QS Study

Features of Capital Market

Capital is essentially needed by an organization which is profitable or non-profitable. Capital is the money or a monetary value by which a firm runs its activities is called the capital of the concerned firm. All businesses must have capital in order to purchase assets and maintain their operations.

There are some specific and general features of the capital market. The well-known features of this market are given below:

Users: Those who are using the capital marketing for raising their fund for the business such as; individual, government, corporations, local govt., local authorities etc., are users of this market. All of these users may directly or indirectly involve with this market. Some users of capital markets follow:

  • Business firms: Business firms are the main user of this market. Firms collect its initial capital from the market. The interim need for funds is also meet from this market.
  • The mass people: General people invest their savings in the capital market. All categories of business are also required funds from this market.
  • Government: Government is one of the giant participants in the capital market. The government collects fund by different instruments. Govt. bond, price bond etc are sold at capital market. For public welfare govt. need the huge amount of money which it met by this market. Government is also regulating this market.
  • Foreign borrowers: Not only the home people but also the foreigners can collect the necessary funds from the capital market. Foreigners can borrow by national corporate bonds, stocks etc.

Instruments: There are some specific instruments used in the capital market. Most of them are of long-term character. By these instruments, this market provides both loan and equity capital.

Duration of instruments: Instruments of capital money market are generally of short-term and usually do not exceed one year. But the instruments of capital market are long-term in nature. The capital market instruments are 5 to 10 years in general.

Confinement of area: The capital market is not confined to a certain area. It is a market where a bank or an insurance company can create time loan, corporate bond, and the stock is converted, govt. issued new bonds or through mortgages, it collects money. The capital market is now worldwide. It is now online base market.

Types of transaction: The transaction in a capital market may be direct or in open market. When a savings or a loan giving society grants a loan for a client it is called direct transaction. And when through market stocks, bonds, debentures, securities, etc are transacted; it’s called open market transaction.

Place of transaction: Most of the transactions of a capital market are done through the secondary market. Transactions among investors are more than collecting new ones. For a transaction, it is not necessary to present at the marketplace. The office building may be at a place. But it is not mandatory to present bodily at the market rather through online easily.

From the above discussion, we can say that these are the features of the capital market. These features differentiate capital market from other markets.