13 Jun 2022


Comparison between India and United States Financial Markets

Format: MLA

Academic level: College

Paper type: Term Paper

Words: 1335

Pages: 5

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Financial markets are primarily the institutions where money is traded. These markets include but not limited to bonds as well as stock exchanges. Government and non-governmental organizations rely on the financial markets to gather money for their daily activities. A perfect example of how organizations depend on financial markets is through IPOs and issuing of bonds to fund the work in progress ( Bruno and Shin, 2015) . On the other hand, investors benefit mutually buying securities that give them a profit at the end of every year in return. Financial markets may be categorized as primary or secondary depending on the where the trading takes place. In many countries, these markets are managed by government agencies while some capital markets regulate themselves. 

Financial institutions in a country play a vital role of transferring capital from one person or organization to the other. These institutions include banks, stock markets, and microfinance that people connect with to deposit and withdraw money to fund their operations. Capital market can be termed as the major liquid cash providers. Therefore, they balance the rate of current assets and fixed assets in the economy of any given state ( Kidwell et al., 2016) . That is made possible through regulation of transaction prices that indicate a measure of the assets value. Financial markets have different functions depending on the laws and regulations of a country. They facilitate dissemination of information and quick evaluation of other financial instruments. Most capital markets also make a point of insuring companies against market risks. As a result, they create numerous opportunities for individuals and institutions participate in the exchange market. 

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Financial Markets in India 

The Indian financial market is archived as one of the oldest markets in Asia that started back in the 18 th century. The beginning of financial markets in India was as a result of the economic development facilitated by the growth of private and government sectors. Agriculture has also been a major contributor to the economic development since the 1970s ( Joshi and Ruparel,2016) . A big portion of the money that trends in within the Indian financial markets is generated from personal savings, banks as well as insurance companies that involve huge transactions in their daily operations. In India, money markets are divided into two categories namely the gilt-edged and the industrial securities markets. After attaining independence, the Indian government set up different financial institutions such as the Industrial Finance Corporation of India (IFCI) and the India’s State finance Corporations (SFCs) to facilitate transactions by the private and public sectors. 

A discussion on Indian financial markets must incorporate the stock exchange since it is the most significant capital market in the country. The organization benefits a lot from issuing bonds and stocks to investors who have surplus funds. Therefore, a company may sell its shares to people who are willing and have the ability to provide financial support to the firm. Historically, the first stock market was the Bombay Stock Exchange (BSE). It happens to be the oldest stock exchange market in the whole continent of Asia. 

Despite that the stock market has been the root of all securities in India, it has a record of weaknesses. The major problem creating a downfall in the stock exchange is a lack of transparency. There is no traceable integration in the financial market of India. As a result, the capital market is disorganized( Joshi and Ruparel,2016) . The high rate of corruption in India has increased volatility in the money market. The uncontrolled money acts as a source of money for people who require credits to invest in their businesses. Increased number of creditors has resulted to poor banking system in the country. Such loopholes in the financial markets affect its effectiveness in achieving its purpose in the economy. It primarily affects credibility rates and the price of securities in the financial market. 

USA Financial Market 

The United States of America financial market is the strongest in the world when compared to other capital markets like that of Germany. The US government has implemented policies that encourage the expansion of their financial market. Money instruments in the US capital market include bonds, municipal bonds, treasury notes as well as debentures ( James, 2015) . However, the most used are the normal bonds and the treasury notes that circulate in the market often. Some of the markets have up to 30 years of maturity being run by the federal government. 

The use financial market is also well known for its active stock exchange. Due to the big size of the continent with 53 states, America has many stock exchange firms. They include the New York Stock Exchange (NYSE), Philadelphia, Chicago, Boston, and the National stock exchange ( James, 2015) . All the exchange markets are regulated by a body known as the U.S Security and Exchange Commission. The board sets laws and policies under the securities exchange Act of 1934 which is also termed as the Federal security Act. The regulatory authority restores faith upon the public and private investors who have the willingness of putting their money in the capital markets. Unlike India, their corruption in the financial markets of USA does not exist. There is transparency of transactions and reliability of firms. 

Similarities and Differences of Indian versus U.S.A Financial Markets 

There are a number of features that differentiate the two financial markets and their way of performance. First and foremost, both of the markets are the largest stock in the world. However, the Indian market is older compared to that of US but it is less productive. Reason being, it has a fault in the management structure while that of America advocate for transparency and reliability. The two markets differ in terms of politics, economics, social factors, technology, environment as well as legalization. Therefore, their comparison can be labeled by an acronym PESTEL. 

To begin with the political aspect, financial markets in India are vulnerable and politically influenced. That is due to the country's political instability experienced for many years. The political factors that affect financial markets directly in India include employment laws, tax policies as well trade restrictions. Contrary to what happens in India, the American financial markets are not politically affected. Trade in the US is done on facts with no speculations since the country is not experiencing political instability ( James, 2015) . The high rate of democracy in the United States of America and good employment ratio has made the capital markets a success. Therefore, money markets require minimal political interference for them to perform efficiently. 

Secondly, the Indian government ensures that economic policies are set to support the financial markets. For example, allocation of 3-G spectrum to companies registered an upward growth in the capital market ( Joshi and Ruparel, 2016) . When the organizational shares are sold at a good price, the credibility of financial markets becomes encouraging. America has a different case when it comes to the economic aspects. The financial markets have been affected by the deviations in GDP and economic choices made by the government. For example, in October 1959, the stock exchange market lost many investors as a result of the depression that occurred in 1931. 

Socially, both countries have maintained a good relationship between their financial markets and the unity of their people. The primary factors to consider while checking on social matters include safety, population growth, age distribution as well as career attitude. India and America has a good social life with minimal discriminations in terms of race and nationality. Technologically, the financial markets of both countries are less affected in a negative manner since they are well developed. Though India is not a first world country, technology invention in the country is very high ( Joshi and Ruparel, 2016) . On the other hand, environmental hardly play an important role in the money market. However, legal factors are the stem of financial markets in both countries. Laws set by the government directly affects the capital market in a positive or negative manner. The US and Indian governments are cautious in making policies that encourage investors to join their markets. Trade unions have also been reinforced in both countries to boost the rate at which foreigners invest in the country. 


The analysis of financial markets situation in India and United States of America reveals that investment in India is done on speculations while in the USA, it is driven by factual information. As a result, investors are likely to take a risk in the American financial markets compared to those of India. Therefore, there is need to regulate capital markets and ensure openness for clients to get motivated. Indeed, both financial markets being the largest globally, the regulatory authorities are doing their best to ensure the effective growth of the markets to increase economic growth. 


Bruno, V., & Shin, H. S. (2015). Capital flows and the risk-taking channel of monetary policy.    Journal of Monetary Economics ,    71 , 119-132. 

James, J. A. (2015).    Money and capital markets in postbellum America . Princeton University Press. 

Joshi, A., & Ruparel, P. (2016). India. In    Angel Financing in Asia Pacific: A Guidebook for Investors and Entrepreneurs   (pp. 151-169). Emerald Group Publishing Limited. 

Kidwell, D. S., Blackwell, D. W., Whidbee, D. A., & Sias, R. W. (2016).    Financial institutions, markets, and money . John Wiley & Sons. 

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StudyBounty. (2023, September 16). Comparison between India and United States Financial Markets.


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