The financial markets can broadly be
divided into money and capital market.
A. Money Market: The money market
provides investment avenues of short term tenor. Money market transactions are
generally used for funding the transactions in other markets including
Government securities market and meeting short term liquidity mismatches.
By definition, money market is for a
maximum tenor of up to one year. Within the one year, depending upon the
tenors, money market is classified into:
i. Overnight market or Call money -
The tenor of transactions is one working day.
ii. Notice money market – The tenor
of the transactions is from 2 days to 14 days.
iii. Term money market – The tenor
of the transactions is from 15 days to one year.
B. Capital Market: Capital market is
a market for long-term debt and equity shares.
In this market, the capital funds
comprising of both equity and debt are issued and traded. This also includes
private placement sources of debt and equity as well as organized markets like
stock exchanges.
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