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By John Wick

The Indian Stock Market or the International stock market is quite volatile. If we keep aside its volatility, then the stock market has a lot to offer. From great investments to future savings, the stock market is a profitable ocean of opportunities. An individual is not born with stock market understanding or knowledge, he has to acquire the knowledge and skills through learning and dedicated practice. In such a scenario, online stock market courses come as a boon. 

The stock market is not the sole financial market where you can invest in getting high returns. There are various other financial markets that are highly profitable too. To give you a clear overview of the financial markets, in this article, we have covered the different types of financial markets, its significance, and their features. So, gear up, and begin your learning journey from here.

What are financial markets?

Financial markets play an important role in the earmarking of limited resources present in the economy of a country. Financial markets are marketplaces where the purchasing and selling of securities occur, including the bond market, stock market, forex market, derivative markets, among others. Financial markets are essential for the smooth running of capitalist economies. 

Financial or capital markets provide a platform for mobilization of the funds between the investors and the savers. They create liquidity and simultaneously allow the business to evolve and grow and also help them in raising money through their ventures. As a result of having public information at traders’ and investors’ fingertips, these markets help reduce risk and calm the economy by restoring investor confidence. This in turn, ultimately help in balancing the economy.

For the seamless running of capitalist economies, financial markets play a vital role by allocating resources to investors and entrepreneurs. The markets make it quite lucid for sellers and buyers to trade their financial holdings. The capital markets create securities products providing returns for individuals who have excess funds (lenders/investors) and make the funds available to individuals who require additional money i.e. borrowers.

Certain financial markets are small-scale with little activity, and others, like the National Stock Exchange (NSE) or the New York Stock Exchange (NYSE), trade million of securities daily. The stock market is a financial market that allows investors to purchase and sell shares of publicly traded companies. The primary stock market is the place where newly issued stocks known as Initial Public Offerings (IPOs) are sold. Following stock trading, investors sell and buy securities they already own on the secondary market.

Types of Financial Markets

  1. Stock Markets

The all-pervasive of financial markets are the stock markets. Stock markets are venues where organizations list their shares and subsequently those are purchased and sold by investors and traders. The stock market is used by organizations to raise capital via IPOs, with shares eventually traded among sellers and buyers in the secondary market. 

Stocks are traded on the listed exchanges like the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE) or else at the Over-the-counter Exchange of India (OTCEI). Most of the trading in stocks is taken place via regulated exchanges, and these play an essential role in the economy of a country as both as the gauge of the entire health in the economy as well as providing dividend income and capital gains to investors. 

For trading in the stock market, one needs to have a clear concept of the fundamentals such as fundamental analysis, technical analysis, wealth planning, candlesticks, taxation, to name a few. 

  1. Over-the-counter Market

An over-the-counter or OTC market is a decentralized market where trading is conducted electronically and market participants trade stocks and securities directly between two parties without the involvement of a broker. The Over-the-counter Exchange of India (OTCEI) is under the ownership of Ministry of Finance of the Government of India. OTC markets handle trading stocks of smaller or riskier companies or companies who do not fit into the criteria of exchanges, but most of the trading is done via the exchanges. The transactions that occur on the OTC markets are far less liquid, regulated, and opaquer. Moreover, certain derivatives markets also make up an important segment of the OTC markets. 

  1. Bond Markets

Bonds are securities that an investor purchases for a defined period of time at a fixed interest rate. Bonds can be considered as an agreement between the lender and the borrower that entails the intricacies of the loan and its payments. They are issued by corporations as well as by states, municipalities, and sovereign governments for financing operations and projects. The bond market is also regarded as the fixed-income, debt, or credit market. 

  1. Derivatives Markets

Derivatives are contracts between two or more parties, which are based on an underlying financial asset (like a security) or set of assets (like an index). Derivatives are secondary securities, meaning their values are solely derived from the primary security’s value they are linked to. Derivatives market rather than trading stocks, trade in futures and options, and other futuristic financial products, deriving value from their underlying instruments such as currencies, commodities, bonds, market indexes, interest rates, and stocks.

Futures markets are venues where futures contracts are traded. These markets utilize systematized contract specifications, utilize clearinghouses, and are well-regulated to confirm and settle trades. Options markets, on the other hand, regulate options contracts. Both options and futures exchanges list contracts on various asset classes such as fixed-income securities, equities, commodities, and so on. 

  1. Forex Markets

In the Forex or the Foreign Exchange markets, the participants can actively purchase, speculate, sell, and hedging on the exchange rates between currency pairs. This is the most liquid market because cash is the most liquid of all assets. Daily currency transactions amount to more than $5 trillion, which dwarfs the volume of futures and equity markets combined. Just like OTC, the forex market is also not centralized and so consists of the global network of brokers and computers from all around the world. This market is made up of banks, hedge funds, commercial companies, investment management firms, central banks, and retail forex investors and brokers.

  1. Money Markets

The money market trades short-term (1 year) products with a high degree of liquidity and is characterized by a relatively low return on investment. The money markets on a wholesale level involve large-volume trades between traders and institutions. On the other hand, money market at retail level includess mutual funds purchased by individual investors and money markets accounts open by bank customers. Mutual fund investing is cost-efficient and include advanced portfolio management. Individuals may also invest in other money markets instruments such as treasury bills, certificates of deposits (CDs), Commercial Paper (CPs), to name a few. 

Functions of Financial Markets

The financial markets’ role in the strength and success of a country’s economy cannot be underestimated. Following are the four essential functions:

  • Puts your savings into much productive use

You must not let the money on your savings account vault simply sit and relax. Financial markets open a new avenue for individuals to put to use their hard-earned money. 

  • Determining securities’ prices

Ultimately, the aim of investing should be earning profits. The price of services and goods is determined by the laws of demand and supply. In the same way, prices of securities are determined by financial markets. 

  • Formulates financial assets liquid

Sellers and buyers are free to determine their time of trading securities. Financial markets can be used by investors to make investments or sell their securities. 

  • The costs of transactions are lowered

Financial markets allow investors to get information about securities without spending any money.

Importance of Capital Markets

  • It is a venue where participants like debtors, investors, traders, regardless of their capacity, will receive proper and fair treatment.
  • Companies, governments, and individuals are given access to capital.
  • Financial markets offer many job opportunities. Hence, lowering the rate of unemployment. 

The best course to learn financial markets: All-in-One Financial Market Made Easy

Presenting to you the boss of all stock market courses, “All-in-One Financial Market Made Easy” a combo course curated by Elearnmarkets for a holistic understanding of the financial markets. At an unimaginably affordable price, this course covers a myriad of topics like Technical Analysis, Technical Trading, Derivatives, Stock Investing, Financial Modelling, Wealth Planning, Options Trading, Mutual Funds, Interest rate Derivatives, Bond Market, Macroeconomics, Currency Market, Commodity Market, and many more. 

There is no limit to the depth of knowledge you can acquire of financial markets and the Indian stock market. And, this course perfectly fits into this domain. This combo course has strong base-building modules. And, as you complete each module, you get a better and deeper understanding of the financial markets. This course hoards 21 stock market-related courses to provide you with a detailed and comprehensive understanding of the financial market. Some of the courses that you will find are:

  • Stock Markets Made Easy
  • AtoZ of Stock Market for Beginners
  • Technical Analysis Made Easy
  • Mutual Fund Made Easy
  • Stock Investing Made Easy
  • Option Trading Made Easy
  • RSI Made Easy
  • Candlesticks Made Easy

These are recorded courses by Industry’s best mentors who are stock market experts as well. With these recorded courses you can give yourself sturdy wings to fly in the financial markets, making wise investments. 

Financial TakeawayFinancial markets and stock market courses are essential for understanding the Indian Stock Market. Individuals are looking for better and newer avenues for employment and put their money in wishful investments. Everyone wants to earn money, and the best way is by investing in knowledge first and then in the financial markets.