Indian Financial Market

Indian financial markets refer to any marketplace where securities are traded. Financial markets come in many varieties, including (but not limited to) bond, stock, money, and forex markets. The capital and debt markets are two types of markets. Besides, there are the forex markets. Financial markets, which trade in all types of securities, are essential to the smooth operation of a capitalist society. Economic disruption, including recession and unemployment, can occur when financial markets fail. These markets may include assets or securities listed on regulated exchanges or traded over-the-counter (OTC). 

Introduction to the Indian financial market

In general, the financial market is divided into two segments. 

• The Money markets are concerned with the short-term lending and borrowing of funds. In contrast, securities or capital markets are concerned with the longer-term transfer of funds through debt and equity instruments. 
• The financial market is more than just a source of funds. However, participants’ liquidity and exit options are also important.

Let us now examine the structure of the Indian financial markets.

Commodity Market:

This market facilitates commodity exchanges among both producers and consumers. Commodity transfers can be carried out in the cash market for instant payment and delivery or the forward and futures markets for settlement later.

• Exchange-traded futures contract standardises the underlying quality, quantity, and settlement terms, reducing counterparty risk in the trade.

• Commodity market investors involve consumers and businesses seeking to mitigate risk in their access, venture capitalists trying to get ahead of price fluctuations, and investors looking to profit from anticipated price swings.

There are three national commodity exchanges for trading commodity futures:

1. India’s National Multi Commodity Exchange Ltd.
2. Multi Commodity Exchange of India Ltd.
3. National Commodity and Derivative Exchange Ltd.

The Forward Markets Commission (FMC) regulates commodity futures and forward transactions in India, and FMC operations are subject to SEBI scrutiny. The most recent SEBI circular says that this regulation applies to all market segments except for commodities. This means that SEBI also acts as a regulator in the commodities sector.

Security Market 

The securities market is a structure through which organisations can raise capital by issuing assets.

• The primary market, also known as the new issue market, is how financial institutions elevate funds by selling securities to venture capitalists.
• The secondary market, also known as the stock market, helps facilitate trade in previously issued securities.
• There are numerous market participants, including stockbrokers (members of stock exchanges), mutual funds, and asset management firms.
• Financial institutions include institutional foreign investors, companies that make investments, private investors, depository participants, and banks.
• Aside from these, capital market intermediaries such as Transition Agencies and Authorities, Arbiters and Trustees, and Depositories exist.

Markets for Over-the-Counter Merchandise

Over-the-counter markets refer to a decentralised market where market participants sell and buy stocks, securities, and commodities, as opposed to centralised stock exchanges. OTCs do not involve brokers. Dealers themselves act as market makers and fix the price for the trade without other participants being aware of the price. This results in a less transparent and risky trading platform. While OTCs do not have fewer regulatory controls, the liquidity in OTC markets attracts higher premiums.

Impact of Brexit on Indian Financial Markets

The impact of Brexit on the Indian stock market before, during, and after Brexit tells that a lot has on its pallet. India will have to counter the trade regulations, tariffs, and policies of two different markets instead of a single free-flowing market of the EU. Indian companies that rely primarily on the UK to offer their services and products in the EU will now face difficulties. The separation of the UK from the EU might also result in increased protectionism, and this might cause an impact on India’s FDI inflows and foreign trade.

BREXIT is the momentous event that puts the entire globe at a loss for words. From the time it publicised the BREXIT referendum in 2016 until its eventual exit from the European Union (EU) on January 31, 2020, all eyes were on the United Kingdom. The reason for the global focus was anxiety over the impact of withdrawal on their countries, the global economy, etc. India is a former British colony with strong economic links to the country. The impact of Brexit on India and its ties with the United Kingdom continues to generate substantial interest and conjecture.

In contrast, Brexit may bring some chances for India in the short-to-medium term. The Pound’s declining value against the Rupee has made the UK a more affordable and appealing destination for Indian enterprises looking to purchase high-priced commodities such as real estate. Considering the velocity of its economic growth and the ongoing uncertainty surrounding Brexit, India is likely to appear to be a more desirable location for foreign investment than the UK. Furthermore, the United States’ economic nationalism and protectionism make it more probable that rising economies, such as India and China, will seize an even bigger share of global commerce.

Conversely, Indian enterprises having a presence in the UK face a slew of additional risks and obstacles due to Brexit. This new mindset is fueled by the idea that the power balance between the two countries has moved significantly in India’s favour.

Conclusion

Therefore experts predict that the restrictions on the free movement of professionals between the two markets will benefit India’s services sector. According to the Brexit trade and security agreement, UK nationals will no longer have unrestricted freedom to work, study, start a business, or live in the EU, despite both sides having tariff-free and quota-free access to each other’s markets.