Karnataka 2nd PUC Business Studies Notes Chapter 10 Financial Markets
→ Financial Market: it is a market which deals with various financial instruments & financial services
→ Money market: it is a market for borrowing & lending of short-term funds with high liquidity.
→ Money market instruments:
- Treasury bills.
- Call money.
- Certificate of deposits.
- Commercial papers.
- Commercial bills
→ Treasury bills: It is an instrument of short term borrowing by the Government of India maturing in less than one year.
→ Call Money: It is a method by which banks faced with temporary shortage of cash, will borrow short term finance from other banks.
→ Certificate of Deposit: These are short term, unsecured negotiable instrument in bearer from issued by the commercial banks.
→ Commercial Paper: Commercial paper is a short term unsecured promissory note, negotiable & transferable with a fixed maturity period issued by the companies.
→ Commercial Bills: commercial bills are short terms, negotiable & self liquidating money market instrument with low risk.
→ Capital Market: it is a market for medium & long terms funds.
→ Feature:
- Deals with long term & medium term funds.
- makes arrangements of large amount of funds
- deals in longterm instruments such as stock, shares, debentures, bonds & securities of the government
- consists of financial institution such as banks financial enterprises, brokers, merchant banks etc.
→ Components of capital market: Primary market & Secondary market.
→ Primary Market: It also known as New Issue Market. It mobilizes the funds from the investors by the directly issuing securities.
→ Secondary Market: It is a market for the purchase & sale of second hand or existing securities.
→ Stock exchange: it is a secondary market for securities, that means, the securities which are already issued in the primary market, are traded in this market.
→ Definition: Stock exchanges are organized auction markets where buyers & sellers come together through their brokers to effective transactions in securities admitted to listing on the exchange.
→ Functions:
- Ready & continuous market for securities.
- Provides liquidity
- Mobilization of savings.
- Capital formation
- Ensures safety of funds.
- Evaluation of securities.
- Price stability.
- Controls company management.
- Capital mobility.
- Public finance.
- Facilities speculation.
- Acts as an economic barometer.
→ Trading procedure:
- selection of a broker,
- opening Demat Account,
- Placing the order,
- Executing the order,
- Settlement
Securities and Exchange Board of India
Objectives:
- Development of securities market,
- Protection of Interest of Investment
- Regulation of capital market
→ Functions:
- Regulating the business in stock exchanges & any other securities market
- Registering & regulating the working of mutual funds
- Promoting & regulation self-regulatory’ organization
- Prohibiting insider trading in securities.
- Regulating substantial acquisition of shares & take-over of companies.
- Conducting enquiries & audit of stock exchange.
- Levying fees & other changes for carrying out its functions.
- Conducting research for the above purposes.
- Promoting investors education & training of intermediaries of securities market.
- Registering & regulating the working of capital market intermediaries.
→ Relevant terms in stock exchange:
- NSEI (National Stock Exchange India)
- NASDAQ (National Association of Securities Dealers Automate Quotation)
- Dow Jones Industrial Average.
- Bulls
- Bears
- Lame duck Stag
- Spot Delivery
- Forward deliver
- BSE SENSEX
- NSE NIFTY
- Blue Chips.