Capital Market - Sources of Business Finance, Business Economics & Finance Video Lecture | Business Economics & Finance - B Com

hello and welcome to the online classes
offered by credit Academy
my name is acid roof this is the first
video are in a series of videos on the
topic of capital markets in this video
we will try to understand what is a
capital market now what do we mean by a
capital market before I attempt to
answer that question I want you to take
a look at this picture what do you think
this is of course this is a market a
market a vegetable market a market where
you go and buy vegetables right all very
simple yes of course
but then what is this well this is a
share market a place where you buy and
sell shares but then what is the
difference between this and this well
apart from the fact that in one place
you are buying rudimentary stuff buying
and selling
rudimentary stuff like vegetables and in
another case where you are buying a bit
more complex things called shares of a
company there is not much difference
between these two because both of them
are markets so what do we mean by a
market well a market actually is a
actual of virtual place where forces of
demand and supply operate and where
buyers and sellers interact directly or
through intermediaries to trade goods
services or contracts or instruments for
money or barter what does mean well it
means that a market is a place basically
where buyers and sellers will interact
to buy and sell something
the market place could be actual it
could be a physical place like a
vegetable market or it could be virtual
that means it does not exist physically
but is a collection of computers over a
network which creates the market okay
it is a it is a place where the buyers
and sellers interact to trade some goods
or service or contracts or instruments
for money or for something else it could
be a barter market as well where you
provide a commodity in exchange for
another commodity okay but the key thing
about any market is that there is a
buyer there is a seller and demand that
the forces of demand and supply operate
in that market okay so in simple terms a
market is is a platform which enables
buyers and sellers to interact and
transact okay
it could be directly they might interact
with themselves directly for example
when you go to a website like OLX calm
and quicker calm it's it's a marketplace
which is direct which is in a way direct
because you're directly trying to
contact the buyer or the seller okay but
a market like the stock market if you
are going to buy and share some shares
in a stock market you will have to do it
through a member of a stock exchange and
the members is a broker so you have to
buy shares via an intermediary who is
the member or the broker of the stock
market okay so what is a capital market
well a capital market is just like any
other market but in this case what is
being traded between the buyer and the
seller is capital okay also in simple
words money but why do we have something
like a capital market well because at
the core of any economy are is capital
right what I mean by this well any
business which is producing a goods or a
service will not be able to produce its
goods or service without capital it will
not be able to pay its employees it will
not be able to pay its rent so capital
is very important for businesses
four households like you you need
capital for your day-to-day activities
to buy your the necessities of life okay
for governments capital is very
important because a government cannot
build roads and bridges without capital
they cannot you know put money into
welfare activities without capital so
capital is at the core of any economy so
it is but obvious that a market for
capital is crucial for any economy so
what is the structure of a capital
market well just like any market a
capital market has buyers
it has intermediaries and it has sellers
who are the buyers in the capital market
well one example of a buyer in a capital
market is a entrepreneur who is in need
of a loan so he takes a loan from a bank
to say set up a factory well in this
case the entrepreneur is the buyer of
the capital the bank is the intermediary
it is not the seller of the capital why
because the money which the bank is
lending out is something that the bank
got wire deposits from investors or
depositors so the sellers of capital in
this case are the depositors the bank is
the intermediary and the entrepreneur
who is going to set up a factory is the
buyer of the capital okay other way are
other forms of buyers in a capital
market well companies which sell shares
in the market and raise capital are also
buyers the capital in this case the
investors who buy the shares of those
company are the sellers in the capital
and the intermediary is the exchange or
the investment bankers which facilitate
this process of raising capital via
issuing shares of a company they are the
intermediaries in this process are other
examples of capital markets buyers in
the capital market well when an
entrepreneur or any company or
business tries to raise money by issuing
new loans directly to investors not
going to the banks but directly going to
the investors to issue to raise new
capital is also a form of capital market
activity in this case the buyers of the
capital are again the company or the
business of the entrepreneurs and the
seller are the investors who buy the
loan of that particular company or buy
the bonds of that particular company
okay similarly governments are also
buyers in a capital market they raise
capital primarily of via debt to finance
their activities
so in this entire market structure as
you can see in your screen you do need a
set of umpires so to say who will
provide the guidelines I will and will
ensure that there are no loopholes or
any legalities process who are these
umpires or regulators as we call them
well Sebby which is the Stock Exchange
Board of India that's one major
regulator of Indian stock markets or
stock exchanges then there is the
Reserve Bank of India India central bank
they're also a very important player in
framing policies which provide
guidelines of how the capital market
India should work then there is the FMC
the forward market commission which is a
regulator for commodity markets mostly
and then you have the various government
ministries which are also the policy
Famers who set these rules and the
regulatory policies for capital markets
well there are basically two types of
capital markets one is equity capital
markets or stock markets which you all
probably have heard this is by far the
more popular capital market but there is
then there's the other capital market
which is the debt or bonds but equity
capital markets is
the owners the businesses are you know
part with their ownership of the company
that is they sell the ownership of the
company to investors investors buy a
share of the ownership of the company
and hence the word share in a dead
capital market a the company which wants
to raise capital which wants to raise
money does not actually sell ownership
of the company but what it does it's it
raises loans directly from the investors
promising to pay back the capital that
they have taken along with a certain
amount of interest okay so this is
basically a type of a loan but in this
case the loan has not been taken from
banks but it has been taken directly
from investors who buy the debt of that
particular company so that is a debt
capital market so these are the two
broad types of capital markets equity
capital markets where ownership of the
companies are sold to raise capital and
debt capital markets where companies
borrow money directly from investors to
raise capital okay in future videos we
are going to look into a classification
of the capital markets and then we are
going to talk about some important
concepts within capital markets like
stock markets and IPOs and other
important terms within capital markets
till then goodbye and good luck