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Indian Financial Markets

The document discusses Indian financial markets. It defines financial markets as institutions that facilitate trading of financial assets and credit instruments. It outlines the key functions of financial markets as creation and allocation of credit/liquidity, serving as intermediaries, and facilitating fund transfers to assist economic development. The structure of Indian financial markets includes the capital market and money market. The capital market deals with long-term funds and equity/debt capital raising. The money market facilitates short-term borrowing and lending through various instruments like commercial paper, certificates of deposit, and treasury bills. Several financial institutions, markets, and debt instruments that make up India's capital and money markets are described in detail.

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102 views11 pages

Indian Financial Markets

The document discusses Indian financial markets. It defines financial markets as institutions that facilitate trading of financial assets and credit instruments. It outlines the key functions of financial markets as creation and allocation of credit/liquidity, serving as intermediaries, and facilitating fund transfers to assist economic development. The structure of Indian financial markets includes the capital market and money market. The capital market deals with long-term funds and equity/debt capital raising. The money market facilitates short-term borrowing and lending through various instruments like commercial paper, certificates of deposit, and treasury bills. Several financial institutions, markets, and debt instruments that make up India's capital and money markets are described in detail.

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Indian Financial Markets

By Dr. Vineet Chouhan


Financial Markets
 Capital:
Wealth used in the production of further
wealth. It comprises the money and the
money value invested in the business units.

 Financial market refers to the institutional


arrangements for dealing in Financial
Assets and credit instruments of various
kinds such as currency, cheques, bills,
bonds, Bank deposits, etc.
Functions of Financial Markets
 Creation and allocation of credit and liquidity.
 To serve as intermediaries.
 Provide financial convenience or facilitate
transfer of funds.
 Assists the process of economic development.
Structure of financial markets.
Capital Market and Money Market
1. Capital Market
Market for long term funds
Equity and Debt
Concerned with raising the money capital for
the purpose of investments.
Capital Market in India
Financial Institution

Development Investment Other FIs


Financial Institutions Merchant Banks
instruments LIC Leasing companies
IFCI UTI Venture Capital
IDBI
ICICI Securities Markets
SFCs
Securities Markets
Gift-Edged or Govt. Industrial Securities
Securities Markets Markets
Primary Secondary
Markets Markets

IPO Further Organised over the


Issue Stock counter
Exchanges markets

Bonds Equities
Preference
shares
Money Market
oThe money market refers to the
institutional arrangements facilitating
borrowing and lending of short-term funds
o “The money market is the collective name
given to the various firms and institutions
that deals in the various grades of near
money.” -Crowther
o Money market is an avenue for borrowing
and lending for the short term funds.
Characteristics
oArrangements in short term funds
oCollection of market
oCommodity market
oNetwork of large number of participants
owholesale market of short term debt instruments.
oTrading through telephone or other mean of
communication.
oTrends in liquidity and interest rates.
oBrokers are not needed.
Call Money Market
oMarket for extremely short period.
oMoney can be called on a very short notice.

oCollateral Loan Market


oLoan offered against collateral securities, like stock and
bonds.

oAcceptance Money Market


oMarket for bankers acceptances involved in cash.

oBill market or Discount market


oCommercial Paper Market( CPs)
oShort term unsecured promissory note with fixed
maturity.(25 lakh and 3to6 month, 11.82%to 13.32%)

oCertificate of Deposit Market (CDs)


oCDs represent bank deposit accounts which are
transferable from one party to another.
o 2week to 5years, 9to 16.33%

oTreasury Bill Market


oIssued by government of India for 91 days and
182 days.25,000&multiple, (3to4.6 to 9.35%)
Institutions in Money Markets

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