The capital market in India is distinct from the money market because it deals with loanable funds with longer maturities.This phrase alludes to the various forms of lending and receiving money, as well as the corresponding institutional frameworks, known variously as “term funds,” “medium term funds,” and “long term funds.” Companies typically employ funds borrowed from the primary capital market for long-term investments. It has nothing to do with the products of monetary investment. Instead, the conversation centers on spending money and the reasons for investing. To learn more, take a look at these features of indian capital market.
The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) oversee the Indian stock exchange. The purpose of establishing these regulatory bodies was to strengthen the foundation of India’s financial markets and to ensure the safety of investors. Stock market trading platforms are now accessible from anywhere in the country via trading terminals, thanks to the widespread adoption of IT.
Features of Indian Capital Market
The term “capital market” refers to the financial market where investors can “capitalize” their savings. In this marketplace, those with extra funds or assets to invest or lend can connect with those seeking capital for a wide range of purposes. Long-term investments are the primary focus in such a market. The investment is subject to a lock-in period of more than a year. Continue reading to become an expert on features of indian capital market and learn everything you should know about it.
Lessen the Price Changes
Market observers describe price changes from one period to another as volatile. It refers to how quickly the stock price rises or falls. Market participants view volatility negatively because it indicates uncertainty and risk. Since the year 2000, when trading in index futures began, price fluctuations have been less extreme.
Helps to Bring in Money
Those who have surplus funds and would like to invest them in order to reap the benefits of compounding might do so on the financial market. These individuals can take advantage of these possibilities by investing in the stock market.
Helps those in Between;
Traders, banks, and other financial institutions are all examples of intermediaries that facilitate investor transactions by facilitating the transfer of dollars and shares. The general public believes that trading on the capital markets is risk-free since the government regulates the industry.
Ban on Insider Trading
Those with insider knowledge of a corporation may utilize that information unethically to profit from stock market fluctuations. Also, the Securities and Exchange Board of India (SEBI) has been quite clear that any type of insider trading is prohibited in the Indian financial markets.
Circuit Breakers
They installed breakers to reduce the frequency of large sell-offs and panic selling. A “collar” is a measure taken by an exchange to restore calm to the market and investigate any accusations of manipulation if an index or a specific stock has a 10%, 15%, or 20% price movement.
Long-term Investments are a Link between Savers and Investment Opportunities
In addition, the capital market facilitates the transfer of funds from investors to businesses in need of financing, thereby connecting savings and investment. It facilitates long-term investments, allowing investors to put their money to better use.
A Factor in how Much Money is Made
Actions on the capital market set the output of the economy in terms of capital. Those in a position to do so are compelled to invest more of their surplus in the hopes of profiting from the capital market’s many alluring prospects.
Rules and Laws Set by the Government
The capital market must adhere to governmental regulations regardless of whether or not any restrictions are in place. The government regulates and legislates these marketplaces. The Securities and Exchange Board of India (SEBI) is one such government agency that establishes stock exchange regulations.
Makes Use of Middlemen
Capital market intermediaries come in numerous forms, including agents, underwriters, depositories, and others. These intermediaries perform crucial functions for the capital market and can be compared to the “working organs” of the body. The stock market could not function without intermediaries.
T+2 Time for Settlement
In order to finalize deals on the Indian stock market, the “T+2” period is currently in use. The term “T” refers to the trading day, whereas “T+2” indicates that settlement and delivery of the shares will occur on the following trading day.
FAQ
What is One of the most Important Parts of a Market Economy?
Free exchange of goods and services between individuals is central to the principles of market economy. In this transaction, money used because it serves as both a store of value and a medium of exchange.
How do i Begin to Learn about the Stock Market?
Registering for one of our courses, such as “Basics of Financial Markets,” is a great way to kickstart your education in the financial markets. You can also visit our articles and films on YouTube for more information on this subject.
What are the Capital Market’s Middlemen?
Various intermediaries such as stock exchanges, underwriters, and investment banks all play a role in the Indian capital market. These hubs of communication aid in maintaining robust and efficient capital markets.
Final Words
The Capital Market is a meeting ground for those looking to lend money and those seeking to borrow it. There is a market for long-term financial assets, defined as those with a maturity of ten years or more. The market operates in accordance with the guidelines established by the government. Brokers, sub-brokers, depositories, payment banks, underwriters, and others all play intermediary roles in the Capital Market. Market forces largely determine the rate at which new money is generated. So, this article will cover features of the Indian capital market in-depth, along with various examples for your convenience. For a more extensive education on classification of capital market, continue reading.
