Question

State with reasons whether you agree or disagree with the following statement.

The capital market plays an important role in India.

Options

• Agree

• Disagree

Answer 1

I Agree with the given statement.

 Explanation:

The following are the roles of the Capital Market:

1. Mobilizes long-term savings: There is an increasing demand for investment funds by industrial organizations and the government. But the availability of financial resources is insufficient to meet this growing demand. Capital market helps to mobilize long-term savings from various sections of the population through the sale of securities.
2. Provides equity capital: Capital market provides equity capital or share capital to entrepreneurs which could be used to purchase assets as well as fund business operations.
3. Operational efficiency: Capital market helps to achieve operational efficiency by lowering the transaction costs, simplifying transaction procedures, lowering settlement timings in purchase and sale of stocks.
4. Quick valuation: Capital market helps to determine a fair and quick value of both equity (shares) and debt (bonds, debentures) instruments.
5. Integration: Capital market leads to integration among real and financial sectors, equity and debt instruments, government and private sector, domestic and external funds etc.