Economy Simplified: Understanding What is the Money Market and Capital Market?

Money Market

(Lending and Borrowing takes place for a short term up to one year. )
1. The money market is the trade in short-term debt having a maturity period of one or less than one year
2. It is a constant flow of cash between governments, corporations, banks, and financial institutions, borrowing and lending for a term as short as overnight and no longer than a year.
3. The Money Market is regulated by the RBI.

Capital Market

[Lending and borrowing takes place for the medium term and long term (Usually more than 365 days)]
1. The capital market encompasses the trade in both stocks and bonds or in other words, Capital markets include the equity market and the debt market.
2. This is the long-term financial market of an economy, where capital is raised for a period of minimum 365 days and above.
3. The Capital Market is regulated by the SEBI.
4. These are long-term assets bought by financial institutions, professional brokers, and individual investors.
Capital Market can be classified into two types: 
Primary market
: A primary market where the fresh issue of securities is offered to the public.
Secondary market: A secondary market where securities are traded between the investors.

Leave a Comment

Your email address will not be published. Required fields are marked *