Capital Market

Introduction

• Capital market is a market for long-term funds- both equity and debt and funds raised within and outside the country.
• Capital market aids economic growth by mobilizing the savings of the economic sectors and directing towards channels of productive use.
• Capital Market is an institutional arrangement, deals in trading of securities to raise medium and long-term funds for a period of 1-5 years and above.
• Commercial banks, Governments, Public Financial Institutions like LIC, GIC, DFI’s, Mutual Funds and any individuals are the main participants in the market.
• The capital market operates under the regulatory and supervisory controls of the Securities and Exchange Board of India (SEBI). The main purpose of regulation and supervision is only to protect the public interest and fair trading.

Function of Capital Market

• It mobilizes long-term savings to finance long-term investments.
• It provides risk capital in the form of  equity to entrepreneurs.
• It encourages ownership of productive assets.
• It provides liquidity with a mechanism enabling the investor to sell financial securities.
• It enables wide participation of investors and equity holders.

Primary Market and Secondary Market

• Capital Market is further classified into two different segments namely primary and secondary market. 
• The primary market deals with new or fresh issue of securities and is, therefore, also known as new issue market; whereas the secondary market provides a place for purchase and sale of existing securities and is often termed as stock market or stock exchange.