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Financial markets of India

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  1. Introduction
  2. What is financial market?
    1. Important functions of financial markets
    2. Features of financial market
    3. Functions of financial market
    4. Classification of financial market
  3. Meaning of capital market
    1. Capital market from pre-period 1991
    2. Importance of capital market
    3. Classification of capital market
    4. Factors Influencing the capital market
    5. The emerging scenario of the capital market
  4. Evolution of money market in India
    1. Pre-independence period
    2. Post-independence period
    3. Meaning of money market
    4. Functions of money market
    5. Characteristics of money market
  5. Reserve Bank Of India and the money market
  6. Components of money market in India
  7. Role of the RBI in the call market
  8. Call money market in India
  9. Meaning of commericial paper
    1. Characteristics features of commercial papers
    2. Commercial papers in India
    3. Guidelines in respect of the sale of commercial papers
    4. Definition of stock market
    5. Conclusion
    6. Reference

Financial institutions, financial market and financial instruments are considered main components that are closely linked with each other, because financial institutions deals in financial instruments in the financial market. Financial transactions takes place in financial markets. Each and every business unit must operate within the financial system. The financial system consists of a number of organization and institutions and markets serving the needs of consumers, firms and governments. If a firm invests temporarily idle funds in marketable securities, then it has to approach the financial markets. Most firms use financial markets to help finance their investments in assets. Financial markets are at the core of the transmission mechanism of monetary policy. In India, financial markets have been developed with a specific emphasis on increasing allocation efficiency of resources and promoting financial stability. A Financial system operates through financial markets and institutions. Financial markets deal in financial assets and instruments of various kinds such as currency, deposits, cheques, bills, and bonds, etc. Financial markets are very much like markets for goods and services. As such, they have their own demand, supply, quantities, prices etc. Financial markets are the centers or arrangement that provide facilities for buying and selling of financial claims and services. The corporations, financial institutions, individuals and governments trade in financial products on the markets either directly or through brokers and dealers on organized exchanges or off-exchanges. The participants on the demand and supply sides of these markets are financial institutions, agents, brokers, dealers, borrowers, lenders, savers, and others who are inter-linked by the laws contracts covenants and communication networks.

[...] Capital Market from pre-period 1991 Prior to the onset of financial sector reforms in 1991, the capital market structure in India was subject to several controls and opaque procedures. The trading and settlement system was outdated and not in tune with international practices. Raising of capital from the market was regulated by the capital issues act which was administered by the Controller of Capital Issues [CCIs] in the ministry of finance, Government of India. The scheme of controls under the act required all the companies to obtain prior consent for issues of capital to the public. [...]

[...] Meaning of money market Money market is the important segment of the financial system as it provides the fulcrum for equilibrating short-term demand for and supply of funds, thereby facilitating the conduct of monetary policy. It is a market for short-term funds with a maturity of up to one year and includes financial instruments that are close substitutes for money. The main instruments comprising the money market are: Call / Notice money market Certificates of deposit Commercial paper Commercial bill Definition of money market The money market includes the entire machinery for channeling a short-term funds. [...]

[...] Call loans in India are given to the bill market, the purpose of dealing in the bullion markets and stock exchanges, between banks, Frequently to individuals of high financial status in Mumbai for ordinary trade purposes in order save interest on cash credits and overdrafts. Among these uses, inter-bank use has been the most significant and their use on stock exchanges and other markets has been modest. Over a period of time, non-inter bank uses of call money have further declined in relation to inter-bank transactions. [...]

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