TOPIC:

CAPITAL MARKET
 MEANING :
 A capital market is a financial market in
which long-term debt or equity-
backed securities are bought and sold.
 The primal role of this market is to make
investment from investors who have surplus
funds to the ones who are running a deficit.
 Money is provided for periods longer than a
year.
 DIFFERENT FINANCIAL
INSTRUMENTS TRADED
 Equity Instruments
 Credit Market Instruments,
 Insurance Instruments,
 Foreign Exchange Instruments,
 Nature of capital market
It Deals In Long-Term Securities
It Performs Trade-off function
It Creates Dispersion In Business Ownership
It Helps In Capital Formation
It Helps In Creating Liquidity
TYPES OF CAPITAL MARKET

PRIMARY CAPITAL MARKET

SECONDARY CAPITAL MARKET

 Primary Market
 Itis that market in which shares, debentures
and other securities are sold for the first time
for collecting long-term capital.
 This market is concerned with new issues.
Therefore, the primary market is also called
NEW ISSUE MARKET.
 Secondary Market
 The secondary market is that market in which
the buying and selling of the previously issued
securities is done.
 The transactions of the secondary market are
generally done through the medium of stock
exchange.
 The chief purpose of the secondary market is
to create liquidity in securities.
 CAPITAL MARKET RISK
 Investment in long term financial instruments
is accompanied by high capital market risks.
Since there are two types of capital markets-
the stock market and the bond market.
 So risks are present in both the market.
 CAPITAL MARKET
INVESTMENT
 Capital market investment takes place
through the bond market and the stock market.
 The capital market is basically the financial
pool in which different companies as well as
the government can raise long term funds.
 Capital market investment that takes place
through the bond and the stock market may be
elucidated in the following heads.
Capital market investments in the stock market
 The stock market is basically the trading
ground capital market investment in the following:
i) Company’s stocks
ii) Derivatives
iii) Other securities
 The capital market investments in the stock market
take place by:
1) Small individual stock investors
2) Large hedge fund traders.
 The capital market investments can occur either in:
1) The physical market by a method known as the
open outcry.
 2) Trading can also occur in the virtual
exchange where trading is done in the
computer network.
 The investors in the stock market have the
liberty to buy or sell the stock that they are
holding at their own discretion unlike the case
of government securities, bonds or real estate.
 The stock exchanges basically function as
the clearing house for such liquid transactions.
Capital Market Investments in the Bond
Market
 The bond market is a financial market where
the participants buy and sell debt securities.
 The bond market is also differently known as
the debt, credit or fixed income market.
 There are different types of bond markets
based on the different types of bonds that are
traded. They are:
Corporate,
Government and agency, 
Municipal,
Bonds backed by mortgages & assets,
 Individual investors are attracted to the bond
market and make investments through
the bond funds, closed-end-funds or the unit
investment trusts.
 Another way of investing directly in the bond
issue is the Exchange-traded-funds.
 The capital market investment in the bond
market is done by:
Institutional investors
Governments, traders and
Individuals.
THANK YOU