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Financial Market In India ,Businees Notes
1. A market may be defined as an institutions or
arrangements that facilitates the purchase
and sale of goods ,services and others things.
2. A market may be defined as an institutions or
arrangements that facilitates the exchange of
financial instruments including loans and
deposits, corporate stocks and bonds,
government bonds ,and more instruments.
It is market in which people trade financial
securities, commodities.
3. Financial Market helps in achieving the
balanced economy growth.
It helps in the transfer of funds from potential
savers to bankers.
It eliminate the need to search for each
others.
Markets actors can acts as the borrowers and
investors.
4.
5.
6. Money market is a
market for short term
loans generally less
than 1 year.
It is a market where
the demand for and
supply of short term
funds meet.
Money market
may be classified as:
Lenders and Borrowers
8. According to RBI “It is a center for dealings
,mainly of a short term character , in
monetary asset, it meets the short term
requirements of borrowers and provides
liquidity or cash to the lenders.”
According to Crowther “The money market is
the collective name given to the various firms
and institutions that deal in the various
grades of near Money. ”
9. Constituents of Money Market
Heterogeneous Market
Dealers of Money Market
Short-term Loans
Different from Capital Market
Settlements of transactions
Encourages economic growth
Proper allocation of resources
11. This bill is also called T-bill or promissory
note. These are the short term debt
instruments used by the govt. to obtain
funds. The govt. promises to pay the amount
to the bearer of the instrument on the due
date. There is no fixed rate of interest
payable on T-bills.
12. It is a sub-market in which the trade bills or
commercial bills are traded. These bills are
drawn by the drawer(seller) on the
drawee(buyer) for the value of goods
delivered to him.
It is a common instruments used in credit
purchase and sale. These have short term
maturity period generally 90 days and can be
discounted with bank before maturity period.
13. Certificate of deposit is a bearer certificate or
document of title of funds that remain on
deposit at the bank for a specified period at a
specified rate of interest. It can be transferred
easily. The time ranges from 90 days to 1
year.
14. Call money market is a market where day to
day surplus funds of banks are traded. The
maturity of the loans varies between one day
or overnight but not exceeding two weeks.
They are usually unsecured. These are
repayable within a short period. The rate of
interest is very low and varies from day to
day.
15. Commercial papers are short term promissory
notes with a fixed maturity. This was
introduced in January 1990 in India. These
were introduced to enable highly rated
corporate borrowers to diversify their source
of short term borrowings. RBI has issued the
guidelines to regulate the issue of
commercial papers.
16. Repo is a money market instruments which
helps in collateralised short term borrowings
and lending through sale and purchase
operations in debt instruments.
It is an agreement between a seller and a
buyer in which securities are sold by their
holders(sellers) to the investors (purchaser)
with an agreement to repurchase them at a
predetermined rate.
17.
18.
19. The term capital market refers to the market
for medium and long term funds. It includes
all the institutions, organization which
provide long term and medium term funds.
It does not include the institutions which
provide funds for short period.
Instruments of capital market are shares,
debentures, bonds , mutual funds, public
deposits etc.
20. According to V.A. Avadhani— “Capital market
is a wide term used to comprise all
operations in all the new issues and stock
market.”
21. Deals in long term investments
Utilises Intermediaries
Govt. rules and regulations
Effectively allocate the financial resources
To mobilise the financial resources at
national level
22.
23. It is that market in which shares, debentures
and other securities are sold for the first time
for collecting long-term capital.
This market is concerned with new issues.
Therefore, the primary market is also called
NEW ISSUE MARKET.
The money collected from this market is
generally used by the companies to modernize
the plant, machinery and buildings, for
extending business, and for setting up new
business unit.
24. It deals with new securities.
Prices of new issues are influenced by the
price movements in stock exchanges.
The sale of securities is made only once at
the time of issues.
It does not have any tangible form.
25. The secondary market is that market in
which the buying and selling of the
previously issued securities is done.
The transactions of the secondary market
are generally done through the medium of
stock exchange.
The chief purpose of the secondary market
is to create liquidity in securities.
26. It Creates Liquidity
It Comes After Primary Market
It Has A Particular Place
It Encourage New Investments
28. Equity shares
Equity shares are those shares which are
held by the owners of a corporate entity.
These are known as ordinary shares. They
occupy a primary position. The equity
shareholder enjoy all rewards and risks
associated with such ownership.
29. Risk capital
Fluctuating dividend
Fluctuating market value
Growth prospects
Voting rights
30. Preference shares
Preference shares that carry preferential
rights in comparison with ordinary shares
are called preference shares. These are the
rights regarding payment of dividend the
distribution of the assests of the company
in the event of its winding up.
31. Cumulative and non cumulative shares
Redeemable and irredeemable shares
Convertible and non convertible shares
Participating and non participating shares
32. Debentures
Debentures are another kind of security
traded in the capital market. It is an
acknowledgement of a debt by a company
usually issued under a common seal,and
unsecured or secured by a fixed or floating
charge on the assests of the company.
33. A fixed rate of interest is paid on debentures.
The interest gained on them is fully taxable.
Redeemable at a premium.
Traded on the stock exchanges.
