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The IUP Journal of Applied Finance
Contribution of Market Intermediaries
to the Growth of Securities Market in India:
Assessing the Relationship and Impact
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In today’s world, securities market cannot be imagined without the services of a large number of intermediaries who act as conduits between users and suppliers of funds. Intermediaries help in matching preferences of risk, liquidity and maturity characteristics of both suppliers and buyers of securities. They intermediate in the securities market by establishing a direct relationship between supplier of funds and suppliers of securities. Therefore, to have a comprehensive view of the relationship specifically between securities market intermediaries and securities market developments, this study has been undertaken. The study attempts to explore the relationship, both conceptually and empirically, between the functioning of intermediaries and securities market. The study found that there exists a strong correlation between the value added by securities market intermediaries and share prices in India. There is a long-term relationship between value added by securities market intermediaries (market capitalization per market intermediaries) and share prices in India. Further, both the variables taken for the study are found to be cointegrated. Thus, broadly it can be concluded that intermediaries have provided depth to the securities market, thereby facilitating the flow of funds from investors to demanders of money.

 
 
 

Securities markets play an important role in channelizing funds from savers to investors. To channelize the savings of these investors, there are economic agents who act as intermediaries between those who demand securities and those who supply securities. These intermediaries help in matching preferences of risk, liquidity and maturity characteristics of both suppliers and buyers of securities. The growth of the capital market depends upon the active participation of the investors, availability of investment instruments and prominent role of market intermediaries, and in this regard, market intermediaries have special significance as they tend to act as a link between capital providers and seekers across the country. Therefore, it is necessary that the securities market provides a well developed, efficiently administered and properly regulated market system.

The term ‘securities market’, as used in the paper, refers to the component of financial market wherein financial securities are issued and traded by economic agents. Thus, it constitutes the channel through which the capital resources generated in the society are made available for the economic development of the nation. It provides long-term financial resources, which are required for the development of different sectors of the economy. It comprises both new issues and stock or secondary market.

 
 
 

Applied Finance Journal,Securities Market in India,Assessing the Relationship and Impact, Contribution of Market Intermediaries .