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Characterstics of Financial Markets

Financial markets can be classified as organized or unorganized and include money markets and capital markets. Money markets deal in short-term debt instruments for meeting short-term funding needs, while capital markets provide long-term funding through debt and equity instruments. Primary markets facilitate new issues of securities, while secondary markets allow for the trading of outstanding securities for providing liquidity.

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2K views15 pages

Characterstics of Financial Markets

Financial markets can be classified as organized or unorganized and include money markets and capital markets. Money markets deal in short-term debt instruments for meeting short-term funding needs, while capital markets provide long-term funding through debt and equity instruments. Primary markets facilitate new issues of securities, while secondary markets allow for the trading of outstanding securities for providing liquidity.

Uploaded by

bhavya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Characteristics of Financial

Markets
Financial markets
• Classification (Organized & Unorganized market);
• Nature Functions and Classification of Money market and Capital Markets
• Role and Functions of Primary and Secondary Markets;
• Characteristics and functions of Various types of Markets :
– Debt markets,
– Securities markets,
– Credit markets
– Foreign exchange markets,
– Derivatives markets,
– Commodity Derivatives Market,
– Mutual funds Market
– Pension Funds Market and
– Insurance Markets
Learning Objectives
• Classify and distinguish Organized &
Unorganized markets;
• Identify the Characteristic features and
distinguish the role of each the markets;
Indian Financial System

Non- Organized
Organized
Money lenders
Regulators Local bankers
Financial Institutions Traders
Financial Markets Landlords
Financial services Pawn brokers
Chit Funds
Financial Markets
• They are a mechanism for the exchange of
financial products under a regulatory
framework.
• 2 types
– Money market
– Capital market
Nature of money market
• It is a market for short term debt instruments
which are close substitutes for money
• It is a highly liquid market (overnight to short
term funds)
• Securities are bought and sold in large
denominations
• Call money market, certificate of deposit,
commercial paper, treasury bills
Characteristics of Money market
• It is a market for several instruments
• Wholesale or bulk market
• Based on creditworthiness
• Players: RBI, DFHI, MFs, Insurance cos, NBFCs,
corporate investors, PSUs
• Transactions are based on need
• Transactions are secured as well as unsecured
Functions of Money Market
• Meets the demand for short term funds
• Provides a platform to central bank for
controlling liquidity and interest rates
• It provides a platform to suppliers of excess
cash an investment avenue and users of
excess cash a borrowing avenue
Indian Money Market
• Turnover :Rs 1,00,000 crore daily
• Money market is controlled by RBI
• 2 segments : formal(organised) and informal
(unorganised)
• Money market centres : Mumbai, Delhi and
Kolkata
Nature of Capital Markets
• Market for long term funds
• Both debt and equity funds
• Funds are raised within and outside the
country
• New issue – primary market
• Trading of outstanding shares – secondary
market
Functions of Capital Market
• Collect long term savings for long term
investments
• Provide capital to entrepreneurs
• Encourage larger ownership of productive
assets
• Provide liquidity to investors to sell assets
• Lower transaction cost and information cost.
• Competitive pricing
Functions of Capital Market
• Quick Valuation of financial instruments( both
debt and equity)
• Derivative trading provides protection against
market risk
• Creates integration amongst different sectors
Primary Vs Secondary market
• Market for new issues • Market for outstanding
• Required for capital securities
formation • Facilitates liquidity and
marketability of
outstanding shares
Indian Capital Market
• Regulator : SEBI (Security exchange board of
India)

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