Indian Financial

Market

Shruthika.N
Finance is the study of
money – its nature, creation,
behaviour, regulation and
administration
System stands for a set of
bodily organs
All those activities dealing in
finance are organized in a
system known as the
Financial markets is the institutional
arrangements for dealing in financial
assets and credit instruments of different
types like currency, cheques, bills, etc…

Functions:

Creation & allocation of credit & equity

Mobilization of savings
Cater to various credit needs
Assist balanced economic growth
The financial market is divided into
two categories based on the credit
requirement for short term or long
term purposes

Money Market – Short term funds

Capital Market – Long term funds

 MONEY MARKET
Money market is the collective
name given to the various firms
and institutions that deal in
various grades of near money
-
Crowther
Loans for less than a year
Credit instruments are called
near money assets
Components of Money Market:
Call money market

Collateral loan

Acceptance market

Bill market
Call money market:
Loan disbursed by commercial
banks
1 day – 7 days
Bank can recall the loan at its
discretion
Usually advanced to bill brokers &
stock exchange brokers.
Collateral loan market:
Lender - Commercial banks

Borrower - Stock brokers

Short term - Few months

Back up – Securities, bonds,

stocks

If the loan is not paid the bonds

or securities become the property of
the lender
Acceptance market:
“ A draft drawn by an individual or a
firm upon a bank & accepted by the
bank whereby it is ordered to pay to
the bearer a sum of money at a
specified time in future.”
-
Raymond.P.Kent

Primarily used in international

trade
Bill market:
Bills of Exchange
Written
unconditional order
which is signed by the
drawer & the drawee
to pay on demand or
at a fixed time in the
future a definite sum
of money
Usually used by
traders
Treasury bills:
Government Paper Securities

Duration of 91 days

Promissory note of the

government to pay a specified
sum after a specified period
Significance/Functions of
Money market
Economic development
Profitable Investment
Borrowings by the governor
Importance for Central Bank
Mobilization of funds
Self-sufficiency of Commercial
Banks
Savings & investment
Defects of Indian Money
market:
Unorganized money market
Disparity in interest rates
Seasonal diversity of the
market
Lack of a proper bill market
Lack of a well organized
Capital market:
An organized mechanism for
effective & efficient transfer of financial
resources from the investing parties
engaged in industry or commerce in the
business either be it public or private
sectors of the economy.

Functions:
Mobilization of funds
Securing foreign capital
Promote balanced regional development
Components of Capital
market
Primary market

Secondary market
Primary market :
New issue market
New shares & bonds that have never
been issued are offered
Facilitates transfer of funds from
willing investors to the entrepreneurs
to set - up new enterprises
The sentiment of the stock market
influences the primary market
Instruments:

Equity shares

Preference shares

Deferred shares

Debentures
STOCK MARKET
“Stock exchanges are privately
organized markets which are used to
facilitate trading insecurities”
- Husband &
Dockeray
Functions:
Ensure liquidity of capital
Market for securities
Mobilize surplus savings
Raising new capital
Listing securities
Procedure for dealing at stock
exchanges

Selection of Broker

Placing an order

Making a contract

Contact Note

Settlement note
PRE - REQUISITES TO BUY A SHARE:
Register with a stock
broker.
A PAN card holder.
Open a demat
account.
REGISTERING AS A
CLIENT:
Filing a client
registration form.
Sign the member
constituent
agreement.
STAGES OF
TRANSACTION:
Place an order
Execution
Reporting the deal
Settlement of
DOCUMEN
TS:
Order confirmation
slip
Trade confirmation
slip
Control note slip
BASIS TO BUY SHARES OF A
PARTICULAR FIRM
Product manufactured.
Demand.
Amount of dividend.
Ranking of the
company.
Change in prices.
Reputation of the
TYPES OF SPECULATORS :

Bull

Bear

Stag

Lame Duck
Factors influencing prices
on stock exchange:

Financial position of the firm

Demand & Supply position
Lending rates
Trade cycle
Speculation activities
Government control
Stock Exchanges in
India:
Native Stock& Share Brokers
Association
24 recognised Stock Exchanges
in India
Bombay Stock Exchange
National Stock Exchange
Thank you