Capital Market

Investments

Quick Definition

Capital Market is a financial market where long-term funds are raised and traded through instruments like stocks, bonds, and debentures.

Detailed Explanation

Capital Market connects investors (who have surplus funds) with companies and governments (who need funds). It helps in raising capital for long-term investments and economic growth.

In India, capital markets operate through exchanges like the National Stock Exchange and Bombay Stock Exchange, regulated by the Securities and Exchange Board of India.

Types of Capital Market

  • Primary Market: Where new securities are issued (IPO)
  • Secondary Market: Where existing securities are traded

Key Instruments

  • Equity Shares (Stocks)
  • Bonds and Debentures
  • Mutual Funds
  • Government Securities

Functions of Capital Market

  • Mobilizes savings into investments
  • Provides liquidity to investors
  • Supports economic development
  • Facilitates price discovery

Why Capital Market Matters

  • Helps businesses raise funds
  • Offers investment opportunities
  • Drives economic growth

Example

"A company raises funds by issuing shares through an IPO in the primary market, and later those shares are traded on stock exchanges."

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