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Where securities are created C ompany sells stocks/bonds to investors Direct Method of purchasing Securities can be sold once Price of the shares is fixed

W here those securities are traded by investors Investors buy/sell stocks amongst one another Indirect Method of purchasing Securities can be sold and bought multiple times Price of the shares fluctuates based on market performance

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Helps new promising business to prosper by offering expansion and diversification Underwriters serve as intermediaries No geographical presence Company makes a profit from the sale of shares

Funding to the companies is not provided Brokers act as intermediaries Physically present at a particular location Investors who gain profit from the sale of shares

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Issues  are generally for  Public Offering  or publicly traded securities like stocks of companies already selling stocks in the stock  market The sale  can also take the form of  Private Placement  specially for closed corporations

Market for currently outstanding securities, referred to as secondary  securities Secondary Market only transfer ownership, but do not affect the total outstanding shares or  securities (Shares  held by the public ), except  when the issuing corporations redeem bonds or retire stocks

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Period of maturity ranges from one day to one year There is a formal arrangement of creating liquidity The transactions are made in the instruments issued by the financial institutions and financially strong companies

Period of maturity is more than one year Only actively traded securities enjoy liquidity Securities of every company (big or small, financially weak or strong) are bought and sold. Hence, there is more risk involved.

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Instruments are generally safe due to shorter duration and credibility of issuers The expected rate of return is less due to short duration Major participants are RBI, commercial banks, financial institutions and finance companies

Instruments are riskier both in terms of returns and repayment of principal The expected returns are high and there is even a possibility of capital gain Participants are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from the members of the public

Basic Classification of Financial Market

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