FINANCIAL MARKET

Financial Market is where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives.

MONEY MARKET

"Money Market" refers to the market for short-term requirement and deployment of funds. Money market instruments are those instruments, which have a maturity period of less than one year.

The most active part of the money market is the market for overnight call and term money between banks and institutions

and repo transactions. Money Market is regulated by RBI.

Money Market can be further divided into 3 parts. These are:

a) Call Money Market

b) Term Money Market

c) Notice Money Market

The market to get funds for 1 day only is called as Call Money Market. The market to get funds for 2 days to 14 days is called as Notice Money Market. The market to get funds for 15 days to 1 year is called as Term Money Market.

Some of the Money Market instruments are:

1) Commercial Paper

2) Certificate of Deposit

3) T-bills

4) Cash Management Bills

Commercial Papers

a)A CP is a short term security (7 days to 365 days) issued by a corporate entity (other than a bank), at a discount to the face value.

b) Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.

c) CPs normally give a higher return than fixed deposits & CDs. 

d) CP can be issued in denominations of Rs. 5 lakh or multiples thereof. Amount invested by a single investor should not be less than Rs. 5 lakh (face value).

e) Only corporates who get an investment grade rating can issue CPs, as per RBI rules. It is issued at a discount to face value.

f) Bank and FI’s are prohibited from issuance and underwriting of CP’s.