Role Of Stock Market For Any Country

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Share market trading

In layman’s terms, stock markets are basically platforms where shares of different companies are bought and sold. It is a marketplace for the trading of shares and this kind of transaction takes place between public companies, investors, and traders, bringing mutual benefits to all.

For centuries now, stock markets have been intrinsic to the financial growth of individuals as well as small and large-scale industries, thereby promoting the economic development of a country. To both individuals and industries, stock markets have been proven to be valuable assets. To be precise, stock markets may be used as markers to suggest the rise or fall of an entire nation’s economy.

Let’s have a look at the significant role of the stock market for any country.

Significance of stock market for any country:

  1. Increase in capital: Share market trading can increase the capital of businesses and firms so that they get access to funds required for their overall growth and expansion. That, in turn, increases the chances of more employment. The companies that are already gaining high profit, sell their shares at a higher price, thus increasing their long-term capital. This helps in boosting their financial aspects. Generating an Initial Public Offering (IPO) in primary markets helps these companies to increase their capital, without the issue of repayment.
  2. Increase in the wealth of the general public: The general public can be highly benefitted by investing a part of their savings in stock markets. The profit they earn by investing in shares can result in an increase in their wealth and improve their lifestyle, further enhancing the economy of the whole country.
  3. Security in investment through liquidity: In stock markets, investors are given assurance that their shares can be liquidated into cash at any point in time. This provides a secure environment for investment for the general public as well as other investors.
  4. Increase in savings: Investing in stock markets can be a great way to increase one’s savings. The general public can save a huge amount of their earnings, by buying shares in the stock market, rather than splurging on something unproductive. This way, all their savings are secured and can be multiplied, allowing them to make more profit.
  5. Mobilizing resources and Industrialization: Mobilizing resources is crucial to the economic development in the industrial sector, and the overall economy of a country. Stock markets play a major role in the mobilization of resources, through capital investments.
  6. Boosts the economy of a country: The Government can benefit by earning taxes from the companies that invest in the stock market. This, in turn, helps the Government to invest more in promoting the economic growth of the country, resulting in a high GDP. A successfully functioning stock market not only attracts local investors but also invites investors from across the world. This naturally boosts the nation’s economy.
  7. Impact on non-investors: Those who do not invest in stock markets are impacted too, by its rise and fall. For example, the government’s tax rates are highly influenced by the stock market. Also, low stock prices can affect the employment scenario of a country. More and more people are unemployed if there is a fall in the stock prices.

In Conclusion

The stock market serves the overall economy of a country. From business corporations to the general public, almost every individual is hugely impacted by the functioning of the stock market. It helps in the economic growth of industries, including the commodity futures market, through capital investment. It also helps the general public to save more and gain prosperity, by investing in a regulated environment. This improves the economic condition of the entire nation.