INTRODUCTION OF CAPITAL MARKET & CAPITAL MARKET INSTRUMENTS

INTRODUCTION OF CAPITAL MARKET & CAPITAL MARKET INSTRUMENTS


The financial assets are also called financial claims or financial securities or paper assets. These
financial securities are issued by deficit units in exchange for their savings. It is this reason that
surplus-generating units are called investors while deficit units are called issuers. These investors
and issuers of financial securities constitute two important elements of the securities market.
The third critical element of markets is the intermediaries who act as conduits between the
investors and issuers. Regulatory bodies, which regulate the functioning of the securities markets,
constitute the last but very significant element of securities markets. Thus, there are four
important elements of securities markets namely investors, issuers, intermediaries and regulators.
Now depending upon the nature of the relationship among these elements of securities
markets, the markets are classified as primary and secondary. Further, depending upon the
time, the markets are classified as short term and long term and depending upon the issuers,
these are classified government securities or corporate securities. Government securities are
also called gilt-edged securities. To pick up the right kind of securities, an investor or a portfolio
manager should be fully conversant with the different segments of securities markets, different
types of securities which are traded and different trading arrangement which exist in the
market. In this unit, we shall distinguish between primary market and secondary market securities
and discuss various traded securities and trading arrangements prevalent in India. Let us
begin distinguishing primary and secondary markets.

CAPITAL MARKET & CAPITAL MARKET INSTRUMENTS

CAPITAL MARKET & CAPITAL MARKET INSTRUMENTS


Financial market is a place or a system where financial assets or instruments are created and
exchanged by market participants. Financial markets play a significant role in performing the
resource management in an economy. They help capital creation by acting as a bridge between
the savers and the spenders through various financial instruments like equity, debt or a mix of
both. In the process it facilitates price discovery and providing liquidity for financial assets.
In every economic system, some units which may be individuals or institutions, are surplusgenerating
(savers) while others are deficit units (spenders). Savers can either invest or hold
their savings in liquid cash. Holding liquid cash is required to meet transaction or precautionary
or speculative needs. The surplus-generating units could invest in different forms. They
could invest in physical assets viz. land and building, plant and machinery or in precious
metal viz. gold and silver, or in financial assets viz. shares and debentures, units of the Mutual
Funds, treasury bills, commercial papers, etc.,