Capital market:

Capital Markets are markets where financial securities like shares and bonds are issued to raise
medium to long term financing and also where the securities are traded. It helps channelize
surplus funds from small investors to institutions so that it can be put to productive use. It
consists of primary and secondary market. Primary market deals with the issue of new securities
like stocks or bonds. While secondary market deals with the exchange of existing securities.
Another classification of capital market can be done on the basis of nature of securities traded
like bond market or stock market. In short, the securities are issued in a primary market and then
traded in secondary market.

Broadly, capital markets refer to markets of any financial asset. A capital market is where buyers
and sellers trade financial securities such as stocks, bonds, etc. Buyers and sellers can be
individuals or institutions.

Sellers - include life insurance companies, pension funds, and charitable foundations like
religious institutions, hospitals, colleges and non-financial institutions that generate excess cash
beyond their investment needs.

Buyers - include nonfinancial companies, motor vehicle and home purchasers, and governments
financing infrastructure investment and operating expenses.

Capital markets trade mainly in long-term securities and facilitates channelization of surplus
funds from savers to institutions that invest them into productive use. They represent the inherent
strength of the economy and encourage capital creation in the economy by offering a range of
investment avenues to its investors.

Capital market segments

Marketing segmentation is the research that determines how your organization divides its customers or
cohort into smaller groups based on characteristics such as, age, income, personality traits or behavior.
These segments can later be used to optimize products and advertising to different customers.

Market segmentation is a marketing term that refers to aggregating prospective buyers into groups or
segments with common needs and who responds similarly to a marketing action. Market segmentation
enables companies to target different categories of consumers who perceive the full value of certain
products and services differently from one another.

Segmentation refers to a process of bifurcating or dividing a large unit into various small units which have
more or less similar or related characteristics.

Types of market segmentation:

 Geographic segmentation
 Demographic segmentation
  Psycho graphic segmentation
 Behavioral segmentation

The main functions of capital markets are as follows –

 Mobilization of savings for long term investment financing.

 Help Trading of securities.
 Encourage a broad range of ownership of productive assets.
 Minimization of information and transaction cost.
 Quick valuation of financial instruments including debentures and shares.
 Help in transaction settlement based on the definite time schedules.
 Offer insurance against price or market risk through derivative trading.
 Enhancement in capital allocation effectiveness with the competitive price mechanism.

Types of Capital Market

The capital market is bifurcated in two segments, primary market and secondary market:

1. Primary Market: Otherwise called as New Issues Market, it is the market for the trading of new
securities, for the first time. It embraces both initial public offering and further public offering. In
the primary market, the mobilization of funds takes place through prospectus, right issue and
private placement of securities.
2. Secondary Market: Secondary Market can be described as the market for old securities, in the
sense that securities which are previously issued in the primary market are traded here. The
trading takes place between investors that follows the original issue in the primary market. It
covers both stock exchange and over-the-counter market.

Capital market improves the quality of information available to the investor regarding the
investment. Add to that, it plays a crucial role in encouraging the adoption of rules of corporate
governance, which backs the trading environment. It includes all the processes that help in the
transfer of already existing securities.