Capital Market

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Apurba Sir

[1]

9433076742

Capital Market

M-15

Concept, Security market, Primary & Secondary markets-Functions & Role, Functionaries of stock exchanges-Brokers, Sub- Brokers, Jobbers, Consultants ,Institutional Investors & NRIs. Definition of Capital Market Capital market is the market from where long-term capital raised for industry, trade and commerce and long-term securities are transacted. It is a well-organised market for providing long-term capital whether in the form of securities or borrowings. Distinguish between Money Market and Capital Market. Two main components of financial market are — (1) capital market and (2) money market. Main aim of two markets is to supply money in industry, trade and commerce. The differences between the two markets are discussed here : 1. Definition: Capital market is the market from where long-term capital is collected for the purpose of industry, trade and commerce. Money market is the market from where short-term capital is collected for industry, trade and business. 2. Types of Capital: Capital market supplies long-term capital mainly. Money market supplies short term capital generally. 3. Use of Capital: Capital collected from capital market is used to purchase fixed asset and meet deficiency of current capital. Capital collected from money market is used to meet current capital only. 4. Impact: Capital market creates scope for investment in industry and business through indirect securities transaction. Money market creates scope for investment in agriculture, industry and commerce directly. For example — money market arranges cash credit system in agriculture. 5. Protection of Interests: Capital Market makes arrangement for investment to protect the investors’ interest. Money market makes arrangement of investment for their own interest with depositors’ money. 6. Ancillary Functions: The members of capital market do not usually perform ancillary functions on behalf of clients but they may render institutional services. The members of the money market performs different types of ancillary functions, such as purchase of shares and debentures, collection of dividend, keeping of valuable articles in custody etc. on behalf of their clients. 7. Underwriting Functions: Underwriting of shares and debentures are one of the main functions of capital market. Underwriting of shares and debentures of companies are secondary functions of money market. 8. Constituents: The constituents of capital market are — insurance company, investment trust, underwriters, and government and private organisations. Money market is composed of Reserve Bank of India, commercial bank, cooperative society, indigenous bankers and investors. 9. Segments: Capital market may be divided into two segments viz. new issue market and secondary market. The important segments of money market are: Treasury bill market, commercial paper, call money market, certificates of deposit markets. 10. Regulation: Capital market in India is mainly regulated by the Securities and Exchange Board of India. Indian money market is regulated by The Reserve Bank of India. Describe the features of Indian Capital Market. The features of Indian capital market are discussed here : (1) Lack of Specialised Agencies: Industrial bank, underwriting agencies, share issue house — all these expert institutions are found in capital market of foreign countries. But such expert organisations are absent in capital market of India. (2) Capital Supply by Managing Agent: In India the custom of supplying capital by managing agent is not found in any other country of the world, though this custom has been abolished now. (3) Establishment of Capital Supplying Agency: A good number of financing institutions have been set up in India at the initiative of the government. All these institutions are more important than private financing institutions in the capital market of India. (4) Governmental Efforts: Investment trust and insurance companies which...
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