Relationship Between Banking Sector And Stock Market

Every country’s stock market plays a crucial role in economic development, but it also impacts every sector. If a country’s stock market is well-run, its economy is sure to be vibrant. UPI bank transfers have made the investment process much more manageable. A developed stock market will boost saving and investment, which would increase the banking sector’s and economy’s growth rate. Before we get started, let’s define what a stock market is and why it is essential to have a functioning stock market for the betterment of the economy. 

The stock market is where long/short term financial assets such as bonds, equity and mutual funds get traded. The stock market is where you can buy and sell financial investments that you own.

The financial assets traded in the stock market are long term securities. Stocks, Bonds, warrants, mutual funds, and other derivatives instruments get traded over the stock market.

People with extra income can invest their money in any financial asset available in the stock market, and their money will keep compounding. It takes about a couple of days for the depository to make the money transfer to the trader’s account.

But before you start trading, funds are transferred into your trading account. There are various ways to send money into your trading account. For example, you can go for an NEFT bank transfer or an RTGS facility, or you can go for a margin cheque / DD to your broker.

Here are some needs of the stock market 

1. Offering good returns on investment encourages the investor to invest more.
2. Provides a sense of urgency to invest 
3. The stock market helps in the allocation of resources rationally.
4. A well-performing stock market can also help reduce the inflation rate by providing capital to the borrowers.

Also, there are some benefits of the investor

1. SEBI makes some safety rules for a safer investment.
2. Investors are now enabled to keep track of their investment and thereby help them in earning more profits.
3. It helps bring buyers and sellers together and thus ensures the marketability of assets.

For sure, the stock market in every country plays a vital role in developing its economy. The stock market is one of the core factors that have a massive influence on the development of the GDP of a particular country, and it’s the best way someone can use their savings to compound.

The most fundamental factors that influence the price of any financial instrument are the demand and supply factors. If more people are buying, then prices move up, and if people start selling, then costs go down. There are also some other factors such as government policies, firms and companies’ performance that affect the demand behaviour of the investors but only in primary and secondary markets. One can view the price factors by macro and micro-economic factors. Macro-economic factors include how the economy performs and government regulation. There may be other factors like demand and supply which can affect a company’s performance. Micro factors can be the market return and price equity share with particular reference to the banking sector.

A developed stock market will highly contribute towards economic growth and development.

Thus, it is clear that the stock market plays a critical role in developing an economy as a whole, just as the banking sector also plays a vital role in an economy.