– Finance is the study of money , , its nature creation

, behaviour regulation andadministration

System stands for a set of bodily organs

All activities dealing in finance are organized in a system known as the financial

system

Financial markets is the institutional arrangements for dealing in financial

assets and credit instruments of different , , , … types like currency cheques bills etc

:Functions

& & Creation allocation of credit equity

Mobilization of savings Cater to various credit needs Assist balanced economic growth

The financial market is divided into two categories based on the credit

requirement for short term or long term purposes

– Money Market Short term funds

– Capital Market Long term funds

Money market is the collective name given to the various firms and institutions that deal in

various grades of near money - Crowther Loans for less than a year Credit instruments are called

near money assets

MONEY MARKET

:Components of Money Market

Call money market

Collateral loan

Acceptance market

Bill market

:Call money market Loan disbursed by commercial banks – 1 day 7 days Bank can recall the loan at its

maturity & Usually advanced to bill brokers

.stock exchange brokers

:Collateral loan market - Lender Commercial banks

- Borrower Stock brokers

- Short term Few months

– , , Back up Securities bonds stocks

If the loan is not paid the bonds or securities become the property of the lender

:Acceptance market“ A draft drawn by an individual or a

& firm upon a bank accepted by the bank whereby it is ordered to pay to the bearer a sum of money at a

.”specified time in future - . . Raymond P Kent

Primarily used in international trade

Bank merely adds a guarantee to the draft

Its importance has declined now

:Bill market Bills of Exchange

Written unconditional order

which is signed by the & drawer the drawee to

pay on demand or at a fixed time in the future a definite sum

of money Usually used by

traders Popular in the

West especially London

:Treasury bills

Government Paper Securities

Duration of 91 days

Promissory note of the government to pay a specified sum

after a specified period

/ Significance Functions of Money market

Economic development Profitable Investment Importance for Central Bank Mobilization of funds - Self sufficiency of CommercialBanks & Savings investment

Defects of Indian Money:market

Unorganized money market Disparity in interest rates Seasonal diversity of themarket Lack of a proper bill market Lack of a well organized

Banking system

:Capital market An organized mechanism for

& effective efficient transfer of financial resources from the investing

parties engaged in industry or commerce in the business either be it public or

.private sectors of the economy

:Functions Mobilization of funds

Securing foreign capital Promote balanced regional development

Components of Capitalmarket

Primary market

Secondary market

:Primary market

New issue market & New shares bonds that have never been issued

Facilitates transfer of funds from willing investors to the

- entrepreneurs to set up new enterprises

The sentiment of the stock market influences the primary market

:Instruments

Equity shares

Preference shares

Deferred shares

Debentures

STOCK MARKET “ Stock exchanges are

privately organized markets which are used ” to facilitate trading in securities

- & Husband Dockeray

: Functions Ensure liquidity of capital Market for securities

Mobilize surplus savings Raising new capital Listing securities

Procedure for dealing at stockexchanges

Selection of Broker

Placing an order

Making a contract

Contact Note

Settlement note

- :PRE REQUISITES TO BUY A SHARE

Register with a stock.broker

.A PAN card holder .Open a demat account

:REGISTERING AS A CLIENT

Filing a client .registration form

Sign the member .constituent agreement

:STAGES OF TRANSACTION Place an order

Execution Reporting the deal Settlement of

transaction

Order confirmationslip Trade confirmationslip Control note slip / Purchase Sale note

:DOCUMENTS

BASIS TO BUY SHARES OF A PARTICULAR FIRM

.Product manufactured.Demand .Amount of dividend .Ranking of the company .Change in prices

Reputation of the.company

:TYPES OF SPECULATORS

Bull

Bear

Stag

Lame Duck

Factors influencing prices :on stock exchange

Financial position of thefirm & Demand Supply position Lending rates Trade cycle Speculation activities Government control

:Stock Exchanges in India

& Native Stock Share BrokersAssociation 24 recognised Stock Exchanges in India

Bombay Stock Exchange National Stock Exchange Over the Counter Exchange ofIndia