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1. ABSTRACT
Title: Financial Market & its Instrument Problem or issue: Identification and definition
Problem Identification: In the present environment where the scope for the investment
is very wide and various fields are available for the investment to an individual so Find out the various instrument & tools available in the financial market.
Definitions: Financial Market: A financial market is a mechanism that allows people to easily buy and
sell (trade) financial securities (such as stocks and bonds),commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient-market hypothesis. in finance, financial markets facilitate The raising of capital (in the capital markets) The transfer of risk (in the derivatives markets) International trade (in the currency markets)
Types of Market:
Capital markets Commodity markets Money markets Derivatives markets Insurance markets
Instruments: In terms of finance, the financial instruments are those through which we
can invest the money in the market to increase the wealth.
Types of Instruments: There are various instruments available of financial market but its
depend on nature of the market. Following are the some example of the instruments. Shares Bonds Debenture T-Bill Fixed deposit Foreign exchange Interbank participation certificate Commercial paper Certificate Deposit, etc.
Impact/ Relevance of issue: Financial Market & its Instrument this topic is relevant to
the present environment because in this global recession period many investors has lost there money, so improve the market analysis skill to earn the money in this flop market it is compulsory to have the knowledge of the available various instrument.
2. RESEARCH METHODOLOGY
2.1 Title of the study
Financial Market & its Tools (instruments)
Time allocation
Preparation & finalization of blue print and abstract Collection of secondary data Finalization & compilation of secondary data Preliminary preparation of Final Report Finalization of the Report : : : : : 6 days 10days 6 days 5 days 2 days
under various markets of financial market. It covered the following sector. The raising of capital (in the capital markets); The transfer of risk (in the derivatives markets); International trade (in the currency markets) It also covered the
Money market Stock market Currency market Derivative market. Capital market Foreign
1. Secondary data: this project study was totally based on the secondary data
collected by the various sources like books, websites, magazines etc. but by the help of data we can analyze the topic only theoretically, not practically . 2. By this method we can only get the searched information but we cant get the customer feedback or latest trend. 3. We learnt only the basic of financial market but we didnt learn the new trends, tools, and the investors behavior about the financial market after the great crash in the financial market.
3. CORE STUDY
3.1 FINANCIAL MARKET: AN INTRODUCTION
3.1.1 Introduction
In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient-market hypothesis. Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity. Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy. In finance, financial markets facilitate: The raising of capital (in the capital markets); The transfer of risk (in the derivatives markets); International trade (in the currency markets)
And are used to match those who want capital to those who have it. Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends.
3.1.2 Definition
In economics, typically, the term market means the aggregate of possible buyers and sellers of a thing and the transactions between them. The term "market" is sometimes used for what are more strictly exchanges, organizations that facilitate the trade in financial securities, e.g., a stock exchange or commodity exchange. This may be a physical location (like the NYSE) or an electronic system (like NASDAQ). Much trading of stocks takes place on an exchange; still, corporate actions (merger, spinoff) are outside an exchange, while any two companies or people, for whatever reason, may agree to sell stock from the one to the other without using an exchange. Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on a stock exchange, and people are building electronic systems for these as well, similar to stock exchanges. Financial markets can be domestic or they can be international.
Broadly speaking, savings bank account, money market/liquid funds and fixed deposits with banks may be considered as short -term financial investment options: i. Savings Bank Account is often the first banking product people use, which offers low interest (4%-5% p.a.), making them only marginally better than fixed deposits. ii. Money Market or Liquid Funds are a specialized form of mutual funds that invest in extremely short -term fixed income instruments and thereby provide easy liquidity. Unlike most mutual funds, money market funds are primarily oriented towards protecting your capital and then, aim to maximise returns. Money market funds usually better returns than savings accounts, but lower than bank fixed deposits.
iii. Fixed Deposits with Banks are also referred to as term deposits and minimum
investment period for bank FDs is 30 days. Fixed Deposits with banks are for investors with low risk appetite, and may be considered for 6-12 months investment period as normally interest on less than 6 months bank FDs is likely to be lower than money market fund returns.
i. Post Office Savings: Post Office Monthly Income Scheme is a low risk saving
instrument, which can be availed through any post office. It provides an interest rate of 8% per annum, which is paid monthly. Minimum amount, which can be invested, is Rs. 1,000/and additional investment in multiples of 1,000/-. Maximum amount is Rs. 3,00,000/- (if Single) or Rs. 6,00,000/- (if held Jointly) during a year. It has a maturity period of 6 years. Premature withdrawal is permitted if deposit is more than one year old. A deduction of 5% is levied from the principal amount if withdrawn prematurely. ii. Public Provident Fund: A long term savings instrument with a maturity of 15 years and interest payable at 8% per annum compounded annually. A PPF account can be opened through a nationalized bank at anytime during the year and is open all through the year for depositing money. Tax benefits can be availed for the amount invested and interest accrued is tax-free. A withdrawal is permissible every year from the seventh financial year of the date of opening of the account and the amount of withdrawal will be limited to 50% of the balance at credit at the end of the 4th year immediately preceding the year in which the amount is withdrawn or at the end of the preceding year whichever is lower the amount of loan if any. iii. Company Fixed Deposits: These are short -term (six months) to medium- term (three to five years) borrowings by companies at a fixed rate of interest which is payable monthly, quarterly, semi-annually or annually. They can also be cumulative fixed deposits where the
entire principal along with the interest is paid at the end of the loan period. The rate of interest varies between 6-9% per annum for company FDs. The interest received is after deduction of taxes.
iv. Bonds: It is a fixed income (debt) instrument issued for a period of more then one year with the purpose of raising capital. The central or state government, corporations and similar institutions sell bonds. A bond is generally a promise to repay the principal along with a fixed rate of interest on a specified date, called the Maturity Date .
v. Mutual Funds: These are funds operated by an investment company which raises money from the public and invests in a group of assets (shares, debentures etc.), in accordance with a stated set of objectives. It is a substitute for those who are unable to invest directly in equities or debt because of resource, time or knowledge constraints. Benefits include professional money management, buying min small amounts and diversification. Mutual fund units are issued and redeemed by the Fund Management Company based on the fund's net asset value (NAV), which is determined at the end of each trading session.
The money market is a mechanism that deals with the lending and borrowing of short term funds (less than one year). A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded.
its trading volumes, the extreme liquidity of the market, its geographical dispersion, its long trading hours: 24 hours a day except on weekends (from 22:00 UTC on Sunday until 22:00 UTC Friday), the variety of factors that affect exchange rates. the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes) the use of leverage
stock market typically refers to a financial market that handles the buying and selling of company stocks, derivatives and other securities. Stock markets trade company securities that are listed in the stock exchange Investors and security issuers both participate in stock markets. Different sized entities participate in stock market activities, ranging from small investors to the governments, corporations, large hedge fund traders, and banks.
Corporations, governments, and companies issue securities on the stock market to collect funds. The stock market acts as a platform for companies to raise money for their business and investors to invest in securities. When both the buyers and sellers in stock markets are institutions, rather than individuals, the stock market principle is more institutionalized.
The emergence of this institutional investor concept has brought some improvements to stock market operations around the world. Stock markets can exist in both real and virtual arenas. Stock exchanges with physical locations carry out stock trading on trading floor.
This method of conducting trading, where the traders enter verbal bids, is called open outcry. In virtual stock exchanges, trading is done online by traders who are connected to each other by a network of computers. In addition to acting as a market place for stock trading, stock markets also act as the clearinghouse for stock transactions.
This means that stock exchanges collect and deliver the securities and also guarantee payment to the seller. This ensures both the buyers and sellers of securities that their counterparts will not default on the transaction. Stock markets in various countries around the world have performed well due to financial sector reforms and integration. International flow of funds has raised the expertise of stock exchanges in the respective countries. There are a lot of jargons, terms related to market that are used as Stock Market Terms The most important terms are given below: Stock: A stock is a type of security that signifies ownership of a company and it is a representation of a claim on the part of the company's earnings and assets.
Stock Market: A stock market is a place where shares are issued and traded through stock exchanges or over-the-counter markets. The stock market can be categorized into two parts, the Primary Market and the Secondary Market. Stock Exchange: A stock exchange is an organization, which facilitates stockbrokers and traders for trading company stocks and other securities. Over-the-counter Markets:It is a decentralized market where securities not listed with an exchange are traded over the telephone, facsimile, or computer network. This type of trading is not done on a physical trading floor and there is no central exchange or meeting place for this. IPO: Initial Public Offerings or the first sale of stock of a company to the public. Sensex: The word Sensex is derived from Sensitive Index. The Sensex is an index that describes the direction of the companies that are traded on the Bombay Stock Exchange(BSE). NIFTY: NIFTY is the counterpart of Sensex on the National Stock Exchange (NSE).
Bull: The bull is a person who has an optimistic thinking and purchases shares in the belief that the market price of that particular company's shares will rise. They try to profit from the rise in share prices. Bull Market: The Bull Market is a financial market, which consists of a specific group of securities in which prices are going up or are expected to go up. A Bull Market is accompanied with growing investor confidence and it inspires the investors to buy stocks in anticipation of more capital gains. Bear: The counterpart of Bull is the bear. If a person has a pessimistic thinking that stock prices are bound to go down, he is termed as a bear. Bears try to profit from a downfall in share prices. Bear Market: It is a condition where the prices of securities are going down or are expected to go down. A Bear Market is always associated with far-reaching pessimism. Investors panicked by anticipation of further losses are provoked to sell stocks. .
Shares/Securities
The definition of Securities as per the Securities Contracts Regulation Act (SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or other marketable securities of similar nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the Central Government.
offer to the public to subscribe to the share capital of a company. Once this is done, the company allots shares to the applicants as per the prescribed rules and regulations laid down by SEBI. Various way of issuing new shares Initial Public Offering (IPO ) is when an unlisted company makes either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuers securities. A follow on public offering (Further Issue) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. Rights Issue is when a listed company which proposes to issue fresh securities to its existing shareholders as on a record date. The rights are normally offered in a particular ratio to the number of securities held prior to the issue. This route is best suited for companies who would like to raise capital without diluting stake of its existing shareholders. A Preferential issue is an issue of shares or of convertible securities by listed companies to a select group of persons under Section 81 of the Companie s Act, 1956 which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity capital. The issuer company has to comply with the Companies Act and the requirements contained in the Chapter pertaining to preferential allotment in SEBI guidelines which interalia include pricing, disclosures in notice etc.
The primary market, also called the new issue market, is the market for issuing new securities. Many companies, especially small and medium scale, enter the primary market to raise money from the public to expand their businesses. They sell their securities to the public through an initial public offering. The securities can be directly bought from the shareholders, which is not the case for the secondary market.
Secondary Market
All the securities are first created in the primary market and then, they enter into the secondary market. In the New York Stock Exchange, all the stocks belong to the seacondary. Secondary Market is the market where, unlike the primary market, an investor can buy a security directly from another investor in lieu of the issuer. It is also referred as "after market". The securities initially are issued in the primary market, then they enter into the secondary.
In other words, secondary market is a place where any type of used goods are available. In the secondary market shares are maneuvered from one investor to other, that is, one investor buys an asset from another investor instead of an issuing corporation. So, the secondary market should be liquid.
A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract. Types of debt instruments include notes, bonds, certificates, mortgages, leases or other agreements between a lender and a borrower. Debt instruments are a way for markets and participants to easily transfer the ownership of debt obligations from one party to another. Debt obligation transferability increases liquidity and gives creditors a means of trading debt obligations on the market. Without debt instruments acting as a means to facilitate trading, debt is an obligation from one party to another. When a debt instrument is used as a medium to facilitate debt trading, debt obligations can be moved from one party to another quickly and efficiently.
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Investing in Bonds
Many people invest in bonds with an objective of earning certain amount of interest on their deposits and/or to save tax. Bonds are considered to be a less risky investment option and are generally preferred by risk-averse investors. Though investors should not get overtly confident of investing in bonds as bond prices are also subject to market risk. For example, bond prices have a negative correlation with interest rates due to which any increase in interest rates can lead to a fall in bond prices and vice-versa. Thus, it is recommended that investors should consider the risk-return factor (i.e. the expected return for the given level of risk) before investing.
INTRODUCTION India, a commodity based economy where two-third of the one billion population depends on agricultural commodities, surprisingly has an under developed commodity market.
Unlike the physical market, futures markets trades in commodity are largely used as risk management (hedging) mechanism on either physical commodity itself or open positions in commodity stock. For instance, a jeweler can hedge his inventory against perceived shortterm downturn in gold prices by going short in the future markets. The article aims at know how of the commodities market and how the commodities traded on the exchange. The idea is to understand the importance of commodity derivatives and learn about the market from Indian point of view. In fact it was one of the most vibrant markets till early 70s. Its development and growth was shunted due to numerous restrictions earlier. Now, with most of these restrictions being removed, there is tremendous potential for growth of this market in the country.
COMMODITY
A commodity may be defined as an article, a product or material that is bought and sold. It can be classified as every kind of movable property, except Actionable Claims, Money & Securities. Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. Retail investors, who claim to understand the equity markets, may find commodities an unfathomable market. But commodities are easy to understand as far as fundamentals of demand and supply are concerned. Retail investors should understand the risks and advantages of trading in commodities futures before taking a leap. Historically, pricing in commodities futures has been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option. In fact, the size of the commodities markets in India is also quite significant. Of the country's GDP of Rs 13, 20,730 crore (Rs 13,207.3 billion), commodities related (and dependent) industries constitute about 58 per cent.
COMMODITY MARKET
Commodity market is an important constituent of the financial markets of any country. It is the market where a wide range of products, viz., precious metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market. This would help investors hedge their commodity risk, take speculative positions in commodities and exploit arbitrage opportunities in the market.
Other Metals: Nickel, Aluminum, Copper etc Agro-Based Commodities: Wheat, Corn, Cotton, Oils, Oilseeds. Soft Commodities: Coffee, Cocoa, Sugar etc Live-Stock: Live Cattle, Pork Bellies etc Energy: Crude Oil, Natural Gas, Gasoline etc
Introduction A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities.[1] The mutual fund will have a fund manager that trades the pooled money on a regular basis. As of early 2008, the worldwide value of all mutual funds totals more than $26 trillion. Since 1940, there have been three basic types of investment companies in the United States: open-end funds, also known in the US as mutual funds; unit investment trusts (UITs); and closed-end funds. Similar funds also operate in Canada. However, in the rest of the world, mutual fund is used as a generic term for various types of collective investment vehicles, such as unit trusts, open-ended investment companies (OEICs), unitized insurance funds, and undertakings for collective investments in transferable securities (UCITS).
What are the benefits of investing in Mutual Funds?
There are several benefits from investing in a Mutual Fund: Small investments
Mutual funds are classified in the following manner: (a) On the basis of Objective Equity Funds/ Growth Funds .Diversified funds Sector funds. Index funds Tax Saving Funds Debt/Income Funds Liquid Funds/Money Market Funds Gilt Funds Balanced Funds
.
b) On the basis of Flexibility Open-ended Funds Close-ended Funds What are the different investment plans that Mutual Funds offer? The term investment plans generally refers to the services that the funds provide to investors offering different ways to invest or reinvest. The different investment plans are an important consideration in the investment decision, because they determine the flexibility available to the investor. Some of the investment pla ns offered by mutual funds in India are:
Growth Plan and Dividend Plan A growth plan is a plan under a scheme wherein the returns from investments are reinvested and very few income distributions, if any, are made. The investor thus only realizes capital appreciation on the investment. Under the dividend plan, income is distributed from time to time. This plan is ideal to those investors requiring regular income.
Dividend Reinvestment Plan Dividend plans of schemes carry an additional option for reinvestment of income distribution. This is referred to as the dividend reinvestment plan. Under this plan, dividends declared by a fund are reinvested in the scheme on behalf of the investor, thus increasing the number of units held by the investors. Are there any risks involved in investing in Mutual Funds? Mutual Funds do not provide assured returns. Their returns are linked to theirv performance. They invest in shares, debentures, bonds etc. All these investments involve an element of risk. The unit value may vary depending upon the performance of the company and if a company defaults in payment of interest/principal on their debentures/bonds the performance of the fund may get affected. Besides incase there is a sudden downturn in an industry or the government comes up with new a re gulation which affects a particular industry or company the fund can again be adversely affected. All these factors influence the performance of Mutual Funds. Some of the Risk to which Mutual Funds are exposed to is given below: Market risk If the overall stock or bond markets fall on account of overall economic factors, the value of stock or bond holdings in the fund's portfolio can drop, thereby impacting the fund performance. Non-market risk Bad news about an individual company can pull down its stock price, which can negatively affect fund holdings. This risk can be reduced by having a diversified portfolio that consists of a wide variety of stocks drawn from different industries. Interest rate risk Bond prices and interest rates move in opposite directions. When interest rates rise, bond prices fall and this decline in underlying securities affects the fund negatively. Credit risk Bonds are debt obligations. So when the funds invest in corporate bonds, they run the risk of the corporate defaulting on their interest and principal payment obligations and
when that risk crystallizes, it leads to a fall in the value of the bond causing the NAV of the fund to take a beating.
DERIVATIVES
Derivative is a product whose value is derived from the value of one or more basic variables, called bases (underlying asset, index, or reference rate), in a contractual manner. The underlying asset can be equity, forex, commodity or any other asset. For example, wheat farmers may wish to sell their harvest at a future date to eliminate the risk of a change in prices by that date. Such a transaction is an example of a derivative The price of this derivative is driven by the spot price of wheat which is the "underling". In the Indian context the Securities Contracts (Regulation) Act, 1956 (SC(R)A) defines "derivative" to include1. A security derived from a debt instrument, share, loan whether secured or unsecured, risk instrument or contract for differences or any other form of security. 2. A contract which derives its value from the prices, or index of prices, of underlying securities. Derivatives are securities under the SC(R) A and hence the trading of derivatives is governed by the regulatory framework under the SC(R)A. Derivative products
initially emerged as hedging devices against fluctuations in commodity prices, and commodity-linked derivatives remained the sole form of such products for almost three hundred years. Financial derivatives came into spotlight in the post-1970 period due to growing instability in the financial markets. However, since their emergence, these products
have become very popular and by 1990s, they accounted for about two thirds of total transactions in derivative products. In recent years, the market for financial derivatives has grown tremendously in terms of variety of instruments available, their complexity and also turnover. In the class of equity derivatives the world over, futures and options on stock indices have gained more popularity than on individual stocks, especially among institutional investors, who are major users of indexl inked derivatives. Even small investors find these useful due to high correlation of the popular indexes with various portfolios and ease of use.
3.5.1 Introduction:
The international financial market where short term trading take place is called the money market. The money market is meant to make available the liquid funding to the financial system of the world and this liquid funding is provided for a short period. The trading of the money market consists of the Treasury Bills, Commercial Paper etc . As a financial market, money market is very much secured in comparison to the other markets. The main participants or the borrowers and lenders of this market are the financial organizations, huge corporations and the governments of various countries. The participants of the market take part in the proceedings to make sure that their money resources are in a good condition. It may have many similarity .with the bond market but the primary difference is between the participants of both the market. Again the money market is, as described, a short term market but the bond market is usually a long term
market. The money market deals in the 'paper', which is an financial instrument for a short span of time. The term generally consists of 12-13 months. When national governments or the giant corporations borrow money, it is a money market. The proceedings of the money market and the stock market is very close to each other but both are not the same thing. The main difference is the huge funds that are dealt by the money market. Again, the stock market is meant for the individuals but the money
market has some different trends and the individual investor has very little to do in this market. Although the returns of this market is comparatively low, the security factor of the market prompts the investor to put his or her money in this market. According to the trend, any individual investor cannot enter the market directly simply because of the giant size of the participants. But through the money market mutual funds, an individual can take part in the proceedings. The treasury bills are another portion provided to the individual.
marketable, affordable and risk free. The security attached to the treasury bills comes at the cost of very low returns. Certificate of Deposit: The certificates of deposit are basically time deposits that are issued by the commercial banks with maturity periods ranging from 3 months to five years. The return on the certificate of deposit is higher than the Treasury Bills because it assumes a higher level of risk. Commercial Paper: Commercial Paper is short-term loan that is issued by a corporation use for financing accounts receivable and inventories. Commercial Papers have higher denominations as compared to the Treasury Bills and the Certificate of Deposit. The maturity period of Commercial Papers are a maximum of 9 months. They are very safe since the financial situation of the corporation can be anticipated over a few months. Bankers Acceptance: It is a short-term credit investment. It is guaranteed by a bank to make payments. The Banker's Acceptance is traded in the Secondary market. The banker's acceptance is mostly used to finance exports, imports and other transactions in goods. The banker's acceptance need not be held till the maturity date but the holder has the option to sell it off in the secondary market whenever he finds it suitable. Euro Dollars: The Eurodollars are basically dollar- denominated deposits that are held in banks outside the United States. Since the Eurodollar market is free from any stringent regulations, the banks can operate at narrower margins as compared to the banks in U.S. The Eurodollars are traded at very high denominations and mature before six months. The Eurodollar market is within the reach of large institutions only and individual investors can access it only through money market funds. Repos: The Repo or the repurchase agreement is used by the government security holder when he sells the security to a lender and promises to repurchase from him overnight. Hence the Repos have terms raging from 1 night to 30 days. They are very safe due government backing.
market infrastructure has been particularly smooth in India due to the countrys world class IT industry. This has pushed up the operational efficiency of the Indian stock market to global standards and as a result the country has been able to capitalize on its high growth and attract foreign capital like never before. The regulating authority for capital markets in India is the SEBI (Securities and Exchange Board of India). SEBI came into prominence in the 1990s after the capital markets experienced some turbulence. It had to take drastic measures to plug many loopholes that were exploited by certain market forces to advance their vested interests. After this initial phase of struggle SEBI has grown in strength as the regulator of Indias capital markets and as one of the countrys most important institutions.
As all the Financial Markets in India together form the Indian Financial Markets, all the Financial Markets of Asia together form the Asian Financial Markets; likewise all the Financial Markets of all the countries of the world together form the Global Financial Markets. Financial Markets can be domestic or international. The Global Financial Markets work as a significant instrument for improved liquidity. Financial Markets can be categorized into six types: Capital Markets: Stock markets and Bond markets
Commodity Markets Money Markets Derivatives Markets: Futures Markets Insurance Markets Foreign Exchange Markets The Financial Markets play a major role in the Global Economy because it helps businesses to raise capital (in capital markets), they facilitate transferring of risk (in derivative markets), and they help international trade (in currency markets) to prosper. The International Stock Markets form a major part of the Global Financial Markets .The Amsterdam Stock Exchange (or Amsterdam Beurs) is the oldest stock exchange, which started operating in continuous trade in the earlier part of the 17th Century. Some of the Important Stock Exchanges of the world are: The New York Stock Exchange (merged with Euronext): The New York Stock Exchange (NYSE) is a stock exchange based in New York City, USA that was incorporated in 1817. In terms of dollar volume, it is the largest stock exchange in the world, and in terms of the number of companies listed it is the second largest stock exchange in the world. The NYSE is also known as the Big Board. The indexes used in the NYSE are the NYSE Composite Index and the Dow Jones industrial Average Index. The NYSE functions under NYSE Euronext, the formation of which was the result of NYSE's merger with Archipelago Holdings and Euronext. Tokyo Stock Exchange: The Tokyo Stock Exchange (TSE), incorporated in 1949,is located in Tokyo, Japan. In terms of monetary volume, The Tokyo Stock Exchange is the second largest stock exchange in the world, only next to New York Stock Exchange. The indexes used in the TSE are Nikkei 225, Topix, and J30. NASDAQ: The National Association of Securities Dealers Automated Quotations, or NASDAQ, is an electronic stock market based in New York City, USA that was incorporated in 1971. The NASDAQ Stock Market, Inc. is the owner and regulator of NASDAQ. The main index used in NASDAQ is the NASDAQ Composite. London Stock Exchange: Established in 1801, the London Stock Exchange (LSE) is one of the oldest and largest stock exchanges in the world. In terms of market capitalization, the London Stock Exchange was ranked 4th among all the other important
stock exchanges in the world in March 2007. The London Stock Exchange is located in Paternoster Square near St. Paul's Cathedral, London. The stock market index of London Stock Exchange is the Footsie (FTSE).
4. SWOT analysis
The SWOT analysis of financial market is as below : Strength
The base of the economy of any country . Able to provide strong financial support to the country. Barometer of the countrys growth. To provide a safe & healthy market to the investors for investment.
Weakness
Most of the instruments are based on speculative activities. High rate risk
Opportunity
To make the investors more strong after the global financial crisis People will take more interest to invest in financial securities due to healthy rate of return and safety & security.
Threats
High rate risk If investor are not rational in that case he may loss his entire invested amount
Weakness: Illiquidity outside the scrips in futures and options may lead to large scale
price manipulation in illiquid scrips and lower price realisations in such counters. Poor Indian Accounting disclosures may lead to large scale manipulation of figures by publicly traded companies.
Opportunities: A large domestic market that is still into traditional fixed income and other
government savings is all buy bound to enter the market sooner if not later.
5. Conclusion
The financial markets serve a vital purpose in the growth and development of a company that wants to expand. Such companies with expansion plans and new projects are in need of funding and the financial market serves as the best platform from which a company can determine the feasibility of such possibilities. In finance, financial markets facilitate : The raising of capital (in the capital markets); The transfer of risk (in the derivatives markets); International trade (in the currency markets) and are used to match those who want capital to those who have it. Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends. The capital market is the market for securities, where companies and governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. The capital market includes the stock market and the bond market. Financial regulators, such as the U.S. Securities and Exchange Commission (SEC), oversee the capital markets in their designated countries to ensure that investors are protected against fraud.The
capital market provides both overnight and long term funds and uses financial instruments with long maturity periods. The following financial instruments are traded in this market: Foreign exchange instruments Equity instruments Debt instruments Commodity instruments Mutual funds Derivative instruments
As per RBI definitions money market is A market for short terms financial assets that are close substitute for money, facilitates the exchange of money in primary and secondary market. The money market is a mechanism that deals with the lending and borrowing of short term funds (less than one year). A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. Certificate of Deposit Bankers' Acceptance Federal Agency Short-Term Securities Commercial Paper Repurchase Agreement Treasury Bills Money Market Mutual Funds Municipal Notes Euro Dollar Deposit Repos
The financial markets have indicators in place that reflect the performance of companies whose securities are traded in those markets. Financial markets are a vital part of an economy making it possible for industry, trade and commerce to flourish without any obstacle in terms of resources. Today most economies around the world are judged by the performance of their financial markets. The financial markets serve a vital purpose in the growth and development of a company that wants to expand. Such companies with expansion plans and new projects are in need of funding and the financial market serves as the best platform from which a company can determine the feasibility of such possibilities. Everyone should know the concept of financial market because its a tool which provides the safe place of the money with certain return.
6. Bibliography
Text Books
Financial Management (Text, Problem and Cases) Author : M Y Khan & P K Jain Publication : Tata McGraw-Hill Publishing Company Limited Understanding of Financial Market(e-book) Author : Braamvan den Berg Website : www.eagletraders.com Financial Institution and Market Author : Meir Kohn Publication : Oxford University Press
Security Analysis Publication : ICFAI University Indian Financial Market Publication : ICFAI University Page No. : according to chapter
Websites
www.wikipedia.com Link: http://www.wikipedia.com/financial market/ www.nseindia.com Link: http://www.nseindia.com/content/ncfm/curriculam.htm www.economywatch.com Link: http://www.economywatch.com/market/moneymarketinstruments.htm www.investopedia.com Link: http://www.investopedia.com/university/moneymarket/ www.investopedia.com Link: http://www.eagletraders.com/books/afm/htm