Capital and Money Market

GAHLOT INSTITUTE OF
MANAGEMENT STUDIES
AND RESEARCH
Presentation topic:
Capital market
And
money market
Presented by:
Jaya gupta and amit gupta
Capital
market
Capital market
THE CAPITAL MARKET IS A MARKET WHICH
DEALS IN LONG TERM LOAN.
IT SUPPLIES INDUSTRIES WITH FIXED AND
WORKING CAPITAL AND FINANCES MEDIUM
TERM AND LONG TERM BORROWING OF THE
CENTRAL, STATE AND LOCAL GOVERNMENT.
THE CAPITAL MARKET DEALS IN ORDINARY
STOCK ARE SHARE AND DEBENTURES OF
CORPORATION, AND BONDS AND SECURITIES
OF GOVERNMENTS.
Capital market, cont.

THE PRIMAL ROLE OF THIS MARKET IS TO MAKE INVESTMENT FROM
INVESTORS WHO HAVE SURPLUS FUNDS TO THE ONES WHO ARE
RUNNING A DEFICIT.
Features of capital market

1. LINK BETWEEN SAVERS AND INVESTMENT
OPPORTUNITIES.
2.
DEALS IN LONG TERM INVESTMENT.
3.UTILITIES INTERMEDIARIES.
4.DETERMINANT OF CAPITAL FORMATION.
5.GOVERNMENT RULES AND REGULATION.
Types of capital market
THERE ARE TWO TYPES OF CAPITAL

MARKET:
1.PRIMARY MARKET,
2.SECONDARY MARKET
Primary market
THIS MARKET IS CONCERNED WITH NEW
ISSUES. THEREFORE, THE PRIMARY MARKET IS
ALSO CALLED NEW ISSUE MARKET.
IT IS THAT MARKET IN WHICH SHARES,
DEBENTURES AND OTHER SECURITIES ARE
SOLD FOR THE FIRST TIME FOR COLLECTING
LONG-TERM CAPITAL.
IN THIS MARKET, THE FLOW OF FUNDS IS
FROM SAVERS TO BORROWERS (INDUSTRIES),
HENCE, IT HELPS DIRECTLY IN THE CAPITAL
Primary market, cont..

THE MONEY COLLECTED FROM THIS MARKET IS GENERALLY USED BY THE
COMPANIES TO MODERNIZE THE PLANT, MACHINERY AND BUILDINGS, FOR
EXTENDING BUSINESS, AND FOR SETTING UP NEW BUSINESS UNIT.
Features of primary market

1.IT IS RELATED WITH NEW ISSUES
2.IT HAS NO PARTICULAR PLACE
3.IT HAS VARIOUS METHODS OF FLOAT CAPITAL:
FOLLOWING ARE THE METHODS OF RAISING
CAPITAL IN THE PRIMARY MARKET:
I) PUBLIC ISSUE
II) OFFER FOR SALE
III) PRIVATE PLACEMENT
IV) RIGHT ISSUE
V) ELECTRONIC-INITIAL PUBLIC OFFER
4.IT COMES BEFORE SECONDARY MARKET
Secondary market
THE SECONDARY MARKET IS THAT MARKET IN
WHICH THE BUYING AND SELLING OF THE
PREVIOUSLY ISSUED SECURITIES IS DONE.
THE TRANSACTIONS OF THE SECONDARY
MARKET ARE GENERALLY DONE THROUGH THE
MEDIUM OF STOCK EXCHANGE.
THE CHIEF PURPOSE OF THE SECONDARY
MARKET IS TO CREATE LIQUIDITY IN
SECURITIES.
Secondary market (cont..)

IF AN INDIVIDUAL HAS BOUGHT SOME
SECURITY AND HE NOW WANTS TO SELL IT,
HE CAN DO SO THROUGH THE MEDIUM OF
STOCK EXCHANGE TO SELL OR PURCHASE
THROUGH THE MEDIUM OF STOCK EXCHANGE
REQUIRES THE SERVICES OF THE BROKER
PRESENTLY, THEIR ARE 24 STOCK EXCHANGE
IN INDIA.
Features of secondary market

1.IT CREATES LIQUIDITY
2.IT COMES AFTER PRIMARY MARKET
3.IT HAS A PARTICULAR PLACE
4.IT ENCOURAGE NEW INVESTMENTS
Money
market
Money market
MONEY MARKET IS THE PART OF FINANCIAL MARKET
WHERE INSTRUMENTS WITH HIGH LIQUIDITY AND VERY
SHORT-TERM MATURITIES ARE TRADED. IT'S THE PLACE
WHERE LARGE FINANCIAL INSTITUTIONS, DEALERS AND
GOVERNMENT PARTICIPATE AND MEET OUT THEIR
SHORT-TERM CASH NEEDS.
THEY USUALLY BORROW AND LEND MONEY WITH THE
HELP OF INSTRUMENTS OR SECURITIES TO GENERATE
LIQUIDITY. DUE TO HIGHLY LIQUID NATURE OF
SECURITIES AND THEIR SHORT-TERM MATURITIES,
MONEY MARKET IS TREATED AS SAFE PLACE.
Role of reserve bank of india

THE RESERVE BANK OF INDIA (RBI) PLAYS A
KEY ROLE OF REGULATOR AND CONTROLLER
OF MONEY MARKET. THE INTERVENTION OF
RBI IS VARIED CURBING CRISIS SITUATIONS
BY REDUCING KEY POLICY RATES OR
CURBING INFLATIONARY SITUATIONS BY
RISING KEY POLICY RATES SUCH AS REPO,
REVERSE REPO, CRR ETC.
Instrument of money
market
1.TREASURY BILLS (T-BILLS).
2.CERTIFICATE OF DEPOSITS (CDS).
3.COMMERCIAL PAPERS (CPS)

4.REPURCHASE AGREEMENT (REPO)
5.BANKERS ACCEPTANCE
distinguished from
capital market
1. MATURITY PERIOD:
THE MONEY MARKET DEALS IN THE LENDING AND BORROWING OF SHORT-TERM FINANCE (I.E., FOR ONE YEAR OR LESS), WHILE THE CAPITAL MARKET DEALS IN THE LENDING
AND BORROWING OF LONG-TERM FINANCE (I.E., FOR MORE THAN ONE YEAR).
2. CREDIT INSTRUMENTS:
THE MAIN CREDIT INSTRUMENTS OF THE MONEY MARKET ARE CALL MONEY, COLLATERAL LOANS, ACCEPTANCES, BILLS OF EXCHANGE. ON THE OTHER HAND, THE MAIN
INSTRUMENTS USED IN THE CAPITAL
MARKET ARE STOCKS, SHARES, DEBENTURES, BONDS, SECURITIES OF THE GOVERNMENT.
(Cont..)
3. NATURE OF CREDIT INSTRUMENTS:
THE CREDIT INSTRUMENTS DEALT WITH IN THE CAPITAL MARKET ARE MORE HETEROGENEOUS
THAN THOSE IN MONEY MARKET. SOME HOMOGENEITY OF CREDIT INSTRUMENTS IS NEEDED FOR
THE OPERATION OF FINANCIAL MARKETS. TOO MUCH DIVERSITY CREATES
PROBLEMS FOR THE INVESTORS.
4. INSTITUTIONS:
IMPORTANT INSTITUTIONS OPERATING IN THE' MONEY MARKET ARE CENTRAL BANKS,
COMMERCIAL BANKS, ACCEPTANCE HOUSES, NONBANK FINANCIAL INSTITUTIONS, BILL BROKERS,
ETC. IMPORTANT
INSTITUTIONS OF THE CAPITAL MARKET ARE STOCK EXCHANGES, COMMERCIAL BANKS AND
NONBANK INSTITUTIONS, SUCH AS INSURANCE COMPANIES, MORTGAGE BANKS, BUILDING
SOCIETIES, ETC.
(cont..)
5. PURPOSE OF LOAN:
THE MONEY MARKET MEETS THE SHORT-TERM CREDIT NEEDS OF BUSINESS; IT PROVIDES WORKING CAPITAL TO THE INDUSTRIALISTS. THE CAPITAL MARKET, ON THE OTHER HAND,
CATERS THE LONG-TERM CREDIT NEEDS OF THE INDUSTRIALISTS AND PROVIDES FIXED CAPITAL TO
BUY LAND, MACHINERY, ETC.
6. RISK:
THE DEGREE OF RISK IS SMALL IN THE MONEY MARKET. THE RISK IS MUCH GREATER IN CAPITAL MARKET. THE MATURITY OF ONE YEAR OR LESS GIVES LITTLE TIME FOR A DEFAULT TO
OCCUR, SO THE RISK IS MINIMISED. RISK VARIES BOTH IN DEGREE AND NATURE THROUGHOUT THE CAPITAL MARKET.
(cont..)
7. BASIC ROLE:
THE BASIC ROLE OF MONEY MARKET IS THAT OF LIQUIDITY ADJUSTMENT. THE BASIC ROLE OF CAPITAL MARKET IS THAT OF PUTTING CAPITAL TO WORK, PREFERABLY TO LONG-TERM, SECURE AND
PRODUCTIVE EMPLOYMENT.
8. RELATION WITH CENTRAL BANK:

THE MONEY MARKET IS CLOSELY AND DIRECTLY LINKED
WITH CENTRAL BANK OF THE COUNTRY. THE CAPITAL
MARKET FEELS CENTRAL BANK'S INFLUENCE, BUT MAINLY
INDIRECTLY AND THROUGH THE MONEY MARKET.
(cont..)
9. MARKET REGULATION:
IN THE MONEY MARKET, COMMERCIAL BANKS ARE CLOSELY REGULATED. IN
THE CAPITAL MARKET, THE INSTITUTIONS ARE NOT MUCH REGULATED.

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GAHLOT INSTITUTE OF

Capital market, cont.

Features of capital market

DEALS IN LONG TERM INVESTMENT.

Types of capital market

THERE ARE TWO TYPES OF CAPITAL

Primary market, cont..

Features of primary market

Secondary market (cont..)

Features of secondary market

Role of reserve bank of india

3.COMMERCIAL PAPERS (CPS)

8. RELATION WITH CENTRAL BANK:

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