Overview and Structure of Financial Markets in India

Overview and Structure of Financial Markets in India

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Any market where securities are traded is considered a financial market. The Indian financial market can be thought of as a place where financial products and services are frequently bought and sold. It buys and sells a variety of investments, financial services, loans, and other items. The financial market in India can be partitioned into the Money and the capital market. Financial markets can include, but are not limited to, bond markets, stock markets, money markets, and so on. Securities and assets that are listed on regulated exchanges or traded over-the-counter (OTC) are examples of financial markets. The nation's economic growth is based on the financial markets. In the event that the markets fail, unemployment and a recession could follow.

The financial market in India is similar to other markets in that it involves trading, or buying and selling only financial goods and services. As a result, the primary business of the financial markets is the sale and purchase of a variety of investments, financial services, loans, and other products. Since the prices of financial instruments determine demand and supply, they are subject to change. Borrowers and lenders can meet in financial markets. They bring together people who have extra money and people who need money so that they can easily transfer money between each other. In the financial markets, a variety of financial instruments facilitate the transfer of funds.

Structure of the Indian Financial Market - The money market and the capital market are the two main parts of the Indian financial market where primary and secondary markets further subdivide the capital market.

1. Money Market - The currency market goes about as a commercial center for momentary getting and loaning. It encompasses large-scale dealings among institutions and traders at wholesale level. Individual investors purchase mutual funds and customers of banks open accounts in the retail money market. The money market's assets are risk-free and highly liquid. Risk of volatility is low and returns are low because the maturity period is shorter.

2. Capital Market - Capital markets trade long-term securities in contrast to the money market. The capital market is where securities with maturities of more than one year are traded. The market then trades both equity-oriented and debt-oriented securities. Foreign Institutional Investors (FIIs), financial institutions, non-resident aliens (NRIs), individuals, and others all participate in the capital market. Primary Market and Secondary Market are additional divisions of the capital market.