Capital market

From Wikipedia, the free encyclopedia

A capital market is a market for securities (debt or equity), where business enterprises (companies)

and governments can raise long-term funds. It is defined as a market in which money is provided for periods
longer than a year,[1][dead link] as the raising of short-term funds takes place on other markets (e.g., the money
market). The capital market includes the stock market (equity securities) and the bond market (debt). Financial
regulators, such as the UK's Financial Services Authority (FSA) or the U.S. Securities and Exchange
Commission (SEC), oversee the capital markets in their designated jurisdictions to ensure that investors are
protected against fraud, among other duties.

Capital markets may be classified as primary markets and secondary markets. In primary markets, new stock
or bond issues are sold to investors via a mechanism known as underwriting. In the secondary markets,
existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-
counter, or elsewhere.

What is Capital Market ? Meaning, Functions and Role

Post : Gaurav Akrani Date : 9/23/2010 01:06:00 PM IST
No Comments Lables : Economics, Study Notes

Meaning and Concept of Capital Market

Capital Market is one of the significant aspect of every financial market. Hence it is necessary to study its correct
meaning. Broadly speaking the capital market is a market for financial assets which have a long or indefinite maturity.
Unlike money market instruments the capital market intruments become mature for the period above one year. It is
an institutional arrangement to borrow and lend money for a longer period of time. It consists of financial institutions
like IDBI, ICICI, UTI, LIC, etc. These institutions play the role of lenders in the capital market. Business units and
corporate are the borrowers in the capital market. Capital market involves various instruments which can be used for
financial transactions. Capital market provides long term debt and equity finance for the government and the
corporate sector. Capital market can be classified into primary and secondary markets. The primary market is a
market for new shares, where as in the secondary market the existing securities are traded. Capital market
institutions provide rupee loans, foreign exchange loans, consultancy services and underwriting.
 Significance, Role or Functions of Capital Market

Like the money market capital market is also very important. It plays a significant role in the national economy. A
developed, dynamic and vibrant capital market can immensely contribute for speedy economic growth and
development.

Let us get acquainted with the important functions and role of the capital market.
1. Mobilization of Savings : Capital market is an important source for mobilizing idle savings from the
economy. It mobilizes funds from people for further investments in the productive channels of an economy. In that
sense it activate the ideal monetary resources and puts them in proper investments.
2. Capital Formation : Capital market helps in capital formation. Capital formation is net addition to the
existing stock of capital in the economy. Through mobilization of ideal resources it generates savings; the
mobilized savings are made available to various segments such as agriculture, industry, etc. This helps in
increasing capital formation.
3. Provision of Investment Avenue : Capital market raises resources for longer periods of time. Thus it
provides an investment avenue for people who wish to invest resources for a long period of time. It provides
suitable interest rate returns also to investors. Instruments such as bonds, equities, units of mutual funds,
insurance policies, etc. definitely provides diverse investment avenue for the public.
4. Speed up Economic Growth and Development : Capital market enhances production and productivity in
the national economy. As it makes funds available for long period of time, the financial requirements of business
houses are met by the capital market. It helps in research and development. This helps in, increasing production
and productivity in economy by generation of employment and development of infrastructure.
5. Proper Regulation of Funds : Capital markets not only helps in fund mobilization, but it also helps in proper
allocation of these resources. It can have regulation over the resources so that it can direct funds in a qualitative
manner.
6. Service Provision : As an important financial set up capital market provides various types of services. It
includes long term and medium term loans to industry, underwriting services, consultancy services, export finance,
etc. These services help the manufacturing sector in a large spectrum.
7. Continuous Availability of Funds : Capital market is place where the investment avenue is continuously
available for long term investment. This is a liquid market as it makes fund available on continues basis. Both
buyers and seller can easily buy and sell securities as they are continuously available. Basically capital market
transactions are related to the stock exchanges. Thus marketability in the capital market becomes easy.
These are the important functions of the capital market.

Final Glance and Conclusion on Capital Market

The lack of an advanced and vibrant capital market can lead to underutilization of financial resources. The developed
capital market also provides access to the foreign capital for domestic industry. Thus capital market definitely plays a
constructive role in the over all development of an economy.

capital market
  

Definition
A financial market that works as a conduit for demand and supply of debt and equity
capital. It channels the moneyprovided by savers and depository
institutions (banks,credit unions, insurance companies, etc.)
to borrowers andinvestees through a variety of financial
instruments (bonds,notes, shares) called securities.
A capital market is not a compact unit, but a highlydecentralized system made up of
three major parts: (1)stock market, (2) bond market, and (3) money market. It also
works as an exchange for trading existing claims oncapital in the form of shares.
Capital Market Sources from which long-term capital is raised for the setting up the sustained
growth of companies. The stock exchange is a part of the capital market, not only because it readily
provides money for new or existing ventures, but also because it helps investors to trade in their
shares and maintains the liquidity of investments. Investment in further public and rights issues,
convertible and non-convertible debentures, therefore, become an attractive proposition and
companies are able to raise the resource they need. The capital market is distinct from money market
– banks and lending institutions – which provides short – term finance.

A fortnightly magazine on the share market scene in the country. A particularly useful feature of this
magazine is the detailed scrutiny of forthcoming new issues with ratings given on a hundred-point
scale. Another regular feature is a share price analysis of any buy and sell recommendations on the
important companies in nearly ninety industry groups. From time to time it publishers surveys of
different industries in the stock market context. Technical analysis of certain share prices, examination
of half-yearly results, information on allotments or new issues, dates of book closure, dividend
announcements, and market movements are other regular features. Published alternative Fridays from
11 th Floor, 115 Jolly Maker Chambers, Nariman Point, Bombay 400 021. Available at newsstands. An
important financial journal for making buying decisions from the primary or secondary market

What Does Capital Markets Mean?

A market in which individuals and institutions trade financial securities. Organizations/institutions in the
public and private sectors also often sell securities on the capital markets in order to raise funds. Thus,
this type of market is composed of both the primary and secondary markets.  

Investopedia explains Capital Markets

Both the stock and bond markets are parts of the capital markets. For example, when a
company conducts an IPO, it is tapping the investing public for capital and is therefore using the capital
markets. This is also true when a country's government issues Treasury bonds in the bond market to fund
its spending initiatives.