Money and capital market.

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——————————————————————–


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