Distinguish between Capital Market and Money Market.

Basis of Difference

Capital Market

Money Market

Time Span of Securities

Capital Market mainly deals in the trading of medium and long-term securities wherein, the maturity period is more than one year.

Money Market deals in the trading of short-term securities wherein, the maturity period can vary from one day to a maximum of one year.

Liquidity

Capital market securities are liquid in nature as they are tradable on stock exchanges, but are less liquid in comparison to the money market securities.

The securities traded are highly liquid in nature. DFHI discounts money market securities and offers a ready market for them.

Returns Expected

Expected returns are higher due to the possibility of capital gains in long-term and regular dividends or bonus.

Expected returns are lower due to shorter duration.

Instruments

Instruments traded in capital market comprise of equity shares, preference shares, debentures, bonds and other long term securities.

Instruments traded in money market comprise of treasury bills, commercial bills, certificate of deposits and other short-term securities.

Risk

Capital market securities involve greater risk in terms of repayment of the principal amount.

Money market securities are less risky due to short time period and sound financial position of the issuers.