Distinguish between Capital Market and Money Market.

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> [!TLDR]
> The capital market deals in long-term securities (equity, debentures) and is riskier but higher-yielding; the money market deals in short-term instruments (T-bills, commercial paper) and is safer but lower-yielding.

| Basis | Capital Market | Money Market |
| --- | --- | --- |
| **Participants** | Financial institutions, banks, corporates, foreign and retail investors. | Mainly institutional — RBI, banks, financial institutions, finance companies. |
| **Instruments** | Equity shares, debentures, bonds, preference shares. | T-bills, trade bills, commercial paper, certificates of deposit. |
| **Investment outlay** | Low unit value, so small savers can invest. | Instruments are expensive; transactions involve huge sums. |
| **Duration** | Medium- and long-term securities. | Maximum tenure of one year; may be for a single day. |
| **Liquidity** | Marketable on exchanges, though a share may not always find a buyer. | Higher liquidity through a formal arrangement. |
| **Safety** | Riskier in return and repayment. | Generally much safer, minimum default risk. |
| **Expected return** | Higher, through capital gains and dividends. | Lower, given the short duration. |

Basis	Capital Market	Money Market
Participants	Financial institutions, banks, corporates, foreign and retail investors.	Mainly institutional — RBI, banks, financial institutions, finance companies.
Instruments	Equity shares, debentures, bonds, preference shares.	T-bills, trade bills, commercial paper, certificates of deposit.
Investment outlay	Low unit value, so small savers can invest.	Instruments are expensive; transactions involve huge sums.
Duration	Medium- and long-term securities.	Maximum tenure of one year; may be for a single day.
Liquidity	Marketable on exchanges, though a share may not always find a buyer.	Higher liquidity through a formal arrangement.
Safety	Riskier in return and repayment.	Generally much safer, minimum default risk.
Expected return	Higher, through capital gains and dividends.	Lower, given the short duration.

Q.Distinguish between Capital Market and Money Market.

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