INTRODUCTION ON CAPITAL MARKET INSTRUMENTS :

Financial Instruments that are used for raising capital resources in the capital market are known as capital market instruments. The capital market instruments are usually used by the Government, Corporations and Companies. The instruments used by the corporate sector to raise funds are selected on the basis of – (i) investor preference for a given instrument, (ii) the regulatory framework, which regulate the issue of security.

Factors effecting the preferences for choosing any instruments :

For issuers	For investor
Cost	Return
Post Tax Cost of Capital	Tax on return received
Servicing	Yield
Debt-equity ratio and debt service capabilities	Risk reward ratio
Ceding the control in case of equity	Gaining the control in case of equity
Company Law, SEBI Regulations etc	Marketable and liquidity