Definition of Capital Market
A capital market is where financial securities like shares, bonds, or financial instruments are traded by their buyers and sellers. Individual and institutional investors trade all kinds of financial securities in that market. Generally, long-term securities or debt are traded, with maturities of one or more years.
Capital markets exist in two parts: the primary market and the secondary market. The primary market refers to new securities born and sold for the first. In contrast, the secondary market refers to those securities that already exist in the primary market and then come on the secondary market for trade.
Features of Capital Market
The capital market has immense significance in terms of its usage and network, which does not work only in a particular sector or nation, but works worldwide and globally. This can include the stock market, bond market, foreign stock market, currency market, etc. The capital market has excellent features, which are given below;
It connects to savers and investors
The capital market enables to connect the link between savers and investors. Through this link, savers who want to lend their money can easily do so via the capital market, and investors who are seeking money can easily raise funds from the capital market. Here the capital market provides systemized mechanism between savers and investors.
It deals in long-term funds
Generally, the capital market provides medium-term and long-term funds. For example, the age of securities maturities is one year or more. It never deals with short-term funds that are less than one year of maturity.
Utilizes Intermediaries
It is an essential element of the capital market that utilises various intermediaries like brokers, underwriters, depositors, etc.
Government Rules and Regulations
The capital market operations are governed under the guidelines of government policies, rules, and regulations. The framework of the capital market is covered under the rules and regulations. For example, the stock exchange works under the guidelines of SEBI, which the government declares.
