CLASS XII 📊 CHAPTER 10

: FINANCIAL MARKET- REVISION NOTES

1. WHAT IS A FINANCIAL MARKET?

Definition: A Financial Market is a marketplace where financial assets (shares, bonds, debentures) are created and traded between savers and investors.

💡 Memory Trick: Financial Market = “Saver → Investor Bridge”

People with extra money (savers) give funds to businesses needing money (investors).

“Savings flow, investments grow,
Financial markets make money go!”

2. FUNCTIONS OF FINANCIAL MARKETS

Remember acronym MPLT

Letter	Function
M	Mobilisation of savings
P	Price discovery
L	Liquidity
T	Transaction cost reduction

Mobilisation of Savings: Transfers money from households → businesses for productive use.
Price Discovery: Price of shares is determined by demand and supply.
Liquidity: Investors can easily buy or sell securities.
Reduction in Transaction Cost: Common platform reduces time, effort and cost.

“Mobilise, Price decide,
Liquidity keeps money alive.”

3. TYPES OF FINANCIAL MARKETS

💡 Memory Trick: “MoCa Rule” → Money + Capital

💰 MONEY MARKET (Short Money)

Meaning: Market for short-term funds (less than 1 year).

Features: Short-term instruments, highly liquid, low risk, no physical location.

Participants: RBI, Commercial banks, NBFCs, Corporates, Mutual funds.

Money Market Instruments (TCCC)

Letter	Instrument
T	Treasury Bills
C	Commercial Paper
C	Certificate of Deposit
C	Call Money

“T-Bills, Papers, Deposits too,
Call money helps banks pull through!”

💹 CAPITAL MARKET (Long Money)

Meaning: Market for medium and long-term funds.

Importance: Promotes growth, provides long-term finance, encourages investment.

💡 Memory Trick: “PS Rule → Primary then Secondary”

4. PRIMARY & SECONDARY MARKETS

🆕 PRIMARY MARKET (New Issue Market)

Market where new securities are issued for the first time. Example: IPO of a company.

Methods of Floatation (POReP)

[Image showing primary market floatation methods: Prospectus, Offer for Sale, Rights Issue, Private Placement]

Letter	Method
P	Prospectus
O	Offer for Sale
R	Rights Issue
eP	Private Placement / e-IPO

“Prospectus first, brokers may sell,
Rights to owners work as well!”

🔁 SECONDARY MARKET (Stock Market)

Market where existing securities are bought and sold. Example: Reliance or Infosys on NSE/BSE.

Functions (LPEG)

Liquidity | Price discovery | Economic growth | Guide investments

“Buy and sell, price will tell,
Secondary market works so well!”

5. STOCK EXCHANGE & TRADING

Meaning: Organised institution for trading existing securities (e.g., BSE, NSE).

Functions: SPREAD

💻 ELECTRONIC TRADING

Screen-based trading (Zerodha/Upstox). Adv: Transparency, Speed, Wider access, Lower cost.

📂 DEMATERIALISATION (DEMAT)

Converting physical shares → electronic form.

💡 DEMAT = Digital Equity Management Account Technology

Benefits: No loss, Faster transfer, Safe storage.

🏦 DEPOSITORIES

“NC stores shares” → NSDL + CDSL

1. NSDL (National Securities Depository Ltd) | 2. CDSL (Central Depository Services Ltd)

6. SEBI (The Regulator)

Established: 1988 (Formed) | 1992 (Statutory powers).

Objectives (PDP)

Protect investors | Develop securities market | Promote fair practices

“Protect investors, markets grow,
SEBI keeps the system in flow!”

Functions (RDP Rule)

1. Regulatory	Register brokers, regulate exchanges, control takeovers.
2. Development	Investor education, training, research.
3. Protective	Prevent fraud, control insider trading, stop price rigging.

⚡ ULTRA QUICK EXAM REVISION

Topic	Trick
Functions of Market	MPLT
Money Market Instruments	TCCC
Types of Capital Market	PS
Methods of Floatation	POReP
SEBI Functions	RDP
SEBI Objectives	PDP

🎵 Final Memory Song
“Money short and capital long,
Primary issues start the song.
Secondary trades all day,
Stock exchanges guide the way.
SEBI protects investors’ right,
Financial markets power growth bright!”

BUSINESS STUDIES MASTER