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Indian Financial System

Notes contract has only the obligation and no right. As the seller of the contract bears the obligation,
he is paid a price called as 'premium'. Therefore the price that is paid for buying an option
contract is called as premium.

Exchange Traded Funds

An exchange-traded fund (or ETF) is an investment vehicle traded on stock exchanges, much like
stocks. An ETF holds assets such as stocks or bonds and trades at approximately the same price
as the net asset value of its underlying assets over the course of the trading day.
Most ETFs track an index, such as the S&P 500 or MSCI EAFE. ETFs may be attractive as investments
because of their low costs, tax efficiency, and stock-like features, and single security can track the
performance of a growing number of different index funds (currently the NSE Nifty).

Gold ETF

Gold Exchange Traded Fund (ETF) is a financial instrument like a mutual fund whose value
depends on the price of gold. In most cases, the price of one unit of gold ETF approximately
reflects the price of 1 gram of gold. As the price of gold rises, the price of the ETF is also expected
to rise by the same amount. Gold exchange-traded funds are traded on the major stock exchanges
including Zurich, Mumbai, London, Paris and New York There are also closed-end funds (CEF's)
and exchange-traded notes (ETN's) that aim to track the gold price.

4.8 Summary

 A capital market is a market for securities (debt or equity), where business enterprises and
government can raise long-term funds. It is defined as a market in which money is provided
for periods longer than a year, as the raising of short-term funds takes place on other
markets (e.g., the money market).
 The capital market is characterized by a large variety of financial instruments: equity and
preference shares, fully convertible debentures (FCDs), non-convertible debentures (NCDs)
and partly convertible debentures (PCDs) currently dominate the capital market, however
new instruments are being introduced such as debentures bundled with warrants,
participating preference shares, zero-coupon bonds, secured premium notes, etc. The g-
securities market is at the core of financial markets in most countries.
 The earliest securities markets in the globe were markets for government securities and
relatively more prominent.
 The g-securities market is distinct from other market because of its immanent features,
such as size, turnover, liquidity and security. Central banks play a significant role in
managing public debt of their respective countries.

 The g-securities market plays crucial role in overall economic development of a country.
For effective functioning of the market, certain fundamental principles and strategies
need to be factored in while designing and developing the market.
 The lack of an advanced and vibrant capital market can lead to underutilisation of financial
resources. The developed capital market also provides access to the foreign capital for
domestic industry. Thus capital market definitely plays a constructive role in the overall
development of an economy.

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