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If you all don’t know about the stock exchange and its major functions then you don’t need to worry about it and proceed further because you will get to know in brief. Let us with our article on “Major Functions of Stock Exchange in India”.
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Okay, so moving further with the basics let’s discuss “what is a stock exchange?”
What is Stock Exchange?
Stock Exchange is the place where you can trade in the financial instruments likewise in the shares, financial assets or securities etc. This is also known as the share market.
In India, there are major two exchanges available that is:
- National Stock Exchange (NSE India)
- Bombay Stock Exchange (BSE)
The participants for the stock market are:
- Securities and Exchange Board of India
- National Stock Exchange (NSE)
- Bombay Stock Exchange (BSE)
In the below sub-headings, there are many functions of the stock exchange and in this article, we will discuss the 10 major functions. So, let’s proceed further with the functions ahead:
Top 10 Major Functions of Stock Exchange in India
1. Mobilize the Savings for Investments
Savings in the investment can be done through mutual funds, investment trusts, and a variety of other securities, and these are all traded in the stock exchanges.
For those individuals that cannot afford to invest in the huge amount of securities for, there are many opportunities by the mutual funds and investment trusts.
2. They protect the Investors Interest
The Stock Exchange has also been a safeguard for the investors to protect their interest in the stock market. The investments or the funds that all the investors used in the stock market are controlled by the exchange in order to gain the trust of the investors to make an interest in the stock market.
3. Economic Growth
The share market is used to control the channel through which all the savings of the investors has been made in some of the useful investments according to the individual investors. Due to all this channelization of the savings, it leads to economic growth and capital formation in the economy.
4. Stock Exchange provides Liquidity
In the stock exchange, you get the opportunity of liquidity. As whenever there is the need for funding’s then you can sell the investment positions from the stock exchange with ease and with a short period of time and then you can take out your money from it.
5. Provides Safety in Capital and in Fair Dealing
All the transactions that have been made in the stock exchange are transparent and abide by the rules and regulations of the Securities and Exchange Board of India. This measure ensures the safety of the capital of the investors and the format of fair dealing for all the investors.
6. Encourages Healthy Speculation in the Stock Exchange
The price for the securities is based on the demand and supply of the position. This helps in the encouragement of speculation in the stock exchange by providing opportunities to the investors to speculate and get to make high profits from the fluctuations in the security prices.
7. Mobility in funding
The stock exchange helps both the investors and the companies in order to buy or sell their securities and creates the funds for them. Due to this procedure, the money market also gets strong in dealing with short-term funds.
8. Corporate Governance
There are many rules and regulations by the stock exchange in order to maintain the corporate governance to satisfy the demands of the shareholders and to make the management more efficient.
9. Redistribution of the Wealth
By giving the chance to all types of investors or traders to do their trades in the stock market, the stock exchange removes the inequalities in the wealth generation. All types of traders or investors can make profitable deals from the stock market.
10. It also creates Investment Opportunities for small investors
Investing in the stock market can be done with some funding also rather than entering into the big businesses with huge capital investments.
So, it benefits the small investors also to grow their funding with small amounts and provides them with passive income from their savings.
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