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Capital Markets Securities Market

Capital Markets Securities Market

The capital markets are relatively for long term (greater than one year maturity) financial instruments (e.g. bonds and stocks). Their role can be summarized as follows:

(a) The Capital Market is the indicator of the inherent strength of the economy.

(b) It is the largest source of funds with long and indefinite maturity for companies and thereby enhances the capital formation in the country.

(c) It offers a number of investment avenues to investors.

(d) It helps in channeling the savings pool in the economy towards optimal allocation of capital in the country.

The securities / capital market is divided into two parts, namely, primary and secondary stock market. The relationship between these parts of the markets provides an insight into its organization.

Capital Markets Securities Market

Primary Market:

A market where new securities are bought and sold for the first time is called the New Issues market or the IPO market. In other words, the first public offering of equity shares or convertible securities by a company, which is followed by the listing of a company’s shares on a stock exchange, is known as an initial public offering (IPO).

The Primary market also includes issue of further capital by companies whose shares are already listed on the stock exchange.

Secondary Market:

A market in which an investor purchases a security from another investor rather than the issuer, subsequent to the original issuance in the primary market. So, it can be stated that secondary markets are the stock exchanges and the over-the-counter market. When the securities are traded from that first holder to another, the issues trade in these secondary markets.

The secondary market is a market for old securities, i.e. securities which have been issued already and granted stock exchange quotation. The stock exchanges, therefore, provide a regular and continuous market for buying and selling of securities.

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Capital Markets Securities Market


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Capital Markets Securities Market

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