Financial Market

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What are the financial markets? If you are confused, there is a good reason. That’s because financial markets go by many terms, including Capital Markets, SENSEX, NIFTY, even the Markets. Some experts even simply refer to it as the stock market, even though they are referring to stocks, bonds and commodities.

Quite simply, that is what the financial markets are - any type of financial transaction that helps businesses grow and investors make money. Here is an overview of the financial markets, from the simple to the complex.

The financial markets can be divided into different subtypes:
Capital markets which consist of:
Equity Markets {Stock Markets}, which provide financing through the issuance of shares or common stock, and enable the subsequent trading thereof.
Debt Markets {Bond Markets}, which provide financing through the issuance of bonds, and enable the subsequent trading thereof.
Commodity Markets, which facilitate the trading of commodities.
Money Markets, which provide short term debt financing and investment.
Derivatives Markets, which provide instruments for the management of financial risk.
Futures Markets, which provide standardized forward contracts for trading products at some future date.
Insurance Markets, which facilitate the redistribution of various risks.
Foreign Exchange Markets, which facilitate the trading of foreign exchange.

The Indian financial system consists of banks, insurance companies, mutual funds and other institutions such as, non-bank financial institutions, which promote and mobilise savings and make the same available to actual investors – individual investors, industrial and trading companies and the government. It also includes other institutions, which actually act as alternative channels for investment of savings rather than promoters of savings. For instance, the new issue market and the stock exchanges which facilitate the buying and selling of shares and debentures of various companies. Finally, the various regulatory agencies are also an important part of the financial system. They are indispensable from the point of view of promoting financial stability and protecting interests of consumers of financial services. Above all, they play a crucial role in giving a direction to the financial sector to align it with the mood and needs of the macroeconomic system.

Most of the countries have realized the true benefits of a financial market and accordingly have stepped forward to develop the market. Role of financial Markets in the overall economic development have increased at a faster pace.

India Financial Market promotes the savings of the economy, providing an effective channel for transmitting the financial policies. It is a well-developed, competitive, efficient and integrated financial sector. There are large number of buyers and sellers of the financial product, the prices are fixed by the market forces of demand and supply within the Indian Financial Market.