Financial Markets (1)

8/3/2019 Financial Markets (1)

1/21

Capital Markets&

Money Markets


2/21

Capital markets are markets in equity

(Shares)&long term debts (bonds).

It can be further divided in to Primaryand Secondary market.


3/21

Primary market: It is a market where

securities are offered to public for

subscription for the purpose of raising

capital. It is the first sale market.eg:shares & bonds


4/21

An Initial public offer is the selling of

securities to the public in the primary

market. It is when an unlisted companymakes either a fresh issue of securities or

an offer for sale of its existing securities

or both for the first time to public


5/21

Secondary market :It is a market where

already existing (pre-issued)securities

are traded among investors It is also called as stock exchange


6/21

CAPITAL MARKET MONEYMARKET

It is used for Business &

Government to obtain

access to long term funds

Investors in capital markets

take on greater risks and

earn greater returns

It is used for Business &

government to obtain

access for short term funds

Investors in money markets

take on less risks and less

returns


7/21

It is the stock market index for BSE.

It was established in 1875

It is made up of 30 stocks representing asample of large, liquid and representative

companies.

There are more than 6000 stocks which

are listed


8/21

It is the stock market index for NSE

It was incorporated in the year 1992 NOV

It is a 50 stock index accounting for 23sectors of the economy

Companies in this group were told that

there were consistent earnings growth

and high P/E ratiosEx of nifty are coca-cola, IBM & General

electric


9/21

It is the regulatory body for the

investment market for India

The purpose of this board is to maintainstable and efficient markets by creating

and enforcing regulations in the market

place


10/21


11/21

Money market is a market that provides

liquidity for individuals and institutions

by dealing in short-term funds with amaturity date of about one year or less.


12/21

Short term debt instruments

Services immediate cash needs

Speedy and efficientLarge Denominations

Insensitive to interest rate changes

Low default risk


13/21

Treasury Bills:

These are short term obligations issued

by the Govt. with a maturity period ofless than one year. The GOI issues 4

types of T-bills(14day, 91day, 182day and

364day)


14/21

Call Money:

Short term funds transferred between

financial institutions usually for no morethan one day.


15/21

Repurchase Agreements:

An agreement which involves a sale of a

security with an undertaking to buy backthe same security at a pre-determined

price and a future date.


16/21

Certificate of Deposit:

Acertificate of deposit (CD) is a time

deposit with a bank. CDs are generallyissued by commercial banks but they can

be bought through brokerages. The

discount rate is determined by the

issuing bank.

Min1Lakh and multiples thereafter.


17/21

Commercial Papers:

Short Term unsecured promissory notes

issued by a company to raise short-termcash. They mature no more than 270 days.


18/21

Bankers Acceptances:

These are time drafts payable to a seller

of goods, with payment guaranteed by abank. Bankers acceptance is essentially a

post-dated check on which a bank has

guaranteed payment.


19/21

The money market specializes in debt

securities that mature in less than one

year.

Money market securities are very liquid,and are considered very safe.As a result,

they offer a lower return than other

securities.Banker's acceptances (BA)are negotiable

time draft for financing transactions in

goods.


20/21

The easiest way for individuals to gain

access to the money market is through

a money market mutual fund.T-bills are short-term government

securities that mature in one year or less

from their issue date and are consideredto be one of the safest investments.

CD is a time deposit with a bank.

Commercial Paper is an unsecured,

short-term loan issued by a corporation.Returns are higher than T-bills because of

the higher default risk.


21/21

Financial Markets (1)

Documents

Transcript of Financial Markets (1)