PARTICIPANTS IN THE SECONDARY MARKET
The players in the secondary capital market include:
- Individual Investors (Public).
- Companies.
- Mutual funds.
- Financial Institutions.
- Foreign Institutional Investors.
- Individual Investors (Public)
The general investing public plays a notable role in the stock market. Popularly referred to as small investors, they are investing traditionally in tax savings schemes. Mutual funds are very popular among small investors. Even among the mutual fund schemes, debt related schemes garner several times more funds than equity related schemes.
Companies
Most of the companies having surplus funds will invest in the money markets. Generally, inter-corporate deposits and commercial papers are favored by these companies. But for long-term needs, companies tap capital markets. These companies, which have made investments using their surplus funds are required to disclose the same in their annual reports. Generally, companies are not regular players in the capital market. Some finance/investment companies offering portfolio management services to clients or companies with stock market operations as their main objective, however, are regular players in the secondary market.
Mutual Funds
Mutual Funds pool funds from investors and invest them in well-diversified portfolios. Fund managers and investment consultants select the of companies for investment for maximizing returns on investments. All the mutual funds in the country are regulated in accordance with the provisions laid down by the government. Mutual Funds are the single largest player category in the stock market.
Financial Institutions
Generally, financial institutions partake in the share capital of various companies. By their active buying and selling of securities from the secondary market, the financial and investment institutions maintain a balance in the market.
Foreign Institutional Investors
Foreign Institutional Investors (FIIs) means institutional investors (mutual funds or equity firms) maintained and controlled from outside the country. Generally, FIIs pick up stocks keeping an eye on long-term gains. The presence of FIIs in the stock markets has been a big boost to the market sentiments. Usually, the orders from FIIs are large blocks of shares which cannot be picked up from the trading rings alone. Such purchases are effected by off-market deals. Block transactions arranged by brokers between FIIs and large shareholders like government financial institutions are termed as off-market deals. They have to take prior permission from the authorities concerned in the countries where they want to invest.