prpri Comparative Study of Law Relating to Capital Markets in India, China & Germany Comparative Study of Law Relating to Capital Markets in India, China & Germany


Capital market is a market where lenders and borrowers exchange medium or long-term funds. There are various methods by which such funds are raised, the concerned entity may privately raise funds from closed sources (for example: relatives of promoters and friends), from strategic investors (for example venture capital, private equity and angel investors) or from financial institutions such as banks or non-banking financial companies, either through debt or equity or using a combination of both of them. Another alternative being that the entity may raise funds directly from the public at large through securities market and the issue shares or debt instruments on recognised stock exchanges against the funds so raised.


The Indian Capital Markets are regulated and monitored under the aegis of the Ministry of Finance, The Reserve Bank of India and most importantly The Securities and Exchange Board of India. (Hereinafter referred to as “SEBI”)

SEBI is the principal regulatory body of The Indian Capital Markets it was established as a statutory authority under the SEBI Act of 1992. SEBI was first established as a non-statutory body in the year 1988. SEBI’s primary objectives include protection of the interests of investors, promotion and the regulation the Indian capital market.

The financial intermediaries which participate in any capacity in The Indian Capital market go through do layers of institutional scrutiny. Firstly, they are assented to by their respective sectoral regulators, Secondly, they are obliged to abide by SEBI’s regulations as well. The scrutiny also extends to Foreign Portfolio Investors, as per which they are required to register themselves with their respective Depository Participants to participate in The Indian Capital Market.

Prior to the establishment SEBI as the market regulator, the Indian Capital Market was regulated by the Controller of Capital Issue, established under the Capital Issues Act, 1947.

The Ministry of Finance regulates the Indian Capital Market via its arm of the Department of Economic Affairs – Capital Markets Division. The Capital Markets Division administers legislations and rules made under the:

  • Securities Contracts (Regulation) Act, 1956
  • Securities and Exchange Board of India Act, 1992.
  • Depositories Act, 1996,

The maximum volume of trades takes place through two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

The Bombay Stock Exchange was established 1875. The NSE, being a relatively newer stock exchange, was established in 1992 and trading therein started in 1994. Despite of the differences in their time periods of establishment, both the said exchanges follow the same electronic trading mechanism now.


The Capital Market of China being relatively new, opened out to investors as late as in 1991. The two most significant stock exchanges of China, namely: The Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE) were established in the 1991. Therefore, speaking strictly in terms of terms of time elapsed since the inception of China’s Capital Market, it is safe to remark that the Chinese Capital Market is still in its nascent stages.

The statutory framework of The Chinese Capital Market consists of the Company Law of the People’s Republic of China (PRC), numerous fundamental rights appended thereto and interpretations of the judiciary in the said regard. In addition, it also includes the Securities Law of the People’s Republic of China, and various rules and regulations attached therewith by the virtue of delegation legislations.


The Capital Market in India dates back far more than its contemporary in China, and is also more welcoming to all categories of investors, be it retail or institutional and also for participating companies. The Indian Capital Market is much more inclusive than China’s, specifically for smaller companies.

However, China’s Capital Market has grown leaps and bounds since its inception, which is reflected from the fact that it took China just three decades to match up with the development that the Indian capital market took more than a century to establish. Moreover, China is desirous of expanding its development in The Capital market, because of which, it is endeavouring to expedite its opening-up to more investors.

As far as the first-mover advantage is concerned, The Indian Capital Market has to its credit of being the oldest in Asia. The Bombay Stock Exchange (BSE) was Asia’s first stock exchange, which was founded in 1875 in Mumbai’s Dalal Street. Since then, numerous stock exchanges have been established in India. As also mentioned earlier, India currently has two major national exchanges: the Bombay Stock Exchange and the National Stock Exchange.

Tracking the performance of the companies listed on stock exchanges, India’s stock market has two major indices, the BSE Sensex is an index of biggest 30 companies (by weightage on the exchange) listed on the BSE, and the Nifty 50, an index of the biggest 50 companies listed on NSE’s index. The Sensex is regarded to be reflective of the mood of India’s domestic stock markets, as the overall market capitalization of companies listed on it accounts for around 45 percent of the total capitalization of all listed companies on the Bombay Stock Exchange.

Speaking of the indices of the Capital Market in China, The Shanghai Composite Index, the Shenzhen Component Index and the blue-chip CSI300 Index are China’s most significant indices reflective of the health of the economy of the nation.

The Capital Market in China Starting from 100 points in 1990, has seen exponential growth since then, with currently the index being at around 3000 points, close to a 30-fold growth in three decades. Bringing the Indian Capital Market in perspective, The Sensex has seen a relatively modest 15-times growth since the New Economic Policy in 1991.

The ways in which Initial Public Offering functions in India and China differ materially. The Capital Market in India had abolished its administrative approval system in 1992.

The internationalization of a country’s stock market can be measured using two dimensions: market access requirements for international capital and IPO requirements for foreign companies.

Two foreign companies have been listed on India’s capital market, on the other hand China capital market has none. India opened to foreign capital, having approved foreign investments in India’s stock and bonds markets in the year 1992.


The Frankfurt Stock Exchange (Hereinafter referred to as “FSE”) is the principal stock exchange in Germany and the same functions in division into two segments: the open market and the regulated market. The regulated market further has two subdivisions:

  • the general standard, and
  • the prime standard

The open market on the said exchange is also bifurcated in the entry standard and the quotation board for secondary listings.

The statutory framework covering the listing requirements on the German capital markets constitute:

  • the Stock Exchange Act,
  • the Securities Trading Act,
  • the Securities Prospectus Act,
  • the Exchange Rules for the Frankfurt Stock Exchange,
  • the Stock Exchange Admission Regulation.

In addition, the German Commercial Code also requires for the registration of investment companies.

There are also certain Requirements for trading on the regulated market in Germany, in pursuance of which, the local and foreign companies willing to partake in trade are required to abide by certain requirements, which are:

– the issuer of the concerned securities must publish a prospectus that shall be approved by the German Federal Financial Services Supervisory Authority

  • the concerned company’s shares must be marketable and freely transferrable
  • the concerned company must also file an application for listing on the FSE.

Regulations also extend to trading on the secondary market. In order to get a company listed on the secondary capital market, the issuer is bound to comply with the same regulations as for listing requirements on the primary market.

Initial Public Offerings may be structured as offers of subscribing to a fresh issue of shares stemming from capital increase, or as an offer of existing shares from existing shareholders selling their stakes in a company. The preconditions are to be adhered to while applying for a listing on German capital markets:

  • appointing advisers and investment banks,
  • registering the capital increase with the German Trade Registry,
  • allocating the shares,
  • registering with the Stock Exchange.
  • preparing a business plan,
  • preparing the prospectus,
  • negotiating and drafting the underwriting documents


India’s climb on the worldwide stage has asserted another triumph after its “capital market” surpassed Germany to turn into the seventh biggest on the planet. India’s capital market edged past the value market of Europe’s biggest economy without precedent for a very long time, as indicated by information accumulated by Bloomberg.

The move mirrors India’s positive returns this year as organizations’ dependence on homegrown interest empowered them to stay away from the emergency in other developing business sectors prodded by Federal Reserve fixing and an exchange battle between the U.S. what’s more, China. It additionally features the difficulties confronting the EU, incorporating its future relationship with the U.K., a deadlock with Italy over spending portions and dissenter conflicts in Spain.

Germany infers in excess of 38% of its total national output from sends out, in view of 2017 information from World Bank. The relating proportion for India is just 11%, which means a significant part of the “capital-market” opportunity in the nation comes from homegrown buyer stories.

The dependence on nearby interest and business additionally puts India ahead in development sweepstakes. The south Asian country is projected to develop 7.5 percent this year and 7.3 percent in 2019, a long way from German development of 1.6 percent for every year.


Be it India, China or Germany, the capital market forms the backbone of the economy and is hence, rightfully regulated by a number of statutes and regulations appended thereto. The laws governing the Capital Markets need to be updated periodically and be in tandem with global market cues, while also paying high regard to investor protection and confidence.


  • What is SEBI? History, Functions, Authority and Powers, Capital Via Investment Advisor (May 5, 2021, 9:01 P.M),
  • NSE, last visited May 7, 2021)
  • Lei (Raymond) Shi, In review: capital markets law in China, Lexology (May 17, 2021, 8:04 A.M),
  • Dong Dengxin, How do Chinese and Indian stock markets compare?, Global Times (May 26, 2021, 6:08 P.M),
  • Capital Market Regulations in Germany, Lawyers Germany (May 31, 2021, 5:54 P.M),,%2D%20the%20general%20standard.
  • Srinivasan Sivabasan, India’s stock market overtakes Germany to become 7th largest in the world, Business Standard (June 1, 2021, 8:09 P.M),

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