Stock market is the name of the market where, instead of goods and services, shares and shares are traded. Investors can sell or buy shares, bonds or securities of different companies and corporate entities. More often, these purchases and sales are made through agents or brokers. Now it has become a very necessary and important element of every economy. They serve a vital purpose of accumulating savings and making them available for productive purposes. In fact, the rise of corporations and corporate entities and sustained performance would have been impossible in their absence.

The stock market is an important element of any economy. It performs many functions vital to the steady growth and continued development of the economy. Some of the important functions are explained below:

(1) Determination of share price: The most important function is the determination of stock prices for daily trading. Prices are affected by the forces of supply and demand. It is the place where these forces meet to set the price of a stock. This price then shows the strength of a company in the market.

(2) Capital Market Development: It is the basis of the development of the capital market. As you know, the capital market has two segments i.e. the stock market and the stock market. It is a developed form of this stock market. The active stock market helps a better growth of the capital market. It also provides a medium in which different capital market instruments can be easily traded.

(3) Generation of Savings: The stock market induces people to save. It teaches them to save and then to invest the savings in the right direction. By providing a profitable way to use savings, stock markets increase the savings potential in the economy. Greater savings potentials increase the rate of capital formation in the country. It also helps in expanding the economy in the long run.

(4) Resource Mobilization: It fulfills the vital function of resource mobilization. It not only attracts savings from all classes of society but also channels these savings into different sectors. Then convert savings into investment. These investments are then used to extract and allocate more and more resources of all kinds. Efficient resource mobilization leads to increased production and improved living standards.

(5) Strengthening of the Industrial Base: Strengthens the industrial base of the country. You are well aware that the industry needs a large amount of capital. This need is met mainly by the stock market. It provides an easy means by which investments of any amount can be made. The growth of public limited companies is also possible thanks to the stock market. It is also the place where stock prices are quoted and stocks and shares are traded.

(6) Emergence of New Companies: It plays an important role in the rise of new companies and industries. A publicly traded company enjoys greater confidence from the public and investors in general. Therefore, you are in a better position to attract investment and increase the minimum subscription. Thus, in the presence of the stock market, new projects can be started relatively easily. It also helps raise funds to establish new production lines and industrial units.

(7) Healthy Corporate Structure: It helps in maintaining the corporate structure of the economy. It is a source of promotion for solid and healthy companies. It has its particular set of rules and regulations that must be abided by by all publicly traded companies. These rules ensure the fair running of company affairs. Companies are also required to send you their intermediate and final reports, where they are listed. Therefore, the investor can obtain these reports from the stock exchange and study the affairs of the desired company.

(8) Financial stability: It has a vital role in financial stability. Trends in the stock market affect all major sectors of the economy. That is why the governing authorities (Securities and Exchange Commission) always keep a close eye on the conditions of the stock market. In certain cases, the market may be closed to save investors from losses (as happened after the 9/11 attacks in the US).