What is Capital Market?

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Capital Market or Securities Market is the market for securities, Where companies and the government can raise long term funds.

Capital market includes the Stock Market and the Bond Market.

Financial regulators, oversee the capital markets in their respective countries like SEBI in India to ensure that investors are protected against frauds.

The Capital Market consists of the

Primary Market – where the new issues are distributed to investors for the purpose of raising funds. and

Secondary Market – where existing securities are traded.

Capital Markets are same like any other markets, but differ in terms of Purpose, Products traded and their organization.

In layman language, “Capital Market is a market where Capital is raised by the Companies through Stocks or Bonds and Capital is Invested by the Investors in those companies through Stocks or Bonds.”

or

“Capital Market provides avenue where companies can raise funds to expand on their businesses or establish new ones by issuing securities owned by the companies.”

To make it more understandable that why these Stock or Bonds and this market is known as Securities Market.

Capital Market is also known as Securities Market because when a Investor Invests in any Stock or Bond – in return investor get’s the Written Ownership of that Particular Instrument which is known as Security.

P.S: The word “Security” here doesn’t refer to any Guarantee or Assurance of Investment Appreciation or Safety.

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