The money market is a market for short term loan . The period of borrowing and lending in the money market is one year or less . On the other hand , the capital is a market for long term loans. It is a market in which funds are borrowed and lent for a period over one year. The two markets also differ in terms of its nature of function. The money market deals in highly marketable liquid debt Instruments such as the promissory note , the bill of exchange ,the treasury bill etc. On the other hand ,the capital market deals in common stocks , share , debentures and bonds . There are usually different financial institutions engaged in these two types of markets. The bill brokers , discount houses and commercial banks form the money market , while investment trusts , insurance companies , finance houses, etc form the capital market. However , in underdeveloped countries the two markets are difficult to distinguish because of the lack of organised money and capital markets. Both the money and capital markets are jointly called financial markets.
These two markets are very common and familiar to people and people always discuss about it . So i want to explain it in very simple way , that why every common people could understand it. The money market is not a market in the usual sense of the term . It does not mean a single trading organisation dealing in money . But it refers to ” a net work of markets that are grouped together because they deal in financial instruments that have a similar function in the economy and are to some degree substitutes from the point of view of holders. The instruments of the money are liquid assets , interest bearing debts that mature within a short period of time or are callable on demand.” Related to this matter, a famous Economist pointed out that ” Money market is a the collective name given to the various forms and institutions that deal with the various grades of near money.” Thus the money market deals not in money proper but in near money assets and ” in which short term debt obligations are traded.” It is usually associated with a particular place like London , New York, Mumbai or Tokyo where national or international dealings are done in short – term loans.
As we know that both money market and capital market are two parts of same coin . These markets forms are very comprehensive by nature as well as in functions too. So I think it will be better to explain in several steps one by one . That’s why my dear readers , i will write about Capital Market in my next blog. It may be possible, this way of my writing never bother you. thanks and meet you in next blog.
Capital market is a known market which is commonly used for Capital by investor.The capital market is a market which deals in long-term loans. It supplies industry with fixed and working capital and finances medium term and long term borrowings of the central , state and local governments. The capital market deals in ordinary stocks , shares and debentures of corporations , bonds and securities of governments.
The funds which flow into the capital market come from individuals who have savings to invest , the capital bank , the commercial banks and non- bank financial intermediaries , such as insurance companies , finance houses , unit trusts, investment trusts, building societies etc. Further there are the issuing houses which do not provide capital but underwrite the shares and debentures of companies and help in selling their new issues of shares and debentures. The demand for funds comes from joint stock companies for working and fixed capital and from local , state and central governments, improvement trusts, port trusts etc.
The capital market functions through the stock exchange market. A stock exchange is a market which facilitates buying and selling of shares , stocks , bonds , securities and shares but also for new shares and securities. In fact , the capital market is related to the supply and demand for new capital , and the stock exchange facilitates such transactions. ————————————————————————————————————————————————————————————————————————————-The End——————————————————————–