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

2nd PUC Business Studies Notes Chapter 10 Financial Markets

→ 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.

2nd PUC Business Studies Notes Chapter 10 Financial Markets

→ 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.

2nd PUC Business Studies Notes Chapter 10 Financial Markets

→ Trading procedure:

  • selection of a broker,
  • opening Demat Account,
  • Placing the order,
  • Executing the order,
  • Settlement

Securities and Exchange Board of India


  • 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.

2nd PUC Business Studies Notes Chapter 10 Financial Markets

→ 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
  • Blue Chips.

2nd PUC Business Studies Notes

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