Agenda Capital Market Primary Market Features of Primary market Secondary Market Features of Secondary Market Conclusion
CAPITAL MARKET The market where investment instruments likebonds, equities and mortgages are traded isknown as the capital market. The primal role of this market is to makeinvestment from investors who have surplusfunds to the ones who are running a deficit.
The capital market offers both long term andovernight funds. The different types of financial instrumentsthat are traded in the capital markets are:> equity instruments> credit market instruments,> insurance instruments,> foreign exchange instruments,> hybrid instruments and> derivative instruments.
Importance of Capital Markets Help firms and governments raise cash by sellingsecurities Allow investors with excess funds to invest and earn areturn Channel funds from savers to borrowers Allocate resources optimally (i.e., provide funds to thosewho can make the best use of them) Help allocate cash to where it is most productive Help lower the cost of exchange Secondary markets, where investors trade existingsecurities, assures investors that they can quickly selltheir securities if the need arises
Types of capital marketThere are two types of capital market: Primary market, Secondary market
Primary Market It is that market in whichshares, debentures and other securities aresold for the first time for collecting long-term capital. This market is concerned with new issues.Therefore, the primary market is also calledNEW ISSUE MARKET.
In this market, the flow of funds is from saversto borrowers (industries), hence, it helps directlyin the capital formation of the country. The money collected from this market isgenerally used by the companies to modernizethe plant, machinery and buildings, forextending business, and for setting up newbusiness unit.
Features of Primary Market It Is Related With New Issues It Has No Particular Place It Has Various Methods Of Float Capital: Followingare the methods of raising capital in the primarymarket:i) Public Issueii) Offer For Saleiii) Private Placementiv) Right Issuev) Electronic-Initial Public Offer It comes before Secondary Market
Initial public offering (IPO) The first sale of acompany’s stock to the general public. Investment bankers Financial specialists who handlethe sales of most corporate and municipal securities. Underwriting Process of purchasing an issue from afirm or government and then reselling the issue toinvestors.
Factors to be considered by Investors Promoters Credibility Project Details Product Financial data Risk factors Auditors report
Secondary Market The secondary market is thatmarket in which the buying andselling of the previously issuedsecurities is done. The transactions of the secondarymarket are generally done throughthe medium of stock exchange. The chief purpose of the secondarymarket is to create liquidity insecurities.
If an individual has bought somesecurity and he now wants to sell it, hecan do so through the medium of stockexchange to sell or purchase throughthe medium of stock exchange requiresthe services of the brokerpresently, their are 24 stock exchangein India..
Features of Secondary Market It Creates Liquidity It Comes After Primary Market It Has A Particular Place It Encourage New Investments Aids in financing the industry Ensures safe & fair Dealing( MEDIABROADCASTING)
Functions of Secondary Markets Provides regular information about the value ofsecurity. Helps to observe prices of bonds and their interestrates. Offers to investors liquidity for their assets. Secondary markets bring together many interestedparties. It keeps the cost of transactions low.
Famous Secondary Markets worldwide New York Stock Exchange NASDAQ The London Stock Exchange The Tokyo Stock Exchange Shanghai Stock Exchange