Why this matters now
The capital market, its segments and SEBI’s role are core GS-3 finance topics — central to investment, savings mobilisation and economic growth.
Primary and secondary markets
The capital market deals in long-term funds (over 1 year). The primary market is where securities are first issued (e.g. an IPO); the secondary market (stock exchanges) is where existing securities are traded. Instruments include equity (shares) and debt (bonds/debentures). Major exchanges: NSE and BSE.
The role of SEBI
The Securities and Exchange Board of India (SEBI) — a statutory regulator (SEBI Act, 1992) — protects investors, regulates and develops the securities market, and curbs malpractice (insider trading, fraud). It oversees exchanges, intermediaries, mutual funds, IPOs and FPIs.
Reforms and significance
A deep capital market mobilises savings, funds firms and infrastructure, and aids price discovery. Reforms include dematerialisation, T+1 settlement, the rise of retail investors and mutual funds/SIPs, REITs/InvITs, and corporate-governance norms. India is now among the world’s largest equity markets by capitalisation.
UPSC angle
Know capital market (long-term) — primary (IPO) vs secondary (exchanges), equity vs debt, NSE/BSE — and SEBI (1992, statutory: protect/regulate/develop). Reforms: demat, T+1, REITs/InvITs.
Frequently asked questions
What is the difference between primary and secondary markets?
The primary market is where securities are first issued (e.g. an IPO); the secondary market is where existing securities are traded.
What is SEBI?
The Securities and Exchange Board of India — the statutory regulator that protects investors and regulates the securities market.
What instruments trade in the capital market?
Equity (shares) and long-term debt (bonds and debentures).
What are India’s major stock exchanges?
The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).