Capital Market

Capital markets are financial markets for the buying and

selling of long-term debt or equity-backed securities. These
markets channel the wealth of savers to those who can put
it to long-term productive use, such as companies or
governments making long-term investments.

Classification of Capital Market

Primary Market
Secondary Market
The Primary Market is the part of the capital market that
deals with issuing of new securities. Companies, governments
or public sector institutions can obtain funds through the sale
of a new stock or bond issues through primary market.

The Secondary market, is also called aftermarket, is the

financial market in which previously issued financial
instruments such as stock, bonds are bought and sold

Primary Market:

This is the market for new long term securities. The

primary market is the market where the securities are sold
for the first time. Therefore it is also called the new issue
market (NIM).
In a primary issue, the securities are issued by the
company directly to investors.
The company receives the money and issues new security
certificates to the investors.
Primary issues are used by companies for the purpose of
setting up new business or for expanding or modernizing the
existing business.
The primary market performs the crucial function of
facilitating capital formation in the economy.

It has various methods to raise capital

IPO
Private Placement
Rights Issue

Secondary Market:
In the secondary market, securities are sold by and
transferred from one investor or speculator to another.

The chief purpose of the secondary market is to create

liquidity in securities.

The transactions of the secondary market are generally done

through the medium of stock exchange.

Another classification in Capital Market is:

Stock (Equity) Market

Debt (Bond) Market
A place where shares are bought and sold either through
exchanges or over-the-counter markets.

Bond Market:

The environment in which the issuance and trading of debt

securities occurs.

The bond market primarily includes government-issued

securities and corporate debt securities, and facilitates the
transfer of capital from savers to the issuers or organizations
requiring capital for government projects, business expansions
and ongoing operations.

Money Market in India

A money market is a market for borrowing and lending of
short-term funds. It deals in funds and financial instruments
having a maturity period of one day to one year.

It is a mechanism through which short-term funds are lent

or borrowed.

FUNCTIONS OF MONEY MARKET:

1)It caters to the short-term financial needs of the economy.
2) Money market helps the industries in securing short-term loans
to meet their working capital requirements through the system of
finance bills, commercial papers, etc.
3)It provides mechanism to achieve equilibrium between demand
and supply of short-term funds.
4)It helps in allocation of short term funds through money market
Instruments.
5)It also provides funds to thegovernment to meet its deficits.
6)It facilitates economic development.