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Lecture 17 
Financial Markets
Prelims 2020 Crash Course 
Capstone IAS Learning
Page 2


Lecture 17 
Financial Markets
Prelims 2020 Crash Course 
Capstone IAS Learning
What will we cover
What are financial markets ? 
Money and Capital Market 
Various terms associated with Capital Market  
Stock Exchanges and Stock Indices 
Various Regulatory Bodies
Page 3


Lecture 17 
Financial Markets
Prelims 2020 Crash Course 
Capstone IAS Learning
What will we cover
What are financial markets ? 
Money and Capital Market 
Various terms associated with Capital Market  
Stock Exchanges and Stock Indices 
Various Regulatory Bodies
Financial Markets
Financial Market refers to a marketplace, where creation 
and trading of financial assets, such as shares, 
debentures, bonds, derivatives, currencies, etc. take place. 
It plays a crucial role in allocating limited resources, in 
the country’s economy. It acts as an intermediary 
between the savers and investors by mobilising funds 
between them. 
Financial Markets can be divided into two parts : 
1. Money Market - it caters to short-term fund 
requirements.(< 1 year) 
2. Capital Market - it caters to long-term fund 
requirements.(> 1 year)
Page 4


Lecture 17 
Financial Markets
Prelims 2020 Crash Course 
Capstone IAS Learning
What will we cover
What are financial markets ? 
Money and Capital Market 
Various terms associated with Capital Market  
Stock Exchanges and Stock Indices 
Various Regulatory Bodies
Financial Markets
Financial Market refers to a marketplace, where creation 
and trading of financial assets, such as shares, 
debentures, bonds, derivatives, currencies, etc. take place. 
It plays a crucial role in allocating limited resources, in 
the country’s economy. It acts as an intermediary 
between the savers and investors by mobilising funds 
between them. 
Financial Markets can be divided into two parts : 
1. Money Market - it caters to short-term fund 
requirements.(< 1 year) 
2. Capital Market - it caters to long-term fund 
requirements.(> 1 year)
Functions of 
Financial 
Markets
Savings 
Mobilisation
Liquidity
Capital  
Formation
Intermediation
Page 5


Lecture 17 
Financial Markets
Prelims 2020 Crash Course 
Capstone IAS Learning
What will we cover
What are financial markets ? 
Money and Capital Market 
Various terms associated with Capital Market  
Stock Exchanges and Stock Indices 
Various Regulatory Bodies
Financial Markets
Financial Market refers to a marketplace, where creation 
and trading of financial assets, such as shares, 
debentures, bonds, derivatives, currencies, etc. take place. 
It plays a crucial role in allocating limited resources, in 
the country’s economy. It acts as an intermediary 
between the savers and investors by mobilising funds 
between them. 
Financial Markets can be divided into two parts : 
1. Money Market - it caters to short-term fund 
requirements.(< 1 year) 
2. Capital Market - it caters to long-term fund 
requirements.(> 1 year)
Functions of 
Financial 
Markets
Savings 
Mobilisation
Liquidity
Capital  
Formation
Intermediation
Money Market
Organised 
That part of money 
market which comes 
under the regulatory 
ambit of organisations 
like RBI, SEBI etc.
Unorganised 
It is an old and ancient 
market, mainly made up 
of indigenous bankers 
and moneylenders.
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165 videos|297 docs|142 tests

FAQs on PPT: Financial Markets - Indian Economy for UPSC CSE

1. What are financial markets?
Ans. Financial markets are platforms where individuals and institutions trade financial assets such as stocks, bonds, commodities, and currencies. These markets facilitate the buying and selling of these assets, allowing participants to raise capital, invest, and manage risks.
2. How do financial markets function?
Ans. Financial markets function through the interaction of buyers and sellers. Buyers, such as investors or financial institutions, place orders to purchase financial assets, while sellers offer these assets for sale. The market matches these orders based on price and volume, and transactions are executed. This process is facilitated by various intermediaries such as stock exchanges, brokers, and electronic trading platforms.
3. What are the different types of financial markets?
Ans. There are several types of financial markets, including the stock market, bond market, commodity market, foreign exchange market, and derivatives market. The stock market deals with the trading of shares of publicly listed companies, while the bond market involves the buying and selling of debt securities. The commodity market focuses on the trading of physical goods like gold, oil, and agricultural products. The foreign exchange market handles the trading of different currencies, and the derivatives market involves trading financial contracts derived from an underlying asset.
4. How do financial markets impact the economy?
Ans. Financial markets play a crucial role in the economy by allocating capital, facilitating investment, and managing risks. They provide individuals and businesses with access to funds for various purposes such as starting a business, expanding operations, or purchasing assets. Financial markets also enable efficient price discovery, which reflects market expectations and guides economic decisions. Additionally, they provide opportunities for investors to diversify their portfolios and hedge against potential losses.
5. What factors influence financial markets?
Ans. Several factors influence financial markets, including economic indicators, geopolitical events, monetary policy decisions, and investor sentiment. Economic indicators such as GDP growth, inflation rates, and employment data can impact market participants' expectations and influence their investment decisions. Geopolitical events like wars, trade disputes, or political instability can create uncertainty and affect market sentiment. Monetary policy decisions by central banks regarding interest rates and liquidity can significantly impact borrowing costs and investment decisions. Lastly, investor sentiment, influenced by factors like market news, trends, and psychological biases, also plays a role in shaping financial markets.
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