classification of financial markets

8/4/2019 Classification of Financial Markets

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PRESENTED BY:

PRIYANKA PRIYADARSINI- 05

SHRADHANJALI PRADHAN- 06


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A market is a venue where goodsand services are exchanged.


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A financial market is a place whereindividuals and organizations wanting

to borrow funds are brought togetherwith those having a surplus of funds


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FINANCIAL MARKET

ORGANISEDMARKET

ORGANISEDMARKET

ORGANISEDMARKET

MONEY MARKET

PRIMARY

MARKET

SECONDAR

Y NARKET

TERM LOAN

MARKET

MARKET FOR

MORTGAGE

MARKET FOR

FINANCIAL

GUARENTIES

CALL

MONEY

MARKET

COMMERCIAL BILL

MARKET

TREASURY BILL

MARKET

SHORT TERM LOAN

MARKET

MONEY

LENDORS,INDEGE

NOUS BANKERS

INDUSTRIAL

SECURITIES

MARKET

GOVT.

SECURITIES

MARKET

LONG TERM LOAN

MARKET


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There are standardized rules and

regulation governing financial dealing.

These markets are controlled by RBI.

These market can be classified into 2category:-

i) Capital marketii) Money market


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Capital Market:The market concerned with relatively long

term (greater than one year originalmaturity) debt and equity instruments (e.gbonds and stocks) is called capital market.


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Money Market: The market concerned with buying

and selling of short term (less than oneyear original maturity) governmentand corporate debt securities is calledmoney market.


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Capital market may be devided into 3

categories:

i) Industrial securities market

ii) Govt. securities market

iii) Long term loan market


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It is a market for industrial sercurities likeequity shares, preference share, bond or

debenture. Here industrial concerns raise there

capital by issuing appropriate instrument.

It can be subdivided into 2:

i) primary marketii) Secondary market

Govt. securities market


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Primary Market:A market where new securities are

bought and sold for the 1

st

time (anew issues market) is called primarymarket.

Here there are 3 ways by which acompany may raise capital:

i) Public issueii) Right issue

iii) Private issue


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Secondary Market:A market where existing (used)

securities are bought and sold ratherthan new issues are called secondarymarket.


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Otherwise known as Gilt- Edged security

market

Govt. securities(short- term, long-term)are traded

Securities are issued by the Central

Govt., State Govt., Semi- Govt. authoritielike City corporation, All India and State


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Here development bank and

commercial bank play a significant role

by supplying loan to corporatecustomers

It is also classified into:

i)Term loan market

ii) Mortgage market

iii) Financial guarantees market


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In India many industrial financing

institution created by the got both at

the. national and regional levels tosupply long and medium term loans to

corporate customers directly as well as

indirectly.

example IDBI, IFCI, ICICI


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A guarantee market is a center where

finance is provided against the

guarantee of a reputed persona in thefinancial circle .

Guarantee is a contract to dischargethe liability of a 3rd party in case of its .

It act as a security from the creditor point

of view


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In this market number of money lenders ,

indigenous bankers traders etc , who

lend money to the public. There are also private financial

companies, chit fond etc , whoseactivity are not controlled by RBI.


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It deals with financial assets and

securities which have a maturity period

of one year. It is the market purely for short term

funds.


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Call money market

Commercial bill market

Treasury bill market

Short term lone market


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The call money market is the market for

extremely short period loans say day 1 to

14days . It is highly liquid.

The loans are repayable on the

demand at the option of either thelender or borrower.

The special features of this market is that

the interest rate is varies from day to-

day and even from hour-to-hour.


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It is a market of bill of exchange.

In case of a credit sale , the seller may

draw a bill of exchange on the buyer. The buyer may accept such a bill

promising to pay at a later date the

amount specified in the bill. The seller need not wait until the due

date of the bill . Instead he can get

immediate payment by discounting the

bill.


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It is the market which have short term

maturity period .

It is a promissory note or financial billissued by the govt.

It is highly liquid because its repayment is

guaranteed by the govt. There are two types of treasury bill

market;

ordinary treasury bills and ad hoc treasury

bills .


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Ordinary treasury bills are issued to the

public, banks and other financial

institute. To meet its short term financialneeds.

Ad hoc treasury bills are issued in favor ofthe RBI only .

Treasury bills have a maturity period of 91

days or 182 days or 364days only.


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It is the market where short term loans

are given to the corporate customers to

meeting their working capitalrequirement .

Commercial banks plays an importantrole in this market.

It provides short term loan in the form of

cash credit and overdraft.


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classification of financial markets

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