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Indian Financial Market

Indian Financial Market

Classifications of Indian Financial Market

  1.  On the basis of period of the investment avenues

On the basis of the above criteria financial market can be bifurcated among Capital Market and Money Market.

Money market is the market wherein short term instruments i.e. instruments which have a maturity period of less than 365 days (less than 1 year) traded.

The common instruments available in the money market are Treasury Bills, Commercial Papers, Certificate of Deposits, Repurchase agreements and other instruments which have a maturity period of less than one year.

Conversely, capital markets are used for long-term assets, which are any assets with maturity tenor greater than one year. Capital markets include equity (stock) and debt (bond) market. However from regulatory perspective the entire Indian financial system.

2. On the basis of regulatory architecture

From the view point of regulatory set up the Indian financial system can be classified in the following categories

• Banking Sector regulated by Reserve Bank of India (RBI).

• Securities Market regulated by Securities & Exchange Board of India(SEBI).

• Commodities Market regulated by Forward Market Commission(FMC).

• Pension Schemes regulated by Pension Fund Regulatory Authority of India(PFRDA).

• Insurance Sector regulated by Insurance Regulatory and Development Authority of India (IRDA).

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.

Indian Financial Market


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