Financial Markets

Let us understand about financial markets -  we can say financial markets is basically a set up where financial instruments like shares debentures bonds are issued by different entities and they are traded and sold.  we can classify the financial markets into two categories One is capital market and the other one is money market.

In capital market long term debt and equity instruments are issued and traded and they are used by companies for raising long term funds  whereas in money market short term debt securities are traded for Sourcing short term funds and these instruments will have tenor upto 1 year.

Let us also understand the functions of capital markets - In financial market, there will be lot of intermediaries in financial market and they will be providing market related services like Investment banking, credit rating, online trading and so on - if you see financial markets  are growing and if they show vibrant activity level then we can infer that there is good industrial growth, capital formation and overall economic performance.

We know that Financial Markets can be divided into primary market and Secondary Market as well - Primary market will enable the companies to raise the capital so that they can invest in their growing business. Similarly secondary market also helps in capital formation not directly but it does it in indirect way - that is existing investors can sell their holdings and invest their money in next growing sector.  Next financial markets provide lot of investment opportunities for investors - If you don’t have sufficient funds to start your own business then u can invest that fund in already existing businesses and earn returns out of it.