INFORMATION OF CAPITAL MARKET AND TYPES OF CAPITAL MARKET:
ABOUT CAPITAL MARKET :
The market where investment instruments like bonds and equities are traded is also known as the capital market.
The primary role of capital market is to make investment from investors who have surplus funds to the ones who are running a deficit.
The capital market offers both long term as well as overnight funds.
•The different types of financial instruments that are traded in the capital markets are:
(1) equity instruments.
(2) credit market instruments.
(3) insurance instruments.
(4) foreign exchange instruments.
(5) hybrid instruments.
(6) derivative instruments.
IMPORTANCE OF CAPITAL MARKET :
- Allow investors with excess funds to invest and earn a good return.
- Allocate resources optimally (i.e. provide funds to those who can make the best use of them to make good returns).
- Help allocate capital(cash) to where it is most productive.
- Secondary markets, where investors trade existing securities, assures investors that they can rapidly sell their securities if the need arises.
TYPES OF CAPITAL MARKET :
•There are two types of capital market:
[1] PRIMARY MARKET:
Primary market in which shares, debentures and other securities are sold for the first time for collecting long term capital.
Primary market is concerned with new issues. Therefore, the primary market is also called 'NEW ISSUE MARKET'.
[2] SECONDARY MARKET :
Secondary market in which the buying and selling of the previously issued securities is done. In India the transactions of the secondary market are generally done through the medium of Stock exchanges like NSE &BSE. The chief purpose of the this market is to create liquidity in securities.