Long term finance for corporate and authorities: The capital market is the market for securities. where companies and authoritiess can raise long term financess. Selling stock and merchandising bonds are two ways to bring forth capital and long term financess. It provides a new avenue to corporate and authorities to raise financess for long term. Helps to bridge investing – nest eggs spread: Capital market spread out the investing options available in the state. which attracts portfolio investings from abroad. Domestic nest eggs are besides facilitated by the handiness of extra investing options. This enables to bridge the spread between investing and nest eggs and paves the manner for economic development. Cost – effectual manner of raising finance: Capital market in any state provides the corporate and authorities to raise long term finance at a low cost as compared to other manners of raising finance Therefore capital market is of import. more so for India as it embarks on the way of going a developed state.
Provides an avenue for investors to park their excess financess: Capital market provides the investors both domestic every bit good as foreign. assorted instruments to put their excess financess. Not merely it provides an avenue to park excess financess but it besides helps the investors to harvest nice wagess on their investing. This realisation has resulted in increased investings in capital market both from domestic every bit good as foreign investors in Indian capital market.
Conducive to execution of Monetary Policy: since RBI controls the motion and handiness of money in the economic system. When RBI follows the expansionary policy it purchases authorities securities from the bond market and sells the same in the in the secondary market. This procedure has some consequence on the involvement rates. Thus capital market helps RBI in using the pecuniary policy. Indicates the province of the economic system: Capital market is said to be the face of the economic system. This is so because when capital market is stable. investings flow into capital market from within every bit good as outside the state. which indicates that the future chances of the economic system are good.