Financial markets and capital markets have the same meaning and objective, which is to enable trade in the securities of public limited companies. Here is providing you with a financial market overview. The financial markets have certain indicators in place that reflect the performance of the companies whose securities are traded in those markets. Financial markets are a vital part of an economy making it possible for industry, trade and commerce to flourish without any obstacle in terms of resources. Today most economies around the world are judged by the performance of their financial markets.
The financial markets serve a vital purpose in the growth and development of a company that wants to expand. Such companies with expansion plans and new projects are in need of funding and the financial market serves as the best platform from which a company can ‘sell’ itself to the discerning public on the basis of merit among other things. To trade in the financial market a company has to be absolutely transparent about its vital fundamentals such as revenues, income, assets, liabilities, infrastructure, etc. as this allows the investing public to make a fair assessment of the said company’s market worth.
The financial markets function on the basis of two market concepts.
Primary markets
When a company decides to sell its securities to the public through an (Initial Public Offer) IPO it is said to be operating in the primary market. In fact, for companies that offer their securities to the public for the first time, this process is a mandatory requirement and involves a few stages of compliance with the market regulator that eventually allows it to trade in the securities market.
Secondary markets
After a company has successfully completed its IPO it is allowed to get listed in the particular security exchange where it has applied for membership. Here it may be said that the company has entered the secondary market and its securities are available for trade as those of other companies listed on the securities market. The listing price is determined by the market regulator but thereafter the company’s securities are traded on a regular basis and the price is determined by the market forces, primarily demand and supply.
Most financial markets around the world have undergone a process of steady evolution and have changed in relation to the process known as ‘globalization’. With information technology changing the way we do business all over the world it was inevitable for financial markets to also integrate their functions in an IT enabled electronic environment. This has not just revolutionized the way companies raise money for expansion or new ventures but also brought about a level of transparency and ease in the functional areas of trade in securities that was never seen before.
The most famous financial markets of the world are:
- London financial market
- New York financial market
- Tokyo financial market
- Hong Kong financial market
- Singapore financial market
- Mumbai financial market
The most important financial market in India is in Mumbai, where the market movement indicator the (Bombay Stock Exchange) BSE Sensex is the most important indicator of India’s economic performance. However, the BSE Sensex is steadily loosing out to the NSE (National Stock Exchange) market indicator known as Nifty. Nifty has a broader base than the BSE Sensex and is expected to take over as India’s main market indicator since it reflects the integrated financial market in India.