Suppose someone asks you about the traffic situation in your city right now. Your city may have thousands of roads and intersections, and it would be practically impossible to check each one before giving an answer. Instead, you would quickly observe a few important roads, highways, and major junctions spread across different parts of the…
Imagine the securities market as a large, organized ecosystem where companies raise money and investors invest their savings. For such a system to function smoothly, it needs institutions, platforms, and mechanisms that regulate, facilitate, and settle transactions. India has built a well-structured financial market infrastructure, consisting of regulatory bodies, trading platforms, custodial institutions, and settlement…
To understand Credit Rating Agencies, imagine the financial market as a large marketplace where many borrowers (companies, governments, institutions) come to raise money by issuing debt instruments such as bonds or debentures. Investors who want to lend money naturally ask a simple but crucial question: “How safe is my money?” Credit Rating Agencies (CRAs) exist…
To understand Investment Funds, it is useful to first step back and think about a basic problem faced by most investors. Many individuals want to invest their savings, but they often face three challenges: Investment funds emerged as a solution to these problems. Let us understand this idea. Investment Funds An investment fund is a…
This topic is extremely important in understanding how the government raises money, manages public debt, and influences the financial system. If we look carefully, Government Securities (G-Secs) form the foundation of India’s debt market and are also a key instrument of monetary policy. What is a Government Security (G-Sec)? A Government Security (G-Sec) is a…
To understand derivatives, it helps to first recall a basic principle of financial markets: sometimes investors do not directly trade the asset itself, but rather trade a contract whose value depends on that asset. That is exactly what derivatives are. Let us explore this concept: What are Derivatives? Derivatives are financial instruments whose value is…
Suppose a government or a company wants to build a highway, expand a factory, or finance a large project. Instead of borrowing from a single bank, it borrows small amounts of money from thousands of investors. The instrument through which this borrowing happens is called a bond. So, a bond is essentially a debt instrument….
To understand Debentures, it is useful to first recall a fundamental idea in finance: companies need capital to grow. Sometimes they raise this capital by giving ownership (through shares), and sometimes by borrowing money. Debentures belong to the second category. Let us understand this concept. What are Debentures? A Debenture is a long-term debt instrument…
Imagine a company not merely as a business entity, but as a collective ownership structure. Instead of a single individual owning the entire company, ownership can be divided into many small units. These units are called shares. Meaning of Shares A share (or stock) represents a unit of ownership in a company. When a person…
To understand Primary Market Instruments, imagine the capital market as a place where companies raise money directly from investors for the first time or for expansion. This happens in the Primary Market, where securities are issued directly by the company to investors. Now let us understand the major instruments. Initial Public Offer (IPO) An Initial…
