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Question : 4
Total: 8
Differentiate between 'Capital Market' and 'Money Market' on the basis of the following:
(i) Participants
(ii) Instruments
(iii) Duration
(iv) Investment outlay
(v) Liquidity
(i) Participants
(ii) Instruments
(iii) Duration
(iv) Investment outlay
(v) Liquidity
Solution:
| Basis for Difference | Capital Market | Money Market |
|---|---|---|
| Participants | Participants in this market include financial institutions, merchant bankers, stock exchanges, mutual funds, foreign investors and general public. | Participants in this market include RBI, commercial banks, principal dealers and brokers, and non-bank financial institution. |
| Instruments | Instruments traded consist of equity shares, preference shares, debentures, bonds and other longterm securities. | Instruments traded consist of treasury bills, commercial bills, certificates of deposits and other short-term securities. |
| Investment Outlay | This market dealsin small value securities, i.e. securities of values | This market deals in high value securities. For example, the minimum amount of call loan is |
| Duration | Securities traded are of medium term and long term wherein the maturity period is of more than one year. | Securities traded are only of short-term wherein the maturity period can vary from one day to a maximum of one year. |
| Liquidity | Capital market securities are liquid in nature as they are tradable on stock exchanges, but are less liquid in comparison to the money market securities. | The securities traded are highly liquid in nature. |
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