Financial market:

• The market that deals with financial securities (or instruments) and financial services is called financial market.
• Financial transactions related to finance such as issue of equity shares by a company, purchase of shares and bonds in the secondary market, depositing money in bank account, etc. take place in the financial market.

On the basis of term of maturity, financial market can be classified into:
1. Money market:

Money market is a market of short term securities such as treasury bills, commercial papers, etc.

2. Capital market:

• Capital market is a market of long term securities such as shares, debentures, bonds, etc.
• Capital market is further divided into two parts:
  1. Primary market and
  2. Secondary market.
• When a company publicly sells new stocks or securities and bonds for the first time in the market, the market is called the primary capital market. So, primary capital market is the market of newly issued securities.
• The secondary market is the market in which securities such as shares (stock), bonds, etc. which were originally issued in the primary market can be purchased and sold (traded/exchanged). The secondary market is also called the stock exchange.
• Based on the condition of the financial market, investors can decide when and where they should invest their savings.

Participants:

Following participants participate for trading in the of capital market:

1. Issuers of various type of securities, i.e. borrowers of money
2. Purchasers of securities i. e. financiers
3. Financial intermediaries, i. e. financial institutions