FINANCIAL MARKET

Financial market is a link between savers and borrowers.This market

Transfers the money or capital from those are who have surplus money to those
who are in need of investment.Generally the investors are called surplus units and
business enterprise are called deficit units.financial market acts as a link between
surplus and deficit units and brings together the borrowers and lenders.
There are mainly two ways through which funds can be allocated
(a)Via banke (b) financial market.The households who are the surplus units may
keep their savings in banks,they may buy securities from the capital market.The
banks and financial market both in turn lead the funds to business firm which
called deficit unit.
Banks and financial market are competitor of each other . Financial market is a
market for the creation and exchange of financial assets.
 FEATURES OF FINANCIAL MARKET
 (1)Mobilization of saving and channelising them into productive use. Financial market at as a
link between saver and investors. Financial markets transfer savings of saver to most appropriate investment
opportunities

 (2) Facilates price discovery. Price of anything depends upon demand and supply factors .demand and
supply of financial assets and securities in financial markets help in deciding the prices of various financial
securities
 (3) Provide liquidity to financial assets. In financial market financial securities can be bought and sold
easily so financial market provides a platform to convert securities in cash
 (4) Reduce the task of transaction. Financial market provides complete information regarding price,
availability and cost of various financial securities.So investors and companies do not have to spend much on
getting the information as it already available in financial market
 Types of financial market
Money market Capital market
 It deal wIth short term funds which meant for use for a period upto one year it is a  It is market for medium and long term it includes only organisation
source of working capital. deal in long term.
 The common instruments used in capital markets are
 INSTRUMENt ARE CALL MONEY, TREASURY BILLS, COMMERCIAL BILLS AND PAPER AND
CERTIFICATE OF DEPOSIT. share,debentures.
 The investment ine capital market does not require use financial
 The instrument of money market is are quite expensive so huge investment is required.
investment as the value of securities is generally low rupees 10 to
 Money market securities enjoy higher degree of liquidity. 100.
 The instrument of money market are safe all less Risky due to short duration and soundness of  Capital market securities are considered liquid because of stock
issues. exchange but compare to money marking instrument these are less
liquid.
 The expected return of money market is less due to short duration.
 The instrument of capital market are Riskier in respect to returns as
 Companies approach money market for working capital requirement. well respect to principal repayment as issuing company may for fail
 Money market deal with short term security having maximum tenure of 1 year.  The expected return Is higher in capital market as long with regular
dividend or interest there are chances of capital gain.
 Company approach capital market for fixed capital requirement.
 Money market
Money market is a market for short term points meant for use for a period of up to 1 year. Generally money market is the source of finance
for working capital. Transaction of money market includes landing and borrowing of cash for short term period of time and also sale and
purchase of security having one year term or which get redeemed paidback within 1 year period

Money market is not a fixed geographical area but it constitute all organisation and institution which deal which short term debt. The
common institution are reserve Bank of India, State Bank of India, commercial banks, LIC,GIC,UTI etc many of these institutions deal on
telephone and fax only.

Features of money market:

 Marker for short term.
 No fixed geographical.
 Major institution involved in money market are RBI, commercial bank, LIC, GIC etc.
 Common instruments of money market are call,money, treasury bill, commercial paper, commercial deposit, commercial bills etc.
 Instruments of money market
1. Call money. The money or lent on demand for short term period which is generally one day Sunday and other holidays are
excluded for this purpose. Mostly Bank use call money. When Bank faces temporary shortage of cash then the bank with surplus cash
lend to bank in short age for one or two days. Call money is also known as enter Bank call money market. But even other organisation
such as insurance company and mutual funds also deal with most of the time Bank required call money to meet the minimum
requirement of cash reserve ratio the interest paid on call rate.

2. Treasury bills (T.bills). Treasury bills are issued by reserve Bank of India on behalf of the governmentOf India. These
bills enable government to get short term funds as these bills are sold to the bank and general public. These bills are negotiable
instrument are freely transfer these are issued at discount these considered as a safest investment as these are issued by RBI the maturity
period of treasury bills varies from 14 to 364 days.

3. Commercial bills. Trade bills for accommodations bill are bills drawn by one business to another. These common
instruments is used for credit purchase and sale these have short term maturity period 90 days and can be discounted with bank even
before the maturity period. These are negotiable instrument and can be easily transferred.

4. Commercial bills (C.P.). The commercial paper was introduced in India for the first time in 1990. It is the unsecure
promissory note issued by public or private sector of companies with a fixed maturity period which varies form 3 to 12 month. fund
raised through commercial paper are used to meet the flotation cost this is also known as bridge financing.

5. Certificate of deposit. It is a time or deposit which can be sold in the secondary market. Only a bank can issue CD. It
is a bearer certificate or document of title it is also known as negotiable instrument and can be transferred easily.
 Capital market
Capital market is a market for medium and long term funds. It include all the organisation, institution, and
instrument that provide long term funds and medium. It does not includes the instrument and institution
which provide finance for short term period up to 1 year. The common instrument used in capital market are
shares, debentures, bonds, mutual fund, public deposit etc.

Features of capital market

1. Link between savers and investment opportunities. Capital market is a crucial link
between saving and investment process. The capital market transfer money from savers to entrepreneur
borrowers

2. Deals in long term investment. Capital market provides fund for long and medium term
it does not deal with channelising saving for less than 1 year.

3. Utilises intermediaries. Capital market make use of different intermediate is such as

brokers, uunderwriter, depositary .These intermediaries act as a working organ of capital market and
are very important element of capital market.

4. Determinant of capital formation. The activities of capital market determine the rate
of capital formation in an economy. Capital market offers attractive opportunities to those who have
surplus funds so that they invest more and more in capital market and are increased to save more for
profitable opportunities.
 Method of floatation of securities in primary
market
1. Public issue through prospectus- under this method company issue prospectus to inform and attract genral
public .in this they provide details of purpose for which funds are raised. In prospectus company provide detail about the purpose
for which funds are raised.Past financial performance of the company, background and future prospects of company

2. Offer for sale-In this method new securities are offered to genral public but not directly by the company but a
intermediaiary who buys lot of securities from the company generally the intermediate is the firms of broker so the sales of the
security take place in two step first when the company issue situated to the intermediary at face value and then intermediate Aries
issue secretary to the public at higher prices to earn profit.

3. private placement-under this method securities are sold by the company to the intermediate and securities are sold to the
selected cilent at higher prices such as UTI,LIC. The private placement method is a cause saving method as a company saved
from the expense of underwriter, fees, managers agent,commission listing of companies name in stock exchange. Small a new
company prefer private placement as they cannot afford to raise from public issue.

4. Righrt issue (for existing companies). This is the issue of new share to existing share holder. It is called right
issue because it is the pre-emptive rights of shareholder that company must offer them the new issue before subscribing to
outsider. Right issue is mandatory for companies under companies act 1956. the stock exchange does not allow the existing
companies to go for new issue without giving pre-emptive right to existing shareholder.

5. E-ipos.(electronic intial public offering). It is the new method of issuing security through online system of
stock market. In this company has to appoint resistered broker for the purpose of accepting application and placing order. The
companyissue security has to apply for listing of its security on any exchange the manager coordinate the activity through broker
connected with the issue
 Capital market
 Primary market  Secondary market
 It is also known as new issue market as in this market securities are sold for  It is also known as stock exchange it is the market for
the first time in this company goes directly to the investor and and sell sal and purchase of second hand goods and in this
securities. securities are not directly issued by the company to
investor.
 There is a sale of new securities.
 It is a market for existing or second and security and
 In primary market security or directly issued by companies. securities.
 Primary market contributes directly for capital formation as funds are  Security transfer between investor only.
transferred from surplus unit to deficit unit.
 Secondary market contributes indirectly for capital
 All company enter the primary market to raise capital for their operations. formation as fund are exchange between surplus unit

only.
There is no fix geographical area for primary market. All the institution
bank, foreign, investor etc constitute primary market.  Only listed companies securities are bought and sold in

secondary market.
Prices of securities are fixed by the management of companies.
 Only there is a fixed geographical area and working
hours.
 Prices of security our face by the demand and supply
factor of stock exchange market.
Rakesh Jhunjhunwala 24971 Cr

Premji & Associates 284534 Cr

Radhakrishnan Damani 230263 Cr
Mukul Agrawaal 2093 Cr
Ashish Dhawan 2014 Cr

October 18, 2021 by

Team IPO Invest
Foreign direct investment (FDI) is an ownership stake in a foreign company or project made by an investor, company, or government from another country.

Generally, the term is used to describe a business decision to acquire a substantial stake in a foreign business or to buy it outright to expand operations to a
new region. The term is usually not used to describe a stock investment in a foreign company alone. FDI is a key element in international economic
integration because it creates stable and long-lasting links between economies.
 Securities exchange board of india
Securities exchange board of India SEBI was set up in 1988 to regulate the function of securities market. SEBI promote orderly and healthy development
in the stock market but initially SEBI was not able to exercise completely control over the stock market transactions. It was left as a watch dog to
observe the activities but was found I in effective in regulating and controlling them. As a result in May 1992 SEBI was granted legal status. SEBI is a
body corporate having a separate legal existence and prepetual succession.

Reason for establishments of (SEBI)

With the growth in the dealings of stock market lot of Mal practices also started in stock market such as price rigging unofficial premium on new issue
delay and delivery of shares violation of rules and regulation of stock exchange and listing requirement due to the small practices the customers title
using confidence and faith in the stock exchange. So Government of India decided to set up an agencies or regulatory body known as securities exchange
board of India.

Purpose and role of (SEBI)

SEBI ko setup with the main purpose of keeping a check on Mal practises and protect the interest of investors. It was set up to meet the need of 3 groups.

1. Issuers. For issuers it provide a marketplace in which they can rays finance fairly and easily

2. Investors. For investor it provide production and supply of accurate and correct information.

3. Intermediaries. For intermediate it a competitive professional market.