Financial Markets for UPSC Prelims Exam: Strategy and Resources for Preparation

Indian financial market is a contributor to largest chunk of questions in UPSC Preliminary Exam. Economy on the one hand has been regarded as the most basic and fundamental subject for UPSC prelims exam that constitutes 12-15 questions in prelims exam. Out of these questions financial market questions have 2-3 in numbers in Prelims exam. However these questions put maximum level of difficulty before the aspirants as they are associated mostly with the dynamic portion. One often find difficulty in finding resources and books for this section. Most of the time questions from banking and monetary instruments preoccupy the entire segment of economy so the financial instruments have very limited or little role remains in the prelims exam. In this scenario only basic and fundamental knowledge about financial market suffice. The current article deals with the tactics and resources to study financial market so that questions from this section never go unsolved in prelims exam.

Before discussing strategy and resources let’s have a cursory knowledge about Financial Market and instruments. Financial Market refers to the system consisting of financial institutions, financial instruments, regulatory bodies, and organisations. It facilitates the flow of debt and equity capital. Banks, Development Financial Institutions (NABARD, SIDBI, IDBI, etc.), and Non- Banking Financial Institutions form Financial Institutions. Financial Instruments are shares, bonds, debentures, etc.

Main functions of the financial market

The main functions of the financial market.

(a) It provides facilities for interaction between the investors and the borrowers.

(b) It provides pricing information resulting from the interaction between buyers and sellers in the market when they trade the financial assets. 

(c) It provides security to dealings in financial assets.

(d) It ensures liquidity by providing a mechanism for an investor to sell the financial assets.

(e) It ensures a low cost of transactions and information.

Financial markets consist of two major segments:

Money Market: The market for short term funds

Capital Market: The market for long and medium-term funds.

There are two types of Capital Flow –

• Lending
• Borrowing

Resources to be followed

For basic understanding one can follow Macroeconomics and Microeconomics of NCERT publication. The ncerts are holy grail for UPSC examination. They are written in simple and lucid language that are easy to understand and comprehend. After scanning NCERT thoroughly one can refer the following books for deeper understanding

• Economics by TMH Publication 5th Edition : Chapters 11,12 and 14
• Union Budget and Relevant Chapters of Economic Survey Both Volumes
• Hindu Business Line and Business Standard for Current Developments
• Online Paper LiveMint give analytical articles

Previous Years Question Papers

Previous Years Question Papers help a lot to understand the pattern and nature of the questions asked. You can have an assessment of difficulty and easiness of the questions from this. Apart from this these papers is also reveal the status of your preparation and hence help you to form Strategy accordingly.

GS Score Sampoorna Fact File on Financial Market :

This fact file is an annual compilation of all related events of financial market. This fact file has been made in such a way that it eases your preparation by consolidation of all related facts and information at a single place. This also helps you in revision by providing all the information in crisp and consolidated manner. This fact file is also helpful in mains exam too. This fact file can be downloaded from GS Score website for free.