Contribution of Capital Markets to the Economy

Contribution of Capital Markets to the Economy

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A market for equity shares and long-term debt is the Capital Market. Capital funds, including equity and debt, are issued and traded in this Market. Private equity and debt sources from private placements are also included, as are organized markets like stock exchanges. Capital Markets are made up of financial instruments that have a maturity of more than one year. The significance of capital markets is that a working stock market can help an economy grow in the following ways:

1. The expansion of savings, Proficient distribution of speculation assets

2. Proficient distribution of speculation assets

3. Better use of the resources that is already available

In Market economy like India, capital Market foundations give the road by which long haul reserve funds are assembled and directed into ventures. The Market's growth and development depend on investors' confidence in the market. For any Securities exchange, the Market Lists is the gauge of its presentation and mirrors the common opinions of the whole economy. The purpose of the Stock Index is to inform investors of the stock market's average share price. The equity market's movement is represented by the Index's ups and downs. These indices must accurately reflect the country's typical portfolio return.

In general, there are three kinds of news that can affect a company's stock price:

• Company-specific

• Industry-specific

• Economy-specific

An all-share index includes stocks from all economic sectors, canceling out stock- and sector-specific news and events that affect stock prices (law of portfolio diversification) and reflecting the market's overall performance and news. The most significant application of the equity market index is as a benchmark for a stock portfolio. The common Stock Index serves as a benchmark for the returns of all diversified portfolios, whether they are owned by mutual funds or retail investors. The modern financial application of derivatives makes use of indicators.