importance of capital market | what is capital market | what is capital market and money market
The capital market plays an important role in the development of industry and commerce in any country. Professor S.C. Kuchhal According to, "It consists of a series of channels through which the savings of the community are made available for industrial and commercial enterprises and public authorities."
Therefore, the
importance of the capital market in the expansion of the country's industry and
commerce is immense. For example –
1. Help in the Establishment and Expansion of Industry and Commerce:
Industrial and
commercial establishments require fixed capital for establishment, expansion, and maintenance. Capital markets provide all these necessary funds. However, as
the nature of the companies in this market is different, their working
methods are also different. For example, although the stock market included in
the capital market does not directly provide capital, they facilitate the
investment of capital in business by creating the opportunity to buy and sell
shares, debentures, and government bonds. Therefore, the importance of the capital
market in the establishment or expansion of the country's industry, and business is
immense.
2. Motivation to
Savings:
There are many
experienced brokers in the capital market. These brokers provide valuable
advice to prospective investors on investing in profitable sectors. Thus, this
market encourages citizens to save by creating opportunities to invest in
various profitable investments.
3. Supply of
Loan-Capital:
Long-term loans are
generally required for industrial expansion. Only the capital market can meet
this long-term debt problem. Currently, due to the expansion of the capital market,
even small investors can enter this market. For which the capital market has huge importance in raising a large part of the country's savings as
capital.
4. Proper Utilization of Resources:
Expanded capital market activity leads to competition in industry and
commerce. This competition helps in building alliances. As a result, small
inefficient firms cannot survive and only efficient companies can use the
country's resources efficiently.
5. Create Ready Market:
Investments are
regularly traded in the capital market. If the investor is not able to collect
money by selling the investment, then he does not feel motivated to invest. On
the other hand, if there is no opportunity to buy an investment at the right time,
the investor feels disappointed. Capital markets satisfy the needs of both
buyers and sellers by creating a liquid market for investment securities.
6. Advisory Functions:
Investors don't always
understand profitable sectors or profitable investments. There are many skilled
and experienced brokers in the capital market, who can help investors with
investment advice. Not only that, but the members of the capital market also advise
on legal aspects or management related to buying and selling of shares.
How developed a
country's economy is, we can understand from the working dynamics of the
capital market. Therefore, the importance of the capital market in the
financial development of the country is immense.