Capital Market Essay Example for Free

corking Market Essay Capital market is the market for leading and borrowing of spiritualist and great term funds. The demand for long-term funds comes from industry, trade, agriculture and government (central and state). The supply for funds comes from individual savers, corporate nest egg, banks, insurance companies, specialized financial institutions and government.* import A sound and efficient majuscule market is extremely vital for the sparing development of a nation. So, the significance of capital market has increased. The following points all the way bring out the economic consumption and significance of capital market in India. i)CAPITAL FORMATION Capital market encourages capital formation as it ensures speedy economic development. The process of capital formation includes collection of saving effective mobilisation of these savings for racy investment. Thus three distinctive inter-related activities i.e. collection of savings, mobilisation of savings and in vestment lead to capital formation in the country. The volume of capital formation depend s on the efficiency and intensity with which these activities are carried on.ii) economical GROWTH Capital market plays a vital role in the growth and development of an economic system by channelising funds in developmental and productive investments. The financial intermediaries channel funds into those investments that are more important for economic development.iii) INDUSTRIAL DEVELOPMENT Capital market promotes industrial development and motivates industrial entrepreneurship. It provides cheap, seemly and diversified funds for industrial purposes such as expansion, modernisation, technological upgradation, establishment of new units, etc. It to a fault provides services uniform provision of underwriting facilities, participation in equity capital, credit-rating, consultancy services, etc.vi) MODERNISATION AND REHABILITATION OF INDUSTRIES Capital markets also contribute towards moder nisation and rehabilitation of industries. Developmental financial institutions like IDBI, IFCI, ICICI,etc provide finance to industries to look at modern techniques and new upgraded machinery. They also participate in the equity capital of industries.v) RIVIVAL OF SICK UNITS Commercial and financial institutions provide adequate funds to viable sick of(p) unit to overcome their industrial sickness. Bank and FIs may also write off a part of the loan or re-schedule the loan to offer defrayal flexibility to weak units.vi) TECHNICAL ASSISTANCE The financial intermediaries in the capital market stimulate industrial entrepreneurship by providing technical and advisory services like preparation of feasibility reports, identifying growth potential, and training entrepreneurs in project management. This promotes industrial investment and leads to economic development.vii) DEVELOPMENT OF BACKWARD AREAS Capital markets provide funds for projects in backward area and facilitate their ec onomic development. Long-term funds are also provided for development projects in backward / rural areas.viii) EMPLOYMENT GENERATION Capital markets provide Direct Employment in capital market related activities like stock markets, banks and financial institutions. Indirect Employment is provided in all the sectors of the economy through various funds disbursed for developmental projects.ix) FOREIGN CAPITAL Capital markets make it possible to generate foreign capital by enabling Indian firms to evidence capital from overseas market through bonds and other securities. Such foreign exchange funds have a great impact on the economic development of the nation. Moreover, foreign direct investments (FDIs) also bring in foreign capital as well as foreign technology that leads to greater economic development.x) DEVELOPMENT OF STOCK MARKETS Capital markets lead to development of stock markets by encouraging investors to invest in shares and debentures and to trade in stocks. FIIs are a lso allowed to deal in Indian stock exchange.xi) FINANCIAL INSTITUTIONS Financial institutions play a major role in capital markets. They provide medium / long term loan to industrial and other sectors and also undertake project feasibility studies and surveys. They refinance commercial banks and rediscount their bills of exchange. They provide merchant banking services. They subscribe to equity capital of the firms.xii) investment funds OPPORTUNITY Capital markets provide various alternative sources of investment to the people. People can invest in shares and debentures of public companies and earn good returns.xiii) INVESTMENT IN INDUSTRIAL SECURITIES Secondary market in securities encourage investors to invest in industrial securities by providing facilities for continuous, regular and ready buying and selling of these securities. This facilitates industries to raise substantial funds from various sectors of the economy.xiv) RELIABLE GUIDE TO PERFORMANCE Capital market serve s as a reliable guide to the performance of corporate institutions. It value companies accurately and thus promotes efficiency. This leads to efficient resource allocation and economic development.*CONCLUSION Thus we can say that capital markets play a crucial role in the economic development of a nation. A sound and efficient capital market is one of the most instrumental factors in the development of a nation.