What is capital market?

The capital market is a financial marketplace where long-term funds (typically over one year) are borrowed and lent. It facilitates the flow of capital between savers (investors) and users (borrowers) through instruments like shares, bonds, debentures, and derivatives.

Key Features:

• Long-term financing: Funds are raised for business expansion, infrastructure, or government projects.
• Primary & secondary markets: Primary markets issue new securities (e.g., IPOs), while secondary markets trade existing ones (e.g., stock exchanges).
• Risk & return: Higher returns are offered to compensate for long-term investment risks.
• Regulated: Governed by authorities (e.g., SEBON in Nepal) to ensure transparency and investor protection.

Participants:

• Issuers: Corporations, governments, and financial institutions.
• Investors: Individuals, institutions (banks, insurance), and foreign investors.
• Intermediaries: Brokers, underwriters, and investment banks.

The capital market plays a crucial role in economic growth by channeling savings into productive investments.