Brief Notes On Capital Market In India

The capital market includes both the stock and bond market. The capital market directly influences the economic well-being of a nation. The greatness of a country depends on its economic stability.

Read on to find out what the Capital market is and how important it is for the growth and development of a Nation. Simply put, a capital market means just a place where money is provided to the borrower for a longer period.

The borrower will, in turn, invest the money in different sectors like production, manufacturing, services, etc. Thereby contributing to the financial well-being of the country.

What is meant by the Capital Market?

As stated above, a capital market means a market where trade is taking place in financial assets. Here, people or companies, or even the government, come for long-term loans or funds.

When we talk about the Indian capital markets, two things come to mind; the share market and the bond market. The share market or the stock market deals with equities, and the bond market deals with debt securities.

India is one of the fastest-growing economies in the world. The development brought on by the consecutive five-year plans has put India ahead in many fields.

Progress and development bring with them many problems and obstacles. The Indian capital market is not without drawbacks and loopholes. These are somehow medicated to some extent through various reforms and plans by knowing what the capital market means.

Roles of Capital Market

The most important role of the Capital market is to act as a provider of long-term financial services to business houses. It acts as a place where money from the surplus sector is utilized by the business houses in economic development.

The capital market mobilizes saving and investments by providing securities and equity to the people. It works as a connection between the surplus funds and developmental projects. Without the service of a strong capital market, economic progress can not be sustained.

Various Instruments of Capital Market

The capital market works in different modes like pure, hybrids, and derivatives. Capital market instruments are financial instruments which are shares, stocks, debentures, bonds, scripts, etc. But not all financial instruments are used in capital markets.

The different types of capital market instruments can be explained as follows

Bonds

The debt securities companies use to raise funds are bonds. Even the government uses this method to raise funds.

Stock

Stock literally means ownership. When you buy a share, you become a shareholder.

The NSE and the BSE are the stock exchange companies in India. Different investors buy and sell stocks through these companies.

Types of Capital Markets

There are two types of Capital markets; primary and secondary markets.

• Primary capital markets are where you get fresh securities. It helps in providing new funds to entrepreneurs. It is mostly utilized by investors from the financial sector.
• Secondary capital market. In this type of market, the existing shares and securities are traded. This is where you can sell off your stocks.

Conclusions

As discussed above, the capital market is an integral part of the country’s financial institution. A strong capital market is needed to strengthen the economy.

Various factors affect the functioning of the capital market. Ex- exchange rate, policies and regulations of the government, foreign and domestic investment, interest rate, etc.

The capital market in India is governed by the Securities and Exchange Board of India ( SEBI), The Ministry of Finance, and the RBI.

There are some capital market instruments generally used in the capital market. Example- shares, bonds, stocks, securities, debentures, etc.

In brief, the capital market in India, like in other countries, works for the development of the financial prosperity of the country. 

It attracts surplus funds and uses them in funding businesses and other undertakings. It’s a place for sellers and buyers of financial assets.