Definition and Types of Securities
The Indian securities market refers to the platform where buying and selling of financial instruments, known as securities, take place.
Securities represent ownership or a creditor relationship with an entity. In India, there are two main Types of securities: equity securities and debt securities.
Equity securities, also known as shares or stocks, represent ownership in a company.
When people or institutions buy fairness securities, they come to be shareholders and have the proper proportion inside the organization’s profits and participate in selection-making strategies.
Debt securities, such as bonds or debentures, constitute a loan made via an investor to an entity, consisting of a government or a employer.
Investors who purchase debt securities become creditors and get hold of ordinary hobby bills till the foremost quantity is repaid.
Definition
According to the Securities Contracts Regulation Act (SCRA), a security is one that is exchange tradable.
Securities Contracts Regulation Act (SCRA)
Importance of the Indian Securities Market
The Indian stock market plays an important role in the economy for several reasons.
- It provides an opportunity for companies to raise capital by issuing securities. When companies need funds for expansion, research and development or other purposes, they can sell securities to investors for capital.
- The securities market enables individuals and institutions to invest and earn returns. Stock purchases allow investors to earn shares or interest by participating in the growth and success of companies.
- The security market encourages a more efficient allocation of economic resources. It facilitates the transfer of funds from those with excess capital to those who need capital for productive purposes. Allocation of capital to industry and industry This contributes to economic growth and development.
Role of the Securities Market in the Economy
The securities market plays a vital role in the overall economy in the following ways:
Capital Formation
The market enables companies to raise funds through the issuance of securities. This capital formation supports business expansion, job creation, and economic growth.
Liquidity
The securities market provides liquidity to investors by allowing them to buy and sell securities. Investors can convert their investments into cash quickly and easily, enhancing market efficiency.
Risk Transfer
The securities market enables investors to diversify their portfolios and manage risk. By investing in a variety of securities, individuals and institutions can spread their risk across different assets, reducing the impact of potential losses.
Economic Stability
A well-functioning securities market contributes to economic stability. It helps mobilize savings, promotes investor confidence, and supports stable financial intermediation.
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