Differentiate between ‘capital-market’ and ‘money-market’ on the following basis:
(i) Participants;
(ii) Instruments;
(iii) Investment outlay;
(iv) Duration and
(v) Liquidity.
The major points of distinction between the two markets are as follows:
|
Basis |
Capital Market |
Money Market |
|
Participants |
The participants in the capital market are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from public. |
Participation in the money market are institutional participants such as the RBI, banks, financial institutions etc. |
|
Instruments |
The main instruments traded in the capital market are – equity shares, debentures, bonds, preference shares etc. |
The main instruments traded in the money market are short term debt instruments such as T-bills, trade bills reports, commercial paper and certificates of deposit. |
|
Investment outlay |
Investment in the capital market does not necessarily require a huge financial outlay. The value of units of securities is generally low. |
In the money market, transactions entail huge sums of money as the instruments are quite expensive. |
|
Duration |
The capital market deals in medium and long term securities such as equity shares and debentures. |
Money market instruments have a maximum tenure of one year, and may even be issued for a single day.
|
|
Liquidity |
Capital market securities are considered liquid investments but less compared to money market. |
Money market instruments on the other hand, enjoy a higher degree of liquidity. |
