The stock market is an important and significant part of any economy in the world. It not only represents the growth of the country and its companies but also offers opportunities to investors to make good money. Most of the people want to invest in the share market to create long term wealth for themselves. The eco-system of the stock market runs solely on money. Thus, indirectly it affects the economic status of the country as well.
The government of the country constantly monitors the stock market to check the health of the industry and economy as a whole. In order to ensure fair trading or investment activities in the stock market, the Securities and Exchange Board of India (SEBI) keeps a constant watch on it. It aims to safeguard investor’s interests and ensure that there are no malpractices happening in the market.
Let us learn about what is stock market?
What is Stock Market?
The stock market is a collection of exchanges or markets where the buying, issuing and selling of shares of the publicly held companies take place. These activities are conducted through exchanges or over the counter (OTC) marketplaces which are regulated by the authorities and functions as per the rules laid down. The leading stock exchanges of India are Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
Importance of Stock Market for Companies
The stock market is very significant for a company’s growth. Whenever it requires funds for expansion or any other activity, there are two options available to them. Either they can take loan from financial institutions or they can issue shares through the stock market. The stock market is the primary source to raise funds. The company can raise capital by issuing shares i.e. selling part ownership of the company to public and financial institutions. To do so, the company has to list itself on the stock market. It needs to abide by the rules and regulations of the stock exchange and only then it could go public. When the company wants to raise funds by getting itself listed for the first time, it has to bring Initial Public Offer or IPO. But the company which is already listed and wants to raise additional funds, it can do so by issuing more shares in the market.
Importance of Stock Market to Investors
The share market has huge popularity among the investors because their returns are way higher than the bank’s fixed deposits or other assets. The stock market can help the investors make good money with the right investment. Investing in companies that have bright future can hugely benefit the investors.
There is always a myth about the stock market that most people make losses here. Yes, there are risks in the market but the above statement is not completely true. As an investor you must invest only after carrying out detailed fundamental analysis of the company. You must invest only after the company meets your parameters. The investors can not only make money in the market by investing for long term but also by intraday trading. In fact, large number of traders make money on regular basis through intraday trading.
Importance of Stock Market to Government
Many a times there is a situation when the government wants to raise funds for starting various schemes for the welfare of the people but it does not have sufficient money. Just like companies, they also approach the stock market to raise funds. However, they do not issue shares to the public, instead, they issue government bonds. The public makes investment in government bonds and government gets the required funding. Such projects often improve the condition of the economy and along with that, investors in the bonds get an assurance of increase in the value of their investment.
Economic Barometer
The stock market is the economic barometer of a country. Indices of the stock exchanges reflect the health condition of the economy. An economy with a good condition shall always attract more domestic and foreign investment which further helps in growing the economy of the country.
Conclusion
The stock market is undoubtedly very significant for capturing the growth of the economy. When the investors make money in the stock market it helps in increasing the flow of money. In addition, the government, banks and financial institutions are other beneficiaries of the share market. Stock market is one liquid asset that gives boost to the economy in some way or the other.
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