INTRODUCTION INDIAN FINANCIAL SYSTEM

Indian financial system consists of financial market,

financial institutions, financial instruments or products and financial instruments. The economic development of a nation is depending on the progress of the economic units, broadly classified into corporate sector, government and household sector. Some of the sector may be in surplus and some of them may in deficit. A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit.

An Introduction to Financial Market

In economics, a financial market is a mechanism that allows people to easily buy & sell (trade) financial securities ( such as stocks & bonds ), commodities ( such as precious metals or agricultural goods ).

FINANCIAL INSTITUTION

FINANCIAL MARKET

FINANCIAL SYSTEM

FINANCIIAL SERVICES

FINANCIAL INSTRUMENTS

COMPONENTS OF FINANCIAL SYSTEM

1. FINANCIAL INSTITUTION :Financial institutions are the intermediaries who facilitates smooth functioning of the financial system by making investors and borrowers meet. They mobilize savings of the surplus units and allocate them in productive activities promising a better rate of return.

2. FINANCIAL INSTRUMENTS:financial instruments represent a claim against the future income and wealth of others. It will be a claim against a person or an institutions, for the payment of the some of the money at a specified future date. for e.g:- shares, debenture, bonds, fixed deposits

CONTI..
3. FINANCIAL SERVICES:Financial services is any kind of services of a financial nature offered by a financial service provider. All Banking & Insurance related services are include

4.FINANCIAL MARKET:Finance is a prerequisite for modern business and financial institutions play a vital role in economic system. It's through financial markets the financial system of an economy works. The main functions of financial markets are:
1. to facilitate creation and allocation of credit and liquidity; 2. to serve as intermediaries for mobilization of savings; 3. to assist process of balanced economic growth; 4. to provide financial convenience

FINANCIAL MARKET
A Financial market deals in financial assets & instruments such as currency, deposits, cheque & bill etc. financial transactionsthrough the creation,sale and transfer of financial securities, Part of the economy, Companies and governments need to raise capital,Allow investors toinvest in financial securities and earn a reasonable rate of return.

FINANCIAL MARKET

CAPITAL MARKET

MONEY MARKET

PRIMARY MARKET

SECONDARY MARKET

CALL MONEY MARKRT

GOVT. SECURITIES MARKET

I.Capital Market
Capital Market is a market for financial investments that are direct or indirect claims to capital. It comprises of the institutions and mechanisms through which funds are pooled and made available to business, government and individuals

A. PRIMARY MARKET
Primary market is a market in which companies issues shares or

debentures to the investors directly.

This is the market for new long term equity capital. The primary

market is the market where the securities are sold for the first time. Therefore it is also called the new issue market
If public limited company issues shares for the 1st time, it is

known as INITIUAL PUBLIC OFFERING (IPO)

B.SECONDARY MARKET

Secondary market is a market in which old shares or shares already issued by the companes are traded. It is stock market.
SECURITIES EXCHANGE BOARD OF INDIA Primary market will not function withoutwell-organized and efficient secondarymarket, Must have depth and width characteristics:

It is also orgnised market which is regulated by the govt. through

Liquid

Low transaction costs

Incorporates all available information

Well regulated

II.MONEY MARKET

The money market is a market for short-term financial assets that are close substitutes of money.
is liquid and can be turned over quickly at low cost and provides an avenue for equilibrating the short-term surplus funds of lenders and the requirements of borrowers

The most important feature of a money market instrument is that it

money markets involves Treasury bills, commercial paper, bankers'

acceptances, certificates of deposit, federal funds, and short-lived mortgage- and asset-backed securities

It provides liquidity funding for the global financial system

It is regulated by RBI

A.CALL MONEY MARKET

.The call/notice money market forms an important segment of the

Indian Money Market. Under call money market, funds are transacted on overnight basis and under notice money market, funds are transacted for the period be 2 days and 14 days The call money is the money lent for one day
Deals with overnight borrowing and lending Provides funds that can be used to conduct transactions between

banks, or with other money market dealers

The call money loan essentially works in the same manner as a day to day loan.

B.GOVT.SECURITIES MARKET
The Government securities market consists of securities issued by

the State government and the Central government.

Government securities include Central Government securities,

Treasury bills and State Development Loans.

They are issued in order to finance the fiscal deficit and managing

the temporary cash mismatches of the Government. All entities registered in India like banks, financial institutions, Primary Dealers, firms, companies, corporate bodies, partnership firms, institutions, mutual funds, Foreign Institutional Investors, State Governments, Provident Funds, trusts, research organisations, Nepal Rashtra bank and even individuals are eligible to purchase Government Securities.
They are generally by banks and institutions with the Reserve Bank

of India in Subsidiary General Ledger accounts

Types of Financial Market

Commodity Market

Capital market

Money Market

Financial Market
Derivatives Market Insurance Market
Foreign Exchange Market

TYPES OF FINANCIAL MARKET

CAPITAL MARKETS - Which provide financing through the issuance of shares or common stock ,and enable subsequent trading
COMMODITY MARKETS which facilitate the trading of commodities. MONEY MARKETS which provide short term debt financing and investment. DERIVATIVE MARKETS which provide instruments for the management of financial risk INSURANCE MARKETS which facilitate redistribution of various risks. FOREIGN EXCHANGE MARKETS - which facilitate the trading of foreign exchange.

Conclusion
Investors looks at superior returns and measured risk therefore he has to select a dynamically balanced asset allocation mix consisting of the different investment options available in the Financial Market. Thus Financial market Acts as a backbone of financial structure of any country. Acts as an interface between prospective buyers and sellers. Improves overall business liquidity. Helps in raising capital and improving international trade..