Capital market & Money market

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A brief overview of Capital & Money market

Transcript of Capital market & Money market

  • 1. Capital MarketMeaning:Capital markets are financial markets for the buying and selling oflong-term debt or equity-backed securities.Definition:Capital markets are defined as markets in whichmoney is provided for periods longer than a year.These markets channel the wealth of savers to those who can put it to long-termproductive use, such as companies or governments making long-terminvestments. Financial regulators, such as the UK's Bank of England (BoE) orthe U.S. Securities and Exchange Commission (SEC), oversee the capital marketsin their jurisdictions to protect investors against fraud, among other duties.

2. Capital market includes two types of market Primary market Secondary marketIn primary markets, new stock or bond issues are sold toinvestors, often via a mechanism known as underwriting.In the secondary markets, existing securities are sold andbought among investors or traders, usually on an exchange, over-the-counter, or elsewhere. 3. 4. Mobilization of SavingsCapital FormationProvision of Investment AvenueSpeed up Economic Growth and DevelopmentProper Regulation of FundsContinuous Availability of Funds 5. Money marketMeaning:Money markets are financial markets for assets involved inshort-term borrowing, lending, buying and selling with originalmaturities of one year or less.Trading in the money markets is done over the counter andis wholesale, one year or less. 6. Participants of Money markets are: Trading companies often purchase bankers'acceptances to be tendered for payment tooverseas suppliers. Retail and institutional money market funds Banks Central banks Cash management programs Merchant banks 7. MONEY MARKETINSTRUMENTSCertificate of depositRepurchase agreementsCommercial paperTreasury billsMoney funds 8. 1Financ-ingTrade2Financ-ingIndustry3ProfitableInvestme-nt4Self-SufficiencyofCommercial Bank5Help toCentralBank 9. Money Market Capital MarketDefinition Is a component of the financial marketswhere short-term borrowing takes placeIs a component of financial markets wherelong-term borrowing takes placeMaturityPeriod Lasts anywhere from 1 hour to 90 days.Lasts for more than one year and can alsoinclude life-time of a company.CreditInstrumentsCertificate of deposit, Repurchaseagreements, Commercial paper, Eurodollardeposit, Federal funds, Municipal notes,Treasury bills, Money funds, ForeignExchange Swaps, short-lived mortgage andasset-backed securities.Stocks, Shares, Debentures, bonds,Securities of the Government.Nature ofCreditInstrumentsHomogenous. A lot of variety causesproblems for investors.Heterogeneous. A lot of varieties arerequired. 10. Purpose ofLoanShort-term credit required for smallinvestments.Long-term credit required to establishbusiness, expand business or purchase fixedassets.Basic Role Liquidity adjustment Putting capital to workInstitutionsCentral banks, Commercial banks,Acceptance houses, Nonbank financialinstitutions, Bill brokers, etc.Stock exchanges, Commercial banks andNonbank institutions, such as InsuranceCompanies, Mortgage Banks, BuildingSocieties, etc.Risk Risk is small Risk is greaterMarketRegulationCommercial banks are closely regulatedto prevent occurrence of a liquiditycrisis.Institutions are regulated to keep them fromdefrauding customers.Relation withCentral BankClosely related to the central banks ofthe country.Indirectly related with central banks andfeels fluctuations depending on the policiesof central banks. 11. By,Meghashree SStudent, Jain Institute ofBusiness Management,Jakkasandra, Kanakapurataluk, Ramanagara district.Pin: 562