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 FINANCIAL MARKET

Financial Market allows people to easily buy & sell :

Financial Securities(stocks, bonds)

Commodities(precious metals, agricultural goods)

The transaction may take place at a specific location such

as:

Stock exchanges
Telex
Telephone
Other electronic media

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According to Brigham, Eugene F.

“The place where people and organizations wanting

to borrow money are brought together with those
having surplus funds is called Financial market.”

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 Functions

Intermediary Financial

Capital Formation Arrangement of funds

Price determination Earning assets

Sale mechanism Liquidity in the

markets
Enhancing income

Transfer of resources

Productive usage

Information
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 Primary
market
Foreign
Secondary
Exchange
market
Market

Non-
depository Money market
Market Constituents

Depository Capital
market Market

Equity Debt
Eurobond
market Market
Market

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1) PRIMARY MARKET

 Is that part of capital market that deals with the

issuance of new securities.
 Its also called as “New issue market”.
 The securities are issued by the company directly
to the investors.
 Primary issues are used by the company with the
purpose of setting up new business or expansion.

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 IPO (Initial public offering)
 Right issue method
 Pure prospectus method
 Offer for sale method
 Private placement

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 2) SECONDARY MARKET
 Used for trading securities which are already
issued.
 Facilitates liquidity and marketability of the o/s
equity
 Economic growth is enhanced via allocation of
funds to the most efficient channel through the
process of disinvestment to reinvestment.
 Risk minimization, Wider participation,
Operational efficiency.

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Two major secondary markets
of India are: BSE & NSE

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 3) MONEY MARKET
 A market for short term borrowing and
lending various financial instruments.

 Money market securities includes:

certificate of deposit, treasury bills, commercial
papers, repos, bankers acceptances.

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 Call money market
 Collateral loan market
 Acceptance market

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 4) CAPITAL MARKET
 Used by govt. and private companies to
raise long term funds to trade securities
on the bond & stock market.

 It consists of both primary and

secondary market.

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 Financing of long term investments
 Ownership of productive assets
 Lower transaction cost

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 5) DEBT MARKET
 Any market situation where trading of
debt instruments take place. Example:
mortgages, promissory notes, bonds.
 Its also known as Bond market, Credit
market & Fixed income market.

 Participants – Central & state govt., PSU,

Banks, Corporate, FII, Charitable institutions
& trusts.

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 7) EQUITY MARKET

 It’s a private or public market for trading

of company stocks and derivatives at an
agreed price which are listed in
NSE/BSE.

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8) DEPOSITORY MARKET
 Is that which participates in the debt
market by giving loans or purchasing
other debt instruments such as treasury
bills etc.

 It’s a special type of loan market in

which depositors “loan” money to
depository institutions, which in turn use
the funds to purchase other financial
assets.

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 9) NON DEPOSITORY
MARKETS
 Consisting of those institutions that do
not accept cheques to liquidate
deposits.

 Various constitution:
insurance companies
mutual funds
pension funds

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 10) FOREIGN
EXCHANGE MARKET
 A market which exists wherever one
currency is traded for another.

 Its is the largest and most liquid financial

market in the world and includes trading
b/w large banks, central banks,
multinational corporations, govt. & other
financial institutions.

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 Its trading volumes
 Extreme liquidity of the market
 Large number of traders
 Geographical dispersion
 Long trading hours
 Variety of factors which affect exchange
rates

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THANK YOU…..

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