CAPITAL MARKET
A capital market may be defined as an organised mechanism meant for the
effective and smooth transfer of money capital or financial resources from the
investors to the entrepreneurs. Capital market deals with long term funds
whereas people who borrow and lend money for periods exceeding one year and
they mostly buy and sell corporate securities.
Components of Capital Market
The capital market consist of a no of
individuals and institutions that canalize the supply and demand for long term
capital claims on capital. The stock exchanges, commercial banks, co-operative
banks , development bank, insurance company, investment companies are the
important components of capital market.
Functions
of Capital Market
—It
mobilises the financial resources on a nation wide scale.
—It
secures the much required foreign capital and know-how to promote economic
growth at a faster rate.
—It
ensures most effective allocation of mobilised financial resources.
—A
developed capital market provide a no of profitable investment opportunities
for the small savers.
INDIAN
CAPITAL MARKET
The capital market in India may be broadly
classified into organized and unorganized markets. The organized capital market
consist of the corporate enterprises, government and semi government
institutions. The unorganized sector of the capital market consists of
indigenous bankers in urban areas and money lenders in rural areas.
Structure
The capital market in India consists of the primary markets and the
secondary markets .The primary market
creates long term instruments which corporate entities borrow from the capital
market.
Secondary market is the one which
provides liquidity & marketability to these instruments.
Source
of supply & demand of funds
The capital market consists of the lenders and borrowers .The
supply of funds come from the lenders
& the demand for funds come from the investors. Supply of long term funds
come from the investing public from their savings. These savings from
the following
—Household
savings
—Foreign
capital
—Corporate
savings
—Institutional
investors
—The
government
The capital market serves a very useful
purpose for pooling the capital resources and making the available to the
enterprising investors. Capital market consist of a no of individuals and
institutions that channelize the supply and demand for long term capital &
claims on capital.