Competitive Exams

IIT JEE, NEET, ESE, GATE, AE/JE, Olympiad

Only IAS

UPSC, State PSC

School Preparation

Foundation (Class 6-12), Commerce, Arts, CuriousJr (1st - 8th), Science, International Boards

Govt Exam

Judiciary, SSC, Defence, Teaching, JAIIB & CAIIB, BIHAR EXAMS WALLAH, UP Exams, Railway, Nursing Exams, Banking, WB Exams

UG & PG Entrance Exams

MBA, IPMAT, IIT JAM, LAW, CUET UG, UGC NET, GMAT, Design & Architecture, Pharma, CSIR NET, CUET PG, NEET PG

FINANCE

CA, CS, Finance Courses, ACCA

Others

English Wallah, Online Degrees

English Proficiency Test

IELTS, TOEFL

Agriculture

Equity Capital Markets, Definition, Types, How It Works?

Equity Capital Markets are platforms where companies raise funds by issuing shares and trading stocks. Explore how ECM works, its types, and insights into India’s growing equity market.

Mridula Sharma21 Jun, 2025

Equity Capital Markets: Equity Capital Markets (ECM) represent a vast network of financial institutions and platforms that facilitate businesses to raise funds through trading. This includes the primary market, where companies issue new shares through mechanisms like IPOs and private placements, and the secondary market, where existing securities are bought and sold on stock exchanges.

An IPO, or Initial Public Offering, is when a privately owned company sells its shares to the public for the first time. This turns the company into a publicly owned one and provides money that can be used for paying debts, buying other companies, or solving cash flow problems. For a private company, going public through an IPO is a crucial moment. How well the IPO goes can greatly affect the company's future.

For CA aspirants, mastering ECM isn’t just exam prep, rather, it’s a stepping stone to understanding how real-world finance works. Therefore, candidates aiming to clear CA exams must understand what equity capital markets are, their types, and how they function.

What Are Equity Capital Markets?

The equity capital market (ECM) is where companies get funding by selling shares, and where stocks are bought and sold. It's made up of two parts: the primary market, where new shares are first sold, and the secondary market, where existing shares are traded along with other financial products like futures and options. Think of the ECM as a big financial hub, not just limited to stocks. It deals with various activities like selling new shares (IPOs), private funding, and trading different financial products. The key players here are investment banks, brokers, investors, and firms looking to invest in companies. Working alongside the bond market, the ECM helps move money from savers and banks to investors. This system, in theory, helps make sure money is used efficiently in the economy.

Types of Equity Capital Markets

The following are two main types of equity capital markets: Primary Equity Market The primary equity market involves companies issuing new securities. It has two main parts: the private placement market and the primary public market. In the private placement market, companies sell unquoted shares directly to investors to raise private equity. In the primary public market, private companies can become public through IPOs, and listed companies can offer new equity through seasoned issues. Secondary Equity Market The secondary market, often referred to as the "stock market," doesn't create new capital. Instead, it's where existing shares are bought and sold. This market includes stock exchanges and over-the-counter (OTC) markets. In OTC markets, dealers trade stocks without an intermediary exchange.

Also Check:
Management Accounting	Financial Accounting
Auditing and Assurance	Taxation
Financial Management	Business Laws and Ethics

Raising Capital in Equity Markets

Raising funds through the stock market has its perks for companies. Firstly, it means they don’t have to rely heavily on borrowing money, which can be costly due to high interest rates. Instead, they sell shares, which helps keep their debt levels lower. Plus, the stock market offers more flexibility and diverse options for funding growth compared to borrowing. Sometimes, going public also allows company founders to bring in experienced advisors, which can be a big help in expanding into new markets or products. However, there are downsides to this approach too. Going public can be a lengthy and pricey process involving many parties, which adds to the overall cost and time. Also, once a company is public, it's under constant scrutiny. While stock investors may be more willing to take risks than lenders, they still expect good returns. If a company consistently fails to deliver profits, investors might lose interest, causing its stock value to plummet. Also Check: Stock Market Classes for Beginners

Equity Capital Markets in India

Despite the global economic downturn caused by the pandemic, India's economy has shown resilience. Even during the turmoil in May and June 2020, when stock markets were volatile and trading was disrupted, India managed to bounce back. In October 2020, India's equity capital market reached an all-time high, raising over $32.7 billion, surpassing the 2017 record. This marked an impressive 85% increase compared to October 2019. This surge can be attributed to two main factors: government intervention at both central and state levels, and companies holding onto cash due to uncertainty, leading to increased liquidity in their balance sheets. Analysts predict that more major corporations will follow the lead of companies like Reliance Industries, which raised a record-breaking $7 billion through rights offerings in June 2020. However, global equity markets are still under pressure. Without significant intervention from international organizations like the World Bank, IMF, and others, the global economy is likely to remain stagnant until an effective vaccine is widely available. This uncertainty affects both emerging and developed markets. Get ahead in your CA exams with our PW CA Courses! Master Equity Capital Markets and more to excel in your career. Enroll now for expert guidance and comprehensive study materials.

Also Check
Activity-Based Costing (ABC)	International Standards on Auditing (ISA)
Continuing Professional Development for Chartered Accountants	Direct Tax
Due Diligence	Tax Audit

Equity Capital Markets FAQs

What are Equity Capital Markets (ECM)?

Equity Capital Markets (ECM) are where companies raise funds by selling shares and where stocks are traded. It consists of the primary market for new share issuance and the secondary market for existing share trading.

How do IPOs help companies raise funds?

IPOs (Initial Public Offerings) enable privately-owned companies to sell shares to the public for the first time, providing them with capital for various purposes like debt repayment, acquisitions, or addressing cash flow issues.

What are the primary and secondary equity markets?

The primary equity market involves the issuance of new securities through methods like IPOs and private placements. In contrast, the secondary equity market facilitates the trading of existing shares among investors, including exchanges and over-the-counter markets.

How does raising capital through the stock market benefit companies?

Raising capital through the stock market reduces reliance on debt, offers flexibility in financing options, and allows for bringing in experienced advisors. However, it also entails costs, time, and ongoing scrutiny from investors.

What factors contribute to India's resilient equity market despite global economic challenges?

India's equity market resilience amidst global uncertainties is attributed to government interventions, increased liquidity in company balance sheets, and major corporations' successful fundraising initiatives, like Reliance Industries' record-breaking rights offering.

🔥 Trending Blogs

Latest GST Updates and Practical Problems

CA Exam and Career Resources

Personal and Small Business Tax Planning for 2025

CA Foundation Inventories Complete Guide

CA Foundation Aspirants Strategy for One Day

Talk to a counsellorHave doubts? Our support team will be happy to assist you!

7019243492

07019243492

Check out these Related Articles

CA FOUNDATION

Types and Enforcing of Laws

Read Full Story

24 Jul 2025, 08:06 pm

Latest ICAI Scholarship 2025 Update

Read Full Story

25 Jul 2025, 08:13 pm

CA INTERMEDIATE

CA Intermediate Chapter-Wise Weightage for Sept 2025

Read Full Story

25 Jul 2025, 12:25 pm

CA FINAL

Clear CA Final in First Attempt

Read Full Story

23 Jul 2025, 03:11 pm

CA FOUNDATION

CA Foundation Quantitative Aptitude and Logical Reasoning

Read Full Story

21 Jul 2025, 10:05 pm

CA FOUNDATION

CA Foundation Preparation After Failure

Read Full Story

18 Jul 2025, 07:04 pm

ICAI Tax Audit Limits to 60 per Partner from FY 2026-27

Read Full Story

21 Jul 2025, 09:27 pm

Notification for Online Assessment Test for Certified Course on Stock Market and Equity Research

Read Full Story

21 Jul 2025, 09:42 pm

ICAI Adds Auditor’s Opinion to UDIN System

Read Full Story

21 Jul 2025, 09:16 pm

Join 15 Million students on the app today!

Live & recorded classes available at ease

Dashboard for progress tracking

Millions of practice questions at your fingertips

Free Learning Resources

PW Books

Notes (Class 10-12)

Class 10 Math's Notes

Class 10 Chemistry Notes

Class 10 Physics Notes

lass 10 Biology Notes

Aptitude & Reasoning

Class 10 Geography

Physics Class 11 Notes

Class 11 Chemistry Notes

Maths Notes Class 11

Zoology Class 11

Class 11 Botany Notes

Physics Class 12 notes

Chemistry Class 12

Maths Notes Class 12

Zoology class 12

Class 12th Botany Notes

PW Study Materials

Arjuna JEE Study Material

JEE 5 PYQs

JEE Mind Maps

Yakeen Study Material

NCERT Punch

Arjuna Neet Study Material

NEET PYQs

CBSE Sample Paper

CBSE Question Bank

Udaan For Class 10th Study Material

Notes (Class 6-9)

Class-6 Theory & Notes

Math's Notes for class 7

Science Notes for class 7

Class 8 Math Notes

Class 8 Chemistry Notes

Class 8 Physics Notes

Class 8 Biology Notes

Class 8 SST Notes

Class 9 Math's Notes

Class 9 Physics Notes

Class 9 Chemistry Notes

Class 9 Biology Notes

Ncert Solutions

NCERT Solutions For Class 6

NCERT Solutions For class 7

NCERT Solutions for class 8

NCERT Solutions for class 9

NCERT Solutions for class 10

NCERT Solutions for class 11

NCERT Solutions for Class 12

NCERT Solutions For Class 6

Govt Exams

Entrance Exams

Our Other Websites

Class 6th to 12th Online Courses

Class 12 Online Course

Class 11 Online Course

Class 10 Online Course

Class 9 Online Course

Class 8 Online Course

Govt Job Exams Courses

SSC Online Coaching

Bank Exam Online Coaching

TET Online Coaching

JAIIB & CAIIB Online Coaching

Bihar Exam Online Coaching

UPSC Coaching

UPSC Online Coaching

UPSC Offline & Hybrid Coaching

State PSC Online Coaching

UPPSC Online Coaching

BPSC Online Coaching

Defence Exam Coaching

NDA Online Coaching

CDS Online Coaching

AFCAT Online Coaching

Agniveer Online Coaching

Gate Exam Coaching

Civil Engineering Courses

Mechanical Engineering Courses

Formulas

Other Exams

Company Secretary Exam

Know about Physics Wallah

Physics Wallah is an Indian edtech platform that provides accessible & comprehensive learning experiences to students from Class 6th to postgraduate level. We also provide extensive NCERT solutions, sample paper, NEET, JEE Mains, BITSAT previous year papers & more such resources to students. Physics Wallah also caters to over 3.5 million registered students and over 78 lakh+ Youtube subscribers with 4.8 rating on its app.

We Stand Out because

We provide students with intensive courses with India’s qualified & experienced faculties & mentors. PW strives to make the learning experience comprehensive and accessible for students of all sections of society. We believe in empowering every single student who couldn't dream of a good career in engineering and medical field earlier.

Our Key Focus Areas

Physics Wallah's main focus is to make the learning experience as economical as possible for all students. With our affordable courses like Lakshya, Udaan and Arjuna and many others, we have been able to provide a platform for lakhs of aspirants. From providing Chemistry, Maths, Physics formula to giving e-books of eminent authors like RD Sharma, RS Aggarwal and Lakhmir Singh, PW focuses on every single student's need for preparation.

What Makes Us Different

Physics Wallah strives to develop a comprehensive pedagogical structure for students, where they get a state-of-the-art learning experience with study material and resources. Apart from catering students preparing for JEE Mains and NEET, PW also provides study material for each state board like Uttar Pradesh, Bihar, and others

What Are Equity Capital Markets?

Types of Equity Capital Markets

Also Check:
Management Accounting	Financial Accounting
Auditing and Assurance	Taxation
Financial Management	Business Laws and Ethics

Raising Capital in Equity Markets

Equity Capital Markets in India

Also Check
Activity-Based Costing (ABC)	International Standards on Auditing (ISA)
Continuing Professional Development for Chartered Accountants	Direct Tax
Due Diligence	Tax Audit