Difference between Capital Market and Money Market?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 ROSHNI asked over 3 years ago

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5 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered almost 3 years ago

Dear friend, Difference between Capital Market and Money Market is as follows :- **Maturity Period:** The money market deals in the lending and borrowing of short-term finance (i.e., for one year or less), while the capital market deals in the lending and borrowing of long-term finance (i.e., for more than one year). **Credit Instruments:** The main credit instruments of the money market are call money, collateral loans, acceptances, bills of exchange. On the other hand, the main instruments used in the capital market are stocks, shares, debentures, bonds, securities of the government. **Nature of Credit Instruments:** The credit instruments dealt with in the capital market are more heterogeneous than those in money market. Some homogeneity of credit instruments is needed for the operation of financial markets. Too much diversity creates problems for the investors. **Institutions:** Important institutions operating in the' money market are central banks, commercial banks, acceptance houses, nonbank financial institutions, bill brokers, etc. Important institutions of the capital market are stock exchanges, commercial banks and nonbank institutions, such as insurance companies, mortgage banks, building societies, etc. **Purpose of Loan:** The money market meets the short-term credit needs of business; it provides working capital to the industrialists. The capital market, on the other hand, caters the long-term credit needs of the industrialists and provides fixed capital to buy land, machinery, etc. **Risk:** The degree of risk is small in the money market. The risk is much greater in capital market. The maturity of one year or less gives little time for a default to occur, so the risk is minimised. Risk varies both in degree and nature throughout the capital market.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 3 years ago

The buyers, or the investors, buy the stocks or bonds of the sellers and trade them. If the seller, or issuer, is placing the securities on the market for the first time, then the market is known as the primary market. Conversely, if the securities have already been issued and are now being traded among buyers, this is done on the secondary market. Sellers make money off the sale in the primary market, not in the secondary market, although they do have a stake in the outcome (pricing) of their securities in the secondary market. Money market is often accessed alongside the capital markets. While investors are willing to take on more risk and have patience to invest in capital markets, money markets are a good place to invest funds that are needed in a shorter time period - usually one year or less. The financial instruments used in capital markets include stocks and bonds, but the instruments used in the money markets include deposits, collateral loans, acceptances and bills of exchange. Institutions operating in money markets is Reserve Bank of India.

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Data?1494421730 rohit awasthi answered over 3 years ago

Dear roshni > Difference between Capital Market and Money Market- Capital Market The capital markets are the markets for relatively for long term (greater than one year maturity) financial instruments .e.g. bonds, debentures and equity share. The capital market is divided into two parts, namely, primary and secondary stock market. A primary market (Also known as IPO Market) refers to the set up which helps the industry to raise funds by issuing different types of securities. The secondary market is market for subsequent sale/purchase and trading in the securities. Money Market The money market is a market for short term financial assets that are close substitutes for money. The important feature of money market instrument is that it is liquid. This is market for borrowing and lending Short-term funds. Money market instrument are those instruments which have a maturity period of less than one year. It is a collection of markets such as Treasury Bills, Certificate of Deposits, Commercial Paper, Repo etc. Difference between Capital Market and Money Market-

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Picsjoin 2017224123730582 Archana answered over 3 years ago

Hie Roshni, **Difference between Capital Market and Money Market is as follows :-** - Maturity Period: The money market deals in the lending and borrowing of short-term finance (i.e., for one year or less), while the capital market deals in the lending and borrowing of long-term finance (i.e., for more than one year). - Credit Instruments: The main credit instruments of the money market are call money, collateral loans, acceptances, bills of exchange. On the other hand, the main instruments used in the capital market are stocks, shares, debentures, bonds, securities of the government. - Nature of Credit Instruments: The credit instruments dealt with in the capital market are more heterogeneous than those in money market. Some homogeneity of credit instruments is needed for the operation of financial markets. Too much diversity creates problems for the investors. - Institutions: Important institutions operating in the' money market are central banks, commercial banks, acceptance houses, nonbank financial institutions, bill brokers, etc. Important institutions of the capital market are stock exchanges, commercial banks and nonbank institutions, such as insurance companies, mortgage banks, building societies, etc. - Purpose of Loan: The money market meets the short-term credit needs of business; it provides working capital to the industrialists. The capital market, on the other hand, caters the long-term credit needs of the industrialists and provides fixed capital to buy land, machinery, etc. - Risk: The degree of risk is small in the money market. The risk is much greater in capital market. The maturity of one year or less gives little time for a default to occur, so the risk is minimised. Risk varies both in degree and nature throughout the capital market.

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Data?1494421636 Deep answered over 3 years ago

Capital markets are the most widely followed markets. Both the stock and bond markets are closely followed and their daily movements are analyzed as proxies for the general economic condition of the world markets. As a result, the institutions operating in capital markets viz stock exchanges, commercial banks and all types of corporations, including non-bank institutions such as insurance companies and mortgage banks - are carefully scrutinized. The institutions operating in the capital markets access them to raise capital for long-term purposes, such as for a merger or acquisition, to expand a line of business or enter into a new business, or for other capital projects. Entities that are raising money for these long-term purposes come to one or more capital markets. In the bond market, companies may issue debt in the form of corporate bonds, while the governments may issue debt in the form of government bonds. Similarly, companies may decide to raise money by issuing equity on the stock market. Government entities are typically not publicly held and, therefore, do not usually issue equity. Companies and government entities that issue equity or debt are considered the sellers in these markets. The buyers, or the investors, buy the stocks or bonds of the sellers and trade them. If the seller, or issuer, is placing the securities on the market for the first time, then the market is known as the primary market. Conversely, if the securities have already been issued and are now being traded among buyers, this is done on the secondary market. Sellers make money off the sale in the primary market, not in the secondary market, although they do have a stake in the outcome (pricing) of their securities in the secondary market. Money market is often accessed alongside the capital markets. While investors are willing to take on more risk and have patience to invest in capital markets, money markets are a good place to invest funds that are needed in a shorter time period - usually one year or less. The financial instruments used in capital markets include stocks and bonds, but the instruments used in the money markets include deposits, collateral loans, acceptances and bills of exchange. Institutions operating in money markets is Reserve Bank of India. Money markets provide a variety of functions for either individual, corporate or government entities. Liquidity is often the main purpose for accessing money markets. When short-term debt is issued, it is often for the purpose of covering operating expenses or working capital for a company or government and not for capital improvements or large scale projects. Companies may want to invest funds overnight and look to the money market to accomplish this, or they may need to cover payroll and look to the money market to help. The money market plays a key role in ensuring companies and governments maintain the appropriate level of liquidity on a daily basis, without falling short and needing a more expensive loan or without holding excess funds and missing the opportunity of gaining interest on funds.

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