market provides an effective source of investment as well as
channels the funds of private and the government.
4. The capital market has many such institutions which can be classified as
holding capital and supply them as securities. For example:

a.Commercial banks such as SBI, Citi Bank, etc.

b. Insurance companies such as LIC, HDFC, Bajaj Finserv, etc.
c. Specialised financial institutions such as IFCI, IDBI, UTI, etc.
d. Provident Fund Societies and other such institutions. There are also
individual investors in the market who supply their funds in the capital
market.
 PRIMARY MARKET
The primary market is also known as the Stock
Market. This is also known as the new issue
market as the investors can buy securities directly
from the company that issues.
The securities are also known as primary offerings
or Initial Public Offerings (IPO) or they can also be
raised through the right issue. The company sells
its stocks or shares to the general public and
investors for generating the fund.
It deals with the securities that were not in
existence previously and the fresh securities
offered to the public to invest for the first time.
THE REGULATORY FRAMEWORK AND
LEGISLATION
 The regulation of capital markets has been very important for development
and growth as they provide a stable, steady, and secure platform for both the
suppliers and the buyers.
 The regulatory structure has been framed under the four pillars that are the
Ministry of Finance, Reserve Bank of India, Security and Exchange Board of
India, and the National Stock Exchange.
 Ministry of Finance(MoF)- The ministry depicts that the Government of India
formulate rules and analyze them for the efficient and effective growth of the
market. The Department of Economic Affair which manages the market works
under certain sets of laws that are the Depositories Act, 1996, Securities
Contract (Regulation) Act, 1956, and Securities and Exchange Board of India Act,
1992. There are many other laws such as the Companies Act, 2013, etc
 Reserve Bank of India- The body that was established in 1934
frames the policies, formulates the bodies and regulates the
rules as per the current situation. RBI has active participation in
the stock market and also sets the various parameters that are
used in the transactions of debt, equity, and other types of
securities. They have other various functions in capital markets
such as the implementation of various monetary policies,
managing the foreign exchange system, settlement, and
payments systems.
 Security Exchange Board of India (SEBI)- This body can also be
considered as the apex body of capital market regulators. SEBI is
a principal regulatory body that is also a statutory body
established under the SEBI Act,1992. SEBI was earlier established
as the non statutory body in 1988. They not only protect the
interest of investors in securities but also promote the market.
They perform many other such regulatory functions such as
training of intermediaries, auditing of stock exchanges,
regulating and registering the mutual funds.
 ,
 The Depositories Act,1996- The Act regulates the depositories in
Securities. The primary objective of this Act is to ensure free
transferability of securities with speed, accuracy and security. The Act
eases the ownership of transferability of ownership from one person to
another in a convenient way. It has made the securities freely
transferable in case of Public limited companies along with the securities.
 Securities Contract (Regulation) Act, 1956- The regulatory Act deals in all
types of issues related to Stock trading. The Act aims at smooth
functioning of the stock exchanges. It prevents any kind of defective
transactions. It especially deals in listing of stock exchanges and contracts
in securities.
 Security and Exchange Board of India Act,1992- This Act provides the
statutory powers to the SEBI organisation. The governing body regulates
the market in a multifarious manner by protecting the interest of the
shareholders, preventing any kind of malpractices in the market and
promoting the development of the Securities Market. The Act provides
wide powers and scope to the SEBI in order to effectively and efficiently
run the capital market.
 LOOPHOLES AND RECOMMENDATION
 As the Indian economy is one of the fastest-growing economies of the world, many
such challenges can hinder the growth as certain regulations have loopholes and
there are several cases of embezzling funds, defrauding, and illegal channelizing
of funds. The associates of the markets use it for unfair trade practices.
 Capitalism promotes the concentration of wealth by the few and they invest more
and increase the profit up to a maximum extent. Some of the cases which have
showcased the loopholes are Harshad S. Mehta vs Central Bureau Of Investigation
on 1 October 1992, Harshad S. Mehta vs Central Bureau Of Investigation on 21
September 1998.
 The case of Harshad Mehta indicates the loopholes in the system that how the
funds were channelized illegally and used to manipulate the stock market. He
understood the gap in the money market.
 Another major loophole is insider trading and the manipulation of price as if some
investors take the unpublished information and use it for personal benefit. Such
illegal use negatively impacts the functioning of markets.
 There should be a ceiling over the holding of stocks to promote fairness and to
provide the opportunity for new investors. Most of the financial scams that take
place are due to the private dealings with the banks as they have a pool of funds
so these should be strictly prohibited and a systematic way of regulating the funds
in banks should be formulated.
 SOME CASE LAWS
 Harshad S. Mehta vs Central Bureau Of Investigation on 1
October 1992, Harshad S. Mehta vs Central Bureau Of
Investigation on 21 September 1998. The case of Harshad Mehta
indicates the loopholes in the system that how the funds were
channelized illegally and used to manipulate the stock market.
He understood the gap in the money market.
 Story of Ketan Parekh scam 2001 in which he took a loan and
channelized funds in the case Ketan Parekh vs Securities and
Exchange Board of India on 14 July 2006.
 There is also a provision to appeal in the special court named as
Securities appellate tribunal and the example case is Ashwin K.
Doshi, Pankaj G. Joshi, and others vs Securities and Exchange
Board Of India on 25 October 2002
 CONCLUSION
 The Indian capital market has undergone many
changes after the challenges and the irreparable
loss faced over years. There have been massive
and revolutionary changes over years, and some
significant changes that have reduced the
financial scam cases. There has been a reduction
of malpractices of trade over the years. The
capital market has made tremendous progress in
terms of institution building. They have
transformed and developed the lives of investors
and market intermediaries. The market has been
friendlier by boosting performance and
eliminating the challenges.
 REFERENCES
 https://economictimes.indiatimes.com/definition/capita
l-market

 http://www.legalservicesindia.com/article/2283/Workin
g-of-Capital-Market-In-India.html

 https://www.icsi.edu/media/webmodules/publications/C
apitalMarketandSecuritesLaw.pdf

 https://www.mondaq.com/india/economic-analysis/949
428/capital-market-persevere