A capital market is a financial market where long-term debt or equity-backed securities are bought and sold. It is a place where buyers and sellers come together to trade financial assets such as stocks, bonds, currencies, and other financial instruments. Capital markets are used to channel savings and investments between suppliers and those in need of capital, such as businesses, governments, and individuals. They are composed of primary and secondary markets, with the most common being the stock market and the bond market.

The primary market is where new securities are sold to investors, often via a mechanism known as underwriting. Governments and businesses are the main entities seeking to raise long-term funds on the primary capital markets. Governments issue only bonds, while companies often issue both equity and bonds. The secondary market, on the other hand, deals with the exchange of previously-issued securities among investors.

Capital markets are important because they help people with ideas become entrepreneurs and help small businesses grow into big companies. They also give individuals opportunities to save and invest for their futures. Capital markets bring borrowers and lenders together in efficient ways and help channel resources to create a healthy national and global economy. They provide essential funding that affects peoples lives in many ways, from starting a business to expanding a current one, or providing investment opportunities for people planning for their future.

In summary, capital markets are a crucial part of the financial industry that allows individuals and firms to borrow funds using shares, bonds, debentures, debt instruments, and other financial instruments. They provide a platform for raising funds for business operations, development activities, or wealth enhancement. Capital markets are essential for economic growth and development, as they provide rich sources of funds for various initiatives.