Key Points
Key Points: Concept of Financial Market
- 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.
Key Points: Money Market in India
- 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.
Key Points: Capital Market in India
- 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.
Important Questions [15]
- Justify the following statement. There are many participants in money market.
- Study the following case/situation and express your opinion. Joy ltd. company is a newly incorporated company. It wants to raise capital for the first time by issuing equity shares. Should
- Central government is a borrower in the money market through the issue of ______.
- Write a word or a term or a phrase which can substitute the following statement.A market which provides long term funds
- Write a word, or a term, or a phrase which can substitute for the following statement. A bill which is issued by Reserve Bank of India on behalf of the Government of India.
- Money market is the market for the long term funds.
- Explain the following term/concept. Secondary market
- Primary market is also known as new issue market.
- Differentiate between the money market and the capital market.
- Justify the following statement. Capital market is useful for the corporate sector.
- Distinguish between the following: Primary market and Secondary market
- Correct the underlined word/s and rewrite the following sentence. Companies sell fresh shares for the first time to the public in the secondary market.
- Explain the following term/concept. Primary market
- State whether the following statement is True or False: The securities market is an unorganized marketplace in India.
- Select the Correct Answer from the Possible Choices Given Below and Rewrite the Statement :
