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Money consistently streams from the excess sector to the debt sector. That signifies persons having a surplus of money lend it to those who require money to complete their condition. Likewise, in enterprise sectors, the excess money streams from the investors or lenders to the businessmen for the presentation or sale of goods and services. So, we discover two further groups, one who invest money or lend money and the others, who borrow or utilize the money.
There is a question that how these two groups fulfill and transact with each other. The economic markets function as a relation between these two distinct groups. It promotes this process by working as an intermediate between the borrowers and lenders of money. So, the economic market may be described as a communication agent between investors (or lenders) and the borrowers (or users) via which transfer of funds is relieved’. It consists of individual investors, financial institutions, and other negotiators who are connected by a formal trading rule and contact the web for dealing with the different economic assets and credit tools.
The economic market in India at present is better refined than numerous other sectors as it became classified as early as the 19th century with the securities exchanges in Mumbai, Ahmedabad, and Kolkata. In the early 1960s, the number of securities exchanges in India became eight in number – including Mumbai, Ahmedabad, and Kolkata. Apart from these three exchanges, there were also Madras, Kanpur, Delhi, Bangalore, and Pune exchanges. Today there are 23 provincial securities exchanges in India.
The Indian stock markets to date have stayed stuffy due to the strict economic controls. It was only in 1991, after the liberalization procedure that the Indian securities market noticed a burst of IPOs serially. The market witnessed many new companies transiting across various industry features and business started to thrive.
The establishment of the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange of India) in the mid-1990s enabled controlling a soft and translucent form of securities trading.
The regulatory body for the Indian capital markets was the Securities and Exchange Board of India (SEBI). The capital markets in India participated in turbulence after which the SEBI came into dominance. The market loopholes had to be bridged by taking extreme measures.
Structure of Financial Markets in India 2022
This is widely guided to as economic intermediation and exists at the soul of the Indian economy; obtaining investors and businesses jointly in a symbiotic association. Here is what the financial market consists of.
The Banking System
Indian banking has a multi-tier system. The Reserve Bank of India is the controller of the banking system and monetary management. Its operations include permitting banks and ordinances for a strong and stable banking system. RBI is the note-issuing authority and banker to the government and works as a lender of the final alternative to the other banks. It also performs as a regulator of credit in the monetary system. On the banking front, there are PSU banks, private banks; cooperative banks, and small-scale finance banks, and they converge to determine the Indian banking system.
Indian Securities Market
The securities market delivers an institutional framework for the efficient discharge of capital in the economy. Capital markets restore saving into assets for the investor and it transforms business pedigree into the budget for the businesses. This fundamental structure in the securities markets facilitates the flow of capital from households to businesses, in a controlled institutionalized framework.
The equities, index futures, index options, stock futures, stock options, long-term bonds, medium-term bonds, short-term bonds, money market securities, equity funds, debt funds, hybrid funds, structured products, REITS, INVITs, etc included in the securities market. Security markets are essential for growing money for corporates and institutions and also for investors to assign their money.
Indian Commodities Market
The commodity market enables trades between buyers and sellers of commodities. These commodities are largely split into four categories, agricultural commodities, precious metals, industrial metals, and energy products. Commodities can be dealt with in India in the spot market or the futures market. Commodity markets are effectively used by enterprises, traders, importers, and exporters to evade the commodity cost risk.
Foreign Exchange Market or Forex Market
This is where the currencies are exchanged and there are dealers, arbitrageurs, wagerers, and hedgers in these markets. Globally, the forex trading market is the most extensive compared to other asset categories. The development of international trade made it crucial to be able to decide the relative value of currencies given the discrepancies in their purchasing power. The requirement for exchanging one currency to another for paying trades in goods and services brought about foreign exchange risk and that made a strong forex market. India has had the rupee forward market presented by banks for a long time, but that is proposed by banks only against the real direction. Today, it is feasible to also trade currency pairs in the currency products component of the stock exchange. The USDINR pair is, clearly, the most widespread and extensively traded currency pair.
Indian Insurance Market
The insurance industry in India is controlled by the Insurance Regulatory and Development Authority (IRDA) of India. It controls life and non-life insurance actions in India. Insurance is all about transferring risk. Largely, there are 3 subcategories in insurance, life insurance, non-life insurance, and re-insurance. Insurance in India is still relatively underpenetrated. For a long, the insurance industry was overwhelmed by government-owned corporations but that has changed over the last 20 years with the entrance of private players.
Indian Pension Market
Greatly of the Indian population is still outside the standard retirement benefits cover supplied by the government and its associated organizations, and companies protected under the Employees Provident Fund Organisation (EPFO). In provident fund grants, a portion of the employers’ subsidy is committed to delivering pensions under the Employee Pension Scheme. Some private companies may deliver Superannuation programs and privately funded pension plans to their employees. The National Pension System (NPS) is a determined grant pension scheme now relevant to government employees, where the employee and the government create matching donations to a fund of the employee’s option, managed by licensed fund managers.
Types of Financial market in India
The stock market deals with shares of ownership of public institutions. Each share comes with a cost, and investors make money with the stocks when they function well in the market. It is easy to purchase stocks. The actual challenge is in selecting the right stocks that will make money for the investor.
There are different indices that investors can utilize to observe how the stock market is doing.
The bond market proposes possibilities for companies and the government to guarantee money to finance a project or investment. In a bond market, investors purchase bonds from an enterprise, and the enterprise returns the amount of the bonds within a decided period, plus interest.
The commodities market is where traders and investors purchase and sell natural resources or commodities such as corn, oil, meat, and gold. A typical market is designed for such resources because their price is surprising. There is a commodities futures market wherein the cost of items that are to be provided at a given future time is already recognized and sealed today.
Such a market affects derivatives or contracts whose value is based on the market value of the asset being sold. The futures noted above in the commodities market is an example of a derivative.
Now it is much aware that business units have to increase short-term as well as long-term accounts to meet their working and fixed capital conditions from time to time. This necessitates not only the ready availability of such accounts but also a communication mechanism with the service of which the providers of funds can interact with the borrowers/ users (business units) and move the funds to them as and when needed. This factor is taken care of by the economic markets which deliver a place where or a system through which, the transfer of funds by investors/lenders to the business units is sufficiently reduced.
Here is a detailed description of what is meant by the financial market and its kinds. The Entry learning App will support you to prepare more notes regarding the Banking sector.