Investing in Stock Markets

A stock (or share) market is an integral part of a modern financial system. Stock market is a platform for making investment in corporate securities. The securities are chiefly in the form of equity shares and debentures. The purpose of these securities is to raise long-term funds for companies engaged in production. The function of a stock market is two-fold: (a) to arrange for the raising of new capital (primary market function) and (b) to provide liquidity against existing securities (secondary market function). Corporate enterprises raising fresh capital may be new companies or existing companies planning expansion of their operations. Sometimes, existing private firms also go public, i.e. become public limited companies. Stock market helps in the floatation of new issues by providing a variety of services like underwriting, distribution, and listing of the issue. Stock market contributes in raising capital in order to strengthen the industrial base of an economy. Thus, stock market plays an most important role in supporting the growth of industry and commerce in the country. Ever since the initiation of economic reforms in the early 1990s, the Indian stock market has undergone a sea change. Development of information technology in general and digital technology in particular, has changed the approach of people towards the stock market.