Capital markets are a catalyst in promoting a nation’s economy and apparently play a crucial role in channelizing and mobilizing funds to establishments. It predominantly reinforces a holistic transformation of the economy into a more dynamic, innovative and competitive marketplace. An imperative segment of every financial market, capital market is a hub for financial assets that have a long or an indefinite maturity. The best aspect of capital markets is that government and corporate sector can reap the long term investment benefits for ambitious projects. Capital market is segregated into primary and secondary market. Primary market is precisely a market for new shares and secondary market denotes the market where existing securities are traded. Overall capital market institutes essentially offer rupee loans, foreign exchange loans, consultancy services and underwriting.
Let’s look at the gamut of functions that capital markets by and large offer, to know a detailed outlook of the avenue:
• Capital markets help in mobilizing the savings that are put idle in economy. The inert monetary resources are invested productively in other channels that require attention.
• Capital formation is yet another fruitful venture of capital markets. Mobilized savings are invested in various avenues like agriculture and industry that further helps in enhancing capital formation.
• It assures the development and growth of the economy. Capital market takes care of the financial requirements of the business enterprises. This leads to effective research and development and increase of production and productivity of the economy.
• Capital markets help in focusing on proper allocation of funds into the right channels so that proper regulation of funds can take place. The funds are routed in the perfect format.
• The huge spectrum of services that capital markets offer are loans to industry, underwriting services, consultancy services, export finance and the like.
• Funds are constantly flowing in capital markets for a long term basis. Being a liquid market, capital markets offer continuous availability of funds to enterprises as well as government.
However some of the elements that need to be watched out are also as follows:
• Risks of business like the stock market crashes can be harmful.
• Risks are also involved for people who decide to pursue investment options in capital markets.
• There is a lot of pressure to deliver goods for businesses are accountable for their performances, which can cause havoc in the scenario sometimes.
• If people fail to meet the deadlines or targets, there is a scope of the early exit as well.
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