Money Market
Money market is the place for trading in money and short term financial assets which gets rolled over within a span of 1 year.1) Certificate of Deposit (CD)
CD is a marketable receipt of fund deposited in a bank for a specified period at a specified rate of interest. It is a important source of mobilization of funds for a commercial bank. CD can be transferred to any person through endorsement and delivery.Minimum Size- 1Lakh and multiples of 1Lakh.
Period- minimum- 14days. maximum- 1 year.
Note: On the other hand Fixed Deposits are not negotiable.
2) Commercial Paper (CP)
CP is a short term debt instrument in the form of a unsecured promissory note issued by highly rated companies to raise short term funds. Issue is privately placed through agency banks or financial institutions.While Debentures are long term instruments.
Requirements:
- Net worth of companies- 4 Crores.
- Working Capital- 4 Crores.
- Shares listed on one or more stock exchamges.
- Required specified rating by approved credit rating agencies.
- Minimum Period- 15 days, Maximum Period- 1 year.
- Minimum Amount- Rs 5 Lakhs and multiples of Rs 5 Lakhs.
3) Treasury Bills (T-Bills)
T-Bills are promissory notes issued by Union Government for a period from 91 days to 364 days.It is issued at a discount. (Say a T-Bill of Rs 10,000 is sold at Rs 9,000 and on maturity customer receives the full value).
Maturity- 91 days, 182 days, 364 days.
Main investors are Banks to meet their SLR requirements.
Amount- minimum 1 Lakh and multiples of 1 Lakh.
Capital Market
Markets for financial assets that have long or indefinite maturity.
1) Primary Market
- New issues are made of primary market.
- When a company wishes to raise fresh capital by issuing securities it goes to the primary market.
2) Secondary Market.
Market for already issued shares.
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