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.