Tamilnadu Samacheer Kalvi 12th Commerce Notes Chapter 5 Capital Market Notes
→ The term capital market refers to the facilities and institutional arrangements through which long-term funds, both debt and equity are raised and invested.
→ An ideal capital market is one where finance is available at reasonable cost.
→ Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, and stocks.
→ Like any market, the capital market is also composed of those who demand funds (borrowers) and those who supply funds (lenders).
→ According to Aran K. Datta, capital market may be defined as “a complex of institutions investment and practices with established links between the demand for and supply of different types of capital gains”.
→ The dealings in a capital market are done through the securities like shares, debentures, etc. The capital market is thus called securities market.
→ The price of the securities is determined based on the demand and supply prevailing in the capital market for securities.
→ The participants of the capital market include individuals, corporate sectors, Govt., banks and other financial institutions.
→ Capital market has its impact in the overall economy, wherever suppliers and users of capital get together and do business.
→ The capital market is divided into two i.e., primary market and secondary market.
→ Primary market is a market for new issues or new financial claims. Hence, it is also called New Issue Market.
→ There are three ways by which a company may raise capital in a primary market. They are:
(i) Public Issue, (ii) Rights Issue (iii) Private Placement
→ Secondary Market may be defined as the market for old securities, in the sense that securities which are previously issued in the primary market are traded here.
→ For a speedy economic development adequate capital formation is necessary.
→ A number of institutions of finance have been established to cater to the credit requirements of various segments of industry and needs.
→ The foreign exchange market abets the foreign exchange trading.