Financial Environment of Business

Indian Financial System

Financial Market
 Primary Vs Secondary Market
 Money Vs Capital Market
 FOREX Market
Secondary Market
 Provides liquidity to the investors, not to
the company
 Securities of public limited companies are
traded on Stock Exchange
 The market prices reflect the investors
perception of a company’s performance
 Equity shares, bonds, derivatives, Mutual
funds etc. are traded
Equity Market
 The shares of listed companies are
traded on the stock exchange
 The stock exchange provide the platform
for trading the various instruments
 Volatile market as the price keep on
changing very frequently
 The Indian equity market is dominated by
BSE and NSE
Bond/Debt Market
 Market of Fixed income securities
 Can be issued by central govt., State govt.
or other corporations
 By buying bonds/debenture, one becomes
lender not the owner
Bond/Debt
 Coupon Rate
 Maturity
 Face Value
 Issue Price
 Usually secured by way of fixed charge on
assets
 Less volatile
 G-Sec are part of SLR
 G-Sec are major players in bond market
Commodity Market
 Trading of various commodities either on
spot or derivative market
 Allowed in India since 2003, after 40 years
 Metal, Energy, Pulses, Spices, oil and other
agriculture & non-agriculture
commodities
Commodity Market
 National Commodity and Derivative
Exchange Ltd. (NCDEX), Mumbai
 Multi Commodity Exchange of India Ltd
(MCX), Mumbai
 The National Multi Commodity Exchange
of India Ltd. (NMCE),Ahmedabad
 New York Mercantile exchange, London
metal Exchange
Money Market Vs Capital Market
 Money Market
◦ Market for short term financial assets
◦ Highly liquid instruments
◦ A telephone market
◦ Provides platform for equalization of short-term
surplus with short-term shortfall
◦ Instruments such as inter-bank call money, Bills
discounting, treasury bill, certificates of deposits,
commercial papers,
◦ Players are commercial banks, Mutual funds etc.
Capital Market
 Long term
 Consists of Primary and secondary
market
F & O (Futures & Options) Market
 Derivatives
 Underlying asset: Stock, currency, gold
 Value of derivatives changes according to
the value of the underlying assets
Foreign Exchange Market (FOREX)
 Largest and most liquid market
 No central market place
 Over the counter
 Similar to stock
 Forex can take place:-
◦ Spot Market
◦ Forward Market
◦ Future Market
 Manas: F & O
 Aatharva: Commodity