As a first, India among the top five ECM markets globally in 2022

Despite a 43 percent decrease in the number of funds raised, India was among the top five markets in the world for equity fundraising…

Despite a 43 percent decrease in the number of funds raised, India was among the top five markets in the world for equity fundraising. According to a Kotak Investment Banking report, funds worth $16.4 billion were transacted through equity capital market (ECM) activity in India in 2022.

India’s superior performance is the result of a more severe decline in ECM activity in important markets like the UK, Australia, and Japan. Global ECM activity decreased as a result of increased volatility and rising interest rates.

What Is the Equity Capital Market (ECM)

The area where financial institutions assist businesses in raising equity capital and where stocks are traded is referred to as the equity capital market (ECM). It consists of two markets: the primary market, which is used for private placements, initial public offerings (IPOs), and warrants; and the secondary market, which is used for trading in listed securities, futures, options, and existing shares.

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Understanding Equity Capital Markets (ECMs)

The equity capital market (ECM), which includes a wider variety of financial instruments and activities, is larger than the stock market alone. These include book building, initial public offerings (IPOs), private placements, derivatives trading, and the marketing, distribution, and allocation of issues. Investment banks, broker-dealers, retail investors, venture capitalists, private equity firms, and angel investors are the main participants in the ECM.

The ECM connects investors with funds provided by savers and depository institutions in addition to the bond market. The ECM, a component of capital markets, in theory, results in the efficient distribution of resources within a market economy.

Primary Equity Market

A primary public market and a private placement market are both parts of the primary equity market, where companies issue new securities. Companies raise private equity in the private placement market by selling unquoted shares to investors directly. In the primary public market, listed companies can issue new equity through seasoned issues, and private companies can go public through IPOs.

Secondary Equity Market

The “stock market” is typically thought of as the secondary market, where no new capital is created. It consists of stock exchanges and over-the-counter (OTC) markets, where a network of dealers trade stocks without using an exchange as an intermediary. This is the market where existing shares are bought and sold.