Revision: Business Finance and Marketing >> Financial Markets CUET (UG) Financial Markets

A Stock Exchange is an institution which provides a platform for buying and selling of existing securities. According to the Securities Contracts (Regulation) Act, 1956, “Stock Exchange means any body of individuals whether incorporated or not constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.”

• Finance = management of money; includes personal, corporate and public finance.
• India’s financial system: institutions, markets, instruments and services that move funds for development.
• Financial market = place to buy and sell financial assets like bonds, shares, derivatives, government securities and foreign currency.
• Main types of financial markets: money market and capital market.

Key instruments:

• Bonds – long‑term borrowing by firms/government.
• Equity shares – ownership in a company.
• Derivatives – value based on another asset.
• Government securities – government debt with repayment promise.
• Trade bills – bills of exchange used in trade payments.
• Promissory note – written promise to pay a fixed sum later.

• Money market is a market for short‑term funds used for lending and borrowing.
• It deals in “near money” instruments like trade bills, government securities and promissory notes.
• These instruments are highly liquid, low risk, easily marketable and have a maturity of up to one year.

• Capital market is a market for long‑term funds (more than one year), both equity and debt.
• It supplies finance for agriculture, trade and industry, helping investment and economic growth.
• Main suppliers of long‑term funds are individual savers, companies, banks, insurance firms and special financial institutions.