Capital Market Essay

jacket commercialise is the trade for conk outing and borrow of medium and want term funds. The demand for long-term funds comes from industry, trade, floriculture and government (central and state). The supply for funds comes from individual savers, corporate savings, banks, insurance companies, specialised financial institutions and government.*SIGNIFICANCE A sound and effective large(p) grocery store is extremely vital for the stinting development of a nation. So, the consequence of hood trade has increased. The following points clearly bring out the role and significance of hood market in India.i)CAPITAL FORMATION Capital market encourages capital administration as it ensures speedy stinting development. The process of capital formation includes collection of saving effective mobilisation of these savings for fruitful investment funds. hence three distinctive inter-related activities i.e. collection of savings, mobilisation of savings and investment lead to c apital formation in the country. The volume of capital formation search s on the efficiency and intensity with which these activities are carried on.ii) ECONOMIC maturation Capital market plays a vital role in the harvest-feast and development of an economy 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 maturation Capital market promotes industrial development and motivates industrial entrepreneurship. It put forwards cheap, adequate and diversified funds for industrial purposes such as expansion, modernisation, technical upgradation, establishment of new units, etc. It also provides services the likes of furnish of underwriting facilities, bug outicipation in rectitude capital, credit-rating, consultancy services, etc.vi) MODERNISATION AND REHABILITATION OF INDUSTRIES Capital markets also contribute towards modernisation and rehabilitation of industries. Developmental financial institutions like IDBI, IFCI, ICICI,etc provide finance to industries to adopt modern techniques and new upgraded machinery. They also go in in the equity capital of industries.v) RIVIVAL OF SICK UNITS Commercial and financial institutions provide adequate funds to viable sick 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 payment flexibility to delicate units.vi) TECHNICAL ASSISTANCE The financial intermediaries in the capital market hit industrial entrepreneurship by providing technical and advisory services like forwardness of feasibility reports, identifying growth potential, and training entrepreneurs in figure 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 economic development. Lon g-term funds are also provided for development projects in backward / rural areas.viii) EMPLOYMENT extension 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) outside(prenominal) CAPITAL Capital markets make it possible to generate external capital by enabling Indian firms to raise capital from overseas market through bonds and other securities. Such foreign exchange funds vex 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 promote investors to invest in shares and debentures and to trade in stocks. FIIs are also allowed to extend 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 OPPORTUNITY Capital markets provide various secondary sources of investment to the people. People can invest in shares and debentures of public companies and pretend 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 touch on buying and selling of these securities. This facilitates industries to raise substantial funds from various sectors of the economy.xiv) honest GUIDE TO PERFORMANCE Capital market serves as a time- tested guide to the performance of corporate institutions. It values companies accurately and thus promotes efficiency. This leads to efficient resource allocation and economic development.*CONCLUSION Thus we can opine 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.