Know About Money market and capital market

Generally, the market is the place where buyers and sellers meet, where we can buy our daily needs from anywhere but some financial instruments like stocks.), Bonds, Treasury Bills, etc., there is a different type of market for them, where people trade financial instruments called Financial Markets. ) is called.

Financial market can be divided into two parts

• Money Market
• Capital Market

What is Money Market ?

In the money market, there are financial instruments (financial instruments) through which companies take money for a short time (fund raise), here short time means less than 1 year.

Companies to meet short-term money requirements through money market instruments such as Certificate of Deposits, Commercial Paper, Repurchase Agreement, etc. for a short period of time. Borrows money.

In the money market, transactions usually take place between banks, banks lend money to each other through money market instruments.

The money market is regulated by RBI (Reserve Bank of India). A retail investor can easily invest his money in the money market through a money market account or a money market mutual fund.

 Money market account is a part of savings account in which you get more returns than savings account. But in money market account you have to keep more money (minimum balance requirement) than in savings account.

What is Capital Market?

 There are financial instruments in the capital market through which the company takes money for a long time (Fund raise). Here long time means a time period of more than 1 year.

 The company or the government raises funds through market instruments such as stocks and bonds to meet its long-term money requirements. SEBI regulates capital market. Capital market instruments include money market instruments There is more risk as well as higher returns.

There are two types of capital market

• Primary Market

• Secondary Market

What is Primary Market

New shares and bonds are issued in the primary market, so the primary market is also called the new issue market.

In the primary market, the company sells shares to the investor so that they get money in return and in return the investor gets a stake in the company. In the primary market, there is a transaction directly between the company and its investors. In the primary market, the money given by the investors is directly received by the company and in return the company gives shares to the investors. By which they become partners in that company.

In the primary market, the company can raise money in different ways such as public issue, right issue, private placement etc.

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Public Issue or IPO (Initial Public Offering) – When a company sells its shares to the public for the first time, it is called IPO.

Private Placement – In this, instead of the public, the company sells its shares to a select few investors such as Mutual Funds, Insurance Company, Venture Capitals, Banks etc.

Right Issue –

In this, the company raises money by selling shares to its existing investors. For example, if a company is bringing a rights issue of 7:12 then their investors get the right that if they have 12 shares of that company then they can buy 7 shares it works in a ratio like if If an investor has 96 shares, then he will be able to buy 56 shares. Their investors will get these shares at a lower price than the market price, if the company is giving a discount of 50% and the current price of that share is Rs 1000, then their investors will be able to buy it for Rs 500.

Investors can only buy shares in the primary market, they cannot sell them, if you want to sell the shares bought in the primary market, then you will have to sell them in the secondary market.

In the primary market. when the company sells its shares in the IPO, after the completion of the process of IPO, the investors get the shares of that company which is called allotment. And the company’s shares get listed on the stock exchange.

Stock exchange is the secondary market where you can sell the shares you have bought. To get more information about stock exchange, you can read this article to get detailed information.

Secondary Market –

Whenever we hear the name of stock market, it comes to secondary market as there are two exchanges in stock market National Stock Exchange and Mumbai Stock Exchange whenever we trade in them actually, we are secondary market. we’re trading in.

All the trades that take place in the secondary market are between one investor to another, in which the company is not involved.

For example, if you are buying shares of Reliance Ind on any exchange (NSE or BSE), then you are buying it from another investor and whatever money you pay in return will reach that investor and that the shares purchased by you from the investor will be credited to your demat account.

Secondary market is also called after market because there is buying and selling of shares already started here.

Difference between Primary Market and Secondary Market

New shares and bonds are issued in the primary market. The shares and bonds already issued are traded in the same secondary market.

In the primary market, there is a transaction between the investor and the company, while in the secondary market, there is a transaction between the investors.

In the primary market, money goes from investor to company, while in the secondary market money goes from one investor to another.

The company decides the price of a share in the primary market, while the price of a share in the secondary market is decided on the basis of supply and demand.