Capital Markets
Capital markets covers the primary market, where securities are issued, and the secondary market, where they trade. The exam tests SEBI’s role, demat accounts, IPO mechanics and market conduct.
Core rules
- SEBI regulates securities markets, exchanges, brokers, depository participants and mutual funds.
- Companies raise capital through an IPO or FPO; ASBA blocks application money until allotment.
- Demat accounts hold shares electronically with NSDL or CDSL through a depository participant.
- Stock exchanges such as NSE and BSE provide a regulated secondary market.
- Indian equities settle on a T+1 basis; trades are settled the next working day.
- Insider trading, front-running and misleading disclosures are prohibited.
Worked example
An investor applies for an IPO with ASBA. Reasoning: the bank blocks the application amount; it is not debited immediately. If no shares are allotted, the blocked amount is released. If partially allotted, only the allotted value is debited. A trading account places orders; a demat account holds the securities after settlement.
Traps that cost marks
- Believing an IPO guarantees listing gains.
- Acting on unregistered “tips” or Telegram groups.
- Confusing a demat account with a trading account.
- Assuming T+1 means the shares are sellable before settlement in every case.