CHAPTER VII - Summary & Conclusion

7.1 Conclusion

The study was to understand the linkage between the Capital Market and the

Economic development in the Indian context.

The worldwide trend in the twentieth century towards greater self-regulation

accompanied by tighter Govt, controls.

Functionally stock exchanges help in mobilizing saving for investment in the

economy and provide liquidity through their marketability. Stock exchanges are thus

windows to the economy and a barometer of the performance of the economy. If they

have to perform this function, the stock exchanges themselves should be quick to

respond to the demands of the public of the economy.

In macro aspect the stock market is window of the economy in the capitalist market

oriented countries.

There is very strong linkage between the economic development and the state of the

capital market of any economy. A strong and robust industrial growth and rising

corporate profits and performance gives the necessary impetus to the capital markets

of the country.

The demand for capital is increased in secondary market i.e. the stock market. So the

stock Market is the barometer of an economy or Mirror of an economy. So when the

economy grows the market grows or vice-versa.

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The Study looks at the development of capital market Reforms that has been initiated

since 1992 covering various facets of the market like legislative reforms, trading

reforms, settlement reforms, Risk Management Reforms, Primary Market Reforms,

Fiscal and Budgetary Reforms etc and how it has made the market a safer place.

It also brings out major scams and events that have taken place in the market in the

past. The study also analyses the security mechanisms that has been adopted in the

capital markets and the Regulatory measures implemented to minimise the recurrence

of such irregularities and scams in the future.

The Government has taken these measures as well the SEBI to make the Capital

markets a safer place. The Indian Capital market has now graduated to a much more

elevated level in terms of trading rules and regulations, settlement rules, surveillance

after these events in the past.

The Indian markets are now at par with international standards from almost all

aspects.

The study also analyses the volatility in the market place, and the factors, which

determine the fluctuations.

The study analyses in depth the concepts of volatility as well as the varied reasons,

which contribute to the volatility in the market place.

The study also brings out the linkages between Capital Market and Economy. It

establishes the co- relation between Capital Market and the economic barometers. It
brings out the relationship between Shareholder’s Wealth, and the capital market

performance.

Financial liberalization stimulates the economic development by making both

securities market and banking sector efficient. It performs the vital function of rising

funds for, and channelling funds to productive investments. Thus, successful financial

liberalization is usually an important component of a country’s strategy for econ omic

growth.

It has been illustrated that there is a very strong and direct linkage between the

economic barometers like Foreign Exchange Reserves, GNP growth, GDP growth,

Foreign Funds inflows, Capital raising activities and the Market Capitalization.

The stock market and the economy are closely inter- related to a^reaj, extent. In the
modem day in any developed economy, stock market |||^fexceedingly important

role in the economic development and growth. ***.*&* J

Ai -'/

This has been demonstrated by the fact that in thelhidiii®«Mn^^arso, we have

witnessed that how various segments of the economy i.e. household, corporate and

the Government sector depends heavily on the capital market for various reasons such

as fund raising, channeling of the funds as well as wealth creation.

The industrial growth is closely dependent on the availability of cheap funds, which

the Capital market provides. This in turn provides the impetus for increased industrial

growth, increased production, lowering costs. All these improve the financial
performance of the companies, which in turns translates to better and improved

performance and prospects.

The Capital market and the economy is an integral part of any growth engine. In the

developed economies, the Capital market is the main source of funds deployment by

the general investors.

The US is the most developed economy in the world and it is seen that the Dow Jones

is a barometer of the US economy and its growth potential. The same story hold good

for the developed economies like UK, Japan and many others.

In India also, with the interest rates falling to historic lows, the capital markets will

attract more funds and growth as the risk reward ratio is tilted towards Equity like any

developed economies.

Capital markets is also a barometer of the shareholder' s wealth which is due to the

appreciation in the stock prices as well other corporate benefits like bonus issues,

dividends, Rights Issue etc.

The wealth generated by the capital markets gets invested in productive assets as well

as in consumer goods. The consumer spending increases with the generation of

wealth, which has a positive impact on the economy as a whole, in the form of higher

production and also increased economic activity.

Capital Market development is the heart of any developed nation’s economy. A

vibrant capital market is of paramount importance to the industrial and services sector
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 growth, shareholders wealth and the overall economic performance of any country in

today’s liberalised environment.

So this study brings out the fact that the Capital market is closely interlinked with the

economic development and it is equally true also in the Indian Context.

7.2 Guidelines for future research work

Where do proceed from here? The most immediate answer is to overcome the

drawbacks and limitation of my work, if possible. As far as future research is

concerned, I may suggest two more additional areas to work with.

Firstly, the area of the research can be broadened to include other major economies of

the world and its Capital market linkage in terms of growth and shareholders’ wealth

as this study only dealt with the same in the Indian context

Secondly, the research can also be done on how the various renowned corporations of

the world have succeeded in delivering shareholders’ increased wealth as this study

only dealt with Indian corporates

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