Financial Market

A financial market is a platform where financial assets like shares, debentures, bonds, derivatives, and currencies are created and traded. It plays a vital role in efficiently allocating scarce resources within a country's economy. Financial Market Types Money Market: The money market is a marketplace for trading financial assets like commercial paper, certificates of deposit, and treasury bills that mature within a year. It focuses on short-term funds and doesn’t have a physical location. All transactions are carried out through virtual networks such as fax, internet, or phone. Capital Market: The capital market is a financial market where long-term securities, such as stocks, bonds, and debentures, are bought and sold. It provides businesses and governments with a platform to raise funds for long-term investments and facilitates the transfer of capital from investors to organizations. The capital market is broadly divided into two types mentioned below:

1. Primary Market: Also known as the "new issue market," this is where new securities are issued and sold for the first time. Companies and governments use this market to raise fresh capital. Examples: Initial Public Offerings (IPOs) and private placements.
2. Secondary Market: This is where existing securities are traded among investors. It provides liquidity and a platform for investors to buy and sell securities. Examples: Stock exchanges like the New York Stock Exchange (NYSE) or the Bombay Stock Exchange (BSE).