Updated on March 20, 2023
Capital market is a term used in a broad sense for a market which allows trading of instruments such as shares, debentures, bonds, Exchange Traded Funds, etc. It is one of the primary sources for raising funds for companies, institutions and governments.
Stock exchanges, equity markets, debt markets, options markets, regulators are all stakeholders or part of a capital market.
Capital market is also a mode for channelising money from individual investors or households into shares or bonds with an expectation of earning profits as well as growth or capital appreciation. Large institutions, HNIs and foreign participants are involved in buying, selling and trading various financial instruments in a Capital Market.
Features of a Capital Market
Important features of a Capital Market are:
1. Individual investors, banks, financial institutions, insurance companies, large corporations and pension funds are some of the suppliers of money in a capital market.
2. Investors enter capital markets with an expectation of growing their investment and earn dividends, interest and ownership rights.
3. It is a market where companies, entrepreneurs and governments can raise capital for their funding needs.
4. Capital Markets are monitored and regulated by regulatory bodies /authorities to protect investors and also to prevent illegal activities.