Capital Market

A capital market is a financial market where individuals, companies, and governments come together to trade financial securities such as stocks, bonds, and other long-term investments. It is a crucial component of a well-functioning economy as it provides a platform for raising capital for businesses, enabling them to grow and expand.

Functions of Capital Market

1. Raising Capital: Companies issue stocks and bonds in the capital market to raise funds for their business operations and expansion.

2. Trading of Securities: Investors buy and sell securities in the capital market, which determines the prices of these financial instruments.

3. Facilitating Investment: Capital markets help channel savings into productive investments, thus promoting economic growth.

Types of Capital Markets

1. Primary Market: Where companies issue new securities to raise capital directly from investors.

2. Secondary Market: Where existing securities are bought and sold among investors, without the involvement of the issuing companies.

Participants in Capital Market

1. Investors: Individuals or institutions that buy and sell securities.

2. Issuers: Companies or governments that offer securities for sale.

3. Regulators: Entities that oversee and regulate the capital market to ensure its integrity and transparency.

In conclusion, the capital market plays a crucial role in the economy by facilitating the efficient allocation of capital and promoting economic growth.