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Answer» The major points of distinction between the two markets are as follows: | Basis | Capital Market | Money Market | | Participants | The participants in the capital market are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from public. | Participation in the money market are institutional participants such as the RBI, banks, financial institutions etc. | | Instruments | The main instruments traded in the capital market are – equity shares, debentures, bonds, preference shares etc. | The main instruments traded in the money market are short term debt instruments such as T-bills, trade bills reports, commercial paper and certificates of deposit. | | Investment outlay | Investment in the capital market does not necessarily require a huge financial outlay. The value of units of securities is generally low. | In the money market, transactions entail huge sums of money as the instruments are quite expensive. | | Duration | The capital market deals in medium and long term securities such as equity shares and debentures. | Money market instruments have a maximum tenure of one year, and may even be issued for a single day. | | Liquidity | Capital market securities are considered liquid investments but less compared to money market. | Money market instruments on the other hand, enjoy a higher degree of liquidity. |
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