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

Summary

This 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.