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• Tejashree Soni
• Kunika Gupta
• Preeti Mishra
What is Financial Market ?
Functions of Financial Market
It facilitates mobilisation of savings
It helps in determining the price of the securities. The frequent interaction between
investors helps in fixing the price of securities, on the basis of their demand and supply in
the market.
It provides liquidity to tradable assets, by facilitating the exchange, as the investors can
readily sell their securities and convert assets into cash.
It saves the time, money and efforts of the parties, as they don’t have to waste
resources to find probable buyers or sellers of securities. Further, it reduces cost by
providing valuable information, regarding the securities traded in the financial market.
Money Market
The market where monetary assets such as commercial
paper, certificate of deposits, treasury bills, etc. which
mature within a year, are traded is called money market. It
is the market for short-term funds. No such market exist
physically; the transactions are performed over a virtual
network .
Function of Money Market
1.Financing trade
2. Financing Industry :
3. Profitable Investment :
4. Self sufficiency of commercial bank :
Classification of Money Market
1.Treasury Bills
2.Call Money
3.Commercial Paper
4.Certificate Of Deposit
5.Commercial Bills
Role of RBI in the Money Market
1. To Ensure Liquidity And Short Term Interest Rate Are Maintained At
Consistent Level With The Monetary Policy.
2. To Ensure An Adequate Flow Credit Sector Of Economy.
3. To Bring About Order In The Foreign Exchange Market.
Capital Market
Capital Market means the market for long term investments,
that have explicit or implicit claims to capital. Long term
investments refers to those investments whose lock-in period
is greater than one year.
Classification Of Capital Market
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.
 Improvement in the effectiveness of capital allocation, with the help of
competitive price mechanism.
• 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 mobilization of funds takes place through prospectus, right
issue and private placement of securities.
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.
Recent trends in Indian Capital Market
• Promoting more private sector banks:
• Promotion of mutual funds:
• Online trading in Indian capital market
• Transparency through online trading
Financial scams
Harshad Mehta
Ketan parekh

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Indian Financial System

  • 1. • Tejashree Soni • Kunika Gupta • Preeti Mishra
  • 2. What is Financial Market ?
  • 3. Functions of Financial Market It facilitates mobilisation of savings It helps in determining the price of the securities. The frequent interaction between investors helps in fixing the price of securities, on the basis of their demand and supply in the market. It provides liquidity to tradable assets, by facilitating the exchange, as the investors can readily sell their securities and convert assets into cash. It saves the time, money and efforts of the parties, as they don’t have to waste resources to find probable buyers or sellers of securities. Further, it reduces cost by providing valuable information, regarding the securities traded in the financial market.
  • 4.
  • 5. Money Market The market where monetary assets such as commercial paper, certificate of deposits, treasury bills, etc. which mature within a year, are traded is called money market. It is the market for short-term funds. No such market exist physically; the transactions are performed over a virtual network .
  • 6. Function of Money Market 1.Financing trade 2. Financing Industry : 3. Profitable Investment : 4. Self sufficiency of commercial bank :
  • 7. Classification of Money Market 1.Treasury Bills 2.Call Money 3.Commercial Paper 4.Certificate Of Deposit 5.Commercial Bills
  • 8. Role of RBI in the Money Market 1. To Ensure Liquidity And Short Term Interest Rate Are Maintained At Consistent Level With The Monetary Policy. 2. To Ensure An Adequate Flow Credit Sector Of Economy. 3. To Bring About Order In The Foreign Exchange Market.
  • 9. Capital Market Capital Market means the market for long term investments, that have explicit or implicit claims to capital. Long term investments refers to those investments whose lock-in period is greater than one year.
  • 11. 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.  Improvement in the effectiveness of capital allocation, with the help of competitive price mechanism.
  • 12. • 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 mobilization of funds takes place through prospectus, right issue and private placement of securities.
  • 13. 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.
  • 14. Recent trends in Indian Capital Market • Promoting more private sector banks: • Promotion of mutual funds: • Online trading in Indian capital market • Transparency through online trading