Key Points
Key Points: Concept of Financial Market
- Finance is managed as personal, corporate and public finance.
- Financial markets are a key part of the Indian financial system.
- Financial market deals in assets like bonds, stocks and government securities.
- It links surplus investors with deficit business enterprises.
- Main functions: channelising savings, price determination, liquidity and low transaction cost.
- Financial markets are divided into money market and capital market based on maturity.
Key Points: Money Market
- Money market is for short-term funds and near money instruments.
- All money market instruments have maturity of one year or less.
- Instruments are highly liquid, less risky and easily tradable.
- Key participants include RBI, banks, NBFCs, governments, big companies and mutual funds.
- Main instruments: Treasury bills, call/notice money, commercial papers, commercial bills and certificates of deposit.
- Call rate affects demand for other money market instruments through an inverse relationship.
Key Points: Capital Market
- Capital market is for long‑term funds (debt and equity).
- Supports investment and economic growth.
- Demand: agriculture, trade, industry.
- Supply: individual savers, corporates, banks, insurance companies, special institutions.
- Institutions and instruments: development banks, commercial banks, stock exchanges, shares, debentures, bonds, mutual funds, public deposits.
Important Questions [10]
- 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.
- 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
- Money market is the market for the long term funds.
- Central government is a borrower in the money market through the issue of ______.
- Primary market is also known as new issue market.
- Differentiate between the money market and the capital market.
- Explain the following term/concept. Secondary market
- Justify the following statement. Capital market is useful for the corporate sector.
