The stock market is an important part of the economy of a country. It plays a pivotal role to the growth of industry and commerce of a country, which eventually affects the economy of that country to a great extent. That is why the government, industry, investors, and even the central bank of a country are always vigilant about the operation of its stock market and the ups and downs of stock market indices. The stock market plays two crucial roles in the economy. It can promote economic growth by attracting domestic and foreign capital and channeling it to the corporate sector. At the same time, the stock market is a market place for securities, where they can be traded to provide liquidity to investors. Therefore, it provides opportunities for new capital formation and maintains the investment liquidity. Nowadays, the stock market has become a key driver of our modern market-based economy, and is one of the major sources of raising resources for corporates, and thereby enables the financial development and economic growth of a nation. The Indian economy has experienced significant changes in the economic system. The capital market has also undergone tremendous changes since 1991, when the government adopted liberalization and globalization polices. Like in other developing nations, the government of India has taken significant steps towards the development of its capital market, including opening the market to international investors.
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