fin_mkt_PPT

8/3/2019 fin_mkt_PPT

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INTRODUCTION TOFINANCIAL MARKETS


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Introduction:

Economic growth and development of any country depends upon a well-knitfinancial system. Financial system comprises, a set of sub-systems of financialinstitutions, financial markets, financial instruments and services whichhelp in the formation of capital. Thus a financial system provides a mechanismby which savings are transformed into investments and it can be said that

financial system play an significant role in economic growth of the country bymobilizing surplus funds and utilizing them effectively for productive purpose.The financial system is characterized by the presence of integrated, organizedand regulated financial markets, and institutions that meet the short term andlong term financial needs of both the household and corporate sector. Bothfinancial markets and financial institutions play an important role in the financial

system by rendering various financial services to the community. They operatein close combination with each other.


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Financial System;

financial system is a network of financial institutions, financial markets, financialinstruments and financial services to facilitate the transfer of funds. The system consistsof savers, intermediaries, instruments and the ultimate user of funds. The level of

economic growth largely depends upon and is facilitated by the state of financial systemprevailing in the economy. Efficient financial system and sustainable economic growthare corollary. The financial system mobilises the savings and channelizes them into theproductive activity and thus influences the pace of economic development. Broadlyspeaking, financial system deals with three inter-related and interdependent variables,i.e., money, credit and finance.


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Role/ Functions of Financial SystemThe functions of financial system can be enumerated as follows:Financial system works as an effective channel for optimum allocation of

financial resources in an economy.It helps in establishing a link between the savers and the investors.Financial system allows asset-liability transformation. Banks create claims(liabilities) against themselves when they accept deposits from customers but alsocreate assets when they provide loans to clients.Economic resources (i.e., funds) are transferred from one party to another

through financial system.The financial system ensures the efficient functioning of the payment mechanismin an economy. All transactions between the buyers and sellers of goods andservices are effected smoothly because of financial system.Financial system helps in risk transformation by diversification, as in case ofmutual funds.

Financial system enhances liquidity of financial claims.Financial system helps price discovery of financial assets resulting from theinteraction of buyers and sellers. For example, the prices of securities aredetermined by demand and supply forces in the capital market.Financial system helps reducing the cost of transactions.


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Components/ Constituents of Indian Financial system:

The following are the four main components of Indian Financial system

1. Financial institutions2. Financial Markets3. Financial Instruments/Assets/Securities4. Financial Services.

Financial institutions:

Financial institutions are the intermediaries who facilitates smooth functioning of thefinancial system by making investors and borrowers meet. They mobilize savings ofthe surplus units and allocate them in productive activities promising a better rate of

return. Financial institutions also provide services to entities seeking advises onvarious issues ranging from restructuring to diversification plans. They provide wholerange of services to the entities who want to raise funds from the markets elsewhere.Financial institutions act as financial intermediariesbecause they act as middlemenbetween savers and borrowers. These financial institutions may be Banking or Non-Banking institutions.


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Financial Markets:

Finance is a prerequisite for modern business and financial institutions play a vitalrole in economic system. It's through financial markets the financial system of aneconomy works. The main functions of financial markets are:

1. To facilitate creation and allocation of credit and liquidity;

2. To serve as intermediaries for mobilization of savings;3. To assist process of balanced economic growth;4. To provide financial convenience.

Financial Instruments

Another important constituent of financial system is financial instruments. Theyrepresent a claim against the future income and wealth of others. It will be a claimagainst a person or an institutions, for the payment of the some of the money at aspecified future date.


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Financial Services:

Efficiency of emerging financial system largely depends upon the quality and

variety of financial services provided by financial intermediaries. The termfinancial services can be defined as "activites, benefits and satisfactionconnected with sale of money, that offers to users and customers, financialrelated value".


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FINANCIAL MARKETS

A Financial Market can be defined as the market in which financial assets are created ortransferred, as against a real transaction that involves exchange of money for real goodsor services. A financial transaction involves creation or transfer of a financial asset.Financial Assets or Financial Instruments represents a claim to the payment of a sum ofmoney sometime in the future and /or periodic payment in the form of interest or

dividend.

CLASSIFICATION

Money market

(Short term instrument)

Capital markets(Long term instrument)


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Money Market

The money market is a wholesale debt market for low-risk, highly-liquid, short-term

instrument. Funds are available in this market for periods ranging from a single day up toa year. This market is dominated mostly by government, banks and financial institutions.

Main FunctionTo channelize savings into short term productive investments like working capital.

Importance of Money MarketA developed money market plays an important role in the financial system of a country

by supplying short-term funds adequately and quickly to trade and industry. The moneymarket is an integral part of a countrys economy. Therefore, a developed money market

is highly indispensable for the rapid development of the economy. A developed moneymarket helps the smooth functioning of the financial system in any economy in thefollowing ways:Development Of Trade And Industry: Money market is an important source of

financing trade and industry. The money market, through discounting operations andcommercial papers, finances the short-term working capital requirements of trade andindustry and facilities the development of industry and trade both national andinternational.


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Development Of Capital Market: The short-term rates of interest and theconditions that prevail in the money market influence the long-term interest as wellas the resource mobilization in capital market. Hence, the development of capitalmarket depends upon the existence of a developed money market.

Smooth Functioning of Commercial Banks: The money market provides thecommercial banks with facilities for temporarily employing their surplus funds in

easily realisable assets. The banks can get back the funds quickly, in times ofneed, by resorting to the money market. The commercial banks gain immensely byeconomizing on their cash balances in hand and at the same time meeting thedemand for large withdrawal of their depositors. It also enables commercial banksto meet their statutory requirements of cash reserve ratio (CRR) and StatutoryLiquidity Ratio (SLR) by utilishing the money market mechanism.

Effective Central Bank Control: A developed money market helps the effectivefunctioning of a central bank. It facilities effective implementation of the monetarypolicy of a central bank. The central bank, through the money market, pumps newmoney into the economy in slump and siphons it off in boom. The central bank,thus, regulates the flow of money so as to promote economic growth with stability.


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Formulation Of Suitable Monetary Policy: Conditions prevailing in a money marketserve as a true indicator of the monetary state of an economy. Hence, it serves as aguide to the Government in formulating and revising the monetary policy then andthere depending upon the monetary conditions prevailing in the market.

Non-Inflationary Source Of Finance To Government: A developed money market

helps the Government to raise short-term funds through the treasury bills floated in themarket. In the absence of a developed money market, the Government would beforced to print and issue more money or borrow from the central bank. Both wayswould lead to an increase in prices and the consequent inflationary trend in theeconomy.


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Instruments in Money Market

Call money marketTreasury bills marketMarkets for commercial paperCertificate of depositsBills of ExchangeMoney market mutual funds

Promissory Note


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CALL MONEY MARKETPart of the national money marketDay-to day surplus funds mainly of banks are tradedShort term in natureMaturity of these loans vary from 1 to 15 days. (Lent for 1 day: Call money & Lent formore than 1 day but less than 15 days: Notice money) Convenient interest rate

Highly liquid loan repayable on demandHelps Bank to manage short-term deficit or surplus of money.Helps Bank to fill the gaps or temporary mismatches in funds Helps Bank to meet the CRR & SLR Mandatory requirements as stipulated by the

Central bank. Helps bank to meet sudden demand for funds arising out of large outflows.

Provides funds that can be used to conduct transactions between banks, or with othermoney market dealers Participants are RBI , banks and primary dealers.The rate at which funds are borrowed in this market is called call Money rate.The size of the market for these funds in India is between Rs60,000 million to Rs 70,000 million, Of which public sector banks account for 80% of

borrowings and Foreign banks/private sector banks account for the balance 20%.


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COMMERCIAL PAPERSUnsecured Promissory note.Introduced in India in 1990.CP can be issued either in the form of a promissory note (Schedule I) or in adematerialised form through any of the depositories approved by and registeredwith SEBI.Issued by Corporate, primary dealers (PDs) and the All-India Financial Institutions(FIs) with strong and high credit rating.

Sold directly by the issuers to investors or through agents like merchant banks andsecurity houses.Individuals, banking companies, other corporate bodies registered or incorporatedin India and unincorporated bodies, Non-Resident Indians (NRIs) and ForeignInstitutional Investors (FIIs) etc. can invest in CPs.CPs can be issued for maturities between a minimum of 15 days and a maximum

of 1 year and for meeting short term requirement of fund.Commercial Papers are actively traded in the secondary market since they areissued in the form of promissory notes and are freely transferable in demat form. Issued in denominations of Rs.5 lakhs or multiples thereof.Commercial paper is usually sold at a discount from face value


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REPOS AND REVERSE REPOS

The RBI achieves the function of maintaining liquidity in the money market throughREPOS / REVERSE REPOS.

The repo / reverse repo is a very important money market instrument to facilitate short-term liquidity adjustment among banks, financial institutions and other money marketplayers. A repo / reverse repo is a transaction in which two parties agree to sell andrepurchase the same security at a mutually decided future date and price.From the sellers point of view, the transaction is called a repo, whereby the seller gets

immediate funds by selling the securities with an agreement to repurchase the same at afuture date.Similarly, from the buyers point of view, the transaction is called a reverse repo,

whereby the purchaser buys the securities with an agreement to resell the same at afuture date.

Repo or ready forward contact is an instrument for borrowing funds by sellingsecurities with an agreement to repurchase the said securities on a mutually agreedfuture date at an agreed price which includes interest for the funds borrowed.

The reverse of the repo transaction is called reverse repo which is lending of funds

against buying of securities with an agreement to resell the said securities on a mutually

agreed future date at an agreed price which includes interest for the funds lent.


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The RBI, commercial banks and primary Dealers deal in the repos andreverse repo transactions.

The financial institutions can deal only in the reverse repo transactions i.e.they are allowed only to lend money through reverse repos to the RBI, otherbanks and Primary dealers.The maturity date varies from 1 day to 14 days.The two types of repos are:Inter-bank repos (the transaction takes place between banks and DFHI).RBI repos (The repos / reverse repos are undertaken between banks and theRBI to stabilize and maintain liquidity in the market).Repos and Reverse Repos are used for following purposes:- For injection / absorption of liquidity.To create an equilibrium between the demand for and supply of short-term

funds.To borrow securities to meet SLR requirements.To increase returns on funds.To meet shortfall in cash positions.


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CERTIFICATES OF DEPOSIT

Introduced in July 1989, to enable the banking system to mobilise bulk deposits fromthe market, which they can have at competitive rates of interest.Defined as a negotiable money market instrument and issued in dematerialised formor as a Usance Promissory Note, for funds deposited at a bank or other eligiblefinancial institution for a specified time period.Greater flexibility to investors in the deployment of surplus funds.

Permitted by the RBI to banksIssued by Scheduled commercial banks (except RRBs) and All India FinancialInstitutions .Buyers Individuals (other than minors), corporations, companies, trusts, funds,associations etcMaturity of not less than 7 days and not more than 1 year. (In case of FIs minimum 1

year and maximum 3 years)Minimum amount of investment Rs. 1 lakhs and multiples of Rs. 1 lakhs thereafter.Transferable in natureFree negotiability and limited flexibility.Physical CDs are freely transferable by endorsement and delivery. Dematted CDs canbe transferred as per the procedure applicable to other demat securities. There is no

lock-in period for the CDs.


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MONEY MARKET MF

Defined as short term deposit by way of usance promissory notes.MMMF are one of the safest instruments of investment for the retail low incomeinvestor. The assets in a money market fund are invested in safe and stable instruments

of investment issued by governments, banks and corporations etc.Generally, money market instruments require huge amount of investments and it isbeyond the capacity of an ordinary retail investor to invest such large sums. Moneymarket funds allow retail investors the opportunity of investing in money marketinstrument and benefit from the price advantage.Greater flexibility to investors in the deployment of surplus funds.

Permitted by the RBI to banksMaturity is less than1 year.Transferable in natureFree negotiability and limited flexibility


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TREASURY BILLS

Defined as the instruments of short term borrowing by the Central/State govt.They are promissory notes issued at discount and for a fixed period. Maturity less than one yearAt present, the Government of India issues three types of treasury bills through

auctions, namely, 91-day, 182-day and 364-day. There are no treasury bills issuedby State Governments.Treasury bills are available for a minimum amount of Rs.25,000 and in multiples ofRs. 25,000 Issued by RBI and sold through fortnightly or monthly auctions at varying discountrate depending upon the bids.

Highly liquid and safe investment giving attractive yield.Eligibility for inclusion in SLR.Buyers banks, financial institutions, Primary Dealers, firms, companies, corporatebodies, partnership firms, institutions, mutual funds, Foreign Institutional Investors,Provident Funds, trusts, research organizations,It is available both in primary market as well as secondary market.


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CAPITAL MARKET

Capital market is market for long term securities. It contains financial instruments ofmaturity period exceeding one year. It involves in long term nature of transactions. It is agrowing element of the financial system in the India economy. It differs from the moneymarket in terms of maturity period & liquidity. It is the financial pillar of industrializedeconomy. The development of a nation depends upon the functions & capabilities of the

capital market. In short

Provide resources needed by medium and large scale industries.

Purpose for these resourcesExpansionCapacity ExpansionInvestments

Mergers and AcquisitionsDeals in long term instruments and sources of funds

Main ActivityFunctioning as an institutional mechanism to channelize funds from those whosave, to those who needed for productive purpose.

Provides opportunities to various class of individuals and entities.


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IMPORTANCE OF CAPITAL MARKET

Capital market plays an important role in mobilising resources, and diverting them in

productive channels. In this way, it facilitates and promotes the process of economicgrowth in the country.Various functions and significance of capital market are discussed below:

1. Link between Savers and Investors:The capital market functions as a link between savers and investors. It plays an

important role in mobilising the savings and diverting them in productive investment. Inthis way, capital market plays a vital role in transferring the financial resources fromsurplus and wasteful areas to deficit and productive areas, thus increasing theproductivity and prosperity of the country.

2. Encouragement to Saving:

With the development of capital, market, the banking and non-banking institutionsprovide facilities, which encourage people to save more. In the less- developedcountries, in the absence of a capital market, there are very little savings and those whosave often invest their savings in unproductive and wasteful directions, i.e., in real estate(like land, gold, and jewellery) and conspicuous consumption.


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3. Encouragement to Investment:The capital market facilitates lending to the businessmen and the government and thus

encourages investment. It provides facilities through banks and nonbank financialinstitutions. Various financial assets, e.g., shares, securities, bonds, etc., induce saversto lend to the government or invest in industry. With the development of financialinstitutions, capital becomes more mobile, interest rate falls and investment increases.

4. Promotes Economic Growth:

The capital market not only reflects the general condition of the economy, but alsosmoothens and accelerates the process of economic growth. Various institutions of thecapital market, like nonbank financial intermediaries, allocate the resources rationally inaccordance with the development needs of the country. The proper allocation ofresources results in the expansion of trade and industry in both public and privatesectors, thus promoting balanced economic growth in the country.

5. Stability in Security Prices:The capital market tends to stabilise the values of stocks and securities and reduce thefluctuations in the prices to the minimum. The process of stabilisation is facilitated byproviding capital to the borrowers at a lower interest rate and reducing the speculativeand unproductive activities.


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6. Benefits to Investors:

The credit market helps the investors, i.e., those who have funds to invest in long-term financial assets, in many ways:(a) It brings together the buyers and sellers of securities and thus ensure themarketability of investments,

(b) By advertising security prices, the Stock Exchange enables the investors to keeptrack of their investments and channelize them into most profitable lines,(c) It safeguards the interests of the investors by compensating them from the StockExchange Compensating Fund in the event of fraud and default.


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PLAYERS IN THE CAPITAL MARKETCapital market is a market for long term funds. It requires a well structured market to

enhance the financial capability of the country. The market consist a number of players.They are categorized as:-

Companies : Generally every company can access the capital market. The companieswhich are in need of finance for their project can approach the market. The capitalmarket provides funds from the savers of the community. The companies can mobilize

the resources for their long term needs such as project cost, expansion & diversificationof projects & other expenditure of India to raise the capital from the market.

Financial Intermediaries: Financial intermediaries are those who assist in the processof converting savings into capital formation in the country. The major intermediaries inthe capital market are:-Brokers, Stock brokers ,Underwriters, Registrars, Mutual fundsCollecting agents, Depositories Agents , Portfolio Managers etc.

Individual Investors: These are net savers and purchase the securities issued bycorporates. Individuals provide funds by subscribing to these security or by making otherinvestments.


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STRUCTURE OF THE CAPITAL MARKET IN INDIA

The structure of the capital market has undergone vast changes in recent years. TheIndian capital market has transformed into a new appearance over the last four & a halfdecades. Now it comprises an impressive network of financial institutions & financialinstruments. The market for already issued securities has become more sophisticated inresponse to the different needs of the investors. The specialized financial institutionswere involved in providing long term credit to the corporate sector. Therefore the premierfinancial institutions such as ICICI, IDBI, UTI, and LIC & GIC constitute the largestsegment. A number of new financial instruments & financial intermediaries haveemerged in the capital market.


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CAPITAL MARKET INSTRUMENTS

Capital market has instruments of longer maturity period. These instruments are :

Ownership SecuritiesEquity SharesPreference SharesCumulative Convertible Preference Shares

Debt SecuritiesNon-convertible DebenturesPartly Convertible DebenturesZero-Interest Fully Convertible DebenturesOptionally Convertible Debentures

Deep Discount Bonds

Mutual Fund UnitsIncome SchemesGrowth SchemesSectoral Schemes

Equity Schemes


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EQUITY SHARES means that part of the share capital of the company whichare not preference shares. The majority of Share Capital will be raised through

the issue of Ordinary Shares. Ordinary Shareholders, are the legal owners ofthe business, and are entitled to full shareholder voting rights at meetings - theAnnual General Meeting (A.G.M.), or at Extra-Ordinary General Meetings(E.G.M.s). They are entitled to receive returns out of the companies profit, inthe form of Dividends.

FEATURES OF EQUITY SHARES

1. Right to control2. Voting rights3. Claim on income

4. Claim on assets5. Limited liability


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PREFERENCE SHARESmeans shares which fulfill the following 2 conditions.Therefore, a share which is does not fulfill both these conditions is an equity share.It carries Preferential rights in respect of Dividend at fixed amount or at fixed rate i.e.

dividend payable is payable on fixed figure or percent and this dividend must paid beforethe equity shares holders dividend.

It also carries preferential right in regard to payment of capital on winding up orotherwise. It means the amount paid on preference share must be paid back topreference shareholders before anything is paid to the equity shareholders. In otherwords, preference share capital has priority both in repayment of dividend as well as

capital.Types of Preference Shares1.Cumulative or Non-cumulative preference shares2.Redeemable and Non- Redeemable preference shares3.Participating Preference Share or non-participating preference shares4. Convertible and non-convertible preference shares

Features of preference sharesFixed dividendConvertibilityVoting rightsCumulative dividendRedemption


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DEBENTURE: When a company intends to raise the loan amount from the public it

issues debentures. A person holding debenture or debentures is called a debentureholder. A debenture is a document issued under the seal of the company. It is anacknowledgment of the loan received by the company equal to the nominal value of thedebenture. It bears the date of redemption and rate and mode of paymentof interest. A debenture holder is the creditor of the company.Kinds of debentures

1. Non-convertible debentures2. Fully convertible debentures3. Partly convertible debentures4. Redeemable and Irredeemable debentures5. Secured and Unsecured debentures

Features of debentures1. Fixed rate of interest2. Maturity3. Security4. Redemption5. Claim on assets and income


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Usually the capital markets are classified in two ways:-On the basis of issuer

On the basis of instruments

On the basis of issuer the capital market can be classified again twotypes:- Corporate securities market Governments securities market

On the basis of financial instruments the capital markets areclassifieds into two kinds:-

Equity market: The equity market can be divided into two categories

(a) primary market(b) secondary market

Debt market: Debt market represents the market for long term financialinstruments such as debentures, bonds, etc.


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PRIMARY MARKETIn the primary market, governments, companies, or public sector organizations can

obtain funding through the sale of a new stock or bonds. These are normally issuedthrough securities dealers and banks, which underwrite the offered stocks or bonds.The issuers earn a commission, which is built into the price of the security offering.

TYPES OF ISSUEA company can raise its capital through issue of share and debenture by means of :-

PUBLIC ISSUE :-Public issue is the most popular method of raising capital and involves raising capitaland fund direct from the public .RIGHT ISSUE :-Right issue is the method of raising additional finance from existing members byoffering securities to them on pro rata basis. A company proposing to issue securities

on right basis should send a letter of offer to the shareholders giving adequatediscloser as to how the additional amount received by the issue is used by thecompany.


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BONUS ISSUE:-

Some companies distribute profits to existing shareholders by way of fully paid up bonusshare in lieu of dividend. Bonus share are issued in the ratio of existing share held. Theshareholder do not have to nay additional payment for these share .

PRIVATE PLACEMENT:-

The sale of securities to a relatively small number of select investors as a way of raisingcapital. Investors involved in private placements are usually large banks, mutual funds,insurance companies and pension funds. Private placement is the opposite of a publicissue, in which securities are made available for sale on the open market.


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SECONDARY MARKET

The secondary market is that segment of the capital market where the outstandingsecurities are traded. From the investors point of view the secondary market impartsliquidity to the long term securities held by them by providing an auction marketfor these securities.The secondary market operates through the medium of stock exchange which

regulates the trading activity in this market and ensures a measure of safety andfair dealing to the investors.


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FUNCTIONS OF THE SECONDARY MARKET

1. To facilitate liquidity and marketability of the outstanding equity and debtinstruments.2. To contribute to economic growth through allocation of funds to the most efficientchannel through the process of disinvestments to reinvestment.3. To provide instant valuation of securities caused by changes in the internal

environment (that is, company-wide and industry wide factors). Such valuationfacilitates the measurement of the cost of capital and the rate of return of theeconomic entities at the micro level.4. To ensure a measure of safety and fair dealing to protect investors interest.

5. To induce companies to improve performance since the market price at the stockexchanges reflects the performance and this market price is readily available toinvestors.


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Role of Stock Exchanges In Capital Market of India

Stock Exchanges play a crucial role in the consolidation of a national economy ingeneral and in the development of industrial sector in particular. It is the most dynamicand organised component of capital market. Especially, in developing countries likeIndia, the stock exchanges play a cardinal role in promoting the level of capital formationthrough effective mobilisation of savings and ensuring investment safety.Lets study the role of stock exchanges in capital market of India :-

1. Effective Mobilisation of savingsStock exchanges provide organised market for an individual as well as institutionalinvestors. They regulate the trading transactions with proper rules and regulations inorder to ensure investor's protection. This helps to consolidate the confidence ofinvestors and small savers. Thus, stock exchanges attract small savings especially of

large number of investors in the capital market.


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2. Promoting Capital formation:The funds mobilised through capital market are provided to the industries engaged in theproduction of various goods and services useful for the society. This leads to capitalformation and development of national assets. The savings mobilised are channelisedinto appropriate avenues of investment.

3. Wider Avenues of investment:Stock exchanges provide a wider avenue for the investment to the people andorganisations with investible surplus. Companies from diverse industries like InformationTechnology, Steel, Chemicals, Fuels and Petroleum, Cement, Fertilizers, etc. offervarious kinds of equity and debt securities to the investors. Online trading facility hasbrought the stock exchange at the doorsteps of investors through computer network.

Diverse type of securities is made available in the stock exchanges to suit the varyingobjectives and notions of different classes of investor. Necessary information from stockexchanges available from different sources guides the investors in the effectivemanagement of their investment portfolios.


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4. Liquidity of investment: Stock exchanges provide liquidity of investment to theinvestors. Investors can sell out any of their investments in securities at any time duringtrading days and trading hours on stock exchanges. Thus, stock exchanges provideliquidity of investment. The on-line trading and online settlement of demat securitiesfacilitates the investors to sellout their investments and realise the proceeds within a dayor two. Even investors can switch over their investment from one security to another

according to the changing scenario of capital market.

5. Investment priorities: Stock exchanges facilitate the investors to decide hisinvestment priorities by providing him the basket of different kinds of securities ofdifferent industries and companies. He can sell stock of one company and buy a stock ofanother company through stock exchange whenever he wants. He can manage his

investment portfolio to maximise his wealth.


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6. Investment safety: Stock exchanges through their by-laws, Securities and

Exchange Board of India (SEBI) guidelines, transparent procedures try to provide safetyto the investment in industrial securities. Government has established the National StockExchange (NSE) and Over The Counter Exchange of India (OTCEI) for investors' safety.Exchange authorities try to curb speculative practices and minimise the risk for commoninvestor to preserve his confidence.

7. Wide Marketability to Securities: Online price quoting system and online buying andselling facility have changed the nature and working of stock exchanges. Formerly, thedealings on stock exchanges were restricted to its head quarters. The investors acrossthe country were absolutely in dark about the price fluctuations on stock exchanges dueto the lack of information. But today due to Internet, on line quoting facility is available atthe computers of investors. As a result, they can keep track of price fluctuations taking

place on stock exchange every second during the working hours. Certain T.V. Channelslike CNBC are fully devoted to stock market information and corporate news. Even otherchannels display the on line quoting of stocks. Thus, modern stock exchanges backedup by internet and information technology provide wide marketability to securities of theindustries. Demat facility has revolutionised the procedure of transfer of securities andfacilitated marketing.


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8. Financial resources for public and private sectors

Stock Exchanges make available the financial resources available to the industries inpublic and private sector through various kinds of securities. Due to the assurance ofliquidity, marketing support, investment safety assured through stock exchanges, thepublic issues of securities by these industries receive strong public response (resultingin oversubscription of issue).9. Funds for Development Purpose

Stock exchanges enable the government to mobilise the funds for public utilities andpublic undertakings which take up the developmental activities like power projects,shipping, railways, telecommunication, dams & roads constructions, etc. Stockexchanges provide liquidity, marketability, price continuity and constant evaluation ofgovernment securities.10. Indicator of Industrial DevelopmentStock exchanges are the symbolic indicators of industrial development of a nation.Productivity, efficiency, economic-status, prospects of each industry and every unit in anindustry is reflected through the price fluctuation of industrial securities on stockexchanges. Stock exchange sensex and price fluctuations of securities of variouscompanies tell the entire story of changes in industrial sector.


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11. Barometer of National EconomyStock exchange is taken as a Barometer of the economy of a country.

Each economy is economically symbolized (indicators) by its mostsignificant stock exchange. New York Stock Exchange, London StockExchange, Tokyo Stock Exchange and Bombay Stock Exchange areconsidered as barometers of U.S.A, United Kingdom, Japan andIndia respectively. At both national and international level these stockexchanges represent the progress and conditions of their economies.

Thus, stock exchange serves the nation in several ways through itsdiversified economic services which include imparting liquidity toinvestments, providing marketability, enabling evaluation andensuring price continuity of securities.


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