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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. Modern capital markets are almost invariably hosted on
computer-based electronic trading systems; most can be accessed only by entities within the financial sector or the treasury departments of governments and corporations, but some can be accessed directly by the public. Entities hosting the systems include stock exchanges,
investment banks, and government departments. A key division within the capital markets is between the primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors, often via a mechanism known as underwriting. The main entities seeking to raise long-term funds on the primary capital markets are governments (which may be municipal, local or national) and business enterprises (companies). Governments tend to issue only bonds, whereas companies often issue either equity or bonds. In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-thecounter, or elsewhere. The existence of secondary markets increases the willingness of investors in primary markets, as they know they are likely to be able to swiftly cash out their investments if the need arises. A second important division falls between the stock markets (for equity securities, also known as shares, where investors acquire ownership of companies) and the bond markets (where investors become creditors)
The Money markets are used for the raising of short term finance, sometimes for loans that are expected to be paid back as early as overnight. Whereas the Capital markets are used for the raising of long term finance, such as the purchase of shares, or for loans that are not expected to be fully paid back for at least a year.[3] Funds borrowed from the money markets are typically used for general operating expenses, to cover brief periods of illiquidity. For example a company may have inbound payments from customers that have not yet cleared, but may wish to immediately pay out cash for its payroll. When a company borrows from the primary capital markets, often the purpose is to invest in additional physical capital goods, which will be used to help increase its income. It can take many months or years before the investment generates sufficient return to pay back its cost, and hence the finance is long term.
Stock market
The term the stock market is a concept for the mechanism that enables the trading of company stocks (collective shares), other securities, and derivatives. Bonds are still traditionally traded in an informal, over-the-counter market known as the bond market. Commodities are traded in commodities markets, and derivatives are traded in a variety of markets (but, like bonds, mostly over-thecounter). The size of the worldwide bond market is estimated at $45 trillion. The size of the stock market is estimated at about $51 trillion. The world derivatives market has been estimated at about $300 trillion. It must be noted though that the derivatives market, because it is stated in terms of notional outstanding amounts, cannot be directly compared to a stock or fixed income market, which refers to actual value. The stocks are listed and traded on stock exchanges which are entities (a corporation or mutual organisation) specialised in the business of bringing buyers and sellers of stocks and securities together.
Primary markets
The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus.
Secondary markets
The secondary market is the financial market for trading of securities that have already been issued in an initial private or public offering. Alternatively, secondary market can refer to the market for any kind of used goods. The market that exists in a new security just after the new issue, is often referred to as the aftermarket. Once a newly issued stock is listed on a stock exchange, investors and speculators can easily trade on the exchange, as market makers provide bids and offers in the new stock.
In the secondary market, securities are sold by and transferred from one investor or speculator to another. It is therefore important that the secondary market be highly liquid and transparent. Before electronic means of communications, the only way to create this liquidity was for investors and speculators to meet at a fixed place regularly. This is how stock exchanges originated.
Under
traditional
lending
and
partnership
arrangements,
investors may be less likely to put their money into long-term investments, and more likely to charge a higher interest rate (or demand a greater share of the profits) if they do. With secondary markets, however, investors know that they can recoup some of their investment quickly, if their own circumstances change.
prerequisite. In order to regulate, promote and direct the progress of the Indian Capital Market, the government has set up 'Securities and Exchange Board of India' (SEBI). SEBI is the supreme authority governing and regulating the Capital Market of India.
Merchant Banking
The merchant banker are those financial intermediary involved with the activity of transferring capital funds to those borrowers who are interested in borrowing. The activities of the merchant banking in India is very vast in nature of which includes the following.
Mutual fund
A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities.[1] While there is no legal definition of the term "mutual fund", it is most commonly applied only to those collective investment vehicles that are regulated and sold to the general public. They are sometimes referred to as "investment companies" or "registered investment companies." Most mutual funds are "open-ended," meaning investors can buy or sell shares of the fund at any time. Hedge funds are not considered a type of mutual fund.
resources. It can have regulation over the resources so that it can direct funds in a qualitative manner.
the lessee will have use of that asset during the lease: the lessee will pay a series of rentals or installments for the use of that asset: the lessor will recover a large part or all of the cost of the asset plus earn interest from the rentals paid by the lessee; the lessee has the option to acquire ownership of the asset (e.g. paying the last rental, or bargain option purchase price); The finance company is the legal owner of the asset during duration of the lease. However the lessee has control over the asset providing them the benefits and risks of (economic) ownership.
Treatment in India
Finance lease is the one in which risk and rewards incidental to the ownership of the leased asset is transferred to lessee but not the actual ownership. Thus in case of finance lease we can say that notional ownership is passed to the lessee.Amount Paid As interest During Lease Period is Showed in P/l Dr Side Of Lessee
Features
it's not cancel-able the leassor may or may not bear the cost of insurance, repair, maintenance etc. Usually the lease has to bear all cost. the lease transfer ownership of the asset to the lessee by the end of the lease term
the lessee has an option to purchase the asset at a price which is expected to be sufficiently lower than the value at the end of the lease period
history, which cannot raise funds by issuing debt. The downside for entrepreneurs is that venture capitalists usually get a say in company decisions, in addition to a portion of the equity.
notice. It is also called inter bank loan market. In this market money is demanded for extremely short period. The duration of such transactions is from few hours to 14 days. It is basically located in the industrial and commercial locations such as Mumbai, Delhi, Calcutta, etc. These transactions help stock brokers and dealers to fulfill their financial requirements. The rate at which money is made available is called as a call rate. Thus rate is fixed by the market forces such as the demand for and supply of money.
market of CDs in order to widen the range of instruments in the money market and to provide a higher flexibility to investors for investing their short term money.
According to the RBI, "The money market is the centre for dealing
mainly of short character, in monetary assets; it meets the short term requirements of borrowers and provides liquidity or cash to the lenders. It is a place where short term surplus investible funds at the disposal of
financial and other institutions and individuals are bid by borrowers, again comprising institutions and individuals and also by the government."
To provide help to Trade and Industry. Money market provides adequate finance to trade and industry. Similarly it also provides facility of discounting bills of exchange for trade and industry. To help in implementing Monetary Policy. It provides a mechanism for an effective implementation of the monetary policy. To help in Capital Formation. Money market makes available investment avenues for short term period. It helps in generating savings and investments in the economy. Money market provides non-inflationary sources of finance to government. It is possible by issuing treasury bills in order to raise short loans. However this dose not leads to increases in the prices. Apart from those, money market is an arrangement which accommodates banks and financial institutions dealing in short term monetary activities such as the demand for and supply of money.
developed money market, it is a leading money market among the developing countries. Indian Money Market has the following major features or characteristics :-