Industry Profile: Capital Markets

Capital markets are the financial markets in which stocks, bond, debenture, etc., can be traded between the buyers and the sellers. Capital market is very much essential for the functioning of the economic output. The trading in the capital markets are done for the long term investments only, that trading activities will be done by the participants known as individual investors, companies, governments, or by financial sector also. Capital market is a wide place where most of the people will be trading. It is observed by all over the world, so only trading system have been computerized and some of the computerized services are available to the public and some of the services are monitored by the Securities and exchange commission or financial sector.

Capital market is different from money market because in capital market long term debt and equity finance will be provided to the government and to the corporate sector. Capital market institutions setup the savings of people and lend that savings of funds for long period of time, it also provides loans like rupee loans, foreign loans, consultancy services and underwriting. Capital markets plays an important role between the savers and the investors. The savers are those who lends their savings of funds, on the other hand the investors are those who borrows that savings of funds.

In capital market, there are two categories of financial instruments which are popularly traded by the investors they are as follows:

1. Stocks:

Equity securities are known as stocks, which is issued for medium term or long term period of time which is one year or more than a year. Stocks are issued by the companies to the investors or financial sector.

2. Bonds:

Debt securities are known as bonds, which is issued for medium term or long term period of time which is one year or more than a year. Bonds will be issued by the government and the companies also to the investors or financial sector.

In capital markets, people trade in two different kinds of markets they are as follows:

1. Primary market.
2. Secondary market.

Primary market is a place of market where new issue or fresh issue of securities are done by the companies directly to the investors. In primary market, only long term instruments will be issued for the purpose of raising of funds through the capital market.

Features of Primary Market:

1. There is no need to pay the brokerage commission.
2. It is a place where various kinds of products are traded.
3. For the fresh issue of securities there is no particular place.
4. It is directly issued to the investors by the issuing companies.
5. Primary market plays a vital role in the formation of the capital.
6. Fresh issues are directly issued to the investors for the purpose of expanding the business.
7. The issuing company will receive the funds from the investors and new security certificates will be issued to the investors.