Indian Financial Markets: Key Features

Questions and Answers

Money markets

Providing liquidity and stability to the market

Secondary markets

Aiding the actual transfer of funds between participants Signup and view all the answers

Advising and managing funds for investors Signup and view all the answers

To ensure efficient transfer and allocation of resources for productive activities Signup and view all the answers

Governments, businesses, and households Signup and view all the answers

To channelize surplus funds from lenders to users Signup and view all the answers

The provision of relevant information to all participants Signup and view all the answers

To set up systems and processes to streamline the transfer of funds Signup and view all the answers

Study Notes

Financial markets enable the efficient allocation of resources for productive activities in the economy.
Users of funds include governments, businesses, and households seeking funds for activities.
Providers of surplus funds include governments, businesses, and households with excess funds.
Intermediaries like banks, financial institutions, mutual funds, and insurance companies facilitate the transfer of funds.

Enable access to funds for consumption or productive activities.
Aggregate funds from multiple investors for productive economic activity.
Ensure efficient transfer of funds at a cost that attracts savers and borrowers.

Provide liquidity and exit options for participants.
Facilitate the dissemination of relevant information to all participants.
Allow participants to review and re-allocate resources based on new information.
Ensure the allocation and re-allocation of resources through primary and secondary markets.

Money markets: short-term lending and borrowing of funds.
Securities or capital markets: long-term transfer of funds using debt and equity instruments.

Banks and financial institutions: facilitate fund transfers and provide liquidity.
Mutual funds, insurance companies, and pension funds: large, informed investors providing liquidity and stability.
Fund managers and financial advisors: provide investment advice and fund management services.
Brokers, dealers, custodians, and depositories: facilitate market activities.

Commodities markets: protect against adverse price movements.
Foreign exchange markets: facilitate international trade and investment.
Insurance and pension markets: protect households' financial situations and play a key role as institutional investors.