The Financial markets play a very important role in our everyday lives. Prices of different commodities and services, along with the purchasing power of normal citizens of all the countries all over the world are dependent upon the current financial market.
Due to fluctuation in the financial market, the price of certain commodities can significantly rise. For example, due to the war between Russia and Ukraine, the price of petrol and diesel has risen significantly in lots of countries, including India.
There are many different types of financial markets, and each has a unique purpose. Equity markets, like the New York Stock Exchange (NYSE), facilitate the buying and selling of company shares. These shares represent ownership in a company, and investors can benefit from rising stock prices and dividends. On the other hand, bond markets deal with fixed-income instruments like government bonds. Investors loan money to governments or corporations through bonds, receiving interest payments in return.
Money markets deal with short-term instruments like commercial paper or treasury bills, usually maturing within a year. Whereas, capital markets trade securities with longer maturities, like stocks and long-term bonds.
In this article, we will discuss 10 financial market questions and answers and help you understand what is financial market in a more clarified way.
Explain the various Money Market Instruments.
There are multiple money market instruments that you will get to know about when you will opt for an investment banking course. Some of these financial market instruments are:
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Treasury Bill:
Treasury Bills are certificates of short-term borrowing by any country’s government, and the maturity period of these bills is less than one year. For example, a zero coupon bond is issued by the RBI, or Reserve Bank of India (on behalf of the central government) to satisfy the short-term requirement of funds. These bills are released in the form of a promissory note and have high liquidity.
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Commercial Paper:
It is a form of promissory note which is unsecured, transferable, and negotiable. Commercial Paper also has a fixed maturity period. Huge companies and industry giants usually issue commercial papers to raise short-term funds by providing significantly lower interest rates than the market. Normally, commercial papers have a 15 days maturity period.
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Call Money:
Call Money has a maturity period of 1 day to fifteen days and is repayable on demand. It is also a short-term financial market instrument that is used for inter-bank transactions. While the commercial banks have to maintain a cash reserve ratio, they can borrow from each other using Call Money.
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Certificate of deposit:
Similar to Commercial papers, certificates of deposit are also short-term instruments that are issued by different financial organizations and commercial banks. These are negotiable, unsecured, and short-term bills utilized to assemble a large amount of money during a short period.
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Commercial Bill:
With the help of commercial bills different business firms can finance their requirement for working capital. Companies and businesses utilize this short-term, self-liquidating, and negotiable instrument to finance their credit sales.
How can you find undervalued stocks?
Undervalued stocks are available at a discounted price compared to their original or fair price. Investors and financial analysts usually use fundamental analysis and technical analysis to find undervalued stocks. To learn more about these stock analysis techniques, you can enrol in an investment banking course with placement.
Where can you receive the financial report of a company?
You will be able to find all the company-related information, including their financial report, from a stock exchange platform (BSE or NSE). Some companies also publish their reports directly on their official website.
How to invest in an IPO online?
You will be able to invest in an IPO through your Demat or trading account. You can visit and log in to a stock exchange platform, select the IPO you want to participate in and provide the number of shares you want to buy. Then click the submit button.
Is investing in small-cap companies more profitable than blue-chip companies?
Before investing in any stocks, you need to look at the different metrics and prospects of the companies. In comparison to all of the blue chip companies, small-cap companies have extremely high growth potential. Therefore, you can profit more by investing in small-cap companies.
- How many stocks should you include in your portfolio?
Your portfolio should be well distributed, therefore, you should not focus on investing in single company stock or single type of stock. You should properly distribute your investment funds in different investment tools and diversify your investment portfolio. To know more about investment portfolios, enrol in the financial markets training course.
- How much return can you expect from the market?
The return you will receive from the market depends upon your investment type, and different financial instruments provide a different kind of return during a specific market condition.
- What are the objectives of the SEBI?
The overall focus of the SEBI is to promote the development of the financial market while securing the interest of investors and managing the securities available in the financial market.
- What are the objectives of NSE?
The objectives of the National Stock Exchange are as follows:
- Provide a nationwide trading facility.
- Satisfying the international benchmarks and standards.
- Provide an efficient, fair, and transparent security market utilizing the electronic trading system.
- Equal access to all investors.
What is OTCEI?
OTCEI is a company that has been established under the Companies Act of 1956, and it enables small and medium enterprises to utilize the capital market to raise for the growth and development of their businesses.
If you want to pursue a profession in the field of financial markets, then you can opt for a career in investment banking, and for that, you need to go through an investment banking course with placement. This program can not only boost your skills in the same profession, but you will also get lucrative opportunities from industry giants in the future.
