In: Finance
Basic functions of the stock market are as under-
1) Economic Barometer
The stock market is the mirror of economic condition in the country, It is is the leading indicator which provides an indication of the coming recession or boom in the economy, Everything is included in price. Price adjust themselves to accommodate the changes in the economic conditions
2) Discovery of prices-
The stock market provides a platform for the discovery of prices on the basis of supply and demand<vaulation serves as an important tool for creditors to provide credit or to judge any companies creditworthiness.
3)Economic growth-
The stock market provides the infrastructure for the savings to be channelized in the most productive investment proposals which lead to capital formation and economic growth and reduce dependency on foreign investors
4)Provide scope for speculations-Provide space to earn money or secondary income through price movements of securities in a regulated manner
5)Safety of transaction-All the transaction and complete stock market is regulated by the regulators and different clearinghouses are present to honor the financial result of the transactions.