The capital market is a market for financial investments that are direct or indirect claims to capital. It is wider than the securities market and embraces all forms of lending and borrowing, whether or not evidenced by the creation of a negotiable financial instrument. The capital market comprises the complex of institutions and mechanisms through which intermediate term funds and long term funds are pooled and made available to business, government and individuals. The capital market also encompasses the process by which securities already outstanding are transferred.
The capital market and in particular the stock exchange is referred to as the barometer of the economy. Government’s policy is so moulded that creation of wealth through products and services is facilitated and surpluses and profits are channelized into productive uses through capital market operations. Reasonable opportunities and protection are afforded by the government through special measures in the capital market to get new investments from the public and the institutions and to ensure their liquidity.