Page 310 - DMGT207_MANAGEMENT_OF_FINANCES

Unit 14: Capital Market and Financial Institutions

9. Stock exchanges facilitate the growth of joint stock form of business enterprises. Due to Notes
the above important economic functions performed by the stock exchanges, they have
earned a variety of names. A stock exchange has been described as the “mart of the world”
because the securities which represent the ownership property of companies all over the
world are marketed there.
Since a stock exchange is the market for business in securities of business concerns, it has been
referred to as the market where “business of businesses” is carried on.

14.3.4 Listing

Listing of shares, on a stock exchange, means, such shares can be bought and sold, in stock
exchange.
A Company, which intends to issue shares, through prospectus, shall have to apply to one or
more stock exchanges, for getting its shares listed.
The detailed and elaborate procedure of getting the shares listed on a stock exchange is monitored
by SEBI. The SEBI issues guidelines and notifications from time to time with regard to listing of
securities.
Once the shares are listed, they are divided into two categories:
1. Group “A” Shares

2. Group “B” Shares
Group “A” Shares are referred to as “Cleaned Securities” or “specified shares”. The facility for
carrying forward a transaction from one account period to another is available for these shares.
Group “A” shares represent companies, with huge amount of capital, and equally a large scope
for investment. These shares are frequently traded and command higher price earnings multiples.
Group “B” Shares are referred to as, Non-cleaned securities or non-specified shares. For these
groups facility of carrying forward is not available.

Notes Whenever a share is moved from Group “B” to Group “A” its market price rises;
likewise, when a share is shifted from Group “A” to Group “B”, its market price declines.
There are some criteria and guide lines, laid down by stock exchange, for shifting stocks
from the non-specified list to the specified list.

14.4 Instruments of Capital Market

There are a number of capital market instruments used for market trade, including stocks,
bonds, debentures, T-bills, foreign exchange, fixed deposits, and others. This market is divided
into primary capital market and secondary capital market. The primary market is designed for
the new issues and the secondary market is meant for the trade of existing issues. Stocks and
bonds are the two basic capital market instruments used in both the primary and secondary
markets. The instruments available in the capital markets are as under:
14.4.1 Equity Shares

Equity share is a share that gives equal right to holders. Equity shareholders have to share the
reward and risk associated with ownership of company.

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