Capital market:

The term capital market is used to denote all the activities of the primary and secondary markets. It can also refer to the market for equity and debt instruments, which have a maturity of more than one year. Corporates, individuals and institutions participate in the capital market. The corporates raise capital required for their business in this market. The contribution of capital formation in the economic development is indispensable as already discussed in the earlier chapters. Capital is one of the important factors of production in the economy. Thus, the contribution of capital market which undertakes the investment and capital formation activities, is imperative in the economic development of a country. Mobilizing the savings from the surplus sectors in the economy in the form of investments, the capital market enables the deficit sectors in the economy to meet their needs. It also intermediates in the activities of the savers and the investors. The stock market, which is a part of the capital market, provides liquidity and marketability for the financial instruments. The important characteristics of the capital market are as follows:

An efficient capital market indicates the underlying strength or the health of the economy.

• Capital market enables the companies to get finance through long or indefinite maturity instruments.
• Capital market enhances the choice of investors by making available different investment schemes.
• Capital market enhances the efficiency of optimum allocation of capital in the economy. By helping the flow of savings into the investments of more returns.

Capital market can be segmented into -

• Primary Market, and
• Secondary Market.