PLAYERS OF

MONEY MARKET
AND
CAPITA MARKET

PAWEL KU. GAUTAM

PRATIK DUBEY
SACHIN DHAMODKAR
 What Is Financial Market ?

• A financial market is a market in which

people and entities can trade financial
securities, commodities and other fungible
items of value at low transaction costs and
at prices that reflect supply and demand .
Securities include stocks, bonds and
commodities include precious metals or
agricultural goods .
 Functions Of Financial System

RETURN COST

Financial Market

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Characteristics Of Financial Markets
Types Of Financial Market
 What Is Money Market

• "The Money Market is the centre for dealing

mainly of short character, in monetary assets;
it meets the short term requirements of
borrowers and provides liquidity or cash to
the lenders. It is a place where short term
surplus investible funds at the disposal of
financial and other institutions and
individuals are bid by borrowers, again
comprising institutions and individuals and
also by the government.“
-According to the RBI
 Structure of Indian Money ₹Market

Organised Money Market Unorganized Money Market

• Reserve bank of India • Indigenous Bankers

• Scheduled Commercial • Money Lenders
Banks
• Non - Banking Financial
• Discount and finance House Companies (NBFCs)
of India
• Mutual funds - Chit Funds

• Non-banking finance - Nidhis

companies
- Finance Brokers
• Primary Dealers
 Functions of Money Markets

• Monetary Equilibrium
1 • Economic Growth
2

• Promote Trade and Industry

3 • Aiding Monetary Policy
4

• Capital Formation
5 • Non inflationary source of Finance to Government
6
 Players Of Money Market

• Reserve Bank of India

• Government
• Discount and Finance House of India
• Commercial Banks
• Mutual Funds
• Primary Dealer
• Financial Institutions
• Corporate Firms
 RESERVE BANK OF INDIA
• The reserve Bank Of India is the most important
player in the Indian Money Market.
• The Organised money market comes under the direct
regulation of the RBI.
• The RBI operates in the money market is to ensure
that the levels of liquidity and short-term interest
rates are maintained at an optimum level so as to
facilitate economic growth and price stability
• RBI also plays the role of a merchant banker to the
government. It issues Treasury Bills and other
Government Securities to raise funds for the
government.
 GOVERNMENT

• The Government is the most active player

and the largest borrower in the money
market.
• It raises funds to make up the budget
deficit.
• The funds may be raised through the issue
of Treasury Bills (with a maturity period
of 91day/182day/364 days) and
government securities.
 COMMERCIAL BANKS

• Commercial Banks play an important role

in the money market.
• They undertake lending and borrowing of
short term funds.
• The collective operations of the banks on a
day to day basis are very predominant
and hence have a major impact and
influence on the interest rate structure and
the liquidity position.
 FINANCIAL INSTITUTIONS

• Financial institutions also deal in the

money market.
• They undertake lending and borrowing of
short-term funds.
• They also lend money to banks by
rediscounting Bills of Exchange.
• Since, they transact in large volumes, they
have a significant impact on the money
market.
 CORPORATE FIRMS

• Corporate firms operate in the money

market to raise short-term funds to meet
their working capital requirements.
• They issue commercial papers with a
maturity period of 7 days to 1 year. These
papers are issued at a discount and
redeemed at face value on maturity.
• These corporate firms use both organised
and unorganised sectors of money market.
DISCOUNT HOUSES AND PRIMARY
DEALERS

• They are the intermediaries in the money

market
• Discount Houses discount and rediscount
commercial bill and Treasury Bills.
• Primary Dealers were introduced by RBI
for developing an active secondary market
for Government securities.
• They also underwrite Government
Securities.
MONEY MARKET MUTUAL FUND

• A money market fund is a mutual fund that

invests solely in money market instruments.
• Money market funds are generally the safest and
most secure of mutual fund investments.
• The goal of a money-market fund is to preserve
principal while yielding a modest return.
• Money-market mutual fund is akin to a high-
yield bank account but is not entirely risk free.
When investing in a money-market fund,
attention should be paid to the interest rate that is
being offered.
 What Is Capital Market ?

Markets for buying and selling equity and

debt instruments. Capital markets channel
savings and investment between suppliers of
capital such as retail investors and institutional
investors, and users of capital like businesses,
government and individuals. Capital markets
are vital to the functioning of an economy,
since capital is a critical component for
generating economic output. Capital markets
include primary markets, where new stock
and bond issues are sold to investors, and
secondary markets, which trade existing
securities.
 Types of Capital Market

CAPITAL MARKET

PRIMARY SECONDARY
MARKET MARKET
 Primary Market
• It is that market in which shares, debentures
and other securities are sold for the first
time for collecting long-term capital.
• This market is concerned with new issues.
Therefore, the primary market is also called
NEW ISSUE MARKET.
• The money collected from this market is
generally used by the companies to
modernize the plant, machinery and
buildings, for extending business, and for
setting up new business unit
 Secondary Market

• The secondary market is that market in

which the buying and selling of the
previously issued securities is done.
• The transactions of the secondary market
are generally done through the medium of
stock exchange.
• The chief purpose of the secondary market
is to create liquidity in securities.
Structure of Indian Capital Market with
Diagram
 Functions of Capital Market

Provision of Proper
Mobilization
Investment Regulation of
of Savings
Avenue Funds

Speed up
Continuous
Capital Economic
Availability
Formation Growth and
of Funds
Development
Constituents/Components of Capital
Markets
PLAYERS OF CAPITAL MARKET

• Stock Exchange
• Merchant Banker
• Underwriters
• FII
• Credit Rating Agencies
• Venture Capital Fund
• Brokers
• Portfolio Managers
 Role of SEBI in Regulating Capital
Market
• Increasing Market Transparency.
• Improving the standards of Corporate
Governance.
• Improving Market Efficiency.
• Reduction of Transaction Cost.
• Enhancing the Market Safety.
• Educate investors
 STOCK EXCHANGE

• A market in which securities are bought and sold.

• Makes it easy for investors to buy and sell securities
in secondary markets.
• Freeze active shares and debentures certificates in
the safe custody.
• Computerise trading
• Credit dividend payment directly to the account of
the shareholders in the bank through electronic
clearing mechanism.
• To act as a bank for shares .
 MERCHANT BANKER

• Merchant Banks are a very important factor in the

capital markets. They have a big role to play
especially, in placing equity in the primary
market, through the Initial Public Offers route.
• The SEBI issued guideline for the merchant
bankers in April 1990.
• Merchant banker play major role is in the space of
mergers and acquisitions
• They will especially play a huge role in the
hostile takeovers.
 UNDERWRITERS

• Underwriting is like insurance against the

failure of an issue .
• For the risk that the underwriter takes, he
is paid commission
• Underwriting is a device that ensures the
success of new issues
• The SEBI has made it mandatory for
issuing companies to underwrite all issues
.
 VENTURE CAPITAL

• Venture capital means funds made available

for start-up firms and small business with
exceptional growth potential.
• Venture capital is the financial support to
young , rapidly growing
companies/individuals that have potential to
develop into significant economic contributors
by the business man group to create a product
or service which has a unique idea
• It helps to bridge the gap between capital and
knowledge
Money Market Vs. Capital Market