The financial market enables efficient transfer and allocation of resources for productive activities in the economy. Users of funds include businesses, governments and households who seek funds to run their activities. Households, businesses and governments also act as providers of surplus funds. Intermediaries such as banks, financial institutions, mutual funds and insurance companies, among others, channelize the available surplus funds from lenders to the users.
The function of the financial markets is to ensure that economic activity is enabled by providing access of funds to those that need it for consumption or productive activity. They provide a way for aggregation of funds from a large number of investors and make it available for productive economic activity. In the absence of financial markets, such aggregation may not be possible. An efficient financial market ensures that the transfer of funds happens at a cost that makes it attractive for savers to save and lend and for users to borrow funds. The markets must enable the dissemination of relevant information to all the participants in the market so that the decision on the price of funds is made after integrating all available information. If some are unable to make wise decisions, various organizations provide HNI tips to carry out safe-trade. The market must also allow the participants to review their funding decisions, give new information and to re-allocate the resources accordingly. A heuristic function is provided by the research hubs under HNI intraday calls head. Therefore, providing liquidity and exit options are an important function of financial markets. Financial market regulations and regulators focus on setting up systems and processes in place to streamline the activities associated with the transfer of funds.
The financial market comprises of the money markets that deal with the short-term lending and borrowing of funds and the securities or capital markets that enable longer term transfer of funds using debt and equity instruments. The allocation and re-allocation of resources may happen in the primary markets where securities are issued by the borrowing institutions directly to the lenders or investors or in the secondary markets which provides investors the options to exit or reallocate their resources by dealing amongst themselves. There are free stock cash tips available across the web to boost up one’s investment strategy.
The activities in the financial market are facilitated by the market participants such as banks, financial institutions, brokers and dealers, custodians, depositories and depository participants, among others. Institutions such as mutual funds, insurance companies and pension funds are large and informed investors who provide funds in the markets and provide liquidity and stability. They also play an important role in the proper pricing of financial assets since they can source and evaluate information better. Banks and financial institutions aid the actual transfer of funds between the participants and may also be present in the markets to source funds for their activities or as investors of funds. Fund managers and financial advisors provide the equity cash tips and manage funds for investors so that their savings are invested in a way that suits their requirements the best.
Apart from the financial markets, economic activity is supported by the development of other markets such as the commodities markets and foreign exchange markets that protect producers, consumers and businesses against adverse price movements. Similarly, a well-developed insurance and pension markets protect the personal financial situation of households apart from playing an important role as an institutional investor in the financial markets.
Insight of Indian economy:
The Indian economy has gone through phases of growth and changes have transformed it from being a primarily agriculture-oriented economy to one where services and manufacturing contribute to 3/4th of its gross domestic product. The economy requires the financial system to support growth by enabling access to resources, both financial as well as real resources. The banking sector provides credit at efficient costs, secure systems for transactions and transfer of funds and the means to channelize savings of the economy in productive ways. Securities markets allow wider access to investors for businesses seeking funds by issuing securities with features that cater to the risk and return requirements of different types of investors. This is also ensured by the HNI advisors existing in the country. The foreign exchange markets determine the costs of import of funds and commodities essential for production. A well- developed foreign exchange market helps to hedge the risks of price movements for companies dependent upon imports as well as the earnings of export-oriented organization. Similarly, the commodity markets enable mitigating the risk of adverse price movements in commodities to producers and users. Adequate insurance cover for people will ensure that they are protected from emergencies of large expenses or loss of income. It will enable higher savings and investments. All these markets need to be well developed in systems and regulations to enable economic growth.
Structure of Financial Markets in India
The primary function of the banking system is to accept deposits and make credit available to those entities that qualify for it. The banks act as an intermediary between those that have excess funds to invest and those that need funds by undertaking the role of mobilizing these surplus funds by taking deposits and lending it on the basis of a credit evaluation done on the ability of the borrowers to pay interest and return the principal. The banks also provide a secure system for settling financial transactions of their customers. Apart from these primary banking activities, banks also provide third-party products and HNI services to their clients by offering advice on investments and insurance. Banks tie up with mutual funds, portfolio management service providers, insurance companies and others and offer their products and services.
A security represents the terms of exchange of money between two parties. Securities are issued by companies, financial institutions or the government. They are purchased by investors who have money to invest. Security ownership allows investors to convert their savings into financial assets which provide a return. Security issuance allows borrowers to raise money at a reasonable cost. Thus the objectives of the issuer and the investor are complementary and the securities market provides a vehicle to mutually satisfy their goals. In order to safeguard the savings, many investors prefer researched share market tips.
A commodity market facilitates transactions between buyers and sellers of commodities. These could be agriculture based commodities, commodities for industrial use such as metals and minerals, gas and oil for consumption or production and bullion for investment or industrial use. Commodities can be traded in the cash market for immediate delivery and payment between the buyer and the seller. Or, transactions in commodities can be done in the forward or futures or options market for settlement at a future point in time at prices determined at the time of entering the contract. Traders prefer engaging in binary option tips rather than making an investment decision themselves.
Apart from the above mentioned segregates of Indian financial market, others that contribute to it include Foreign Exchange Market, Insurance market, the Pension market and International Financial Services Centre. All the patches together make up the ever-expanding and growing- Indian Financial Market.