Distinguish between money market and capital market on the basis of:
(a) Participants
(b) Instruments
(c) Safety and
(d) Expected return
| Basis | Capital Market | Money Market |
| Participants |
The participants in the capital market are financial institutions, banks, corporate entities, foreign investors and ordinary retail investors from public. |
Participation in the money market are institutional participants such as the RBI, banks, financial institutions etc. |
| Instruments | The main instruments traded in the capital market are – equity shares, debentures, bonds, preference shares etc. | The main instruments traded in the money market are short-term debt instruments such as T-bills, trade bills reports, commercial paper and certificates of deposit. |
| Safety | Capital market instruments are riskier both with respect to returns and principal repayment. | The money market is generally much safer with a minimum risk of default. This is due to the shorter duration of investing and also to financial soundness of the issuers. |
| Expected return | The investment in capital markets generally yield a higher return for investors than the money markets. The possibility of earnings is higher if the securities are held for a longer duration. | The investment in money market generally yield lesser return for investors than capital market. |
