Capital Market – Functions & Participants
Introduction
The Capital Market is the market for long-term finance. It is the heart of a capitalist economy.
1. Functions of Capital Market
- Resource Mobilization: Channels long-term savings into industrial investment.
- Liquidity: Provides a platform (Stock Exchange) to sell investments easily.
- Price Discovery: Determines the value of companies based on performance.
- Operational Efficiency: Reduces transaction costs and settlement time.
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2. Participants / Intermediaries
A. Stock Exchanges
- Platform where trading happens (BSE, NSE).
- They monitor trading and ensure compliance.
B. Depositories (NSDL & CDSL)
- Hold securities in electronic (Demat) form.
- Facilitate paperless trading.
C. Depository Participants (DPs)
- Agents of Depositories (e.g., Zerodha, HDFC Bank).
- Investors open Demat accounts with DPs.
D. Stock Brokers
- Registered members of Stock Exchange.
- Investors must route orders through brokers.
E. Institutional Investors
- FIIs (Foreign Institutional Investors): Foreign funds investing in India.
- DIIs (Domestic Institutional Investors): Indian Mutual Funds, Insurance Cos (LIC).
Summary
- Role: Long-term funds.
- Exchange: Platform (NSE/BSE).
- Depository: Holds shares (NSDL/CDSL).
- Broker: Executes trade.
Quiz Time! 🎯
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