What Are Capital Markets?
Capital markets basically deal with stocks and bonds in general. In simple words, any firm is it private or government, is always in need of funds, so as to finance its various operations to achieve certain long-term goals. Thus every firm is supposed to acquire these very funds or capital; for which, it sells stocks and bonds. These stocks and bonds are basically like shares, all of which are in the companies name. For instance, when the government of any country, issues what are known as treasury bonds, it basically is tapping into the capital markets, thereby generating capital.
This process is basically known as the IPO or Initial Public Offering. Capital Markets are largely divided into two types, the primary markets, and secondary markets. The companies and governments sell their securities in the primary market, whereas the investors trade with these securities in what is known as the secondary markets. Thus, it is safe to say that the capital markets are an important area of the finance industry.
These markets are more like the foundations on the basis of which, various companies and governments are able to invest in businesses, generate employment as well as better infrastructure. One of the core responsibilities of any capital market includes getting the people who are looking to invest, in contact with those looking for capital. Put so simply, this sounds like a very easy task to do, but in reality, a lot of professionals, perform this high-pressure task, to get the desired results.
The private companies look to raise capitals for various reasons, other than just expanding their businesses. They could be looking to finance start-up business ventures, or to battle with the sudden decline in the turnover, or for buying out the competition. While it may seem like it is only those very companies, which are profited from this whole business, it is not so. The very reason someone would want to provide capital is that that person would be looking to gain profit from their financing efforts.
A lot of people know of capital markets as stock exchanges. These are places where anyone can invest and are more commonly known as the public markets. This is where the Initial Public Offering takes place, which is the first time when any firm, comes out into the public to sell their securities. The next step where securities are bought and sold by investors is known as secondary markets, as spoken about earlier.
These secondary markets take place, subsequently after the primary market proceedings are over. Just as there are public markets, there also exist the lesser-known private markets, which are also known as exempt markets. These can be called as more lenient as compared to the public markets, primarily because there are no regulations to be met. Also, this is seen as a more cost-effective way for companies to fund their financing needs.
Thus the arena of capital markets has come to garner more attention by a lot of people, which is why candidates look for programs, which can make them proficient in the inner workings of capital markets. Imarticus Learning one of the best education institute in India offers industry-endorsed courses in capital markets, finance, and investment banking.
Picking stocks is hard work and there’s a reason why Mutual fund managers get paid so much to do it. So if you don’t have the time, we suggest starting out with an index fund like Franklin India Index or HDFC Index Fund – Sensex. An index fund is a mutual fund that invests in a predefined stocks of an index in a percentage allocation that resembles the index. Your portfolio could be a mix of different index funds, NSE Small caps, BSE Sensex and maybe even an international index fund.