Financial System

Composition of Indian capital market

Capital market is the market for long term funds, just as the money market is the market for short term funds. It refers to all the facilities and the institutional arrangements for borrowing and lending term funds (medium-term and long-term funds).it does not deal in capital goods but is concerned with the raising of money capital for purposes of investment.

The demand for long-term memory capital comes predominantly from private sector manufacturing industries and agriculture and from the government largely for the purpose of economic development. As the central and state governments are investing not only on economic overheads like transport, irrigation and power development but also on basic industries and sometimes even in consumer goods industries, they require substantial sums from the capital market.… Read the rest

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Financial System – Meaning, Functions and Services

A financial system is a network of financial institutions, financial markets, financial instruments and financial services to facilitate the transfer of funds. The system consists of savers, intermediaries, instruments and the ultimate user of funds. The level of economic growth largely depends upon and is facilitated by the state of financial system prevailing in the economy. Efficient financial system and sustainable economic growth are corollary. The financial system mobilizes the savings and channelizes them into the productive activity and thus influences the pace of economic development. Economic growth is hampered for want of effective financial system. Broadly speaking, financial system deals with three inter-related and interdependent variables, i.e.,… Read the rest

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Concepts and Process of Book Building

Book building is a method of price discovery. In this method, offer price of securities is determined on the basis of real demand for the shares at various price levels in the market.

As defined by SEBI guidelines, 1995, “book building is a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda of offer document.”

In book building method, the final issue price is not known in advance.… Read the rest

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Initial Public Offering (IPO)

A good capital market is an essential prerequisite for the industrial and commercial development of a country. Capital market is a central coordinating and directing mechanism for free and balanced flow of financial resources into the economic  system operating in a country. It helps the companies who require capital to expand, modernize or diversify their business. To get the capital that is required by the company it usually goes for the issue of shares and the process of issuing of shares is done in the primary market. The primary market in the simplest terms can be defined as a market where the securities are sold in order to raise the funds or the capital required by the company.… Read the rest

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Difference Between Money Market and Capital Market

In order to understand what the differences between things are you first need to understand what each of the items is. In this case before you can understand the difference between money market and capital market you are going to need to understand what money market is and what capital markets is. Once  you understand the two  items are it will  be easier to see what the difference or differences are between the two markets.

What is Money Market?

Basically the money market is the global financial market for short-term borrowing and lending and provides short term liquid funding for the global financial system.

… Read the rest
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