UNIT -1 AN OVERVIEW OF CAPITAL AND COMMODITIES MARKETS

FINANCIAL SYSTEM:-

Transfer of economics resources from one section of the economy to another.

FUNCTIONS OF FINANCIAL SYSTEM:-

I. Mobilize huge financial resources

II. Effective allocations of resources to investment channels
III. Accelerates rate of economic development

FINANCIAL INSTITUTIONS:-

is a company engaged in the business of dealing with monetary transactions, such as

deposits, loans, investments and currency exchange

MONEY:- CREDIT:- FINANCE:-

It is anything It refers to debt of Monetary resource

which is generally economic unit comprising of
accepted as a
medium of DEBT+OWNERSHIP OF
exchange, FUNDS
measure of value,
store of value and
means for
standard of
deferred

FINANCIAL MARKETS:-

A financial market is a market for the creation and exchange of financial assets. Ex:
securities, bonds, shares.
MONEY MARKET:-

Money market is the market for short terms funds which deals in financial assets whose maturity
period is upto 1 year

E.x RBI, commercial banks, on-banking finance companies, mutual funds

CAPITAL MARKET:-

It is that part of financial market where long term funds are raised through financial assets
having maturity period more than 1 year.

E.x Development banks, commercial banks, stock exchange

PRIMARY MARKET SECONDARY MARKET

It deals with new securities being issued for the It is also known as stock
market or stock exchange

Time hence it is also known as the new issues market. It is a market for the purchase
and sale of existing

Securities

It provides liquidity and marketability

to existing

Securities

STOCK EXCHANGE:-

According to securities (regulation) act 1956, stock exchange means any body of individual
whether incorporated or not consisted for the purpose of

ASSISTING
REGULATING
CONTROLLING
The business of buying and selling or dealing in securities.

DEPOSITORIES:-

A depository is an organization which holds securities like shares, debentures, bonds, mutual
funds etc. of investors in electronic format the request of investors through a registered
depository participant.

ISSUE MECHANISM / ISSUE OF EQUITY SHARES IN PRIMARY MARKET:-

1. Offer through prospectus

Means of advertisement in newspapers and magazines
Contents should be according to provisions of companies act and SEBI guidelines
2. Offer for sale
Securities not issued directly to public
 Offered through intermediaries
Issuing houses,stock brokers
Agreed price to brokers resell them in public
3. Private placement
Allotment of shares to institutional investors
Easier method to raise capital
Followed by those companies which cannot afford expenses of public issue
4. Rights issue
Privilege given to existing shareholders
Shareholders are offered the right to buy new shares in proportions of shares held
by them
5. E-IPOS
Online system of issue of capital issue
Company should appoint registrar to issue having electronic connectivity

BUY BACK OF SHARES:-

The repurchase of outstanding shares by a company in order to reduce the number of

shares in the market.

Methods of buyback

TENDER OFFER OPEN MARKET

OFFER

ADVANTAGES:-

Enables the company to manage cash effectively

Helpful to improve the value of shares
To avoid high financial risk

DISADVANTAGES:-

High buyback may lead to artificial manipulation of prices in stock exchange

Leads to abnormal increase of prices which might lead to heavy risk

COMMODITY COMMODITIES
MARKET

Refers to any movable property other than Refers to market that trades in
primary economic

Actionable claims, money and securities. Sector rather than manufactured

products.

SOFT HARD

Coffee bean
gold
 Cocoa
rubber

Sugar
oil

Wheat silver