This post will help you learn about capital market and its components in the simplest way possible.
Meaning of Capital Market –
It is a part of financial market which helps companies to raise capital through shares, bonds and other securities. Investors invest which invest in securities can be individuals, banks, insurance companies, mutual fund companies etc.
Capital market is divided into two –
- Primary Market – It is also known as New Issues Market because securities are sold for the first time in this market. Here companies go directly to the investors to sell their securities. example – Initial Public Offering (IPO), Issue through Prospectus etc.
- Secondary Market – It is also called after-market. Securities are sold through stock exchange. Thus they are not directly sold by the company to the investors. Stock Exchange acts like the intermediary and the securities are circulate among the stock exchange and the investors as they trade.
In primary market the one cannot sell the securities purchased but in secondary market it’s possible. In secondary market there is no capital formation like it happens in primary market. Investors trade in secondary market to earn profit. There are various stock exchanges in the world, in India there are only two i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).