Basics of capital market

Basics of capital market

The capital market is a market mechanism that is organized which facilitates efficient and effective money transfer from investing class to entrepreneur class in public and private sectors of the economy. It is the market for funds which are long-term in nature. This market helps in providing the equity finance and long-term debt for the corporate and government sector. The capital market is broadly categorized into two: primary market and secondary market.

The capital market is quite different from the cryptocurrency market wherein the digital currencies get traded. The digital currencies are traded through software like Qprofit system. Read this post here to understand the workings of the cryptocurrency market.

Importance of the capital market

The industrial revolution led to mass production which in turn led to the need for massive capital. This massive requirement of capital has paved the way for the development of the security markets.  Hence the capital market is very much essential for the industrial growth. It helps in channelizing the savings of the individuals to the organizations and the corporations who are in need of money.

The capital market helps the entrepreneurs in setting up the projects which are above their financial capacity. Hence, the security market helps in linking the economic surplus units with the economic deficit units. Efficient, transparent and healthy functioning of the security market is very much important for economic development and industrialization.

Functions of the market

The function of the market involves the exchange of the financial asset. The surplus units offer money and in return, they receive the dividend, capital appreciation, and interest. The market helps in bringing the borrowers and savers together by selling the securities to the savers and the lending the same money to borrowers.

The capital market is a means for allocating saved funds in a desirable way as it will help in achieving the national priorities and objectives.  It facilitates the production of services and goods in an efficient manner thereby contributing to the well-being of the society. It raises the living standard of people in an economy.

The capital market helps in transmitting the savings of the country into different productive purposes which in turn increases output and also the level of employment in the country.

The proper growth and development of the market play a critical role in the economy’s growth.  In order to meet the requirements of the growing economy, the capital market should also be able to grow at a quicker pace.