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Market: gathering of people for the purchase and sale of goods or services . usually in exchange for
money or goods.
The market may be in one specific place , might not exit physically at all.
Financial market: market buyer and seller participate in trade of assets such as equities ,bonds
,currencies and derivates .this market having transparent pricing, basic regulations on trading, costs and
fees and determine the prices of securities that trade.
Overview to Financial Markets
In the world of finance ,human greed ,system failures or any other risk will face . every risk avoid
possibly and handsome opportunity to build your wealth. To under stand about the risk is proportional
to returns and you can only minimize the risk but cant eliminate it. Balancing risk with returns in line
with your individual circumstances and mobilizing finance.
Indian Financial System
Financial market provide channels for allocation of savings to investment. These provide varies
investment options to savers as well as investors are can raise funds and based on acts of savings and
investments of their individual ability
Financial market have 2 major components :
1.Capital market Primary and secondary
2.Derivative(secondary ,second born) market Equity ,commodity and Currency.
Financial market in 2 markets
1.Money market
a .organized money market shorter lending /borrowing
b. un organized money market money lenders/ indigenous bankers
2.Capital market
a. Primary b. secondary
Money market:
High liquidity(facing financial problems)and very short maturities are traded .barrowing and landing in
the short term, from several days to just under a year . money market company rising money by
selling commercial papers into the market , money in the short term. High liquid nature of the securities
and short maturities.
Capital Market
The part of a financial system concerned with rising capital by dealing in shares , bonds, and other longterm investments.
Money market caters to the short term needs only. Capital market needs long term needs. The term
capital market refers to the institutional arrangements for facilitating the barrowing and lending for long
term funds. The participants on the demand and supply said of market are financial institutions ,mutual
funds, agents , brokers ,dealers, borrowers and lenders. An efficient capital market is a pre-requisite for
economic development.
Functions of capital market
It is indicator of the inherent health of the economy and it offers a number of investments a
venues to investors.
It is the largest source of funds with long ,canalizing the savings pool in the economy towards
investment.
Primary market : the new issue market where new securities i.e., share or bonds that have never been
previously issued or offered. Both the new and existing companies rise capital on the new issue market.
This is transfer of fund from the willing investment entrepreneur or going in for expansion.
b. brokers
c. Tarawaniwalas
Jobbers: securities merchant dealing in shares , and debentures as independent operation. they buy
and sell securities on their own behalf and try to earn through price changes. Jobbers cannot deal on
behalf of public and are bared from talking commission.
Broker : he is commission agent who act as intermediaries between buyers and seller of securities .he
do not purchase or sell securities , making deal help of buyer and seller.
Tarawaniwalas: BSE have unofficially divided themselves into two categories i.e brokers and
Tarawaniwalas later act as both jobbers and brokers. Tarawaniwalas his own behalf like a jobber may
also act as a broker of the public.
Speculation in stock exchange:
1.Bull 2. Bear 3. Stag 4.Lame Duck
1.Bull: bull ()or tejiwala except price to rise in future ,purchase the securities now and sell them in the
future at a higher price .
2.Bear: bear () or mandiwala except price to fall in future and sells securities at present with a view to
purchase them at lower price in future.
3.stag : speculation , he applies for the shares in new companies and expects to sell them at a premium
if he gets an allotment .he sell the shares before being called to pay the allotment money.
4.lame duck: bear finds it difficult to fulfill his commitment ,he is called struggling like a
lame(weak) duck.
Factors influencing at prices in stock exchange:
Financial position of the company, demand and supply position of shares, role of financial
institutions , leading rates of banks , trade cycle , speculation activities of operators ,
government control .
publication of
Derivatives market
Derivative products ,most notably forwards , futures and options, whose value is derivative from the
value of one or more basic variables (underling assets , index ,or reference rater ) in contractual manner
the underlying assets can be equity , forex , commodity or any other asset.
Derivate contracts have several variants . the most common variants are forwards ,futures, options and
swap.
Forward : customized contract between two entities , where settlement take place on a specific date in
future at todays pre-agreed price.