Capital Market: All you need to know about

Capital Market: All you need to know about

A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold like bonds, stocks, etc.

1-2 Questions about the financial organizations like Capital Market are asked in the government exam in the General Awareness section. Here we are providing the complete information regarding the Capital Market in India.

Capital Market related Complete Information will be very helpful in the General awareness section in different competitive exams like Bank, SSC, Railways, etc.

Capital market

A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments.

एक पूंजी बाजार एक वित्तीय बाजार है जिसमें दीर्घकालिक ऋण (एक वर्ष से अधिक) या इक्विटी समर्थित प्रतिभूतियों को खरीदा और बेचा जाता है। पूंजी बाजार उन लोगों के लिए बचतकर्ताओं की संपत्ति को दर्शाता है जो इसे दीर्घकालिक उत्पादक उपयोग में डाल सकते हैं, जैसे कि कंपनियां या सरकारें दीर्घकालिक निवेश कर रही हैं।

Functions of Capital Market

  • Mobilization of savings to finance long term investments.
  • Facilitates trading of securities.
  • Minimization of transaction and information cost.
  • Encourage wide range of ownership of productive assets.
  • Quick valuation of financial instruments like shares and debentures.
  • Facilitates transaction settlement, as per the definite time schedules.
  • Offering insurance against market or price risk, through derivative trading.

 

  • लंबी अवधि के निवेश को वित्त देने के लिए बचत का जुटान।
  • प्रतिभूतियों के व्यापार की सुविधा।
  • लेन-देन और सूचना लागत का न्यूनतमकरण।
  • उत्पादक परिसंपत्तियों के स्वामित्व की विस्तृत श्रृंखला को प्रोत्साहित करना।
  • शेयरों और डिबेंचर जैसे वित्तीय साधनों का त्वरित मूल्यांकन।
  • निश्चित समय-सारिणी के अनुसार लेन-देन निपटान को सुगम बनाता है।
  • व्युत्पन्न व्यापार के माध्यम से बाजार या मूल्य जोखिम के खिलाफ बीमा की पेशकश करना।

Types of Capital Market

  • Primary Market: Otherwise called as New Issues Market, it is the market for the trading of new securities, for the first time. It embraces both initial public offering and further public offering. In the primary market, the mobilisation of funds takes place through prospectus, right issue and private placement of securities.
  • प्राथमिक बाजार: अन्यथा इसे न्यू इश्यूज मार्केट कहा जाता है, यह पहली बार नई प्रतिभूतियों के व्यापार का बाजार है। यह आरंभिक सार्वजनिक पेशकश और आगे की सार्वजनिक पेशकश दोनों को स्वीकार करता है। प्राथमिक बाजार में, धन का जमाव प्रॉस्पेक्टस, राइट इश्यू और प्रतिभूतियों के निजी प्लेसमेंट के माध्यम से होता है।
  • Secondary Market: Secondary Market can be described as the market for old securities, in the sense that securities which are previously issued in the primary market are traded here. The trading takes place between investors, that follows the original issue in the primary market. It covers both stock exchange and over-the counter market.
  • द्वितीयक बाजार: द्वितीयक बाजार को पुरानी प्रतिभूतियों के लिए बाजार के रूप में वर्णित किया जा सकता है, इस अर्थ में कि प्राथमिक बाजार में पहले जारी की जाने वाली प्रतिभूतियों का व्यापार होता है। ट्रेडिंग निवेशकों के बीच होती है, जो प्राथमिक बाजार में मूल मुद्दे का अनुसरण करती है। यह स्टॉक एक्सचेंज और ओवर-द काउंटर मार्केट दोनों को कवर करता है।

Primary Market 

  • IPO (Initial public offering): Whenever a company makes a new issue of securities of an offer in order to sell the existing securities or both for the very first time to the public an initial public offering is done.
  • Further Issue: This issue is a follow on public offering. This offer is executed by means of an offer document when a listed company releases an offer for sale to the public or makes issue of new securities.
  • Rights Issue: This is an issue where a listed company releases new securities to its shareholders on a recorded date and is offered in a ratio which is based on the securities held beforehand. This is mainly done to raise capital without diluting the stake of its shareholders.
  • Preferential Issue: Shares and convertible securities of listed companies to a particular set of people fall under this issue. It comes under Section81 of the Companies Act 1956. It is neither a public nor a rights issue and is the fastest way for a company to improve capital.

Secondary Market

  • Corporate Action: Corporate actions include- dividend declaration, bonus shares issue and splitting of shares. As the values of shares are altered it has an impact on the market prices of shares.
  • Buyback: Buying back of shares is buying shares from another investor in the market as a motive of investment. This is done to improve liquidity of shares and to enhance wealth.
  • Index: It is like an indication as to how the prices of listed stocks in a particular market are going to behave.
  • Sensex: It is the index which is related to trading of shares on the Bombay Stock exchange.
  • Nifty: It is the index which is related to trading of shares on the National Stock exchange.

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