The main factors that show the difference between money market and capital market is time period or term that is money market deals in short term funds and capital market deals in long term funds. Money Market regulates by RBI where capital market regulates by SEBI. Money Market Instrument is bills of exchange, certificate of deposits, treasury bills, commercial paper, etc. where Capital Market Instrument is shares, debentures, bonds, etc.
To know about Money or Capital market first we have to understand about Financial Market. It is a place where buyers and sellers trade in financial assets like bonds, commodities, currencies, stock and derivatives. It has many types one of them is the capital and another is money market. Let us discuss the difference between them.
Capital market: In this buying and selling is done as a long term investment in which money is provided for a long time more than one year. It is risky and these are for long term financial growth and stability. The instrument of this is stocks, bonds, shares, etc. and its regulate by SEBI. In this brokers deal in long term debt and equity capital in the form of shares, public deposits and debenture. Interest rates or dividend rates depend on supply and demand of securities and on stock market’s Sensex conditions. Now capital market is also divided into two parts.
Primary Market: In this buyer buys the stocks from sellers and seller sell the stock for the first time. In this transaction is made between issuers and investors.
Secondary Market: In this buyer buys existing stock from seller. It means investors to buy or sell the existing securities. In this transaction is made between investors.
Another important segment of this is bond and stock market.
Money Market: In this buy and selling done for short term period up to one year or less than one year, mainly its range from 30 days to a year, sometimes for loans that are expected to be paid back as early as overnight. Here lending and borrowing are done for short term thus; an investor who wants to place investment for short term period goes to the money market. The instrument of this is deposits, bill of exchanges, collateral loans, commercial paper, treasury bills, repurchase agreement and certificates of deposit. This is closely related to cash flow, it is the place where banks deal in short term loans in the form of treasury bills and commercial bills. The rate of interest is controlled by RBI or central bank of any country. It provides many functions to individual, corporate and it plays an important role in ensuring companies to maintain an appropriate level of liquidity on a daily basis. Generally, investors invest funds in the money market in a safe manner, thus it is consider as a low risk market.
Equity Market Investment Strategy by MarketMagnify
Equity Market is the market for trading in equity instrument where stocks are securities that are a claim on the earning and assets of a company. Equity instrument would be a common stock shares those trade in stock exchange.
What is stock exchange and its functions?
Stock Exchange is an organized market, which provide platform to buy and sell the securities. These organize give opportunity to investors to take part in the economic progress of the corporation. There are many functions of a stock market one of them is to make available cost effective trading platform, provide information on prices and the most important function is bound up of liquidity by concentrating demand and supply.
Investment Strategy & Tips for Indian Stock Market
Trading Strategy include various method to trade in stock market like Discretionary trading, automated trading. Similarly, investment strategy advice the investors, one of them investment strategy is buy and hold, it is a long term investment strategy.
