Classification of Financial Market –

Capital Market – Capital market provides a platform for trading in various financial securities like stock, bonds. Private and public sectors organizations often sell bonds & shares in order to raise fund. Thus Capital Market is very critical component of financial market.

Derivative Market - Derivative markets are the financial markets which acquire their value from underlying assets viz. shares, bonds, currencies and indices as Nifty, Bank Nifty or Sensex. Derivatives can be traded either on a regulated exchange, such as the NSE/BSE or off the exchanges, i.e., directly between the different parties, which is called “over-the-counter” (OTC) trading. In India derivatives were launched in June 2000. The first derivative contract to be launched on NSE was the Nifty 50 index futures contract.

Derivatives include Forward, Futures and Options Market.

Commodity Market - Commodity market aims to provide opportunity to traders who wish to trade in primary commodities. These commodities contains soft commodities such as corn, wheat, coffee, sugar, soybeans, pepper, Almond and hard commodities like Gold, Silver, Crude Oil, Aluminium, Copper etc. In India there are 2 vast exchanges available for trading in commodities, MCX- Multi Commodity Exchange and NCDEX- National Commodity Derivative Exchange.

Currency Market - Currency Market is the Market where participant from across the globe can trade in different currencies. In India NSE and MCX-SX exchange facilitates traders for trading in currencies. Currently Currency future contracts allow investors to hedge against foreign exchange risk. Currency Derivatives are available on four currency pairs viz. US Dollars (USD), Euro (EUR), Great Britain Pound (GBP) and Japanese Yen (JPY).

Money Market - A classification of market where securities and financial instruments with short term maturity ranging from 30 days to 1 year are traded is known as Money Market. The only demerit with the money market is that these are unorganized, informal and unregulated market. Theses market provides fixed but lesser return to the investor. Financial assets like treasury bills, certificates of deposits, commercial paper and bankers' acceptance are some of the short-term debt securities traded in the money market.

Initial Public Offer IPO - The first stock sale of a smaller, medium or large privately owned company to raise fund is known as IPO. IPO is the market where the securities are sold for the first time. IPO are sold in primary market segment. In the IPO, the issuer requires assistance of underwriting firm in deciding IPO price and time of hitting the market.

FPO - Follow on Public Offer is a technique where exchange listed company can issue new share in the market in order to raise funds. FPO is very popular methods by which companies can raise additional equity capital by selling their stocks in the market.

Type of Investors - FII & DII

Foreign Institutional Investor FII - When investors of other countries viz US, Chaina, Japan invest in Indian financial market. Then such investors are categorized as Foreign Institutional Investor. Before investing in Indian markets FII have to register with Securities and Exchange Board of India. Post registration they can participate in Indian market.

Domestic Institutional Investor DII - When investors invest in financial market of the native / national country then such investors are known as Domestic Institutional Investor. These investors can be institutions or organizations such as banks, insurance companies, mutual fund houses.

Exchange - Exchange can be defined as a market place in which securities (Shares, bonds), commodities, derivatives and other financial instruments are traded. The core function of commodity and equity exchange is to provide buyer and seller efficient platform where they can buy or sell financial instruments to earn profit. Exchange covers counterparty risk for the transactions done between buyer & seller. Exchanges give companies, governments and other groups a electronic platform to sell securities to the investing public.

There are various equity and commodity exchanges located across the globe which include New York Stock Exchange, Nasdaq and the Tokyo Stock Exchange, London Metal Exchange, Chicago Mercantile Exchange, Shanghai Composite etc. Indian exchanges are Bombay Stock Exchange BSE, National Stock Exchange NSE, MCX- SX MCX Stock Exchange, Multi Commodity Exchange MCX, and National Commodity Derivative Exchange.

SEBI - The Securities and Exchange Board of India (frequently abbreviated as SEBI) is the regulator for the securities & commodities market in India. It was established in the year 1988 and given statutory powers on 12 April 1992 through the SEBI Act, 1992. Current chairman of SEBI is Mr. Ajay Tyagi. In India Stocks, Derivative & Commodity market is regulated by SEBI.

Broker and Brokerage charges - A broker is an intermediate body between exchange and investor who executes transactions of buyer and seller in the market. And they charge nominal charges in lieu of these deals.
For Intraday transaction in cash market brokerage charge is .01% to .05 % of the value of shares traded in the market and for delivery it is 0.10% to 0.50 %. The brokerage charge may differ for various brokers for various markets.

Trading account / D-mat account

Trading Account - Once you start trading in market then you require a trading account. This trading account is managed by investment broker. With this account you can buy and sell securities and commodities in the market.

D Mat account - D Mat account refers to a de materialized account where shares and securities are held in de materialized form. D mat is simply an account where shares & securities can be kept when you take delivery of stocks.
D Mat account can be opened with the broker or depositary participant. One requires address proof, Id proof, Pan Card and colored photographs.

Trading and Type of Trading - In financial market’s term, trading means performing a transaction that involves the selling and purchasing of a security, commodity, currency etc.

INTRADAY Trading - INTRADAY Trading: Intraday Trading is also known as Day Trading. In this trade you take a position on a stock and exit that position before the end of that day's trading session. Thereby making a profit in either buy-sell or sell-buy exercise.
All in one day i.e. from 9:15 AM to 3:30 PM.

DELIVERY/POSITIONAL - When you purchase shares and hold them overnight, then you get delivery of the purchased shares in your D mat account in T+2 days and hence, this is calling Delivery Trading.

Indian Market Indices

Nifty - The CNX Nifty is also known as Nifty or Nifty Fifty, is National Stock Exchange of India’s benchmark index for Indian Equity Market. Nifty tracks 51 top most reputed and reliable stocks of Indian economy. It is well diversified index representing performance of 24 sectors. Word CNX in Nifty stands for 'CRISIL NSE Index'. The base period for the CNX Nifty index is November 3, 1995. The base value of the index has been set at 1000.

Bank Nifty - Bank Nifty is the benchmark index of NSE which represents performance of 12 most liquid and large capitalized stocks from the banking sector. It is reliable index to track down performance of banking sector. Bank Nifty was launched in the year 2000.

Sensex - The S&P BSE SENSEX (S&P Bombay Stock Exchange Sensitive Index) is also known as Sensex or BSE 30. It is a free float market weighted stock market index of 30 stocks of different sectors. The base value of the S&P BSE SENSEX is taken as 100 on 1 April 1979.