What is Capital Market?

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  1. 1. Primary and Secondary Markets
  2. 2. Agenda Capital Market Primary Market Features of Primary market Secondary Market Features of Secondary Market Conclusion
  3. 3. CAPITAL MARKET The market where investment instruments like bonds, equities and mortgages are traded is known as the capital market. The primal role of this market is to make investment from investors who have surplus funds to the ones who are running a deficit.
  4. 4. The capital market offers both long term and overnight funds. The different types of financial instruments that are traded in the capital markets are: > equity instruments > credit market instruments, > insurance instruments, > foreign exchange instruments, > hybrid instruments and > derivative instruments.
  5. 5. Importance of Capital Markets Help firms and governments raise cash by selling securities Allow investors with excess funds to invest and earn a return Channel funds from savers to borrowers Allocate resources optimally (i.e., provide funds to those who can make the best use of them) Help allocate cash to where it is most productive Help lower the cost of exchange Secondary markets, where investors trade existing securities, assures investors that they can quickly sell their securities if the need arises
  6. 6. Types of capital market There are two types of capital market: Primary market, Secondary market
  7. 7. 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.
  8. 8. In this market, the flow of funds is from savers to borrowers (industries), hence, it helps directly in the capital formation of the country. 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.
  9. 9. Features of Primary Market It Is Related With New Issues It Has No Particular Place It Has Various Methods Of Float Capital: Following are the methods of raising capital in the primary market: i) Public Issue ii) Offer For Sale iii) Private Placement iv) Right Issue v) Electronic-Initial Public Offer It comes before Secondary Market
  10. 10. Initial public offering (IPO) The first sale of a companys stock to the general public. Investment bankers Financial specialists who handle the sales of most corporate and municipal securities. Underwriting Process of purchasing an issue from a firm or government and then reselling the issue to investors.
  11. 11. Factors to be considered by Investors Promoters Credibility Project Details Product Financial data Risk factors Auditors report
  12. 12. 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.
  13. 13. If an individual has bought some security and he now wants to sell it, he can do so through the medium of stock exchange to sell or purchase through the medium of stock exchange requires the services of the broker presently, their are 24 stock exchange in India. .
  14. 14. Features of Secondary Market It Creates Liquidity It Comes After Primary Market It Has A Particular Place It Encourage New Investments Aids in financing the industry Ensures safe & fair Dealing( MEDIA BROADCASTING)
  15. 15. Functions of Secondary Markets Provides regular information about the value of security. Helps to observe prices of bonds and their interest rates. Offers to investors liquidity for their assets. Secondary markets bring together many interested parties. It keeps the cost of transactions low.
  16. 16. Famous Secondary Markets worldwide New York Stock Exchange NASDAQ The London Stock Exchange The Tokyo Stock Exchange Shanghai Stock Exchange
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