This article will help you to learn about the difference between capital market and money market.

Difference between Capital Market and Money Market

Capital Market:

1. It provides finance/money capital for long-term investment.

2. The finance provided by the capital market may be used both for fixed and working capital.

3. Mobilisation of resources and effective utilisa­tion of resources through lending are its main functions.


4. Its one of the constituents, Stock Exchange acts as an investment market for buyers and sellers of securities.

5. It acts as middleman between the investor and the entrepreneur.

6. Underwriting is one of its primary activities.

7. Its investment institutions raise capital from public and invest in selected securities so as to give the highest possible return with the lowest risk.


8. It provides long-term funds to Central and State Governments, public and local bodies for development purposes.

Money Market:

1. It provides finance/money for short-term investment.

2. The finance provided by money market is utilised usually for working capital.

3. Lending and borrowing are its principal functions to facilitate adjustment of liquidity position.


4. It does not provide such facilities. The main components include call loan market, collateral loan market, and bill market and acceptance houses.

5. It acts as a link between the depositor and the borrower.

6. Underwriting is a secondary function.

7. It provides outlets to commercial banks, business corporations, non-bank financial concerns and others for their short-term surplus funds.


8. It provides short-term funds to Government by purchasing treasury bills and to others by discounting bills of exchange, etc.