follow the below link to read about Finance market in india :-
Money Market and Capital Market
Money Market is a market for short term financial assets which are near substitutes for money. Money markets instruments are liquid and can be turned over quickly at low transaction cost and without loss. Money market instruments are for short duration, generally defined as less than a year.
Capital Market generally deals in financial assets other than near substitute’s i.e long term primary and secondary issues, claims or securities of maturity period of more than one year.
MONEY MARKET
- Money Market is basically over the phone market. The transactions are conducted through oral communications.
- Dealing in money market may be conducted with or without the help of brokers.
- It is market for short term financial assets that are close substitutes for money.
- Short term for this purpose is generally taken as a period up to one year.
- Money market consists of many sub-markets, such as inter-bank call money, bill rediscounting, treasury bills etc. collectively, they constitute the money market
- Financial assets which can be converted into money with ease speed, without loss and with minimum transactions cost are regarded as close substitutes for money or near-money.
CHARACTERSTICS MONEY MARKET INSTRUMENTS
I. SHORT DURATION
Duration of money market instruments is maximum up to one year in each case –ranging from one day for call loans to one year for 364 day treasury bills and CDs. Day light loans ( i.e for less than one day) also exist in some developed market.
ii. HIGH LIQUIDITY
These instruments are highly liquid. They can be easily and quickly converted into cash at low transaction cost and without loss. Therefore, they called near money or close to money.
iii. HIGH SAFETY
Money market instruments are highly safe with near zero risk of default due to financial soundness of issuers. The issuers are Government of India (treasury bills), scheduled commercial banks (BRS AND CDs), public financial (CDs), highly rated public and private corporate bodies (CPs and securities debt).
iv. RESTRICTED PARTICIPANTS
Besides RBI, DFHI (discount and finance house of India) and STCI (securities trading corporation of India), dealings in these instruments are restricted to scheduled commercial banks, public financial institutions and select corporate entities. Commercial banks can buy and sell any of these instruments without any restriction.
v. LARGE VOLUME
Each single money market instruments is of large amount. A treasury bill is minimum of 1lkh; each CD (commercial deposits) is for least rs.25 lakh: and the minimum amount for a single commercial bill rediscounting and call loan is rs.10 crore. A single transaction of rs.100 crore or ore than is common in case of call loans
MONEY MARKET INSTRUMENTS
Money market instruments operating in Indian money market are:
- Money at call and short notice ( call loans )
- Treasury bills (TBs)—14 day TBs (introduced in May 1997) ,28 day TBs (introduced in October 1997), 91day TBs, 182 day TBs, 364 day Tabs’
- Bill rediscounting scheme BRS
- Certificates of deposits. CDs
- Commercial papers CPs
- Repurchase options or ready forward (REPOs or RF)
- REPOS and REVERSE REPOS
- Options
- Financial futures
- Forward rate agreements
- Swaps
- Collateralized borrowing and lending obligations.
CALL MONEY MARKET
Call money market is important segment of money market. borrowing and lending in call money market are for short duration ranging from overnight to a fortnight. Call loans are repayable on demand at the option of the borrower or lender or at very short notice. Call loans are therefore very liquid, next to cash.
DIFFRENCE BETWEEN PRIMARY MARKET/NIM AND SECONDARY MARKET /STOCK EXCHANGES
PRIMARY MARKET / NIM (new issue market) | SECONDARY MARKET / STOCK EXCHANGE |
MARKET FOR NEW SECURITIES | MARKET FOR EXISTNG SECRITIES |
NO FIXED GEOGRAPHICAL AREA | LOCATED AT FIXED PLACE |
ALL COMPANIES ENTER NEW ISSUE MARKET (NIM) | SECURITIES OF ONLY LISTED COMPANIES CAN BE TRADED AT STOCK EXCHANGE |
SUBJECTED TO CONTROL OUTSIDE BY SEBI,STOCK EXCHANGE AND THE COMPANIES ACT | SUBJECTED TO CONTROL BOTH FROM OUTSIDE AND WITH IN BY SEBI AND COMPANIES ACT |
RESULTS IN RAISING FRESH RESOURCES FOR THE CORPORATE SECTOR | FACILITATES TRANSFER OF SECURITIES FROM ONE CORPORATE INVESTOR TO ANOTHER |
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