📈 Money Market & Capital Market
BSE, NSE, SEBI, IPO, shares, bonds, mutual funds.
📈 Where Money Meets Investment
Financial markets channel savings into productive investments. India has two main segments:
Money Market — deals in short-term instruments (less than 1 year). Purpose: meet short-term liquidity needs. Instruments: Treasury Bills, Call Money, Commercial Paper, Certificate of Deposit, Repo.
Capital Market — deals in long-term instruments (more than 1 year). Purpose: long-term finance. Instruments: Shares, Debentures, Bonds, Mutual Funds.
Capital Market has two segments:
• Primary Market — where companies raise new capital by issuing new shares/bonds (IPO — Initial Public Offering). Company gets the money.
• Secondary Market — where existing securities are traded (BSE, NSE). Company does NOT get money — it's between investors.
SEBI (Securities and Exchange Board of India) — regulates capital markets. Established 1988, statutory body 1992. Protects investor interests.
• BSE (Bombay Stock Exchange) — established 1875. Asia's oldest stock exchange. Located: Dalal Street, Mumbai. Index: SENSEX (30 stocks).
• NSE (National Stock Exchange) — established 1992. Largest by turnover. Index: NIFTY 50 (50 stocks). First fully electronic exchange in India.
• SENSEX = Sensitive Index — tracks 30 largest companies on BSE by market cap
• NIFTY 50 = National Fifty — tracks top 50 companies on NSE
• Market hours: 9:15 AM to 3:30 PM (Monday to Friday)
• Equity/Share — ownership in a company. High risk, high return. Dividends.
• Debenture/Bond — loan to a company. Fixed interest. Lower risk.
• Mutual Fund — pool of money from many investors managed by a professional. NAV (Net Asset Value).
• Treasury Bill (T-Bill) — short-term government debt (91, 182, 364 days). Risk-free.
• Government Securities (G-Sec) — long-term government bonds.
• Commercial Paper — short-term unsecured note by large companies.
• IPO — Initial Public Offering — company lists on stock exchange for first time.
Financial Market Structure
AnimationIndia's financial market has deepened significantly — equity market cap crossed $4 trillion in 2024.
SEBI & Market Concepts
InteractiveProcess:
1. Company hires investment banks as underwriters
2. Files DRHP (Draft Red Herring Prospectus) with SEBI — full financial disclosure
3. SEBI reviews and gives approval
4. Company sets price band (floor and cap price) or book building process
5. Subscription period: investors apply (usually 3-5 days)
6. Allotment: shares allotted to applicants (oversubscribed IPOs use lottery for small investors)
7. Listing: company shares listed on BSE/NSE — trading begins
Key terms:
• Face value: Original value (typically Rs 10 or Rs 1)
• Issue price: Price at IPO (premium over face value)
• Market price: Current trading price after listing
• Grey market premium (GMP): Unofficial demand indicator before listing
Recent notable IPOs: LIC (2022), Paytm (2021), Zomato (2021).
• Where companies issue NEW securities for the first time
• Company raises FRESH capital from investors
• Company receives the money
• Instruments: IPO (first time), FPO (Follow-on Public Offer), Rights Issue, Private Placement
• No physical location — process managed by investment banks
• SEBI regulates disclosure requirements
Secondary Market (Stock Exchange):
• Where EXISTING securities are traded between investors
• Company does NOT get any money — transactions are between buyers and sellers
• Purpose: Provides liquidity — investors can sell their shares anytime
• Physical/electronic location: BSE, NSE
• Price determined by demand and supply (market forces)
Analogy: Primary market = buying a new car from showroom (manufacturer gets money). Secondary market = buying a used car from owner (original manufacturer gets nothing).
Without secondary market, investors would never buy in primary market — no exit route!