Capital Market

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Here is a list of subtopics under Capital Market:

  • Primary Market
    • Initial Public Offering (IPOIPO)
    • Follow-on Public Offering (FPO)
    • Rights Issue
  • Secondary Market
    • Stock Exchange
    • Over-the-Counter (OTC) Market
    • Exchange Traded Funds (ETFs)
    • DerivativesDerivatives Market
  • Capital Market Participants
    • Investors
    • Issuers
    • Intermediaries
    • Regulators
  • Capital Market Instruments
    • EquityEquity SharesShares
    • Debt Instruments
    • Derivatives
  • Capital Market Risks
    • Market Risk
    • Credit Risk
    • Liquidity Risk
    • Operational Risk
    • Political Risk
  • Capital Market Regulations
    • (SEBI)
    • Reserve Bank of India (RBI)
    • Insurance Regulatory and Development Authority of India (IRDAI)
    • Pension Fund Regulatory and Development Authority (PFRDA)
  • Capital Market Trends
    • Growing Institutional Investor Base
    • Increasing Retail Investor Participation
    • Emergence of New Financial Products
    • Increasing Use of Technology
    • Growing Cross-Border Flows

I hope this helps!
A capital market is a market for securities (debt or equity), where buyers and sellers meet to trade. Securities include stocks and BondsBonds, and the capital market is where companies raise MoneyMoney by issuing these securities. The capital market is also where investors can buy and sell these securities.

The capital market is divided into two main markets: the primary market and the secondary market. The primary market is where companies issue new securities to raise money. The secondary market is where investors buy and sell existing securities.

The primary market is where companies raise money by issuing new securities. This can be done through an initial public offering (IPO), a follow-on public offering (FPO), or a rights issue.

An IPO is the first time that a company’s shares are offered to the public. This is usually done through a stock exchange. When a company goes public, it is said to have “listed” on the stock exchange.

A follow-on public offering (FPO) is when a company issues new shares to the public after it has already gone public. This is usually done to raise more money for the company.

A rights issue is when a company offers existing shareholders the opportunity to buy new shares at a discount. This is usually done to raise money for the company or to increase its share capital.

The secondary market is where investors buy and sell existing securities. This can be done through a stock exchange, an over-the-counter (OTC) market, or an exchange traded fund (ETF).

A stock exchange is a marketplace where buyers and sellers of securities meet to trade. The most well-known Stock Exchanges are the New York Stock Exchange (NYSE) and the Nasdaq Stock Market.

An over-the-counter (OTC) market is a market for securities that are not listed on a stock exchange. OTC markets are usually smaller and less regulated than stock exchanges.

An exchange traded fund (ETF) is a type of InvestmentInvestment fund that tracks an index, such as the S&P 500. ETFs are traded on stock exchanges like stocks.

The capital market is a vital part of the economy. It allows companies to raise money to grow their businesses, and it provides investors with a way to earn a return on their money. The capital market is also a major source of liquidity for the economy.

The capital market is regulated by a number of government agencies, including the Securities and Exchange Commission (SEC) in the United States. These agencies are responsible for ensuring that the capital market is fair and orderly, and that investors are protected from fraud.

The capital market is constantly evolving. New financial products are being developed all the time, and new technologies are being used to trade securities. The capital market is also becoming more globalized, with investors from all over the world trading securities.

The capital market is a complex and ever-changing system. However, it is a vital part of the economy, and it provides a number of benefits to businesses and investors.

Here are some of the benefits of the capital market:

  • It allows companies to raise money to grow their businesses.
  • It provides investors with a way to earn a return on their money.
  • It is a major source of liquidity for the economy.
  • It is regulated by government agencies to protect investors.
  • It is constantly evolving with new financial products and technologies.
  • It is becoming more globalized, with investors from all over the world trading securities.

The capital market is a powerful tool that can be used to achieve a variety of goals. However, it is important to understand the risks involved before investing. Some of the risks of the capital market include:

  • Market risk: This is the risk that the value of an investment will go down due to changes in the market.
  • Credit risk: This is the risk that a borrower will not repay a loan.
  • Liquidity risk: This is the risk that an investment cannot be sold easily or at a fair price.
  • Operational risk: This is the risk of losses due to errors, fraud, or other problems with a company’s operations.
  • Political risk: This is the risk that changes in government policy will negatively affect the value of an investment.

Despite the risks, the capital market can be a very rewarding place to invest. By understanding the risks and potential rewards, investors can make informed decisions about where to put their money.
Primary Market

  • Initial Public Offering (IPO): An IPO is the first time that a company offers its shares to the public.
  • Follow-on Public Offering (FPO): An FPO is a secondary offering of shares by a company that has already gone public.
  • Rights Issue: A rights issue is an offer to existing shareholders to buy new shares in a company.

Secondary Market

  • Stock Exchange: A stock exchange is a marketplace where shares of companies are bought and sold.
  • Over-the-Counter (OTC) Market: The OTC market is a decentralized market where shares of companies are bought and sold directly between buyers and sellers.
  • Exchange Traded Funds (ETFs): ETFs are a type of investment fund that tracks an index of stocks or other assets.
  • Derivatives Market: The derivatives market is a market for financial instruments that derive their value from the value of other assets.

Capital Market Participants

  • Investors: Investors are people who buy and sell securities in the capital market.
  • Issuers: Issuers are companies that sell securities in the capital market.
  • Intermediaries: Intermediaries are companies that help investors and issuers trade securities in the capital market.
  • Regulators: Regulators are government agencies that oversee the capital market.

Capital Market Instruments

  • Equity Shares: Equity shares are shares of ownership in a company.
  • Debt Instruments: Debt instruments are loans that companies issue to raise money.
  • Derivatives: Derivatives are financial instruments that derive their value from the value of other assets.

Capital Market Risks

  • Market Risk: Market risk is the risk that the value of a security will go up or down due to changes in the market.
  • Credit Risk: Credit risk is the risk that a company will not be able to repay its debts.
  • Liquidity Risk: Liquidity risk is the risk that a security cannot be sold easily at a fair price.
  • Operational Risk: Operational risk is the risk of losses due to errors, fraud, or other problems with a company’s operations.
  • Political Risk: Political risk is the risk of losses due to changes in government policy or regulation.

Capital Market Regulations

  • Securities and Exchange Board of India (SEBI): SEBI is the government agency that regulates the capital market in India.
  • Reserve Bank of India (RBI): The RBI is the central bank of India and is responsible for and financial stability.
  • Insurance Regulatory and Development Authority of India (IRDAI): The IRDAI is the government agency that regulates the insurance IndustryIndustry in India.
  • Pension Fund Regulatory and Development Authority (PFRDA): The PFRDA is the government agency that regulates the pension fund industry in India.

Capital Market Trends

  • Growing Institutional Investor Base: The number of institutional investors in India is growing rapidly. Institutional investors are large, professional investors such as pension funds, Mutual Funds, and Hedge Funds.
  • Increasing Retail Investor Participation: The number of retail investors in India is also growing rapidly. Retail investors are individual investors who buy and sell securities on their own.
  • Emergence of New Financial Products: New financial products are constantly being developed in the capital market. These new products offer investors a variety of ways to invest their money.
  • Increasing Use of Technology: Technology is being used increasingly in the capital market. This includes the use of online trading platforms, mobile apps, and social media.
  • Growing Cross-Border Flows: The amount of money flowing in and out of the Indian capital market is growing rapidly. This is due to the increasing GlobalizationGlobalization-2GlobalizationGlobalization of the Indian economy.
    Question 1

A company that wants to raise money from the public by selling shares for the first time does which of the following?

(A) Issues an IPO
(B) Issues a FPO
(CC) Issues a rights issue

Answer
(A)

An IPO is an initial public offering, which is when a company first sells shares to the public. A FPO is a follow-on public offering, which is when a company sells additional shares to the public after it has already gone public. A rights issue is when a company offers existing shareholders the opportunity to buy new shares at a discount.

Question 2

A market where investors can buy and sell shares of companies is called which of the following?

(A) A stock exchange
(B) An over-the-counter (OTC) market
(C) An exchange traded fund (ETF)

Answer
(A)

A stock exchange is a marketplace where investors can buy and sell shares of companies. An OTC market is a market where investors can buy and sell shares of companies that are not listed on a stock exchange. An ETF is an exchange traded fund, which is a type of investment fund that tracks an index of stocks or other assets.

Question 3

Which of the following is not a capital market participant?

(A) An investor
(B) An issuer
(C) A regulator
(D) A broker

Answer
(D)

A broker is an intermediary between buyers and sellers of securities. Investors, issuers, and regulators are all capital market participants.

Question 4

Which of the following is a capital market instrument?

(A) An equity share
(B) A debt instrument
(C) A derivative

Answer
(A, B, C)

Equity shares, debt instruments, and derivatives are all capital market instruments.

Question 5

Which of the following is a capital market risk?

(A) Market risk
(B) Credit risk
(C) Liquidity risk
(D) All of the above

Answer
(D)

Market risk, credit risk, and liquidity risk are all capital market risks.

Question 6

Which of the following is a capital market regulator in India?

(A) The Securities and Exchange Board of India (SEBI)
(B) The Reserve Bank of India (RBI)
(C) The Insurance Regulatory and Development Authority of India (IRDAI)
(D) All of the above

Answer
(D)

The Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI), and the Insurance Regulatory and Development Authority of India (IRDAI) are all capital market regulators in India.

Question 7

Which of the following is a capital market trend?

(A) Growing institutional investor base
(B) Increasing retail investor participation
(C) Emergence of new financial products
(D) All of the above

Answer
(D)

Growing institutional investor base, increasing retail investor participation, and emergence of new financial products are all capital market trends.