The function of Indian Capital Market | Role of Indian Capital Market

It plays a role in the development of industry and commerce in any country. According to Livingston, the function of capital markets is to efficiently direct the exchange of capital to maximize returns and increase productive capacity and national income. Indian capital market has several characteristics of its own. Analyzing these features gives an idea about the functioning of the capital market in India. Notable functions of the capital market in India are:

1. Help to Establish and Expansion of Industry and Commerce:

At present, the capital requirement of the industries is increasing due to the wide expanse of the industry. Long-term capital requirement is high in the industry. Capital markets are capable of meeting this long-term capital problem. The scope of capital markets now extends beyond the national to the international level. As a result, it is possible to collect resources from the international market. Apart from that, small investors can also enter this market now. As a result, a large part of the country's total savings is collected through the capital market. However, as the nature of the companies in the Indian capital 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 capital investment in businesses by creating opportunities for buying and selling shares, debentures, and government bonds.

2. Arrangement of Long-term Loan:

Long-term loans are required for business establishment or expansion. Various investment institutions belonging to this market provide long-term loans to industry and commerce.

3. Help to Public Enterprise:

The capital market also helps in buying and selling government and private sector debt securities.

4. Help to National Growth:

The capital market builds up a pool of money by collecting the shortfalls of the public in the country. That money is often used for national development.

5. 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.

6. Advisory Functions:

Investment-seeking individuals or institutions may not always choose profitable securities for the purpose of purchasing shares or debentures. Capital market members provide valuable services to investors by providing sound and honest advice. If the resources of the country are employed in the right field, the investors and the investors benefit as well as the country as a whole.

7. Mobility of Savings:

The capital market mobilizes the savings of the country by mobilizing large amounts of savings for investors and creating opportunities for investment in profitable investments. The capital market acts as one of the tools of economic development.

8. Capital Formation:

One of the functions of capital markets is capital formation. The small savings of the people of the country are deposited in the capital market as investments and build up a stock of money. Long-term loans are given to various business institutions from this fund. As a result, business organizations also benefit from raising capital.

9. Create Ready Market:

The capital markets regularly buy and sell securities of public and private companies. Investors are not motivated to invest if they cannot raise money (or capital) by selling securities as needed. On the other hand, if there is no opportunity to purchase investment instruments at the right time, the investors feel disappointed. Capital markets have eliminated these difficulties for investors by creating a liquid market for securities.

10. High Standard of Living:

The capital market provides the necessary capital to industrial and commercial enterprises. With this capital, business establishments use advanced machinery and advanced technology. As a result, it is possible to produce high-quality products at low cost and consumers can use all these high-quality products at low cost. As a result, the standard of living of the people of the country is improved.

How developed a country's economy is, we can understand from the working dynamics of the capital market. The development of any country depends on the capital formation of that country. Therefore, the importance of the capital market in the financial development of the country is immense.