What is a Capital Market? (2024)

Capital market is a place where buyers and sellers indulge in trade (buying/selling) of financial securities like bonds, stocks, etc. The trading is undertaken by participants such as individuals and institutions.

Capital market trades mostly in long-term securities. The magnitude of a nation’s capital markets is directly interconnected to the size of its economy which means that ripples in one corner can cause major waves somewhere else.

Types of Capital Market

Capital market consists of two types i.e. Primary and Secondary.

  1. Primary Market

    Primary market is the market for new shares or securities. A primary market is one in which a company issues new securities in exchange for cash from an investor (buyer).It deals with trade of new issues of stocks and other securities sold to the investors.

  2. Secondary Market

    Secondary market deals with the exchange of prevailing or previously-issued securities among investors. Once new securities have been sold in the primary market, an efficient manner must exist for their resale. Secondary markets give investors the means to resell/ trade existing securities.Another important division in the capital market is made on the basis of the nature of security sold or bought, i.e. stock market and bond market.

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What is a Capital Market? (2024)


What is capital market in simple words? ›

Capital market is a place where buyers and sellers indulge in trade (buying/selling) of financial securities like bonds, stocks, etc. The trading is undertaken by participants such as individuals and institutions. Capital market trades mostly in long-term securities.

What is capital market vs stock market? ›

The short answer is that the stock market is part of the capital market. While the stock market deals exclusively with stocks, the capital market includes stocks, bonds, and other forms of long-term capital.

What is the difference between money markets and capital markets? ›

“They serve different purposes and carry different risk levels. Money markets are typically shorter-term and carry less risk but offer less potential reward. Capital markets are typically longer-term and offer greater risk but potential for greater rewards,” Milan explains.

What are capital markets simplified? ›

Capital markets are a way to bring together individuals or institutions with money (also known as capital) they wish to invest, and various entities that seek money to underwrite costs to meet specific purposes.

How do capital markets work? ›

Capital markets are financial markets that bring buyers and sellers together to trade stocks, bonds, currencies, and other financial assets. Capital markets include the stock market and the bond market. They help people with ideas become entrepreneurs and help small businesses grow into big companies.

Who needs funds from the capital market? ›

Capital markets are a very important part of the financial industry. They bring together suppliers of capital and those who seek it for their own purposes. This may include governments that want to fund infrastructure projects, businesses that want to expand, and even individuals who want to buy a home.

Are US treasury bills money market or capital market? ›

Money markets include markets for such instruments as bank accounts, including term certificates of deposit; interbank loans (loans between banks); money market mutual funds; commercial paper; Treasury bills; and securities lending and repurchase agreements (repos).

Is money market safer than capital market? ›

The money market fulfils short-term liquidity needs, while the capital market offers a platform for long-term investing. Money market instruments are more liquid than capital market instruments, and the money market is less risky than the capital market.

Are mortgages money market or capital market? ›

Capital markets consist of money market, bond market, mortgage markets, stock market, spot or cash markets, derivatives markets, foreign exchange and interbank markets.

Is real estate a capital market? ›

Real estate capital markets are essentially financial markets that deal with real estate assets. These markets play a critical role in the real estate industry as they provide developers and investors with access to capital.

What companies are in capital markets? ›

Largest Companies In The Capital Markets Industry
SymbolNamePrice (Intraday)
GSThe Goldman Sachs Group, Inc.456.52
MSMorgan Stanley97.84
SCHWThe Charles Schwab Corporation73.28
IBKRInteractive Brokers Group, Inc.125.72
21 more rows

Are treasury bills traded in capital markets? ›

Assets Traded: The money market trades instruments such as Treasury bills, certificates of deposit, promissory notes, commercial papers and bonds redeemable in less than a year. The capital market trades in most bonds, stocks and other instruments either backed by equity or redeemable in more than one year.

What is the capital market line in simple terms? ›

The capital market line (CML) is a graphical representation that shows you the relationship between the risks and returns of different portfolios. It links the risk-free rate of return with a portfolio composed of risky assets.

What is market capitalization in simple terms? ›

Market capitalization shows how much a company is worth as determined by the total market value of all outstanding shares. To calculate a company's market cap, multiply the number of outstanding shares by the current market value of one share.

What is market capitalization simplified? ›

Market cap is the total dollar value of a company's outstanding shares of stock. For example, if a company has 1 million shares of outstanding stock and the stock currently trades at $50 per share, then its current market cap is $50 million.

Does capital market mean money market? ›

Answer. The capital market is a part of the financial market that involves trading bonds, stocks, and debentures for a long period. Answer. The money market is the part of the financial market that involves borrowing and lending in the short term.


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