Equity markets, by virtue of their simplicity, come best in terms of understanding, even for a common man. The question most frequently asked by the crowd is about the state of the market and its course. The question is relevant for the current market conditions also.
The
utility of any securities market lies in transferring
of funds from the surplus to the deficit sectors,
efficiently and at low cost. The sectors, which would
usually have surplus funds, are households, trusts,
some corporates, collective investment vehicles like
mutual funds etc. The deficit sectors include
corporates and governments, who can make economic and
productive use of the collected money. The rationale
behind financial exchange through the securities
markets is that the otherwise idle money with the
surplus sectors can be productively used in the
deficit sectors and the gains can be shared between
the two, thus acting as a motivation for both of them.
In summary, the existence of any securities market is
for the advantage of both the issuers and the
investors. In this article, our focus is on the equity
market in India. We will first examine how effectively
the market is serving the purpose just mentioned. We
will take up a few issues to illustrate our viewpoint.
For
most investors, the primary motive in investments is
to earn a return on their money and to be precise, to
maximize the risk-adjusted return from investments.
The return comes through dividends and capital gains. |
