Lets go with the benefit that a well developed stock market brings to the country, economy, businessmen, investors and common man.
1) Helping the economy grow:
Developing nations need more capital to fund the new projects, set up plans and to grow and expand the operations. A well developed stock market like India encourages the promoters to tap the stock market for these much needed funds.
This is the reason why a lot of companies tap the primary market during the bull run.
2) Banks do not like risk:
A banker is a guy who lends you an umbrella on a fine sunny day, but takes it back the moment clouds appear on the horizon.
However investors are known to be much more patient and show overwhelming support to good enterprises which are in distress.
3) Corporate governance (Keeps businesses in check):
Stock market ruthlessly punish the rogues.
The market and analysts often demand a higher standards of efficiency and management than what the Governments can even dream of asking via laws.
These days the stock holders even force the companies to take CSR, and morals more seriously than what their B-Schools would have taught.
eg: Recently the investors of Berkshire Hathaway forced Warren Buffet to sell his stake in PetroChina because of its alleged links with the atrocities in Darfur.
4) Curb Corruption.
Stock holders wants records, audits and paper trail of every transaction. They stay away from companies which deal in grey market for these companies tend to make the promoters richer at the cost of the investors. Hence stock markets makes a friendly environment to do business in.
5) Reward Ingenuity:
Gone are the days when the revenues and profits increased by a fixed predictable percentage every year. In a knowledge based economy, the best companies do not think about capturing 1-2% more of the market share, but creating a whole new market. The only way to value these companies is the stock market… for the companies are many times more than their book value.
6) Mobilizing the savings:
It gives a common man to relax and let his investments work for him.
7) Redistribution of wealth:
Everybody knows the age old sage: Money attracts money.
A common man like you and me cannot hope to start a whole new industry and reap the benefits, but through stock markets, we can definitely become a partner 🙂
Now for every buyer, there needs to be a seller. And FII with their deep pockets and risk appetite fill exactly this void. They enhance the liquidity of the stock market, they have developed the market so much that its almost impossible for a punter/group to do large scale manipulations.
Hence, Even though I agree that government should check the PN (participatory notes) and check them for laundering, I strongly oppose those people who think FIIs should be kicked out completely.
23 replies on “Benefits of Stock Market”
hey ankur
indian mkts arent well developed
they r rather the best of the developing mkts
a dev mkt is one that has an autonomous regulator
with sufficient leg room to enforce serious debilitating penalties essentially not subject to political interference
it should have a track record of holding people accountable in case of scams has that happened in india ?
see ajays video on my post
i know there is still a lot of room for development… but India atleast has the most developed market in the developing nations.. and FII have a huge role to play in it.
ya i saw Ajay’s video 🙂 and I am optimistic that regulators will only get more teeth in the future
with such govts that are into daily interference -that give psus diktats on how to maintain oil prices and interest rates do u think it is likely?
yes govt has administered oil prices.. and with that all the oil companies (all navratanas) are not only bankrupt… but are their stocks are available for almost free .. yet there r no takers…. 🙂
i hope u did not lose on today evening’s downturn
Prax, have you forgotten the times before NSE.We have come a long way from there.Although I agree- SEBI is anything but an autonomous regulator. I am not sure an autonomous regulator will help the markets. There are too many problems with SEBI.More teeth might result in more problems for the companies but may not necessarily mean more benefits to the investor.
@pre3na
well teeth to regulators does help… because there is always a fear that the punters might manipulate the market and make millions.
but government always overrides its decision… PN notes being one, then the biggest example was the SEBI’s chapter II http://dpe.nic.in/newgl/glch02b29.htm where it tried to force companies to hire independent directors… but government found 100s or reasons to delay its implementation.
@prax…
do you think its the right time to buy HPCL and BPCL
cant really say for super long term hp yes and ongc
depends upon the intention of govt to be populous or practical and how long will it take to ruin them
ya…
however if the market breaches 17k mark, I am buyingback my entire portfolio. but this time, i will add a lot of mutual funds esp ETF to my portfolio.
whats ur strategy?
i was kinda sick with a stomach upset
im all alone without mum around (she is out of town)is kinda tough on my sensetive stomach
didnt bother about stocks and stuff
will look into them though lots of pendg work
mail me ur pf
the idea isnt bad, if u keep monitoring
this market is now goin to be volatile and ideal for st gains i think it wd be better to do selective picking in indl merits
what say u abt ongc im holdg on since ipo and at 100$ a barrel almost and almost all time highs im tempetd to sell as it is the stock hovers between 800 and 1000 – is there a chance for a rerating
also what do u think abt energy stocks like ntpc ?
get well soon. 🙂
i bought 10k of stocks today… and i think i will buy 200-300k in lots over the next week or so.
energy stock… if u remember till last month I was very bullish … and energy stocks led this bull run….
I still believe that their revenues will grow multiple folds over the next decade or so…. but the because of the surge in the prices, i think i would wait till the markets cool.
about ONGC, you do realize that
1) they r not able to find any new discoveries…. I do not remember
when they found something in India and abroad last discovery was in
Suez canal.. and was nothing significant. i usually do not like
companies that just sit idle and milk their investments.
2) oil is a commodity…. ONGC/cain has little or no control over the
price they will sell at.
3) ONGC has interests in Sudan.. Dafur ???
ultimately it boils down to the Oil futures price… if u think it
will go up (which usually starts happens during winter, or if iran is
bombed) then invest in ONGC.. however ur entire investments will go to
dogs if does not happen.
as a rule of thumb, I like to avoid commodities because the share
price is often as cyclical as the commodity itself and has little to
do with the management strength.
my portfolio is:
APOHOS
CLUAUT
ICIPPS
INTTRA
KPRMIL
SAABIO
SANIND
SICAL
SURDIA
TAJGVK
TAMNEW
and is in deep red (30k negative)
BTW oil companies esp Schlumberger Ltd SLB fell by over 10% today….. so monday might be a good time to buy ONGC.
i am thinking of add the following stocks to my portfolio.
1) BSES infrastructure
2) Omaxe
3) TTK Prestige
4) ITC (only if it breaches 170 mark)
5) eastern Silk.
6) Alok Textiles.
stomach is a lot better now
ongc woes started since the exit of Shubir Raha.
i had said hp and ongc in unison cause they work opposite and hedge or cancel out the oil fluctuations
ongc should have been valued double of what it is now thanks to oil prices (compared to world oil producers)but sadly thanks to the Errant promotor or the President P(govt) ongc takes a hit thanks to subsidy burden – psus dont work on mkt fundamentals and govt psus are biggest cheats to small shareholders
ongcs hands r now tied with so much subsidy burden they cant have free reserves to operate effectively and the way the new chief talks and almost begs the govt to consider the situation im loosing hope and patience
will chk out on ur pf when i get some free time
ur strategy of slow creaping purchases is the correct way to go about it
ongc went up today told u it does not work on fundamentals it works on govt diktats i
it reminds me of kp stocks
had held on cause of some split and bonus noises and yes it added a 100bucks from there but noises will remain noises i think lets see ill ride the upside and hopefully exit at 1250 or so
ya i agree that administered prices have killed the PSUs… and its no less than a gamble to even touch them… but i guess the prices have hit rock bottom.. and the only way to go now is up.
I agree ONGC was slightly up today… but the US oil stocks are facing a meltdown…. although the US markets r down 2.5%, oil is down 10-12%
and worse, I am unable to grasp the reason for this sudden dip today.
of the 6 stocks, i am planning to buy… i am actually reentering in 3… and rest 3 were stocks which i wanted to buy for quite some time, but was just waiting for market to tank.
BTW what do u think about franklin tempelton ELSS fund…. it has a 3 year lock in… should i go for this or some other?
thank god ur tummy feels better… otherwise i thought it would be one of those days where u ruin ur weekend because of a short term sickness. so is your mom back?
no she is out of country with my sis
will take her a month im strugglin with eatin out , eat in cook – burnin stuff – forgetin stuff and cleaning the mess i make —basically life!
simple about us oil stocks they were sizzlin for the past 3 mths when oil was in its 80s somwhat like the power stocks here wat goeth up cometh down
luckily web conferencing comes in handy
i can see and talk to her that is a very big plus
//will take her a month im strugglin with eatin out , eat in cook – burnin stuff – forgetin stuff and cleaning the mess i make —basically life!//
dude u should get married 🙂
yeah right
im gettin that from all quarters
not yet
i still am for independence!
then go move in with some one…. but don’t torture yourself for one whole month.
i wonder why a guy says he will lose his freedom…. its the female who has to suffer the most…. she gets kicked out of her home… often asked to live in a strange city… change jobs, lose friends.. and then live life with a pig.. with just a hope that he might one day be civilized.
hey ankur
r u a male or female?
man im all for fem lib but ur stretchin it this time
life is a torture /suffering accordin to buddha
married or not
ps r u married??????
i am one happy stag just like you… but the only difference is that i have been living all alone for almost 8 years now… so there is no pressing need for a partner.