A commodity market is a place where buyers and seller can trade any homogenous good in bulk. Commodities are commonly classified in two subgroups.
(i) Hard commodities : Hard commodities are raw materials typically mined, such as gold, oil, rubber, iron and ore.
(ii) Soft commodities : Soft commodities are typically grown agricultural primary products such as wheat, cotton, coffee and sugar.

Gilt-Edged Market also known as Government Securities market is the market for Government and semi-Government securities.
An important feature of the securities traded in this market. That they are stable in value and are much sought after by banks.
(i) Guaranteed return on investments
(ii) No speculation in securities
(iii) Institutional based investors which are compelled by law to invest a portion of their funds in these securities.
(iv) Predominated by such institutions as LIC, GIC, PFs and the commercial banks.

There are three ways by which a company may raise capital in a primary market. They are:
(i) Public issue: The most common method of raising capital by new companies is through sale of securities to the public. It is called public issue.
(ii) Rights issue: When an existing company wants to raise additional capital, securities are first offered to the existing shareholders on a pre-emptive basis. It is called rights issue.
(iii) Private placement: Private placement is a way of selling securities privately to a small group of investors.

The functions of capital market are as follows:
(i) Factoring Institutions:
(a) "Factoring" is an arrangement whereby a financial institution provides financial accommodation, on the basis of assignment/sale of account receivables.
(b) The factoring institutions collect the book debts for and on behalf of its clients.
(c) Some of the factoring institutions operating in India are SBI Factors and Commercial Services Private Limited, a subsidiary of State Bank of India and Canbank Factors Limited, a subsidiary of Canara Bank.
(ii) Venture Fund Institutions:
(a) Venture capital financing is a form of equity financing designed especially for funding new and innovative project ideas.
(b) Venture capital funds bring into force the hi-technology projects which are converted into commercial production.
(c) Many specialized financial institution have promoted their own venture capital funds. They include Risk Capital Foundation of IFCI, Venture fund of IDBI, SIDBI Technology Development Infrastructure Corporation of India (TDICI) and others.

(i) The period between 1947 and 1973 marked the development of infrastructure for capital market.
(ii) During this period, a network of development financial institutions such as IFCI, ICICI, IDBI and UTI, SFCs and SIDCs were established. These financial institutions strengthened the capital market.
(iii) During the period between 1980 and 1992, debenture emerged as a powerful instrument of resource mobilization in the primary market. The public sector bonds were introduced. A number of stock exchanges came into existence. There was a momentous growth in the secondary market.
(iv) SEBI emerged as an effective regulatory body for the primary and secondary markets and afford a measure of protection to small investors. New financial services such as credit rating was introduced.
(v) A number of committees were constituted in order to suggest measures to revamp and restructure the working of the secondary market and cause buoyancy in the primary market.
(vi) A High Powered Study Group on Establishment of New Stock Exchange, A Committee on Trading in Public Sector Bonds and Units of Mutual Funds.

(i) Under the scriplesss trading system, settlement of transactions relating to securities takes place through a book entry.
(ii) The entire scripless trading system comprises the following three segments.
(iii) National Trade Comparison and Reporting System, which prescribes the terms and conditions of contract for the securities market.
(iv) National Clearing System which aims at determining the net cash and stock liability of each broker on a settlement date.
(v) National Depository System, which arranges to provide for the transfer of ownership of securities in exchange on payment by book entry on electronic ledgers without any physical movement of transfer deed.

(i) Savings and Capital Formation:
(a) In capital market, various types of securities help to mobilize savings from various sectors of population (Individuals, Corporate, Government, etc.).
(b) The twin features of reasonable return and liquidity in stock exchange are definite incentives to the people to invest in securities.
(c) This accelerates the capital formation in the country.
(ii) Ready and Continuous Market:
(a) The stock exchange provides a central convenient place where buyers and sellers can easily purchase and sell securities.
(b) Easy marketability makes investment in securities more liquid as compared to other assets.

Capital market is divided into two i.e. primary market and secondary market.
(i) Primary Market
(a) Primary Market is a market for new issues or new financial claims. Hence, it is also called New Issue Market.
(b) The primary market deals with those securities which are issued to the public for the first time.
(c) In the primary market, borrowers exchange new financial securities for long term funds.
​​​​(d) There are three ways by which a company may raise capital in a primary market.There are:
  a) Public Issue
  b) Rights Issue
  c) Private Placement
(ii) Secondary Market :
(a) Secondary Market may be defined as the market for old securities.
(b) Securities which are previously Issued in the primary market are traded here.
(c) The trading takes place between investors who follow the original issue in the primary market.

(i) Venture Fund Institutions :
(a) Venture capital financing is a form of equity financing designed especially for funding new and innovative project ideas.
(b) Many specialised financial institutions have promoted their own venture capital funds.
(c) They include Risk Capital Foundation of IFCI, Venture capital of IDBI, SIDBI,TDICI and others.
(ii) Mutual Funds :
(a) Financial institutions that provide facilities for channeling savings of smallinvestors into a venues of productive investments are called "Mutual Funds".
(b) Specialized financial institutions like LIC,UT,etc., beside Commercial banks such as SBI, and Canara Bank are carrying out the business of mutual funds.
(iii) Factoring Institutions :
(a) "Factoring" is an arrangement whereby a financial institution provides financial accommodation on the basis ofassignment/ sale of account receivables.
(b) Some of the factoring institutions operating in India are SBI Factors and Commercial Services Private Limited, a subsidiary of  State Bank of India and Canbank Factors Limited, a subsidiary of Canara Bank.
(iv) Over the Counter Exchange of India (0TCEI) :
(a) The OTCEI was set up by a premier financial institution to allow the trading of securities across the electronic counters throughout the country.
(b) It addresses some specific problems of both investors and medium-size companies.
(v) National Stock Exchange of India Limited :
(a) NSEI was established in 1992 to function as a model stock exchange.
(b) The Exchange aims at providing the advantage of nation-wide electronic screen based "scripless" and "loorless" trading system in securities.

 

The significance of capital market functions are as follows
(i) Savings and Capital Formation
In capital market, various types of securities help to mobilize savings from various sectors of population likes Individuals, Corporate, Government, etc.
(ii) Permanent Capital
The existence of a capital market/stock exchange enables companies to raise permanent capital.
(iii) Industrial Growth
The stock exchange is a central market through which resources are transferred to the industrial sector of the economy.The existence of capital market/stock exchange encourages people to invest in productive channels.
(iv) Ready and Continuous Market
The stock exchange provides a central convenient place where buyers and sellers can easily purchase and sell securities.
(v) Reliable Guide to Performance
The capital market serve as a reliable guide to the performance and financial position of corporate and thereby promotes efficiency.
(vi) Proper Channelization of Funds
The prevailing market price of security and relative yield are the guiding factors for the people to channelize their funds in a particular company.

Following are the nature/characteristic of a capital market.
(i) Securities Market
The dealings in a capital market are done through the securities like shares, debentures, etc.The capital market is thus called securities market.
(ii) Price
The price of the securities is determined based on the demand and supply prevailing in the capital market for securities.
(iii) Participants
There are many players in the capital market.The participants of the capital market include individuals, corporate sectors, Govt., banks and other financial institutions.
(iv) Location
Capital market is not confined to certain specific locations, although it is true that parts of the market are concentrated in certain well-known centers known as Stock Exchanges. It has its impact in the overall economy, wherever suppliers and users of capital get together and do business.
(v) Market for Financial Assets
Capital market provides a transaction platform for long term financial assets.