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Investing in the stock market or financial market is a very complicated process for a person who has less knowledge of the market. According to the financial requirements and the needs of different financial institutions and peoples, the financial market is divided into two different markets.
Primary market - the primary market is the market where the stock or share is traded for the first time. The companies who want to gather money from the investors will first issue its securities in the stock market, the company issuing shares for the first time will be called as IPO (initial public offering). All issues in the primary market are subject to strict regulations issued by the regulatory authority. It will be very hard for a company to enter and list its securities in the stock market. The company has to fulfill the norms issued by the regulatory authority while the public interest is related.
Secondary market – the secondary market commonly known as the stock market. Here only those securities are traded which are already issued by the company in the market. The prices of the securities are decided by the free flow demand and supply forces in the market. Trading in the secondary market is much easier while comparing to the primary market, you only need to have a Demat account.
The financial market is divided into two different segments called based on duration and types of securities. The financial market is divided into two segments called the money market and capital market.
Money market - the money market is a part of the financial market that trades only in highly liquid and short-termed securities. The maturity period is less than one year. The instruments to be traded in the money market are a certificate of deposits, derivatives and banker’s acceptance.
Capital market - the capital market is the part of the financial market that only trades in the securities maturing for more than the term of one year. The securities of the capital market are equity shares, debentures, and bonds.
Besides the different categories of a financial market, there is another market for each security based on demand and supply.
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Derivative market - the derivative market deals in such kind of instruments that derives its values from some underlying assets. The rise or fall in commodity value results in the rise or fall in the derivative value.
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FOREX market - the forex market is the market where currencies of different countries are traded. The profit will be made from the difference rate between the two rates of different countries.
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Depository market - the depository market is the mode of raising funds by the companies abroad. A company issuing shares in a foreign country and the trading of the same will fall within the depository market.
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Share market - the share market is the market where the shares of the company are traded. The stock exchange is used to trade in the share market where the real-time transactions took place.
