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What Is Capital Market

Capital markets is a channel through which surplus of individuals is made available to industries and commercial enterprises. Imagine Reliance Jio requiring 1000 crores for the expansion of its business, then Mukesh Ambani will look up to the capital markets to get adequate funds. Get to know about the Features of Capital Market in this article.

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What Is Capital Market

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  1. What Is Capital Market? The capital markets are a conduit via which businesses and industries can access excess human resources. If Reliance Jio needed 1000 crores to expand its business, Mukesh Ambani would turn to the capital markets to secure sufficient funding. The surplus funds of many retail investors are invested in the capital markets, where businesses in need of funding can use them for business purposes. In exchange, investors receive capital market instruments worth the value of their investment. Understand the specifics of capital market instruments, such as stock and preference shares, and the distinctions between the two. Now let’s discuss the features of capital market.

  2. Features of Capital Market 1). Link between investors and borrowers: The capital market's function is to connect fund borrowers (corporate houses) and investors (individuals). It transfers money from those who have extra cash to those who do not. 2). Deals in medium and long-term investment: Shares and debentures are traded on the capital market, which is a venue for medium- and long-term capital market products. Since long- and medium-term capital instruments are exchanged, this presents an excellent investment opportunity for government workers. Corporates, banks, financial institutions, etc. can access long-term funding from both domestic and international markets through this market. 3). Presence of Intermediaries: The following intermediaries play an important role in the functioning of capital markets. Brokers  Underwriters  Merchant Bankers  Collection Bankers  These intermediaries are important elements that constitute the role of the capital market in a country.

  3. 4). Promotes capital formation: Through the issuance of shares, debentures, bonds, and other securities, the capital markets mobilise the savings of investors and householders. And the corporations invest the surplus to grow their enterprises. 5). Deals in marketable and non-marketable securities: Marketable and non-marketable securities are traded on the capital market. Securities that can be transferred are referred to as marketable securities. For instance, bonds, shares, and debentures. Securities that cannot be transferred are known as non-marketable securities. For instance, advances, loans, and term deposits.

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