Indian Stock Market Basics
Why has a Country Needs Stock Market?
Every country needs stock market as it is an excellent opportunity for economic growth. The word stock market sounds very massive. This is both false and true. It is false because, it is not rocket science and can be easily understood and can be well managed by the investors in the stock or shareholders. It is true, because, most of the newcomers in the stock market, blindly jump into the sea of the stock market without the necessary knowledge of the same. However, certain basics about the stock market can ease the new investors in the stock exchange.
Let us try to understand as a holistic picture, in the larger perspective of the country. The country needs money flowing from one hand to another hand in many ways. Companies, which invest crores of rupees to perform the business functions and in return earn the many crores of rupees as turnover. All the money spent by the companies is clearly seen as moving from one hand to another hand in the country.
Sources of Business Funds
When we come deeper from the macro picture into the micro picture and see in the perspective of a business, all businesses need funds to invest as a capital to start up the company. And how does it collect all the huge money it needs to invest? Does it take out from the pocket of the owner of a business? No, though the precise amount of investment can be contributed from the owner of the company, not all the money is taken from the pocket. When the self-investment is one major part of the capital for the investment, another critical component of the capital is the debt. Companies, go to the banks and request for the bonds to invest in capital for the enterprise. However, not all the rest of the money is collected from here, as they do not get all this amount for free of interest, and they have to bear the interest and the interest will become huge within the even small period. So the large chunk of the capital collected from the public funds, which are also called as IPO or Initial Public Offer.
In this way, the companies enter the stock market and the stock market help and support thousands of the companies to raise the funds for the capital of the business and also to expand the company. Ideally all the money accumulated in all these ways is supposed to be spent in the right way to start up the business and grow the company. And the country also gets a benefit of supporting these companies by helping the IPO, because the new business is creating new and more of the employment opportunities for the citizen of the country.
So, in an overall picture, the stock market serves as an interface or mediator in between the companies and the people, who are investing in the market. It is the place, where millions of dollars are exchanged among the people