Define: Capital Market

A capital market is a financial market where individuals and institutions trade financial securities such as stocks, bonds, and derivatives. It provides a platform for companies to raise funds for expansion and investors to earn returns on their investments.

The key participants in a capital market include investors (individuals and institutions), issuers (companies or governments), intermediaries (such as investment banks and brokers), and regulators (government bodies overseeing the market).

Capital markets are regulated by government bodies and regulatory authorities to ensure fair and transparent trading practices. These regulations aim to protect investors, maintain market integrity, and prevent fraudulent activities.

The securities traded in a capital market include stocks (equity shares), bonds (debt instruments), derivatives (financial contracts based on underlying assets), and commodities (raw materials or agricultural products).

Individuals can invest in the capital market by opening a brokerage account with a licensed broker or through online trading platforms. They can then buy and sell securities based on their investment goals and risk appetite.

Investing in the capital market involves certain risks, including market volatility, economic downturns, company-specific risks, and regulatory changes. It is important for investors to conduct thorough research and diversify their portfolios to mitigate these risks.

Insider trading refers to the buying or selling of securities based on non-public, material information about a company. It is illegal because it undermines market fairness and integrity, giving certain individuals an unfair advantage over others. Insider trading is strictly regulated and can lead to severe penalties, including fines and imprisonment.

The capital market plays a crucial role in economic growth by facilitating the flow of funds from savers to borrowers. It allows companies to raise capital for expansion and investment, which in turn creates job opportunities, stimulates innovation, and drives overall economic development.

Some of the major stock exchanges in the capital market include the New York Stock Exchange (NYSE), NASDAQ, London Stock Exchange (LSE), Tokyo Stock Exchange (TSE), and Shanghai Stock Exchange (SSE). These exchanges provide a platform for companies to list their securities and for investors to trade them.