Cash Market, also known as the spot market, is a financial market where securities, commodities, or currencies are traded for immediate delivery and settlement. In a cash market, transactions are settled ìon the spot,î typically within a few business days, allowing buyers and sellers to exchange ownership of assets promptly. Understanding the cash market is essential for investors, traders, and financial professionals to make informed trading decisions and manage liquidity.

The cash market primarily deals with equities, bonds, and commodities where the transaction price is determined by current market demand and supply. For example, in India, when an investor buys shares of a company on the NSE or BSE for immediate settlement, the trade occurs in the cash market. The investor pays the transaction amount, and the shares are transferred within the stipulated T+2 settlement cycle.

One of the key features of a cash market is price transparency. Since trades reflect real-time market conditions, investors can make informed decisions based on actual market prices. Unlike derivatives markets, where contracts are settled at a future date, cash market participants bear the immediate risk and reward of price movements.

Cash markets play a crucial role in the overall financial ecosystem. They provide liquidity, enable price discovery, and facilitate the efficient allocation of resources. Investors can also use the cash market to hedge positions, invest for the long term, or diversify portfolios. Regulatory oversight by SEBI ensures transparency, fair trading practices, and investor protection in the Indian cash market.

In summary, the cash market is a market for immediate trading and settlement of financial instruments. By understanding its mechanics, benefits, and regulatory framework, investors and traders can make informed decisions, manage risks, and participate effectively in SEBI-regulated Indian markets.