Capital market plays a vital role in a country’s economy. Capital market deals with long-term funds. These funds are subject to uncertainty and risk. It supplies long and medium term funds to the corporate sector. It provides the mechanism for facilitating capital fund transactions. It deals in ordinary shares, bond debentures and stocks and securities of the government. In this market the funds flow will come from savers. It converts financial assets into productive physical assets. It provides incentives to savers in the form of interest or dividend to the investors. It leads to capital formation.
The following factors play an important role in the growth of the capital market:
1. A strong and powerful Central Government
2. Financial dynamics
3. Speedy industrialisation
4. Attracting Foreign Investment
6. Speedy Implementation of policies
7. Regulatory changes
8. Globalisation
9. The level of savings and investment pattern of the household sectors
10. Development of financial theories
11. Sophisticated technological advances
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