BASICS OF CAPITAL MARKET

BASICS OF CAPITAL MARKETS (NEED, EVOLUTION AND CONSTITUENTS)

• Capital markets are financial markets for the buying and selling of long-term debt or equity backed securities. The primary role of the capital market is to raise long-term funds for governments, banks, and corporations while providing a platform for the trading of securities.This fundraising is regulated by the performance of the stock and bond markets within the capital market. 
• The member organizations of the capital market may issue stocks and bonds in order to raise funds. Investors can then invest in the capital market by purchasing those stocks and bonds. The capital market, therefore, functions as a link between savers and investors. 
• It plays an important role in mobilizing the savings and diverting them in productive investment. In this way, capital market plays a vital role in transferring the financial resources from surplus and wasteful areas to deficit and productive areas, thus increasing the productivity and prosperity of the country and promotes the process of economic growth in the country. 
• Financial market regulators, such as the Securities Exchange Board of India (SEBI) and The Securities and Exchange Commission (SEC) in US oversee the capital markets in their jurisdictions to protect investors against fraud, among other duties. 
• Capital market is the heart of any economy through which the savings are channelized into effective long-term investments. A developed and vibrant Capital Market will immensely contribute towards speedy economic growth and development. 
• A well-developed Capital market is beneficial both for the investor as well as for the corporate sector and it is the most important parameter for evaluating the health of any economy. It is an engine for economic growth, providing an efficient means of resource mobilization and allocation. 

The Indian capital market is one of the oldest capital markets in the world. It dates back to the 18th century when the securities of the East India Company were traded in Mumbai and Kolkata. However, the orderly growth of the capital market began with the setting up of The Stock Exchange of Bombay in July 1875 and Ahmedabad Stock Exchange in 1884. Eventually,19 other Stock Exchanges sprang up in various parts of the country. The evolution-cum development of Indian capital market may be reviewed under two phases:

(i) Indian Capital Market – Before 1990’s

(ii) Indian Capital Market – After 1990’s

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