Capital Markets and the functions of the capital market in the country.
Capital market is a financial market in which long-term debt or equity-backed securities are bought and sold. It is defined as markets in which money is provided for periods longer than a year.
Capital markets are markets for buying and selling equity and debt instruments. They act as channel savings and investment between suppliers of capital such as retail investors and institutional investors, and users of capital like businesses, government and individuals.
They have numerous participants including individual investors, institutional investors such as pension funds and mutual funds, municipalities and governments, companies and organizations, banks and financial institutions.
Objectives of the Capital Markets
The objectives are discussed below
1. The increase in the size of the industrial units and business corporations due to technological developments, economies of scale and other factors has created a situation where in the capital at the disposal of one or few individuals is quite insufficient to meet the investment demands.
2. A developed capital market can solve this problem of paucity of funds. Form organised market can mobilise and pool together even the small and scattered savings and augment the availability of investable funds.
3. They can create greater financial inclusion by introducing new products and services tailored to suit investors’ preference for risk and return as well as borrowers’ project needs and risk appetite. Innovation, credit counseling, financial
Functions of Capital Markets
Functions of the capital markets includes
1. Mobilization of savings to finance long term investments.
2. Facilitates trading of securities.
Minimization of transaction and information cost.
3.Encourage wide range of ownership of productive assets.
4. Quick valuation of financial instruments like shares and debentures.
5.Facilitates transaction settlement, as per the definite time schedules.
6. Offering insurance against market or price risk, through derivative trading.
7.Improvement in the effectiveness of capital allocation, with the help of competitive price mechanism.
These are the functions of the capital markets as well as the objectives and meaning of capital market in in country.