Stock Exchange-Functions/Importance

Stock Exchange-Functions/Importance-स्टॉक एक्सचेंज-कार्य/महत्व

A stock exchange in the platform where financial instruments like stocks(shares" and "equity) and derivatives ('Futures Contract , Forward contracts ,Swaps) are traded.

Equity components involve the shares, stocks, reserves, and own funds. Hence, equity is a much broader term while shares are part of equity, and hence it is the part of the same.

Important Functions of Stock Exchange /Secondary Market –

-Mobilize savings for investment-

People invest there savings in shares which help companies io mobilize finances .

-Economic Barometer:

Stock exchange is also known as a pulse of economy or economic mirror which reflects the economic conditions of a country.

The rise or fall in the share prices indicates the boom or recession cycle of the economy

-Contributes to Economic Growth:

In stock exchange securities of various companies are bought and sold. This process of disinvestment and reinvestment helps to invest in most productive investment proposal and this leads to capital formation and economic growth.

-Contribution in Gross Domestic Product (GDP)-

The activities of the stock market influence the country’s apex bank’s monetary policies and expansion of the country’s Gross Domestic Product (GDP).

-The Employment Factor

Employment is directly proportion to the health of a stock market.

-Promotes Foreign investment-

In the form of FII(Foreign istitutional investments)

Q-Explain the functions of stock market. (please answer in 100 words) ( MPPSC MAINS- 2018)

Market participants have to be registered with the stock exchange and SEBI to conduct trades.

This includes companies issuing shares, brokers conducting the trades, as well as traders and investors.