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MEANING:
Generally, Financial market is a place where a financial transaction takes place. Financial
market is pervasive in nature, since Financial transactions are themselves very pervasive.
However, Financial market can be referred to as those centers and arrangements which
facilitate buying and selling of financial assets and services.
The participants in the financial markets are the borrowers (issuers of securities), lenders
(buyers of securities) and financial intermediaries (institutions).
Financial markets should not be confused as sources of finance. They are a link between the
savers and borrowers, both individual and institutional.
Prof. Sudipta Kumar Nanda. RIMS,
Rourkela
CLASSIFICATION OF FINANCIAL MARKETS****
LENDERS :
INDIVIDUALS : Many individuals are not aware that they are lenders, but almost
everyone lends money in some way. A person lends money when he :
1. Puts money in a savings account at a bank,
2. Contributes to a pension plan,
3. Pays premiums to an insurance company,
4. Invests in government bonds,
5. Invests in company shares.
LENDERS :
COMPANIES : Companies usually tend to be borrowers of capital . But when they
have surplus cash that is not needed for a short period of time, they may seek to make
money from their cash surplus by lending it, by Investing in bonds and stocks.
Prof. Sudipta Kumar Nanda. RIMS,
Rourkela
BORROWERS :
1. Individuals – e.g. bank loans, mortgages.
2. Companies – for short term or long term cash flows or future business expansion.
3. Governments – for spending requirements, or on behalf of nationalized industries,
municipalities or other public sector bodies.
4. Public Corporations – e.g. postal services, railway companies and utility companies.
This market supplies funds for financing It supplies funds for financing the fixed capital
current business operations, working capital requirements of companies as well as long term
requirements of industries and short term requirements of governments
requirements of the government.
Each single money market instrument is of Each single capital market investment of small
large amount. A CD is of minimum of Rs.1 amount. Each share is of nominal value Rs.10.
lakh.
RBI and commercial banks are the major Corporates, individuals, insurance companies,
players mutual fund AMCs, etc are the players
Transactions are conducted without the help of Transactions are conducted with the help of
broker broker.
GOVT. INDUSTRIAL
LONG-TERM
SECURITIES SECURITIES
LOAN MARKET
MARKET MARKET
MARKET FOR
PRIMARY SECONDARY MARKET FOR
TERM LOAN FINANCIAL
MARKET MARKET MORTGAGES
GUARANTEES
• They are basically the managers of a public issue, acting as the lead
managers.
2) Underwriters :
4) Registrars to an issue :
6) Debenture trustees :
1) Jobbers
2) Brokers
3) Sub-brokers
4) Tarawaniwalas
5) Authorised Clerks
1) Jobbers
2) Broker :
4) Tarawaniwalas :
• The members of BSE have divided themselves into brokers and Tarawaniwalas
•They act as both brokers and jobbers.
• A tarawaniwala makes transactions on his own behalf as a jobber but may also act as a
broker on behalf of the public.
• They may sell their own securities to their clients when prices are higher and vice-
versa.
Prof. Sudipta Kumar Nanda. RIMS,
Rourkela
5) Authorised Clerks :