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Capital Markets and Regulation for UPSC
120 notes · updated 2 Nov 2026
The basics
Capital markets are financial arenas where long-term debt and equity instruments are traded to facilitate capital formation. Unlike money markets, which deal with short-term liquidity, capital markets focus on long-term investments such as shares, debentures, and government securities. The ecosystem relies on Market Infrastructure Institutions (MIIs), including depositories, clearing corporations, and stock exchanges, to ensure the seamless settlement and clearing of transactions.
The Securities and Exchange Board of India (SEBI) serves as the primary regulator, ensuring market integrity, protecting investor interests, and enforcing corporate governance standards. UPSC focuses on this topic because it is central to economic development and the mobilization of savings into productive investments. For Prelims, candidates must distinguish between various financial instruments and the roles of MIIs. For Mains, the focus shifts to systemic issues like market volatility, the impact of Foreign Portfolio Investment (FPI) flows, and the role of capital markets in addressing corporate governance and capital formation.
In the news
- India's IPO market sees record Rs 84,400 crore fundraising in H1 FY27
Grant Thornton Bharat reported a record Rs 84,400 crore fundraising in India's IPO market during H1 FY27, driven by a sharp acceleration in the second quarter.
- Jio Platforms raises $3.2bn in India’s largest-ever IPO to become second most valuable
Jio Platforms successfully raised $3.2bn in India's largest-ever IPO, elevating it to the position of the country's second most valuable company.
- Jio Platforms debuts as India's second-largest listed company at Rs 12.5 lakh crore
Jio Platforms debuted as India's second-largest listed company by market capitalisation at a valuation of Rs 12.5 lakh crore, surpassing Bharti Airtel.
- Jio Platforms lists on NSE with 21.36% pop as India's biggest public offering
Jio Platforms listed on the National Stock Exchange (NSE) as India's largest public offering, making Reliance Industries Group the largest Indian conglomerate by market capitalization.
- Jio Platforms IPO fully subscribed in 100 minutes with over 1.38 crore applications
Jio Platforms launched India's largest public issue, a Rs 30,213 crore IPO, which saw overwhelming investor demand and full subscription within 100 minutes.
- Sebi plans consultation paper to relax disclosure rules for FPIs following Hindenburg allegations
Sebi plans to release a consultation paper to relax disclosure rules for Foreign Portfolio Investors (FPIs) following Hindenburg Research allegations against the Adani Group.
- Indian stocks have lost nearly Rs 30 lakh crore in market value
Indian stocks lost nearly Rs 30 lakh crore in market value as the Nifty 50 fell around 14 per cent, driven by FII outflows and currency risks.
- Foreign investors sold ₹4.55 lakh crore in equities as Sensex fell 14.16%
BlackRock Investment Institute's Powell stated that foreign investors are seeking corporate earnings momentum and stability before increasing Indian equity exposure following a ₹4.55 lakh crore sell-off.
- Jio Platforms IPO hits 22.19x subscription, surpassing Hyundai Motor India at Rs 30,213 crore
Jio Platforms launched India's largest IPO at Rs 30,213 crore, surpassing Hyundai Motor India's previous record and achieving a 22.19x subscription.
- Jio IPO breaks 12 records including Rs 4.5 lakh crore bids
The Jio IPO broke 12 records, including a bid size of Rs 4.5 lakh crore, amidst a period where financial, communication, computer, and manufacturing services accounted for 73% of FDI equity inflows.
- Jio Platforms opens IPO to raise up to Rs 30,213 crore from investors
Jio Platforms launched India's largest-ever IPO to raise up to Rs 30,213 crore, potentially valuing the company at Rs 10.3 lakh crore.
- SEBI to revert to volume-weighted average pricing for derivatives starting December 7
SEBI announced a reversion to volume-weighted average pricing for index and stock derivatives starting December 7 to address sharp price swings during closing auctions.
- Sebi proposes lowering minimum SME IPO application amount from ₹2 lakh to ₹1 lakh
Sebi proposed lowering the minimum SME IPO application amount from ₹2 lakh to ₹1 lakh to enhance accessibility for smaller enterprises.
- SIPs reach record Rs 32,490 crore in September 2026 as Sensex falls 90 points
Indian equity benchmarks (Sensex and Nifty) traded flat as SIP investments reached a record high of Rs 32,490 crore in September 2026 despite market corrections.
- Sebi extended IPO-size flexibility due to soaring primary market activity
SEBI extended IPO-size flexibility and allowed monitoring agencies to report directly to stock exchanges to streamline reporting amidst high primary market activity.
- Mutual funds hit record 11.7% equity holdings as FPI assets fall below 14%
NSDL data revealed a record shift in Indian equity ownership as mutual fund holdings hit 11.7% while FPI assets fell below 14% due to retail flow deluges and foreign selling.
- Reliance and Jio prepare Rs 10.3 lakh crore IPO, potentially India's largest-ever listing
Reliance Industries and Jio are preparing a potential Rs 10.3 lakh crore IPO, which would be India's largest-ever listing, following roadshows by Akash and Isha Ambani.
- Sensex and Nifty post losses for eight weeks as foreign investors withdraw $40bn
The Sensex and Nifty indices recorded their longest losing streak in 25 years as foreign institutional investors withdrew $40bn over two years despite India's 7% GDP growth.
- SEBI to likely stop using closing auction session for derivatives settlement prices
SEBI is likely to stop using the closing auction session (CAS) to calculate derivatives settlement prices to prevent sharp price swings on expiry days.
- India's IPO market hits record $9 billion listing proceeds in July-September quarter
India's IPO market recorded a record $9 billion in listing proceeds during the July-September quarter of 2026, driven by large offerings from major entities.
- Sensex falls over 20% in dollar terms in 2026 as weak sentiment, rupee drag returns
Indian stock indices (Sensex and Nifty) saw significant declines in 2026 due to slowing earnings growth, US tariffs, and foreign capital outflows.
- SEBI Drops Fraud Allegations Against Vinod Adani, Imposes ₹20 Lakh Penalties on Others
SEBI dropped fraud and Minimum Public Shareholding (MPS) allegations against Vinod Adani and 11 others due to insufficient evidence of offshore fund control.
- FPIs pull out ₹2.17 lakh crore, Sensex loses 13.6% in a year
Foreign Portfolio Investors (FPIs) withdrew over ₹2.17 lakh crore from Indian equities over the past year, contributing to a 13.6% decline in the Sensex.
- Sebi Approves PMS Rules, Expanding Portfolio Advisors’ Roles
Sebi approved new Portfolio Management Services (PMS) rules to expand the scope of roles for portfolio advisors, allowing them to offer a broader range of investment options.
- Sebi approves new rules to widen investment avenues
Sebi introduced the PRIM route to allow portfolio managers to invest client funds in mutual fund direct plans, including ETFs and index funds, to broaden investment avenues.
- IFCI, New India Assurance, other stocks drop up to 3% as NSE makes a muted market debut. What to expect?
The National Stock Exchange (NSE) launched its IPO to raise Rs 22,562 crore through an offer for sale by major shareholders including IFCI, NIACL, and GIC.
- NSE to debut in test of India investor faith in long-term growth
The National Stock Exchange of India Ltd. (NSE) is set to debut on the BSE Ltd. following a 5.7 times oversubscribed IPO, testing investor confidence in India's long-term growth.
- 23 firms race to launch IPOs worth Rs 40,775 crore before September 30 deadline
SEBI-approved IPO approvals for 23 firms worth ₹40,775 crore are set to expire on September 30, 2026, forcing companies to either launch or refile.
- Kore Digital shares crash 10% as Sebi alleges Rs 541 cr revenue misstatement, bars CEO, CFO and MD from capital market
Sebi barred the MD, CEO, and CFO of Kore Digital from capital markets and prohibited the firm from raising public funds over allegations of a Rs 541 crore revenue misstatement.
- SEBI Targets Market Manipulators with 20-Minute End-of-Day Auction
SEBI directed local stock exchanges to implement a 20-minute end-of-day auction to prevent large traders from manipulating closing prices following allegations against Jane Street Group.
- Sebi proposes two options to address expiry-day volatility in derivatives
Sebi proposed two options to determine expiry-day settlement prices for index and stock derivatives to mitigate volatility during the Continuous Trading Session (CTS).
- SEBI Proposes Major Changes: New Settlement Prices, Market Timings Up for Debate
SEBI has proposed two options for determining expiry-day settlement prices for index and stock derivatives to improve market functioning.
- NSE slashes IPO size, aims to raise Rs 22,662 crore starting September 17
The National Stock Exchange (NSE) reduced its IPO offer size to 12.64 crore shares, aiming to raise Rs 22,662 crore starting September 17.
- NSE set to launch IPO at ₹1,750 per share in third week of September
The National Stock Exchange (NSE) plans to launch its IPO in the third week of September 2026 after receiving SEBI approval.
- National Stock Exchange’s Rs 30,000-crore IPO set to open, may top Hyundai’s record
The National Stock Exchange (NSE) is launching a nearly Rs 30,000-crore IPO, potentially becoming India's largest offering to date.
- Sebi exempts FPIs from furnishing details, eases investment in government securities
Sebi issued a circular exempting Foreign Portfolio Investors (FPIs) from furnishing investor group details when investing solely in government securities.
- Sebi to Revise Derivatives Settlement Method as Trading Volumes Plunge to Multi-Month Lows
Sebi announced plans to review the settlement price methodology for derivative contracts following a significant drop in trading volumes and feedback from market participants.
- NSE’s IPO set to raise Rs 30,000 crore; IFCI shares surge
Sebi approved the draft offer document for the National Stock Exchange (NSE) IPO, which is expected to raise approximately Rs 30,000 crore.
- AIFs appeal to SEBI, RBI over draft July guidelines on foreign contributions
Alternative Investment Funds (AIFs) appealed to SEBI, RBI, and the Ministry of Finance against draft July guidelines that could classify AIFs with majority foreign contributions as foreign entities.
- General Insurance Corporation of India, New India Assurance, National Insurance, United India
Five state-run general insurance companies (GIC, New India Assurance, National Insurance, United India, and Oriental Insurance) are divesting their stakes in the NSE IPO to improve solvency ratios.
- NSE Set to Launch ₹31,000 Crore IPO, Second-Biggest in India After Jio Platforms
The National Stock Exchange of India (NSE) is set to launch a ₹31,000 crore IPO, the second-largest in India after Jio Platforms, following a draft red herring prospectus filing.
- Jio Platforms Gets Sebi OK for Up to $3.8 Billion IPO
SEBI approved Jio Platforms' massive $3.8 billion IPO, which aims to surpass previous records for India's largest listing.
- SIP assets triple to ₹14.83 lakh crore, driving long-term investment growth
The surge in Systematic Investment Plan (SIP) assets to ₹14.83 lakh crore highlights a structural shift toward retail-led long-term wealth creation in India.
- Sebi scraps notarisation for foreign investors, speeds up onboarding instantly
Sebi has eliminated the requirement for notarisation, apostillisation, or consularisation of Power of Attorney (PoA) documents for Foreign Portfolio Investors (FPIs) to expedite onboarding.
- SEBI bans JPMorgan unit, local firm for alleged market manipulation, seizes ₹37 million
SEBI banned a JPMorgan unit and a local firm for manipulating the BSE Sensex closing auction, highlighting vulnerabilities in the newly introduced auction-based pricing system.
- SEBI plans 15%-20% drop in collateral for liquid stocks to lure back foreign investors
SEBI plans to lower collateral requirements for liquid stocks by 15%-20% to attract foreign institutional capital following a significant sell-off by foreign investors.
- Sebi Chairman Announces Overhaul of IPO Rules for SMEs, Targets Costly Underwriting Systems
SEBI Chairman announced a review of SME IPO rules to address inefficient and costly underwriting systems and reform portfolio management services.
- Sebi Clarifies: Discretionary PMS Clients Can Pledge Securities for Loans
SEBI clarified that clients of discretionary Portfolio Management Services (PMS) can pledge their securities as collateral for personal loans.
- SEBI Allows OBPPs to Offer Products Regulated by RBI IRDAI IFSCA PFRDA
SEBI has expanded the scope for Online Bond Platforms (OBPPs) to offer products regulated by multiple financial bodies, aiming to deepen the capital markets.
- The Securities and Exchange Board of India plans to allow companies
SEBI is proposing to expand the eligibility of companies for SME platform IPOs to increase investor participation and reduce costs for issuers.
- Sebi Proposes Allowing FPIs Broader Participation in Commodity Derivatives
Sebi issued a consultation paper proposing to allow Foreign Portfolio Investors (FPIs) broader participation in physically settled non-agricultural commodity derivatives to integrate Indian markets with global ones.
The newest 51 notes are shown.
Key facts
- Body: Sebi — The Securities and Exchange Board of India note →
- Concept: Current disclosure threshold — Indian equity AUM exceeding ₹50,000 crore or holding over 50% in one group note →
- Concept: Proposed exemptions — Low-threshold holdings and investments in public sector undertakings note →
- Concept: FDI Equity Inflows — 73% of inflows between April and August 2026 came from financial, communication, computer, and manufacturing services. note →
- Concept: FII Outflows — Foreign institutional investors withdrew nearly $32 billion from Indian markets this year. note →
- Figure: Rs 1,69,400 crore — Net equity inflows recorded by domestic institutional investors in Q2 FY27 note →
Practice · 5 questions
With reference to India's IPO market in H1 FY27, consider the following statements:
- Domestic institutional investors recorded net equity inflows of Rs 1,69,400 crore in Q2 FY27.
- The total IPO fundraising reached Rs 84,400 crore during the first half of the fiscal year.
- Financial services companies accounted for 50% of the total capital raised in H1 FY27.
Which of the statements given above is/are correct?
- (a)2 only
- (b)1 and 2 only
- (c)1 and 3 only
- (d)1, 2 and 3
Answer
(b) 1 and 2 only — Statements 1 and 2 are correct. Statement 3 is incorrect: They accounted for 43% of the total capital raised. Note →
With reference to Jio Platforms' IPO and market position, consider the following statements:
- The company reached a valuation of $150bn following the IPO.
- The company began offering free data in 2016 to expand market reach.
- Jio Platforms raised $3.2bn in its initial public offering.
Which of the statements given above is/are correct?
- (a)1 only
- (b)3 only
- (c)1 and 2 only
- (d)2 and 3 only
Answer
(d) 2 and 3 only — Statements 2 and 3 are correct. Statement 1 is incorrect: The note states the valuation reached $131.5bn. Note →
What is the projected monthly churn rate for Jio as mentioned in the report?
- (a)1.6%
- (b)2.5%
- (c)3.2%
- (d)0.8%
Answer
(a) 1.6% — The note specifies Jio's monthly churn rate is 1.6%. Note →
With reference to Jio Platforms, consider the following statements:
- The company aims to achieve a debt-free status by FY29.
- Jio Platforms reported a wireless subscriber market share of 50% as of 2026.
- The company reported 28.6 million home broadband users as of 2026.
Which of the statements given above is/are correct?
- (a)1 only
- (b)3 only
- (c)1 and 3 only
- (d)2 and 3 only
Answer
(c) 1 and 3 only — Statements 1 and 3 are correct. Statement 2 is incorrect: The wireless subscriber market share is 41.7% as of 2026. Note →
What is the current disclosure threshold for FPIs regarding Indian equity AUM?
- (a)₹100,000 crore
- (b)₹10,000 crore
- (c)₹5,000 crore
- (d)₹50,000 crore
Answer
(d) ₹50,000 crore — Current rules require revealing ultimate beneficial owners if a fund's Indian equity AUM exceeds ₹50,000 crore. Note →
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