Which of the following statements about the participants of the capital market and the money market is correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Foreign investors and ordinary retail investors take part in the capital market.
Option (1) Ordinary retail investors normally transact in the secondary money market. — Incorrect. Individual investors are permitted in the secondary money market, but they do not normally transact there.
Option (2) Foreign investors and ordinary retail investors take part in the capital market. — Correct. Capital market participants include financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from the public.
Option (3) Participation in the capital market is by and large undertaken by the RBI and finance companies. — Incorrect. The RBI and finance companies are money market participants, which are mostly institutions.
Option (4) Participation in the money market is by and large undertaken by foreign investors. — Incorrect. The money market is by and large used by institutional participants such as the RBI, banks and finance companies. Foreign investors are named among capital market participants.
NCERT (Pre-rationalised Edition): “(i) Participants: The participants in the capital market are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from members of the public. Participation in the money market is by and large undertaken by institutional participants such as the RBI, banks, financial institutions and finance companies. Individual investors although permitted to transact in the secondary money market, do not normally do so.” |