Basic of capital market pdf

The parties borrowers receiving the capital from the bank pay an interest on such funds to the banks. A portion of this interest is then paid to the individuals who have deposited their funds lenders with the bank.

Mutual Funds : The mutual fund manager connects the individual shareholder with the company by purchasing stocks of a company that he expects will outperform the market. In this way, the mutual fund manager provides the individual shareholder with assets i.

Stock Brokers : Stock Brokers bring together buyers and sellers of securities thereby bringing in liquidity in the securities market. Insurance Companies : Insurance companies collect premium from the individuals and provide them policy benefits to them. There are several other financial intermediaries apart from the ones discussed above. Great article with a precise content indeed. Thank you for sharing. Financial market is a market in which people trade financial securities commodities and their tangible item of value at low transaction cost and at price that reflect supply and demand.

Some of the major functions of financial market are as follows: 1. Borrowing and lending 2. Risk Sharing. Good job. Basic concepts of the Indian capital markets have been very explicitly explained…And if Simone is really interested in developing his long term career or specific goals in the share markets, these basic comments will be of immense importance to him..

Also the other peripheral things belonging to Indian equity market have been very beautifully crafted….. Your email address will not be published.

Continue your financial learning by creating your own account on Elearnmarkets. Remember Me. Explore more content for free at ELM School. Courses Webinars. Home Basic Finance. January 13, Reading Time: 11 mins read. Table of Contents What is Capital Market? Functions of Capital Market While from a broader perspective, Capital Markets is viewed as a market of financial assets with long or infinite maturity, it actually plays a very important role in mobilizing resources and allocating them to productive channels.

The important functions and significance of the markets have been discussed below: — 1. What is the difference between Money Market and Capital Market? What are capital market instruments? How can I start learning about the capital market?

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This is a great value addition and a strong resume builder for anyone seeking a career in this field. However we do not assist in placement on completion of this course. To complete the course successfully, the student needs to appear for NCFM and an internal examination. Secondary markets serve as a monitoring and control network which enables the company to better assess their rank among the industry peers. Equity market involves trading in equity, preference, cumulative preference, and cumulative convertible preference shares.

Debt market involves purchase and sale of bonds. Derivative market is the place for organizing trades in futures and options. Capital market, due to its diverse features, can also be classified as follows. The Securities Contract Regulation Act, [SCRA] defines 'Stock Exchange' as a body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.

OLX in the world of securities. On a macro level, a stock broker is thus the face of stock market. Any eligible person can register with a stock exchange to provide broking services to the public. Trading account is an account in which the funds are deposited exclusively for securities transactions.

Demat account is an account where the securities are deposited. A Depository is the bank of all the respective demat accounts. The intermediaries that are registered with a depository are called Depository Participants. Any eligible person can register to provide demat services to the public. A Clearing Corporation is a part of an exchange or a separate entity and performs three functions, namely, it clears and settles all transactions, i.

It provides financial guarantee for all transactions executed on the exchange and provides risk management functions. CNX Nifty Nifty , is a scientifically developed, 50 stock index , reflecting accurately the market movement of the Indian markets.

It comprises of some of the largest and most liquid stocks traded on the NSE. Sensex is also a stock market index comprising of 30 shares traded on the BSE. Sensex is managed by Bombay Stock Exchange. Sensex and Nifty are the barometer of the Indian Markets. In recent years, indexes have come to the forefront owing to direct applications in finance in the form of index funds and index derivatives.

Familiarity with these instruments is necessary in order to understand the basics of derivatives. A forward contract or simply a forward is a contract between two parties to buy or sell an asset at a certain future date for a certain price that is pre-decided on the date of the contract.

The future date is referred to as expiry date and the pre-decided price is referred to as Forward Price. It may be noted that Forwards are private contracts and their terms are determined by the parties involved. A forward is thus an agreement between two parties in which one party, the buyer, enters into an agreement with the other party, the seller that he would buy from the seller an underlying asset on the expiry date at the forward price.

This is different from a spot market contract, which involves immediate payment and immediate transfer of asset. Forward contracts can be settled either by physical delivery or cash settlement. Physical delivery involves delivery of the underlying asset by a seller to the buyer and the payment of the agreed forward price by the buyer to the seller on the agreed settlement date.

On the other hand, Cash settlement does not involve actual delivery or receipt of the underlying asset. Each party either pays receives cash equal to the net loss profit arising out of their respective position in the contract. Since forward contracts are not traded on exchange, forward contracts are subject to default risk. Regardless of whether the contract is for physical or cash settlement, there exists a potential for one party to default, i. Had the contract been traded over an exchange, a stock broker and an exchange along with the help of clearing corporation would ensure that the settlement is made between the contractual parties.

Like a forward contract, a futures contract is an agreement between two parties in which the buyer agrees to buy an underlying asset from the seller, at a future date at a price that is agreed upon today. However, unlike a forward contract, a futures contract is not a private transaction but gets traded on a recognized stock exchange. In addition, a futures contract is standardized by the exchange.

All the terms, other than the price, are set by the stock exchange rather than by individual parties as in the case of a forward contract. Also, both buyer and seller of the futures contracts are protected against the counter party risk by an entity called the Clearing Corporation.