Debt Market v/s Equity Market - A Comprehensive Study

executive program by IIM calcutta

Investment can be risky business, especially without adequate knowledge or experience. A Forrester market survey reveals 30% growth in the investment market by 2025, making it a promising mode of income for investors. 

Investments are of many types. Debt and equity capital markets are two of the most popular platforms for investment. They are unique in their own ways but can be equally difficult to navigate. The art of investment comes in handy while dealing with finance. 

If you are new to investment and capital markets, this article will help you distinguish between the two markets. Read on to learn more.

What are debt market and equity market?

An investment requires a market to thrive. A market is a financial domain that accommodates the investment for its own purposes and gives returns on it. The debt market and equity market are two sides of the same coin. The former operates in bonds, the latter in stocks. 

Debt market

The debt market involves buying and selling of debt securities. These debt securities or debt bonds are issued by corporations, private or owned by the government. Investors buy these securities at a stable interest rate, aiding the corporation's economic growth. You can retrieve this bond at face value along with the interest it offers. It may change according to the ongoing interest rate for the bond and depends on the kind of operational market.

However, this does not give investors ownership of the corporation but simply promotes the collection of capital for its improvement.

There are two kinds of debt markets:

  • Primary debt market

Investors can buy bonds directly from the corporation

  • Secondary debt market

Investors can buy or sell debt securities over the counter

Equity market

Equity markets are stocks that offer investors a share of the company’s profit. The dividends or the profit share depends on the status of the company.  Equity markets are riskier than debt markets in terms of returns. It is greatly affected by socio-political and economic factors, making it at risk for bankruptcy. 

Difference between debt and equity market

Explore the key differences between debt and equity capital markets for better investment choices. Always assess both cases in their entirety to make better investment decisions. Following is a list of the aspects of both markets and their difference: 

  • Nature

The debt market operates on corporate loans, while the equity market deals in buying a share of the company’s profits. The debt market is less likely to falter than the equity market. 

Unlike the equity market, the transaction cost in the debt market is not standardised.

  • Interest rate

The debt market relies on instruments like fixed-interest bonds. The fixed-interest bond assures an established interest rate for a period of time. 

The equity market, however, has no fixed interest rate. Daily changes in socioeconomic conditions across the globe have a significant effect on it.

The debt market offers low-interest rates compared to the equity market. That makes the equity market more attractive yet risky. 

  • Security

The debt market is undoubtedly more secure than the equity market. The equity market is volatile and more likely to crash, taking down the investments with it. 

The debt market assures that companies will first pay back their investors’ capital if the company collapses. 

  • Market value

The equity market is more valuable than the debt market in terms of the possibility of excellent returns. The equity market may make or break an investment, often bordering on the extremities. 

Debt markets are tax deductible, making it a low-risk and low-return option in the long run. 

How to learn about banking and finances?

An excellent banking programme can open new doors for you in the financial management industry. You can gain mastery over banking and finance management from global financial gurus. Look at the modules that a good banking and investment course should cover.

Foundation modules:

  • Financial accounting and analysis
  • Financial management

Advanced modules:

  • Debt and equity capital markets
  • Mergers, acquisitions and restructurings
  • Portfolio fund management
  • Securities market research and valuation
  • Securities market sales and trading
  • Securities market regulations


The importance of knowing how to invest properly has never been more significant. The debt and equity capital markets are different in their own ways and have distinctive perks. To make the correct investment decision, you must consider all their aspects.

Imarticus Learning’s Executive Programme in Investment Banking and Capital Markets, offered in collaboration with IIM Calcutta, will help you gain insight into the investment banking industry. The curriculum is built to train you in current market components, including portfolio fund management, and mergers and acquisitions, apart from the fundamental elements like financial accounting and analysis. Get an excellent and affordable learning experience with campus immersion and an IIM certificate to augment your CV. 

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