A financial market is a platform where people with extra money (savers/investors) provide funds to those who need money (borrowers/businesses). It enables creation, trading, and exchange of financial assets like shares, bonds, and debentures. It acts as a bridge between savers and users of funds.

The money market is the part of the financial market where short-term funds (up to one year) are borrowed and lent. It provides liquidity, helps in interest rate determination, and acts as an avenue for the government, banks, and companies to manage short-term financial needs.

Call Money is a short-term money market instrument where banks and financial institutions borrow and lend funds for just one day (overnight). It helps banks meet temporary liquidity needs without requiring any collateral. The interest rate in this market is called the 'Call Rate'.

Notice Money and Treasury Bills (T-bills) are two important instruments of the Indian money market. Notice Money allows borrowing and lending between banks and institutions for 2–14 days, while Treasury Bills are short-term government securities issued at a discount and redeemed at face value.

Indian Money Market offers various short-term instruments like Treasury Bills, Cash Management Bills, Certificates of Deposit, and Commercial Papers. They differ in issuers, maturity, risk, and purpose but all help manage short-term liquidity and provide investment avenues.

Trade Bills (also called Bills of Exchange or Trade Acceptance Bills) are short-term negotiable instruments used in trade financing. They allow sellers to get immediate funds by discounting bills with banks, while buyers get credit time to make payments. When accepted by banks, they are called Commercial Bills.

Repo (Repurchase Agreement) and Reverse Repo are short-term money market instruments where securities are sold and repurchased or bought and resold at a future date with interest. Triparty Repo adds a third-party agent to manage settlement, collateral, and custody. These tools are crucial for liquidity management and monetary policy transmission.

Interest rate benchmarks like LIBOR (London Interbank Offered Rate) and MIBOR (Mumbai Interbank Offered Rate) are reference rates used in financial markets to price, value, and settle loans, derivatives, and other instruments. They ensure transparency, consistency, and comparability across financial products. While LIBOR was a global benchmark, it has been phased out due to reliability issues. MIBOR continues to serve as the Indian benchmark for interbank borrowing.

The Unorganised Money Market in India has existed since ancient times and continues to operate today. Unlike the organised money market, it is not directly regulated by the Reserve Bank of India but is recognized by the government. It consists of chit funds, Nidhi companies, loan companies, indigenous bankers, and local moneylenders. These provide savings and credit facilities to people with limited access to formal banking.

The Capital Market is the long-term financial market of an economy where equity and debt securities are traded. It serves as a bridge between investors with surplus funds and businesses or governments needing funds for long-term projects. The capital market consists of two main segments: the Primary Market (new issue of securities) and the Secondary Market (resale of securities).

Companies raise capital by issuing shares through various methods in the primary market. Common methods include Initial Public Offer (IPO), Follow-on Public Offer (FPO), Preferential Issues, and Rights Issues. Each method has different rules, objectives, and target investors, but all aim to mobilize funds for business expansion, diversification, or debt repayment.

The Secondary Market, also known as the stock market or stock exchange, is where existing securities are bought and sold. It provides liquidity to investors, allowing them to disinvest and reinvest, and helps channel funds into productive sectors. The main instruments traded in the secondary market are shares (equity and preference shares).

Derivatives are financial instruments whose value is derived from an underlying asset such as commodities, stocks, currencies, or interest rates. They are contracts between two parties and can be traded on exchanges or over-the-counter (OTC). Derivatives help in hedging risks, speculation, and price discovery. Common types are Futures, Options, Forwards, and Swaps.

Forwards and Swaps are over-the-counter (OTC) derivatives, customized contracts between two parties. Forwards are agreements to buy/sell an asset at a fixed price in the future, while Swaps involve exchanging cash flows or liabilities, often based on interest rates or currencies. Both help businesses hedge against risks but carry counterparty risk.

A Bond is a long-term debt instrument where an investor lends money to a government, company, or other entity. In return, the issuer pays fixed or variable interest (coupon) at regular intervals and repays the principal (face value) at maturity. Bonds are generally less risky than shares, but also offer limited returns.

Bonds are long-term debt instruments issued by governments, corporations, or municipal bodies. While most bonds pay periodic interest, some special types exist such as Zero-Coupon Bonds (no interest, issued at discount), Municipal Bonds (issued by city corporations), Sovereign Bonds (issued by governments), and Sovereign Gold Bonds (denominated in grams of gold).

Apart from regular bonds, several innovative bond instruments exist to support specific sectors and causes. Green Bonds fund environment-friendly projects, Blue Bonds finance marine and ocean-based projects, Social Impact Bonds link returns to social outcomes, and Inflation-Indexed Bonds protect investors against inflation. These instruments are vital for sustainable and inclusive growth.

Masala Bonds are rupee-denominated bonds issued overseas to attract foreign investors, with currency risk borne by investors. Surety Bonds are financial guarantees used mainly in construction contracts, ensuring contractors fulfill obligations. Both instruments are important for infrastructure financing and risk management.

Electoral Bonds are banking instruments issued by SBI, introduced in 2018, to make political donations through a formal channel instead of cash. They are aimed at transparency but also criticized for donor anonymity. Bond Yield is the effective return on bonds, fluctuating with market price, and serves as an important indicator for economy, stock markets, currency, and borrowing costs.

Bond Yield represents the effective return an investor earns from a bond, influenced by interest rates, inflation, and government borrowing. Debentures are long-term debt instruments issued by companies to borrow funds from the public at a fixed rate of interest, without collateral security.

Depositary Receipts (DRs) are financial instruments issued by banks/financial institutions that represent ownership in shares of a foreign company. They allow investors to invest in overseas companies through their local stock exchanges without directly trading in foreign markets.

Participatory Notes (P-Notes), also known as Offshore Derivative Instruments (ODIs), are financial instruments issued by SEBI-registered Foreign Institutional Investors (FIIs) to overseas investors who want to invest in Indian stock markets without registering directly with SEBI. They provide an indirect route for foreign investments in India.

Investment Funds are financial arrangements that pool money from multiple investors and invest it in securities like shares, bonds, or other assets. Each investor owns units in the fund, which represent their share of ownership. These funds are managed professionally and help small investors participate in big markets.

Hedge Funds are alternative investment funds that pool money from High Net Worth Individuals (HNIs) to invest in risky and complex products like equities, bonds, currencies, and derivatives. Real Estate Investment Trusts (REITs) are investment vehicles that allow small and large investors to invest in income-generating real estate properties, much like mutual funds but focused on real estate.

InvITs are collective investment vehicles like REITs but focus on infrastructure projects. Venture Capital is funding given to high-risk startups with high growth potential in exchange for equity ownership. Seed Money is the earliest stage of funding provided to a new business idea before it becomes self-sustainable.

Investors in financial markets can be classified into different types based on their size, knowledge, strategy, and purpose. Some are very large institutions like mutual funds and insurance companies, while some are individual investors like angel investors, bulls, and bears. Each type of investor plays a unique role in creating liquidity, providing capital, and influencing the movement of prices in the stock market.

A stock exchange is a marketplace where buyers and sellers trade securities such as shares, bonds, and derivatives. The prices of these securities are driven by demand and supply. To be traded, securities must be listed on the exchange. Stock indices like Sensex and Nifty reflect the performance of a selected group of companies and indicate the overall health of the economy.

A Social Stock Exchange is a special platform approved by SEBI in 2022 to help social enterprises (for-profit and not-for-profit) raise funds. It works like a stock exchange but focuses on social and development projects, ensuring better transparency and organized utilization of funds.

SEBI is the regulator of the securities and capital market in India. Formed in 1988 and made a statutory body in 1992, SEBI protects investors’ interests, regulates market participants (like brokers, companies, fund managers), and ensures fair functioning of stock exchanges.