Capital Market Essay Example for Free

Capital Market Essay Capital commercialise is the commercialize for leading and borrowing of medium and long term funds. The demand for long-term funds comes from industry, trade, market-gardening and government (central and state). The supply for funds comes from individual savers, corporate savings, banks, insurance companies, specialized financial institutions and government.*SIGNIFICANCE A sound and efficient capital market is extremely vital for the stinting discipline of a nation. So, the moment of capital market has increased. The following points clearly bring out the role and significance of capital market in India. i)CAPITAL FORMATION Capital market advances capital formation as it ensures speedy stinting development. The demonstrate of capital formation includes collection of saving effective mobilisation of these savings for productive investment. Thus 3 distinctive inter-related activities i.e. collection of savings, mobilisation of savings and investmen t lead to capital formation in the country. The masses of capital formation depend s on the efficiency and intensity with which these activities are carried on.ii) ECONOMIC growing Capital market plays a vital role in the growth and development of an economy by channelising funds in developmental and productive investments. The financial intermediaries channel funds into those investments that are more chief(prenominal) for economic development.iii) INDUSTRIAL DEVELOPMENT Capital market promotes industrial development and motivates industrial entrepreneurship. It stands cheap, adequate and change funds for industrial purposes such as expansion, redbrickisation, technological upgradation, establishment of new units, etc. It in any case provides go like provision of underwriting facilities, participation in equity capital, credit-rating, consultancy services, etc.vi) MODERNISATION AND REHABILITATION OF INDUSTRIES Capital markets overly 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 participate 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 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 find out management. This promotes industrial investment and leads to economic development.vii) DEVELOPMENT OF BACKWARD AREAS Capital markets provide funds for projects in returning(prenominal) area and facilitate their economic development. Long-term funds are also provided for development projects in converse / 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 and through various funds disbursed for developmental projects.ix) FOREIGN CAPITAL Capital markets make it possible to generate opposed capital by enabling Indian firms to raise capital from overseas market through bonds and former(a) 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 puff up 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 also allowed to wangle 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 admit 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) coronation 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 veridical funds from various sectors of the economy.xiv) RELIABLE GUIDE TO PERFORMANCE Capital market serves as a unquestionable 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 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 around instrumental factors in the development of a nation.