SEBI means securities and Exchange Board of India. SEBI emerged as an effective regulatory body for the primary and secondary markets and afford a measure of protection to small investors.

The dealings in a capital markets are done through the securities like shares, debentures, etc. The capital market is thus called as securities market.

The price of the securities is determined based on the demand and supply prevailing in the capital market for securities.

The participants of the capital market include individuals, corporate sectors, Government,banks and other financial institutions.

(i) Financial institutions that provide facilities for channeling savings, of small investors into avenues of productive investments are called Mutual Funds.
(ii) A mutual fund company invests the funds pooled from shareholders and gives them the benefit of diversified investment portfolio and a reasonable return

Capital market is a market where buyers and sellers engage in trade of financial securities like bonds and stocks. The buying/selling is undertaken by participants such as individuals and institutions.

Gilt-Edged Market also known as Government Securities market is the market for Government and semi-Government securities.
An important feature of the securities traded in this market. That they are stable in value and are much sought after by banks.
(i) Guaranteed return on investments
(ii) No speculation in securities
(iii) Institutional based investors which are compelled by law to invest a portion of their funds in these securities.
(iv) Predominated by such institutions as LIC, GIC, PFs and the commercial banks.

The functions of capital market are as follows:
(i) Factoring Institutions:
(a) "Factoring" is an arrangement whereby a financial institution provides financial accommodation, on the basis of assignment/sale of account receivables.
(b) The factoring institutions collect the book debts for and on behalf of its clients.
(c) Some of the factoring institutions operating in India are SBI Factors and Commercial Services Private Limited, a subsidiary of State Bank of India and Canbank Factors Limited, a subsidiary of Canara Bank.
(ii) Venture Fund Institutions:
(a) Venture capital financing is a form of equity financing designed especially for funding new and innovative project ideas.
(b) Venture capital funds bring into force the hi-technology projects which are converted into commercial production.
(c) Many specialized financial institution have promoted their own venture capital funds. They include Risk Capital Foundation of IFCI, Venture fund of IDBI, SIDBI Technology Development Infrastructure Corporation of India (TDICI) and others.

(i) Savings and Capital Formation:
(a) In capital market, various types of securities help to mobilize savings from various sectors of population (Individuals, Corporate, Government, etc.).
(b) The twin features of reasonable return and liquidity in stock exchange are definite incentives to the people to invest in securities.
(c) This accelerates the capital formation in the country.
(ii) Ready and Continuous Market:
(a) The stock exchange provides a central convenient place where buyers and sellers can easily purchase and sell securities.
(b) Easy marketability makes investment in securities more liquid as compared to other assets.

Capital market is divided into two i.e. primary market and secondary market.
(i) Primary Market
(a) Primary Market is a market for new issues or new financial claims. Hence, it is also called New Issue Market.
(b) The primary market deals with those securities which are issued to the public for the first time.
(c) In the primary market, borrowers exchange new financial securities for long term funds.
​​​​(d) There are three ways by which a company may raise capital in a primary market.There are:
  a) Public Issue
  b) Rights Issue
  c) Private Placement
(ii) Secondary Market :
(a) Secondary Market may be defined as the market for old securities.
(b) Securities which are previously Issued in the primary market are traded here.
(c) The trading takes place between investors who follow the original issue in the primary market.

(i) Venture Fund Institutions :
(a) Venture capital financing is a form of equity financing designed especially for funding new and innovative project ideas.
(b) Many specialised financial institutions have promoted their own venture capital funds.
(c) They include Risk Capital Foundation of IFCI, Venture capital of IDBI, SIDBI,TDICI and others.
(ii) Mutual Funds :
(a) Financial institutions that provide facilities for channeling savings of smallinvestors into a venues of productive investments are called "Mutual Funds".
(b) Specialized financial institutions like LIC,UT,etc., beside Commercial banks such as SBI, and Canara Bank are carrying out the business of mutual funds.
(iii) Factoring Institutions :
(a) "Factoring" is an arrangement whereby a financial institution provides financial accommodation on the basis ofassignment/ sale of account receivables.
(b) Some of the factoring institutions operating in India are SBI Factors and Commercial Services Private Limited, a subsidiary of  State Bank of India and Canbank Factors Limited, a subsidiary of Canara Bank.
(iv) Over the Counter Exchange of India (0TCEI) :
(a) The OTCEI was set up by a premier financial institution to allow the trading of securities across the electronic counters throughout the country.
(b) It addresses some specific problems of both investors and medium-size companies.
(v) National Stock Exchange of India Limited :
(a) NSEI was established in 1992 to function as a model stock exchange.
(b) The Exchange aims at providing the advantage of nation-wide electronic screen based "scripless" and "loorless" trading system in securities.

 

Following are the nature/characteristic of a capital market.
(i) Securities Market
The dealings in a capital market are done through the securities like shares, debentures, etc.The capital market is thus called securities market.
(ii) Price
The price of the securities is determined based on the demand and supply prevailing in the capital market for securities.
(iii) Participants
There are many players in the capital market.The participants of the capital market include individuals, corporate sectors, Govt., banks and other financial institutions.
(iv) Location
Capital market is not confined to certain specific locations, although it is true that parts of the market are concentrated in certain well-known centers known as Stock Exchanges. It has its impact in the overall economy, wherever suppliers and users of capital get together and do business.
(v) Market for Financial Assets
Capital market provides a transaction platform for long term financial assets.

(b) Mutual funds
Reason : Financial institutions that provide facilities for channeling savings of small investors into avenues of productive investments are called 'Mutual funds'. Other three are functions of capital market.

(a) Primary market
Reason : Primary market is a market for new issues or new financial claims. Primary market is a kinds of capital market. Other three are characteristics of capital market.

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).

(a) Both (A) and (R) are true and (R) is the correct explanation of (A).

(d) (i), (ii) and (iii) are correct

(c) (i) and (ii) are correct