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Unit 14: Regulation and Securities Markets in India

up the unit with discussion on constitution of SEBI and functions of SEBI. To make the learning Notes
easier, we will take the help of globally recognised best practices.
Financial markets have an important relationship with economic development. Regulation has
been acknowledged to enable the orderly functioning of the securities market. The Securities
and Exchange Board of India (SEBI) is the regulator charged with the orderly functioning of the
securities market in India, protect the interests of investors and ensure development of the
securities market. Since the establishment of SEBI in 1992, the Indian securities market has
grown enormously in terms of volumes, new products and financial services.
The Indian securities market, considered one of the most promising emerging markets, is among
the top eight markets of the world. The Stock Exchange, Mumbai, which was established in 1875
as “The Native Share and Stockbrokers Association” (a voluntary non-profit making association),
has evolved over the years into its present status as the premier Stock Exchange in the country.
At present 24 stock exchanges operate all over India. These stock exchanges provide facilities for
trading securities; Securities markets provide a common platform for transfer of funds from the
person who has excess funds to those who need them. Securities market is regulated by the
Securities& Exchange Board of India (SEBI).

14.1 Securities Markets in India

The securities markets in India have witnessed several policy initiatives, which have refined the
market micro-structure, modernised operations and broadened investment choices for the
investors. Basically, Securities markets provide a channel for allocation of savings by an individual
or an organisation to those who have a productive need for them.

Notes A security market can be said a location where the savers meet the real investors
who need the fund.
The savers and investors are constrained by the economy’s abilities to invest and save respectively
which thus helps market in enhancing savings and investment in the economy. Stock Market is
therefore affected by the dynamics of the economic, political, cultural and environmental activities
within the country and rest of the world.

Did u know? The securities market has essentially three categories of participants, namely
the issuers of securities, investors in securities and the intermediaries.
The issuers and investors are the consumers of services rendered by the intermediaries while
the investors are consumers (they subscribe for and trade in securities) of securities issued by
issuers. In pursuit of providing a product to meet the needs of each investor and issuer, the
intermediaries churn out more and more complicated products. They educate and guide them in
their dealings and bring them together. Those who receive funds in exchange for securities and
those who receive securities in exchange for funds often need the reassurance that it is safe to do
so. This reassurance is provided by the law and by custom, often enforced by the regulator. The
regulator develops fair market practices and regulates the conduct of issuers of securities and
the intermediaries so as to protect the interests of suppliers of funds. The regulator ensures a
high standard of service from intermediaries and supply of quality securities and non-manipulated
demand for them in the market.

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