Players of Money Market and Capital Market


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financial market , functions of financial market , Characteristics Of Financial Markets, What Is Money Market ,Structure of Indian Money ₹ Market ,Functions of Money Markets,Players Of Money Market, Capital Market , Types of Capital Market , Structure of Indian Capital Market , Functions of Capital Market , Constituents/Components of Capital Markets, PLAYERS OF CAPITAL MARKET

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Players of Money Market and Capital Market

  2. 2. What Is Financial Market ? • A financial market is a market in which people and entities can trade financial securities, commodities and other fungible items of value at low transaction costs and at prices that reflect supply and demand . Securities include stocks, bonds and commodities include precious metals or agricultural goods .
  3. 3. Functions Of Financial System RETURN COST Financial Market I N V E S T O R S B O R R O W E R S
  4. 4. Characteristics Of Financial Markets
  5. 5. Types Of Financial Market
  6. 6. What Is Money Market • "The Money Market is the centre for dealing mainly of short character, in monetary assets; it meets the short term requirements of borrowers and provides liquidity or cash to the lenders. It is a place where short term surplus investible funds at the disposal of financial and other institutions and individuals are bid by borrowers, again comprising institutions and individuals and also by the government.“ -According to the RBI
  7. 7. Structure of Indian Money ₹Market Organised Money Market Unorganized Money Market • Reserve bank of India • Indigenous Bankers • Scheduled Commercial Banks • Money Lenders • Discount and finance House of India • Non - Banking Financial Companies (NBFCs) • Mutual funds - Chit Funds • Non-banking finance companies - Nidhis • Primary Dealers - Finance Brokers
  8. 8. Functions of Money Markets 1 2 3 4 5 6 • Monetary Equilibrium • Economic Growth • Promote Trade and Industry • Aiding Monetary Policy • Capital Formation • Non inflationary source of Finance to Government
  9. 9. Players Of Money Market • Reserve Bank of India • Government • Discount and Finance House of India • Commercial Banks • Mutual Funds • Primary Dealer • Financial Institutions • Corporate Firms
  10. 10. RESERVE BANK OF INDIA • The reserve Bank Of India is the most important player in the Indian Money Market. • The Organised money market comes under the direct regulation of the RBI. • The RBI operates in the money market is to ensure that the levels of liquidity and short-term interest rates are maintained at an optimum level so as to facilitate economic growth and price stability • RBI also plays the role of a merchant banker to the government. It issues Treasury Bills and other Government Securities to raise funds for the government.
  11. 11. GOVERNMENT • The Government is the most active player and the largest borrower in the money market. • It raises funds to make up the budget deficit. • The funds may be raised through the issue of Treasury Bills (with a maturity period of 91day/182day/364 days) and government securities.
  12. 12. COMMERCIAL BANKS • Commercial Banks play an important role in the money market. • They undertake lending and borrowing of short term funds. • The collective operations of the banks on a day to day basis are very predominant and hence have a major impact and influence on the interest rate structure and the liquidity position.
  13. 13. FINANCIAL INSTITUTIONS • Financial institutions also deal in the money market. • They undertake lending and borrowing of short-term funds. • They also lend money to banks by rediscounting Bills of Exchange. • Since, they transact in large volumes, they have a significant impact on the money market.
  14. 14. CORPORATE FIRMS • Corporate firms operate in the money market to raise short-term funds to meet their working capital requirements. • They issue commercial papers with a maturity period of 7 days to 1 year. These papers are issued at a discount and redeemed at face value on maturity. • These corporate firms use both organised and unorganised sectors of money market.
  15. 15. DISCOUNT HOUSES AND PRIMARY DEALERS • They are the intermediaries in the money market • Discount Houses discount and rediscount commercial bill and Treasury Bills. • Primary Dealers were introduced by RBI for developing an active secondary market for Government securities. • They also underwrite Government Securities.
  16. 16. MONEY MARKET MUTUAL FUND • A money market fund is a mutual fund that invests solely in money market instruments. • Money market funds are generally the safest and most secure of mutual fund investments. • The goal of a money-market fund is to preserve principal while yielding a modest return. • Money-market mutual fund is akin to a highyield bank account but is not entirely risk free. When investing in a money-market fund, attention should be paid to the interest rate that is being offered.
  17. 17. What Is Capital Market ? Markets for buying and selling equity and debt instruments. Capital markets channel savings and investment between suppliers of capital such as retail investors and institutional investors, and users of capital like businesses, government and individuals. Capital markets are vital to the functioning of an economy, since capital is a critical component for generating economic output. Capital markets include primary markets, where new stock and bond issues are sold to investors, and secondary markets, which trade existing securities.
  19. 19. Primary Market • It is 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. • The money collected from this market is generally used by the companies to modernize the plant, machinery and buildings, for extending business, and for setting up new business unit
  20. 20. 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.
  21. 21. Structure of Indian Capital Market with Diagram
  22. 22. Functions of Capital Market Mobilization of Savings Provision of Investment Avenue Proper Regulation of Funds Capital Formation Speed up Economic Growth and Development Continuous Availability of Funds
  23. 23. Constituents/Components of Capital Markets
  24. 24. PLAYERS OF CAPITAL MARKET • Stock Exchange • Merchant Banker • Underwriters • FII • Credit Rating Agencies • Venture Capital Fund • Brokers • Portfolio Managers
  25. 25. Role of SEBI in Regulating Capital Market • Increasing Market Transparency. • Improving the standards of Corporate Governance. • Improving Market Efficiency. • Reduction of Transaction Cost. • Enhancing the Market Safety. • Educate investors
  26. 26. STOCK EXCHANGE • A market in which securities are bought and sold. • Makes it easy for investors to buy and sell securities in secondary markets. • Freeze active shares and debentures certificates in the safe custody. • Computerise trading • Credit dividend payment directly to the account of the shareholders in the bank through electronic clearing mechanism. • To act as a bank for shares .
  27. 27. MERCHANT BANKER • Merchant Banks are a very important factor in the capital markets. They have a big role to play especially, in placing equity in the primary market, through the Initial Public Offers route. • The SEBI issued guideline for the merchant bankers in April 1990. • Merchant banker play major role is in the space of mergers and acquisitions • They will especially play a huge role in the hostile takeovers.
  28. 28. UNDERWRITERS • Underwriting is like insurance against the failure of an issue . • For the risk that the underwriter takes, he is paid commission • Underwriting is a device that ensures the success of new issues • The SEBI has made it mandatory for issuing companies to underwrite all issues .
  29. 29. VENTURE CAPITAL • Venture capital means funds made available for start-up firms and small business with exceptional growth potential. • Venture capital is the financial support to young , rapidly growing companies/individuals that have potential to develop into significant economic contributors by the business man group to create a product or service which has a unique idea • It helps to bridge the gap between capital and knowledge
  30. 30. Money Market Vs. Capital Market