Capital Market: What’s the purpose?

Capital Market

Capital Market is that where financial securities like shares and bonds are issued to raise medium to long term financing and also where the securities are traded. It helps channelize surplus funds from small investors to institutions so that it can be put to productive use. It consists of a primary and secondary market. Primary market deals with the issue of new securities like stocks or bonds. While the secondary market deals with the exchange of existing securities. Another classification of capital market can be done based on the nature of securities traded like the bond market or stock market. In short, the securities are issued in a primary market and then traded in the secondary market.

The most famous of the capital markets are the stock market and bond market.

Capital markets are a part of the larger financial market where government or company securities are created or traded. They are probably the best-known component of the financial market with millions of trades being carried out daily. There are different ways capital markets can be classified depending on the kind of trade being carried out or the types of securities being traded. As mentioned in one of the answers on this thread, two commonly known types of the capital market are the primary and secondary markets where equities are bought directly from the companies issuing them or are bought and sold between investors.

Another way different types of capital markets are distinguished is through the assets that are being traded. Capital markets can, therefore, be further subdivided into bond markets and equity markets. In these cases, funds are traded between different entities using instruments like stocks and bonds. Bonds are normally considered to have less risk than equities and thereby also offer lower returns. The capital market is a market where buyers and sellers engage in trade of financial securities like stock and bonds. The buying and selling are undertaken by participants such as individuals and institutions.

It is a market where securities such as share and bonds are issued to raise medium to long-term financing and where securities are traded. The securities might be issued by a company that could issue the share or bond to raise money. Bond could be issued by other entities in need of long-term cash such as regional or national government.

Capital markets are a part of the larger financial market where government or company securities are created or traded. They are probably the best-known component of the financial market with millions of trades being carried out daily. There are different ways capital markets can be classified depending on the kind of trade being carried out or the types of securities being traded. As mentioned in one of the answers on this thread, two commonly known types of the capital market are the primary and secondary markets where equities are bought directly from the companies issuing them or are bought and sold between investors. Another way different types of capital markets are distinguished is through the assets that are being traded in India and abroad. Capital markets can, therefore, be further subdivided into bond markets and equity markets. In these cases, funds are traded between different entities using instruments like stocks and bonds. Bonds are normally considered to have less risk than equities and thereby also offer lower returns.

Capital Market

The capital market is a market where buyers and sellers engage in trade of financial securities like stock and bonds. The buying and selling are undertaken by participants such as individuals and institutions. It is a market where securities such as share and bonds are issued to raise medium to long-term financing and where securities are traded. The securities might be issued by a company that could issue the share or bond to raise money. Bond could be issued by other entities in need of long-term cash such as regional or national government.

E.g., New York stock exchange, American stock exchange, London stock exchange.

  • Primary Market

The primary market is the market for new securities for the first time. It is also known as the new issue market. In many cases, this takes the form of an initial public offer. This is a market for new long-term equity capital. Securities are issued by the company directly to investors. The company receives the money and issue new certificates of security to the investors. Primary issues are used by companies to set up a new business or for expanding or modernizing the existing business.

  • Secondary Market

The secondary market is also known as the aftermarket. The secondary market is a market where investors buy and sell securities that are already traded/owned.

Companies might want to grow their business, expand, or sustain their business so, capital markets give the companies the platform required for the companies to get the public money.

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