Financial_market_individual_assignment[1].pptx

mutual finds notes for 2023-2024

1. FINANCIAL MARKET AND SECURITIES ASSIGNMENT SAURABH SINGH ERP ID:0231PGM108

2. FINANCIAL MARKET This Photo by Unknown Author is licensed under CC BY-SA The financial market is a vast marketplace where people trade assets such as stocks, commodities, and currencies. It brings together buyers and sellers to engage in various financial activities, including investing, borrowing, lending, and risk management. This market is crucial because it determines the value of assets and fosters economic growth by channeling funds from savers to those who need them for purposes like starting businesses or purchasing homes. Essentially, it functions as a massive engine that ensures the smooth flow of money and the efficient allocation of resources.

3. TYPES OF FINANCIAL MARKET

4. MONEY MARKET

5. Overview of Money Market History : The development of India's Money Market has transitioned from informal practices to a regulated system through regulatory measures and financial reforms, primarily driven by the Reserve Bank of India (RBI). Significant advancements, such as the introduction of Treasury Bills and Commercial Paper, have been instrumental in shaping its structure. Organizational Structure : The Money Market's organizational framework includes various entities such as commercial banks, cooperative banks, NBFCs, mutual funds, and government institutions. Commercial banks play a crucial role in lending and borrowing, NBFCs provide specialized services, mutual funds manage investments for investors, and government bodies issue short-term securities. Regulatory Authority : The RBI is the primary regulatory authority overseeing the Money Market, with additional supervision from SEBI and the Ministry of Finance. The RBI establishes policies, supervises market participants, and ensures market stability, while SEBI focuses on protecting investors and maintaining market integrity.

6. FINANCIAL INSTRUMENTS

7. Treasury Bills (T-Bills) Treasury Bills (T-Bills) are short-term financial instruments issued by the government to raise funds. They have short maturity periods, typically ranging from 91 days to one year. T-Bills are sold at a discount to their face value and are redeemed at full value upon maturity, with the difference representing the investor's profit. The Reserve Bank of India (RBI) oversees auctions to issue T-Bills, which enhances their liquidity and maintains their status as a secure investment option. These instruments are crucial for monetary policy and effective liquidity management in the financial system.

8. Commercial Bills A commercial bill, also known as a commercial paper, is a short-term, unsecured promissory note issued by companies to finance their working capital needs. These instruments are typically used to pay off short-term liabilities and are usually issued at a discount to face value, maturing within a period of up to 270 days. Commercial bills are important tools in corporate finance and money markets, providing liquidity and funding flexibility for businesses.

9. Commercial Papers (CPs) Commercial paper (CP) is a short-term, unsecured debt instrument issued by corporations, financial institutions, and other eligible entities to meet immediate financing needs. Typically, CPs have maturities ranging from 7 days to 270 days, though they can extend up to 1 year in some jurisdictions. They are issued at a discount to their face value and redeemed at par upon maturity.

10. Certificate of Deposits (CDs) Certificate of Deposits (CDs) are time deposits issued by banks and financial institutions, negotiable and with fixed maturity periods ranging from several months to years. CDs offer relatively higher interest rates than standard savings accounts and are considered secure investments. Governed by RBI regulations in India, CDs serve as additional funding sources for banks to manage their liquidity requirements. They are popular among investors seeking safe yet profitable investment avenues in the Indian money market.

11. Evaluation of Shift to Green Investments:

12. In the context of the money market, conventional investment methods typically involve investing in traditional financial instruments such as Treasury Bills, commercial papers, and certificates of deposit. These investments are considered low-risk and provide steady returns. However, they may not directly contribute to environmental sustainability or social responsibility. Analysis : Green investments within the money market encompass environmentally sustainable financial instruments like green bonds, renewable energy projects, and sustainable funds. These investments aim to support projects and initiatives that have a positive impact on the environment and society while providing financial returns to investors. In recent years, there has been a growing interest in green investments as investors seek to align their financial goals with their environmental values.

13. Impact : Shifting from conventional to green investments in the money market can lead to several significant effects. Green investments can provide diversification opportunities and the potential for higher returns, particularly as businesses and governments increasingly prioritize sustainability. However, there are also challenges, such as the limited availability of green investment options, higher initial costs, and uncertainties related to financial performance. Presenting the report : When evaluating the shift to green investments, it's crucial to emphasize both the benefits and challenges for investors and financial institutions. Recommendations might include enhancing transparency and standardization of green investment products, increasing education and awareness about the importance of sustainability, and incentivizing financial institutions to incorporate environmental considerations into their investment strategies. Furthermore, collaboration between governments, financial regulators, and industry stakeholders is vital to fostering a supportive environment for the expansion of green investments in the money market.

14. SUMMARY The money market, a segment within the financial market, facilitates short-term borrowing and lending, typically involving instruments maturing within a year. Vital for managing liquidity and fulfilling short-term financial needs of various entities like governments, financial institutions, and corporations, it includes significant tools such as Treasury Bills (T-Bills), Commercial Bills, Commercial Papers (CPs), and Certificates of Deposits (CDs). T-Bills, for instance, represent secure government debt with maturities ranging from 91 days to 1 year, issued at a discount and redeemed at face value. Commercial Bills, on the other hand, are issued by businesses to cover working capital requirements, traded in secondary markets, and overseen by the RBI. Meanwhile, CPs serve as unsecured, short-term corporate debt, offering a flexible and cost-efficient option compared to conventional loans. CDs, being negotiable bank deposits with fixed maturities, present higher interest rates and are deemed low-risk. Recently, there has been a notable shift towards green investments within the money market, embracing environmentally sustainable assets like green bonds and renewable energy initiatives. These investments strive to marry financial gains with positive environmental outcomes. Despite their potential for diversification and higher returns, challenges such as limited availability, elevated costs, and uncertain financial performance persist. To encourage green investments, recommendations include bolstering transparency, raising awareness, integrating environmental considerations into financial strategies, and fostering collaboration among governmental bodies, regulatory agencies, and stakeholders to nurture the expansion of these sustainable financial avenues.