In the last one and a half decades, many emerging capital markets have undergone drastic changes in terms of market microstructure changes, specifically in secondary markets. One of the policy concerns is the factors determining equity prices in markets. The author studies the various determinants of equity share prices with reference to Indian stock market. The mean values have shown that during the period 1997 to 2004, the market price was far lower due to various uncertainties prevailing in the country. The correlation analysis shows positive significant (1%) association of only price earnings ratio with market price. Book value, dividend cover, DPS, EPS and growth are positive but insignificant. At the same time, there is negative insignificant association of yield with market price (MP). While regression analysis depicts that book value, dividend per share, earnings per share and price earnings ratio are significant determinants, whereas, dividend cover and yield are insignificant with negative value. Growth remained insignificant but with positive value. Finally, it can be concluded from correlation and regression analysis that price earnings ratio, earnings per share, book value and dividend cover are the variables, which contributed the most in determining share prices followed by dividend per share and yield.

Financial management in any company is largely concerned with two main functions: procurement of funds and utilization of funds. There are three major decision areas in any financial department: investment decisions, financing decisions and the dividend decisions. While procurement of funds is largely the result of financing decisions, utilization of funds is the result of investment decisions. Investment is the economic decision of committing a set of fixed monetary resources with the expectation of receiving a stream of returns over a reasonable long period of time in the future. Since the decision to invest in securities is revocable, investment ends are momentary and investment environment is fluctuating, the reliable bases for reasoned expectation become more and more ambiguous as one envisages of the distant future.

Investment is concerned with the purchase and sale of financial assets and an attempt of the investor to make logical decisions about the various alternatives in order to earn suitable return.The investor has various alternative options for investing savings to flow in accordance with his preference. Savings are generally flown into investment with an expectation of return, but savings kept as cash are unproductive (i.e., they do not earn any reward). Savings are invested into return yielding assets depending on their risk and return characteristics.

In the last one and a half decades of economic reforms, there has been a paradigm shift in the Indian capital market. The secondary market in India has transformed itself from a backward system, fraught with broker-defaults, unlimited counter-party risk, bad deliveries, frequent market closures and poor price-discovery to a fully automated system, on par with world's best.

Applied Finance Journal, Equity Prices, Indian Companies, Capital Markets, Indian Stock Market, Economic Decisions, Monetary Resources, Financial Assets, Secondary Market, Bombay Stock Exchange, BSE, Public Sector Companies, Financial Companies, Multiple Regression Model, Market Valuation Model.