1. CAPITAL MARKET
The market where investment instruments like bonds, equities and mortgages are traded is known as the capital market.
The primal role of this market is to make investment from investors who have surplus funds to the ones who are running a deficit.
It refers to the institutional arrangements for facilitating the borrowing and lending of long-term funds.

2. Types of capital market
There are two types of capital market:
Primary market,
Secondary market

3. Primary Market
It is that market in which shares, debentures and other securities are sold for the first time for collecting long-term capital.
This market is concerned with new issues. Therefore, the primary market is also called NEW ISSUE MARKET.

4. In this market, the flow of funds is from savers to borrowers (industries), hence, it helps directly in the capital formation of the country.
The money collected from this market is generally used by the companies to modernize the plant, machinery and buildings, for extending business, and for setting up new business unit.

5. Features of Primary Market
It Is Related With New Issues for long term capital
Securities are sold first time in this market
It is also called new issue market(NIM)
Securities are directly issued to investor
It facilitates capital formation in the economy.
Funds generated in this market are utilized for the purchase of fixed assets.
It does not include long term loans from financial institutions.
Securities are issued by companies for setting new business and for expanding or modernizing existing business.
It is the process of going public i.e., converting private capital into public capital.
It Has No Particular Place
It Has Various Methods Of Float Capital: Following are the methods of raising capital in the primary market:
i) Public Issue
ii) Offer For Sale
iii) Private Placement
iv) Right Issue
v) Electronic-Initial Public Offer
It comes before Secondary Market

6. Functions of New Issue Market
Origination : the proposal is analyzed the nature of security, size, and timing of issue and floatation method.
Underwriting
Time of floating of an issue
Type of issue- equity, preference ,debt etc.,
Price
Distribution- sale of share-performed by the brokers

7. Secondary Market
The secondary market is that market in which the buying and selling of the previously issued securities is done.
The transactions of the secondary market are generally done through the medium of stock exchange.
The chief purpose of the secondary market is to create liquidity in securities.

8. It is also known as “aftermarket”

9. If an individual has bought some security and he now wants to sell it, he can do so through the medium of stock exchange to sell or purchase through the medium of stock exchange requires the services of the broker. .

10. Features of Secondary Market
It Creates Liquidity
It deals in previously issued securities
It Comes After Primary Market
It Has A Particular Place
It Encourage New Investments
It merely transfer existing securities between buyers and sellers
Secondary market do not directly contribute to capital formation.

11. Purpose of stock market
It helps in the capital formation of the country
It maintains active trading
It increases liquidity of assets.
It also helps in price recovery process.

12. Functions of stock market
Ensure liquidity of capital
Continuous market for securities
Evaluation of securities
Mobilizing surplus savings
Helpful in raising new capital
Safety in dealings
Listing of securities
Platform for public debt
Clearing house of business information

13. Major players in stock market
Stock brokers
Commission brokers
Jobber/speculator
Floor brokers –buy and sell to other brokers
Taraniwalla or jobber
Odd lot dealer
Budliwalla – financier in the stock exchange.
Arbitrageur –dealing in different stock exchanges
Security dealer – purchase and sale of govt. securities by security dealer.
Financial intermediaries
Pooling funds from savers and provide the same to the borrowers
Individual investors
Individual investor make implicit forecast about these factors without elaborate reports because they have no need to communicate beyond the purchase or sale order to their brokers.

14. Trading in stock market
Listed securities of public limited companies.
Purpose-facilitates the exchange of securities between buyers and sellers.
Procedures in dealing stock market:
Selection of a broker –approach their banks
Placing an order –broker guides about time to purchase and sell
Marketing the contract- different post are there. Authorized clerk goes to concern post and express his intention to buy/sell.
Contract note – buying and seller brokers prepare notes after their mutual consent next day.
Settlement – the selling broker hands over the transfer form and share certificates to the buying broker after receiving the price.

15. Weakness of stock market
Rampant speculation
Insider trading
Oligopolistic– highly dominated by big financial institutions and brokers
Limited forward trading
Outdated share trading system-an international prospectus is thoroughly outdated
Lack of a single market – the limited inter-market operations have resulted in increased costs.
Problem of interface between the primary and secondary markets –continue with same old infrastructure.
Inadequacy of investor service – small ones have been unable to service their customers adequately.

16. Relationship b/w NIM & stock market
Liquidity –nim cannot function without secondary market.
Listing – rules & regulation to be followed
Marketability –NIM-direct link between investor and company; Stock market- marketability & capital appreciation
Complementary: health of the NIM depends on the secondary market and vice versa.

17. Difference between NIM and Stock market
Issues
Fresh issue -First time
Deals existing securities
location
No fixed geographical location needed
Needs fixed place to carry the trading
Transfer of securities
Transfer fro company to investors first time
Transfer from one investor to other investor.
Entry
All companies can enter NIM and make fresh issue of securities
To trade, listing is mandatory.
Administration
Has no tangible form of administrative set-up
Has definite set up
Regulation
Outside company-SEBI, stock exchanges, companies Act
Subject to both within and outside the stock exchange
Aim
Long term instruments for borrowings
Provide liquidity
Price Movement
Stock price in secondary market influences pricing of new issue
Micro-macro influence stock price movement
Depth
Depends on number & volume of issue
Depends on NIM, -more corporate entities and more instruments to raise funds.