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Unit 2: Financial Markets

Investors shall be given a copy of IPA certificate to the effect that the issuer has a Notes
valid agreement with the IPA and documents are in order.

Task Do a research and list all the instruments of money market and capital market in
India.

2.4 Summary

Financial market can be explained as a mechanism that allows people to easily buy and
sell (trade) financial securities, commodities (such as precious metals or agricultural goods)
and other fungible items of value at low transaction costs.
Financial market is used to match those who want capital to those who have it.
Financial markets are essential for fund raising.
Financial market is of two types, viz. Capital Market and Money Market.
The market where investment funds like bonds, equities and mortgages are traded is
known as the capital market.
The primal role of the capital market is to channelise investments from investors who
have surplus funds to the ones who are running a deficit.
Money market is that segment of the financial market in which financial instruments with
high liquidity and very short maturities are traded.
The money market is used by participants as a means for borrowing and lending in the
short-term, from several days to just under a year.
Money market instruments consist of Treasury Bills, Certificate of Deposits, Commercial
Papers, etc.

2.5 Keywords

Call Money Market: Market in which brokers and dealers borrow money to satisfy their credit
needs, either to finance their own inventory of securities or to cover their customers' margin
accounts.
Financial Market: It is a mechanism that allows people to easily buy and sell (trade) financial
securities, commodities (such as precious metals or agricultural goods), and other fungible
items of value at low transaction costs and at prices that reflect the efficient-market hypothesis.
Initial Public Offer: Introduction of new stocks in the market.
Underwriting: The process of offering new issues of existing stocks to the purchasers.

2.6 Self Assessment

Fill in the blanks:
1. ................ is the money borrowed or lent on demand for a very short period.
2. Money market can be of two types namely .................. money market and ................ money
market.
3. The ................ and the corresponding .............. are determined at each auction of the treasury
bills.

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