In order to understand what the differences between things are you first need to understand what each of the items is. In this case before you can understand the difference between money market and capital market you are going to need to understand what money market is and what capital markets is. Once you understand the two items are it will be easier to see what the difference or differences are between the two markets. What is Money Market? Basically the money market is the global financial market for short-term borrowing and lending and provides short term liquid funding for the global financial system. The average amount of time that companies borrow money in a money market is about thirteen months or lower. Some of the more common types of things used in the money market are certificates of deposits, bankers’ acceptance, repurchase agreements and commercial paper to name a Continue reading
Indian Financial Market
Over The Counter Exchange of India (OTCEI)
Over The Counter Exchange of India (OTCEI) was incorporated in October 1990 under Section 25 of the Companies Act, 1956 with the objective of setting up a national, ringless, screen-based, automated stock exchange. It is recognized as a stock exchange under Section 4 of the Securities Contracts (Regulations) Act, 1956. It was set up to provide investors with a convenient, efficient and transparent platform for dealing in shares and stocks; and to help enterprising promoters set up new projects or expand. their activities, by providing them an opportunity to raise capital from the capital market in a cost-effective manner. Trading in securities takes place through OTCEI’s network of members and dealers spanning the length and breadth of India. Over The Counter Exchange of India was promoted by a consortium of financial institutions including: Unit Trust of India. Industrial Credit and Investment Corporation of India. Industrial Development Bank of India. Industrial Continue reading
Initial Public Offering (IPO)
A good capital market is an essential prerequisite for the industrial and commercial development of a country. Capital market is a central coordinating and directing mechanism for free and balanced flow of financial resources into the economic system operating in a country. It helps the companies who require capital to expand, modernize or diversify their business. To get the capital that is required by the company it usually goes for the issue of shares and the process of issuing of shares is done in the primary market. The primary market in the simplest terms can be defined as a market where the securities are sold in order to raise the funds or the capital required by the company. It is a market for new issues i.e. a market for fresh capital. It provides the channel for sale of new securities. The securities can be in many forms such as equity Continue reading
Commercial Bills Market or Discount Market
A commercial bill is one which arises out of a genuine trade transaction, i.e. credit transaction. As soon as goods are sold on credit, the seller draws a bill on the buyer for the amount due. The buyer accepts it immediately agreeing to pay amount mentioned therein after a certain specified date. Thus, a bill of exchange contains a written order from the creditor to the debtor, to pay a certain sum, to a certain person, after a creation period. A bill of exchange is a ‘self-liquidating’ paper and negotiable/; it is drawn always for a short period ranging between 3 months and 6 months. Definition of Bill of Exchange Section 5 of the negotiable Instruments Act defines a bill of exchange as “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to Continue reading
Financial Sector Reforms in India
In India, a decade old on-going financial reforms have transformed the operating environment of the finance sector from an administrative regime to a competitive market base system. Since mid-1991, a number of reforms have been introduced in the financial sector in India. Rangarajan once noted that domestic financial liberalization has brought about the deregulation of interest rates, dismantling of directed credit, reforming the banking system, improving the functioning of the capital market, including the government securities market. The main emphasis on the financial sector reform has been on the banking system so as to improve the performance of public sector banks. The Narasimhan Committee constituted in 1991 laid the foundation for the revamping of the financial sector in India. The Committee had submitted two reports– in 1992 and 1998 which gave immense importance on enhancing the efficiency and viability of this sector. Taking a cue from the developments in the Continue reading
What is Dematerialization?
Indian investor community has undergone sea changes in the past few years. India now has a very large investor population and ever increasing volumes of trades. However, this continuous growth in activities has also increased problems associated with stock trading. Most of these problems arise due to the intrinsic nature of paper based trading and settlement, like theft or loss of share certificates. This system requires handling of huge volumes of paper leading to increased costs and inefficiencies. Risk exposure of the investor also increases due to this trading in paper. Some of these risks are : Delay in transfer of shares. Possibility of forgery on various documents leading to bad deliveries, legal disputes etc. Possibility of theft of share certificates. Prevalence of fake certificates in the market. Mutilation or loss of share certificates in transit. The physical form of holding and trading in securities also acts as a bottleneck Continue reading