Financial Instruments Available in India

Financial instruments act as channels to invest the money.

There are various financial instruments available on the market
currently. It acts as a tool to raise funds. For investment
purpose, there are many ways to save money. An investor has
to choose the best investment option to fetch the best return
on the invested money.
Types of Financial Instruments in India

1) Equities- It is a type of security that represents the

ownership of a company. Equities are traded in stock markets.
It can also be purchased through Initial Public Offerings (IPO),
whenever a company issue shares to the public for the first
time. In India, share trading actively happens in stock
exchanges, including BSE (Bombay Stock Exchange) and NSE
(National Stock Exchange).
It is one of the best options to invest in equities over an
extended period as it will fetch good returns. It is also subject
to market-related risk, and one needs to do thorough research
before investing in equities.
Equity shares constitute permanent capital for the firm and it
cannot be redeemed during the lifetime of the company and as
per the Companies Act of 1956, a company cannot purchase its
own shares during its existence. At the time of liquidation, the
equity shareholders can demand a refund of their capital
amount. The same will be paid after meeting all the other prior
claims including preference shareholders.

Indian Financial System By- Harshit Wardhan

Financial Instruments Available in India

2) Mutual Funds- In India, Mutual Funds are top-rated because

the initial investment amount is very less and the risk is
diversified. Mutual funds allow a group of individuals to invest
their money together.
The investment avenue is famous because of cost-efficiency,
risk-diversification, professional management and sound
regulation. The minimum amount to be invested can be as
small as INR 500, and the frequency of investment is usually
monthly or quarterly.
3) Bonds- Bonds are fixed income instruments which are issued
to raise working capital. Both private entities, such as
companies, financial institutions, and the central and state
government institutions issue this to raise funds.
The bonds issued by the government carries the lower rate of
risk but guarantees returns. The bonds issued by private
institutions have high risks.
4) Deposits- Investing the money in banks or post-office is one
of the standard method of savings followed in India. The risk
factor involved is zero, and the return on investment is
guaranteed.
5) Cash and Cash Equivalents- These are relatively safe and
highly liquid investment options. All the securities that can be
immediately converted into cash within three months are
known as cash and cash equivalents. Treasury bills, gold, money
market funds are cash equivalents.

Indian Financial System By- Harshit Wardhan