Capital Market Explained | Types of Capital Market and its Instruments | Capital Market kya hoti hai

Paper Tyari

24 Apr 202213:02

Summary

TLDRThis script discusses the importance of capital markets for long-term commercial development. It explains how capital markets, including medium and long-term fund markets, facilitate investment and production by acting as an intermediary between savers and investors. The script covers the functions of capital markets, types of capital market instruments like shares and debentures, and the role of regulatory bodies like SEBI in India. It also touches on primary and secondary markets, IPOs, and the economic indicators provided by stock exchanges.

Takeaways

😀 Capital markets are essential for long-term commercial development by providing necessary long-term capital.
🏭 Capital markets consist of medium-term and long-term fund markets, which direct investments towards industries and businesses.
💼 Investors and savers play a crucial role in capital markets, investing their money and potentially creating productive websites.
📈 Capital markets can facilitate business expansion, like in the example of Reliance Jio, by allowing companies to raise funds through public offerings.
📊 The video emphasizes the importance of watching the entire video for valuable insights into capital markets.
🌐 Capital market functions include mobilizing financial resources, promoting industrial development, and providing cheap and driver-first capital for industrial sectors.
💹 Capital markets contribute to economic growth by encouraging investment in sectors that are vital for a country's development.
🔄 The script differentiates between primary and secondary markets, explaining that primary markets are for new issues while secondary markets facilitate the resale of securities.
🎯 Capital market instruments include shares (stocks) and debentures (bonds), which are used by companies to raise capital and offer returns to investors.
🏢 Regulatory bodies like SEBI (Securities and Exchange Board of India) oversee the capital market to ensure fair practices and investor protection.
📝 The importance of understanding capital market instruments, such as equity shares and preference shares, and debt instruments like debentures, is highlighted for making informed investment decisions.

Q & A

What is the primary role of capital markets in commercial development?
-The primary role of capital markets is to provide long-term capital necessary for commercial development. They help in channeling funds from investors to industries and businesses, facilitating their growth and expansion.
What are the different types of capital market instruments discussed in the script?
-The script discusses two main types of capital market instruments: Shares (also known as Stocks) and Debentures (also referred to as Bonds).
How does the capital market facilitate the flow of funds from savers to productive ventures?
-The capital market acts as an intermediary between savers and investors, directing the funds from savers towards investments in industries and businesses that require capital for their operations and expansion.
What is the difference between primary and secondary markets in the context of capital markets?
-Primary markets are where companies issue shares or bonds for the first time to the public to raise capital. Secondary markets, on the other hand, are where previously issued shares or bonds are traded among investors, providing liquidity to these securities.
What is an Initial Public Offering (IPO) and how does it relate to capital markets?
-An Initial Public Offering (IPO) is the process by which a company offers its shares to the public for the first time in the primary market. It is a way for companies to raise capital for business expansion or starting new ventures.
How do dividends play a role in capital appreciation for investors?
-Dividends are profits shared by a company with its shareholders. They represent a part of the company's earnings that are distributed to investors, providing them with a return on their investment and contributing to their capital appreciation.
What is the significance of stock exchanges in capital markets?
-Stock exchanges are platforms where securities like shares and bonds are bought and sold. They provide liquidity to securities, facilitate the determination of stock prices based on supply and demand, and offer a regulated environment for trading.
What is the regulatory body for capital markets in India?
-The Securities and Exchange Board of India (SEBI) is the regulatory body for capital markets in India, overseeing the operations and ensuring compliance with the Securities Act and other regulations.
How do equity shares differ from preference shares?
-Equity shares, also known as common shares, give shareholders ownership in the company and the right to vote at general meetings. They usually receive dividends only after all preference shareholders have been paid. Preference shares offer priority in dividend payments and capital repayment upon liquidation but typically do not come with voting rights.
What are debentures and how do they function as a capital market instrument?
-Debentures are debt instruments issued by companies to raise funds. They are certificates that acknowledge the debt along with the terms of repayment, including the interest rate and the repayment schedule. Debenture holders are creditors of the company, not owners, and do not have ownership rights.
How do capital markets contribute to economic growth?
-Capital markets contribute to economic growth by efficiently allocating financial resources to productive sectors of the economy. They provide the necessary capital for businesses to expand, innovate, and create jobs, which in turn boosts the overall economic activity.

Outlines

00:00

😀 Introduction to Capital Markets

The script begins with an introduction to the importance of capital markets for commercial development in a country. It explains how capital markets help in the allocation of long-term capital through various financial instruments and markets. The video aims to discuss the functions of capital markets, types of capital, and the role of investors and businesses in this economic system. The host encourages viewers to watch the entire video for valuable insights into capital markets.

05:03

📈 Understanding Capital Market Functions and Instruments

This paragraph delves into the functions of capital markets, such as mobilizing funds from various sources to meet the capital requirements of industries and businesses. It also introduces the concept of primary and secondary markets, explaining how companies raise capital through initial public offerings (IPOs) and follow-on public offers (FPOs). The script uses the example of Reliance Jio to illustrate how capital is raised and allocated for business expansion. Additionally, it touches on the role of stock exchanges in providing liquidity and facilitating transactions between investors.

10:03

💼 Capital Market Instruments: Shares and Debentures

The final paragraph focuses on the types of capital market instruments, specifically shares and debentures. Shares, also known as stocks, represent partial ownership in a company and are a form of equity capital. Debentures, on the other hand, are debt instruments used by companies to borrow money from the market. The script explains the difference between preference shares, which offer fixed dividends and priority in capital repayment, and equity shares, which come with voting rights and variable dividend payments. The video concludes with an overview of how capital markets are regulated in India by SEBI (Securities and Exchange Board of India), emphasizing the importance of understanding capital markets for economic growth and investment.

Mindmap

Keywords

💡Capital Market

The capital market is a financial market where longer-term funds are raised through the issuance of securities. In the video's context, it is essential for commercial development and investment, serving as a medium to long-term funding avenue. An example from the script is the discussion on how capital markets help in the business expansion of entities like Reliance Jio by raising long-term capital.

💡Investment

Investment in this video refers to the act of committing money or capital to an endeavor expected to generate a profit or yield a return. The script talks about how capital markets facilitate investment, directing funds towards industries and businesses, such as the example of investors putting money into Reliance Jio for its expansion.

💡Equity Shares

Equity shares, also known as stocks, represent ownership in a company. Holding equity shares means having a claim on part of the company's assets and earnings. The video explains that by purchasing equity shares, like those of Reliance Industries, investors become partial owners of the company.

💡Debt Instruments

Debt instruments, such as bonds, are financial tools used by companies to borrow money from investors. They represent a debt owed by the company to the bondholders and are typically repaid with interest. The script mentions debt instruments as a way for companies to raise capital for expansion or other business needs.

💡Primary Market

The primary market is where new securities are issued and sold to investors for the first time. The video script discusses the primary market in the context of Initial Public Offerings (IPOs) and Follow-on Public Offers (FPOs), where companies like Reliance Jio raise capital by selling shares to the public for the first time or subsequently.

💡Secondary Market

The secondary market is where previously issued securities are bought and sold among investors. It provides liquidity to investors by allowing them to trade securities that were initially purchased in the primary market. The script explains the secondary market as a place where investors can sell and buy shares of companies that are already listed on the stock exchange.

💡Stock Exchange

A stock exchange is a platform where securities like stocks and bonds are issued and traded. The video mentions stock exchanges as places where companies are listed, and their shares are traded in the secondary market, providing liquidity and price discovery for the securities.

💡Regulatory Bodies

Regulatory bodies oversee and regulate the operations of financial markets to ensure fair practices and compliance with laws. In the context of the video, SEBI (Securities and Exchange Board of India) is the regulatory authority that governs the capital market in India, ensuring transparency and investor protection.

💡Capital Appreciation

Capital appreciation refers to the increase in the value of an investment over time. In the video, it is mentioned in the context of investors gaining from the rise in the price of shares they have invested in, such as the shares of Reliance Jio, as the company grows and expands its business.

💡Dividends

Dividends are payments made by a corporation to its shareholders, usually as a distribution of profits. The script explains dividends as a form of profit-sharing between the company and its investors, where a portion of the company's earnings is distributed to those who own its shares.

💡Preference Shares

Preference shares are a type of equity that has preference over common shares in terms of dividend payment and asset claims in the event of liquidation. The video describes preference shares as having a fixed dividend rate and priority in dividend payments and capital return, but typically without voting rights in company meetings.

Highlights

Capital markets play a crucial role in commercial development by providing long-term capital.

Capital markets include both medium-term and long-term fund markets, directing investments towards industries and production.

Investors and savers interact through capital markets, which act as an intermediary.

Capital markets help in the creation of productive websites and business expansion.

The video discusses the functions and types of capital markets, including their instruments.

A capital market is defined as a place where long-term investments can be made.

Investments in capital markets can be in the form of both equity and debt.

Capital markets facilitate the availability of capital for industries and commercial enterprises.

The video uses the example of Reliance Jio to explain how capital markets work in business expansion.

Investors receive shares in return for their capital, which can appreciate in value.

Capital markets promote economic growth by encouraging investment in various sectors.

The video explains the difference between primary and secondary markets in capital markets.

Primary markets involve the initial public offering of shares, while secondary markets facilitate the resale of these shares.

Stock exchanges are platforms within secondary markets where securities are bought and sold.

The video discusses the functions of stock exchanges, including liquidity, marketability, and price determination.

Shares and debentures are the two main types of capital market instruments discussed in the video.

The video explains the concept of equity shares, preference shares, and debentures, including their rights and repayment.

SEBI (Securities and Exchange Board of India) regulates the capital markets in India.

The video concludes by summarizing the importance of capital markets in economic growth and investment.