Financial Market

By Dr Sheeba kapil

Financial markets
Act as medium/ channels for allocation of savings to
investment.
Efficient transfer of money from those having idle
resources to others who have a pressing need for them
The financial markets have two major components:
Money market
Capital market.

Money Market
market for short-term funds with maturity ranging from
overnight to one year
financial instruments are liquid :very close substitutes of money.
Money Market transactions are done over the counter i.e. done
directly between two parties.
The money market performs three broad functions.
It provides an equilibrating mechanism for demand and supply
of short-term funds.
It provides an avenue for central bank intervention in
influencing both quantity and cost of liquidity in the financial
system, thereby transmitting monetary policy impulses to the
real economy.

MONEY MARKET : MAIN INSTRUMENTS, PARTICIPANTS

Capital Market
The Capital Market comprises
the complex of institutions and mechanisms through which
intermediate term funds and long-term funds are pooled
and made available to business, government and
individuals.
It is the market for securities where either companies or the
government can raise long term funds.
The capital market actually consists of two markets.
1.primary market -where new issues are distributed to
investors
2.secondary market - where existing securities are traded.