The document discusses various aspects of financial markets. It defines a financial market as a mechanism that allows people to buy and sell financial securities and commodities. It then describes different types of financial markets including the money market, capital market, primary market, and secondary market. The document focuses on instruments and importance of the money market, discussing treasury bills, commercial paper, certificates of deposits, repurchase agreements, and banker's acceptances. It also covers capital markets, their importance, and instruments like equity shares, preference shares, bonds, and debentures.

1. Presented By:
Tanushree Patra

2. Financial Market
 A financial market is a mechanism that allows people to buy and sell
financial securities , commodities and other items of value at low
transaction costs and at a prices that reflect supply and demand.
 Securities include stocks, bonds, and commodities include precious metals
and agricultural goods.

3. Financial Market
Financial Market
Capital
Market
Primary
Market
Secondary
Market
Money
Market

4. Money Market
 Money market is a mechanism that deals with
lending of short terms funds which is generally less
than 1 year.
 A segment of the financial market in which
financial instrument with high liquidity and very
short maturities are traded.
 The main purpose of money market is to provide
investors with a safe place to invest easily
accessible, cash-equivalent assets.

5. Importance of Money Market
 Financing Trade
 Financing Industry
 Profitable Investment
 Self sufficiency of commercial bank
 Help to Central Bank
 Encourage to Economic growth

6. Commercial
paper
Treasury
Bills
Money
Market
Instruments
Certificate
of
Deposits
Repurchase
Agreement
Banker’s
Acceptance
Instruments of Money
Market

7. Treasury Bills ( T –Bills )
 T – Bills are the most marketable money market securities.
 These are issued with three month, six month and one year maturities.
 T – Bills are purchased for a price that is less than their par value, when mature,
the government pays the holder the full par value.
 T – Bills are so popular among money market instruments because of
affordability to the individual investors.

8. Commercial Paper
 Commercial paper is a short term unsecured loan issued by large bank
and corporation typically financing day to day operation.
 CP is a very safe investment because the financial situation of a company
can be easily be predicted over a few months.
 Only company with high credit rating issues CP’s.
 Interest rates fluctuate with market condition, but are typically lower than
bank’s rates.

9. Certificates of Deposits
 A Certificates of deposits is a time deposit, financial product commonly offered to consumers
by banks.
 Like most time deposit, funds can’t withdrawn before maturity without paying a penalty.
 CD’s have specific maturity date, interest rate and it can be issued in any denomination.
 The main advantage of CD is their safety.
 It normally give higher return than Bank term deposit, and are rated by approved rating
agencies.

10. Repurchase agreements
 Repo or Reverse Repo are transactions or short term loans in which two parties
agree to sell and purchase the same security.
 These are usually very short term purchases agreement, from overnight to 30
days of more.
 The short term maturity and government backing usually mean that Repos
provide lenders with extremely low risk.
 These transactions can be done only between the parties approved by RBI and
in RBI approved securities.

11. Banker’s Acceptance
 A banker’s acceptance is a short term credit investment created by a non –
financial firm.
 BA’s are guaranteed by a bank to make payment.
 Acceptance are traded at discounts from face value in the secondary market.
 It acts as a negotiable time draft for financing imports, exports or other transactions
in goods.

12. Capital Market
 Capital market refers to the institutional
arrangements for facilitating the borrowing
and lending of long term funds.
 It’s a market place where investment
instruments like bonds, equities mortgages
are traded.
 The primary role of this market is to make
investments from investors who have surplus
funds to the ones who are running a deficit.

13. Importance of Capital Market
 Link between savers and investors
 Encouragement to savings
 Encouragement to Investments
 Promotes Economic Growth
 Stability in Security Prices
 Benefits to Investors

14. Types of Capital Market

15.  Equity Shares
 Preference Shares
 Bond
 Debenture
Instruments of Capital Market

16. Equity Share
 Equity shares are commonly referred to common stock or ordinary shares. The
holders of these shares are the real owners of the company.
 They have a voting right in the meetings of holders of the company. They have a
control over the working of the company.
 Equity shareholders are paid dividend after paying it to the preference
shareholders. The rate of dividend depends upon the profits of the company.
 The risk factor in this instrument is high and thus yields a higher return.

17. Preference Share
 Preference shares are those shares which carry certain special or priority rights.
Firstly, dividend at a fixed rate is payable on these shares before any dividend is
paid on equity shares.
 At the time of winding up of the company, capital is repaid to preference shareholders
prior to the return of equity capital.
 Preference shares do not carry voting rights.
 Types of Preference share:
a. Redeemable Preference share
b. Irredeemable Preference share
c. Convertible Preference share
d. Non – Convertible Preference

18. Bonds
 Bond is a long term debt instrument that promises to pay a fixed annual
sum as interest for specified period of time.
 Interest is usually payable at fixed intervals (semi annual, annual, monthly).
The Interest rate is also know as coupon rate. Usually this rate is fixed
through out the life of the bond.
 Some of the types of bonds: Zero coupon bond, Fixed rate bond,
Government bond, Convertible bond, Floating rate bond, etc.

19. Debenture
 A debenture is a long term debt instrument or security issued by company.
 The company is liable to pay a specified amount with interest and although
the money raised by debentures becomes a part of the company’s capital
structure.
 The rate of debentures are fixed and known to Investors.
 Types of Debenture:
 Convertible Debenture
 Non Convertible Debenture
 Secured Debenture
 Unsecured Debenture

20. Constituents of Stock Market
 National Stock Exchange
(NSE)
 Bombay Stock Exchange
(BSE)