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  • Category: Finance and Investments

    What is money market and what are it's type?


    Do you have a query about money market and stock exchange? Looking out for answers here? On this Ask Expert page check out advice provided for all your questions.

    Is there any difference between money market and stock exchange ? What are the procedures to trade in money market? Is it more profitable than stock market? Do someone go with a professional trader or can do by himself? Please let me Know in detail .
  • Answers

    5 Answers found.
  • The money market is a section of the financial market. In this market financial instruments which are short term investments and are having high liquidity will be traded. Generally, the investment duration will be a year or less.
    The money market will deal with negotiable instruments such as treasury bills, commercial papers and certificates of deposit. This market is used It is used by individuals as well as companies, to raise funds. They sell their commercial papers in the market. It is considered to be a safe place for trading. Money market transactions can't be done through brokers.
    The following are some of the money market instruments
    1. Commercial bills
    2, Treasury bills
    3. Interbank term market
    4. Commercial papers
    5. certificate of deposits
    6. Banker's acceptance
    7. Repurchase agreements.

    drrao
    always confident

  • The money market is a market in which trading always works in pairs and it applies to both the buying and selling of currencies. Therefore, any business that takes place in the money market is simultaneously the purchase of one currency and the sale of another. The value is determined by the exchange rate, which is the value of the currency in relation to the other. The exact nature of currency trading is represented by appropriate symbols. The money market is currently the largest financial market in the world.

    The main instruments of the money market are as follows: -

    Call Money Market: Notice money is money that is lent or borrowed for a short period. When money is lent or taken for a day it is known as Overnight Money.
    Inter-Bank Term Money: The inter-bank market is known as the Money Market for maturing deposits of more than 14 days.
    Treasury Bills - These are the most liquid securities. These are issued by the Reserve Bank to the government. It is a promise made by the government to pay the amount within a period of less than one year of the date of issue.

    It is a short-term loan and a borrowing of cash, where there is a market. The money market is largely unregulated, private, and free, and there is no limit to the amount of currency traded. It does not bind businessmen to stricter restrictions or does not require any institution to act as an intermediary. So it provides opportunities for different types of investors, from banks, governments, companies to individual traders. It works by facilitating the exchange and trading of currencies on its platform. Traders can get the most benefit from the money market.

    Swati Sharma

    Keep your Face to the SunShine

  • Money market is a facility where borrowing and lending of short-term funds take place. The period is anywhere between one day and one year. Money market is used by large institutions to invest or borrow large amounts of funds for short term . Money market is used by banks and other financial institutions to shore up their liquidity and statutory requirements also. As such individuals cannot participate directly in money market. However they can invest through money market Mutual Funds.
    A stock exchange or stock market is where listed securities are traded but money market is a facility where short term debt dealings are done. It is a facility by which short term funds are parked.
    In India the money market operates in two ways. One is the old traditional unorganised way of dealings among the bankers and financial institutions dealing directly or through confidential brokers or agents. This is still in practice. It is used by bankers and financial institutions to tide over their short term deficits or surplus.
    The organised money market is controlled by the RBI and SEBI( Reserve Bank of India and Security and Exchange Board of India0. It is also use by the central bank to regulate economy by intervening in money market operations.
    The organised money market has various instruments like Call Money or Notice Money; Treaury Bills; Certificate of Deposits;,Commercial Bills; Commercial Papers; Money Market Mutual Funds; Repo and Reverse Repo Market
    Retail investors have very limited scope in regard to Money Market. The only way for them is to invest through Money Market Mutual Funds.
    The following are some of the popular Money Market Mutual Funds in India.(Not in any order)
    1.SBI savings Fund
    2.HDFC Money Market Fund
    3.Kotak Money Market Fund
    4.Aditya Birla Sun Life Money Management Fund
    5.ICICI Prudential Money Market Fund
    6.UTI Money Market Fund
    7.Tata Money Market Fund
    8.Axis Money Market Fund
    9. Franklin India Savings Fund
    10.Nippon India Money Market Fund.
    Money market funds are considered less risky as they are least volatile types of funds. For the same reason the returns are also relatively less. The performances are related to the interest rates set by RBI. Nowadays, in the scenario of dwindling bank deposit interest rates the Money Market MFs are becoming more attractive than Fixed deposits.

  • The activity of trading of short term debt instruments by individuals or mutual funds or big financial houses etc is termed as money market activity and the system in which these are performed is known as money market. As these are short term funds of various kinds the return on them is low but being debt instruments, they have good safety. Generally money market transactions are done at a wholesale level by buying or selling large quantities of these instruments. There are various types of money market investment avenues and instruments and some of them are Money Market Funds, Certificates of Deposit (CDs), Commercial Paper (CPs), Banker's Acceptances, Repos etc.

    Money market is an important part of our financial and economic system and through this a large amount of funds is transferred against the financial instruments or securities from one bulk investor to other. These investors could be individuals, banks, mutual fund houses, financial companies, normal companies etc. Many companies raise cash for their short time needs through this route. At the same time many companies park their surplus funds for short time in this popular investment route. Money market works in a very interesting manner and through it companies can get short time loans from the banks or financial institutions through issue of some instruments which can again be traded by the respective agencies if such a need arises. So, in essence, money market is a place where one can get or give money for a short period depending upon the need and it is all done through money market instruments of various kinds.

    There are brokers who facilitate these transactions to the interested customers (individual or institutional) and get their commission out of that. As deals are generally in bulk and have large value, the brokers also get a good money for their services rendered.

    As an individual one can invest in money market instruments through one's Demat account (usually opened for share market and mutual fund transactions) or money market account which can be opened in any bank or financial institution providing that service.

    Knowledge is power.

  • Money market is the place where trading is effected with the short term of financial assets having its maturity not exceeding a year. It would compromise Banking, Finance Corporations and other business houses trading in the area of money markets. It is a part of Financial Market consisting of a lot of smaller sub markets like Billing Markets, Call Markets etc. Money Market does not necessarily deal in cash but there is the involvement of other trading bills, government papers, promissory notes etc.
    Money Market transactions are not carried out through the brokers since it has to be carried out through the formal documents, written or verbal communication etc.
    Some of the examples of the money market instruments are as follows -
    1) Commercial Papers
    2) Treasury Bills
    3) Bankers Acceptance
    4) Certificate of Deposits
    5) Repurchase Agreements.
    This instrument provides the following features-
    1) Liquidity
    2) Safety and
    3) Discounted Price.


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