Types of Financial Markets

What is a Financial Market ?

Financial markets are those markets where buying and selling of securities take place. By securities, it means stock market, bonds, shares, foreign exchange, and others. The Financial Market plays a smooth role in managing our economy. It regulates the distribution of resources in the economy and helps in the stabilisation of the economy. The investors feel free and safe to trade in financial markets as we have a regulatory body Securities Exchange Board of India which takes care that there is no fraudulent activity in the market. They provide returns to investors and in exchange provide those funds to the borrowers. The financial market includes varieties of markets with different features and advantages. Investors can trade in them on the basis they want to invest for a short duration or long duration. Daily, millions of investors buy and sell shares in the financial market. There are two main depositories in India NSDL and CDSL which regulate the buying and selling of shares in stock exchanges.

Advantages Of Financial Market

• Financial Market offers investors to invest in shares for a short duration and a long duration depending upon the amount of investment. 
• From financial markets firms can easily get loans at low cost and with lower interest rates. And also financial markets provide loans without collateral.
• Through financial markets, companies can even raise capital. The intermediaries guide the investors about the market investment and provide accurate information to the investors.
• Due to the regulation of SEBI in the market investors feel secure to invest in the market and this helps to regulate the economy.

Disadvantages Of Financial Market

• As the process of the financial market requires lots of formalities like opening a Demat account, approaching depositors, etc. which makes the processing time-consuming.
• The financial market process involves strict rules and regulations due to which many investors find it difficult to enter the financial market.
• Financial markets are subject to market risk i.e., it involves risk and there are chances that the customer may get huge losses.

Types Of Financial Market 

Stock Market

The stock market is a market where financial organisations raise money to expand their business by dealing through stock that investors sold through a broker. Mutual funds are one such example where investors can buy many stocks. The leading stock exchange “BOMBAY STOCK EXCHANGE” and “NATIONAL STOCK EXCHANGE” in India along with other stock exchanges regulate the financial market

Bond Market

Bond Market is a market where organisations need to get exceptionally huge loans, they go to the security market. It is a market where lenders issue debts in the form of bonds or dealings in the secondary market. Whenever stock costs go up, bond costs will generally go down. When investors invest in the bond market in return they get the original amount with interest.

Derivatives Market

A derivative market is a market that involves derivatives or contracts whose price is based on the market value of the marketed property.

Commodity Market

The commodity markets work like all other markets in the economy. The commodities market is such a market in which the lenders make buying and selling of the essential resources which impact the economy a lot. Commodity market deals with goods like gold,aluminium ,crude oil and other essential elements. 

Foreign Exchange Market

Foreign Exchange Market is a market where foreign currencies are traded through financial spot animations. By foreign exchange market , an investor can determine the value of foreign savings in the economy. Forex is one of the largest financial markets in the world and its value is on a good scale in the economy and impacts the economy of India .

Spot Market

The spot market is a market where the buying and selling of securities are done at the same time on a cash basis only. In the spot market the actual delivery of securities takes place on the same day or the next day and if the investor is not in the same town then dispatching days are excluded and after delivery the next day is counted.

Conclusion

Indeed, even after free administrative bodies and different controlled monetary establishments manage the monetary market, there is no stability in the market as far as cost and rate changes and certain examples of wrong activities have come up which calls for more investment in the stock market. The formation of markets given by monetary business sectors assists us with choosing how and where to put away our shares. A financial market supports the economy by assisting the public authority with investment in the nation as and whenever required and opens up open doors for different areas to develop the economy and to make investors feel safe while investing in the financial market.