Classifications of Capital Market
The capital market can be classified into two main categories: the primary market and the secondary market.
- Primary Market: The primary market is the market where new securities are issued and sold to investors for the first time. This typically occurs when a company issues new stock or bonds in order to raise funds for a new project or investment. The primary market is regulated by regulatory bodies such as Securities and Exchange Board of India (SEBI) in India and the Securities and Exchange Commission (SEC) in the United States.
- Secondary Market: The secondary market is the market where existing securities are bought and sold between investors. This occurs on stock exchanges and other secondary markets, where investors can buy and sell stocks, bonds, and other securities. The secondary market is also regulated by regulatory bodies such as SEBI and SEC.
The capital market can also be classified based on the types of securities traded. Some common classifications include:
- Equity Market: The equity market is a type of capital market where stocks and other equity securities are traded. These securities represent ownership in a company, and investors can earn returns through dividends and capital gains.
- Debt Market: The debt market is a type of capital market where fixed-income securities such as bonds are traded. These securities represent a loan to a company or government, and investors earn returns through interest payments.
- Derivatives Market: The derivatives market is a type of capital market where financial instruments such as options, futures, and swaps are traded. These instruments allow investors to hedge against risk or speculate on future market movements.
In conclusion, the capital market can be classified based on the primary and secondary market, as well as the types of securities traded. Understanding these classifications can help investors make informed decisions when investing in the capital market.
