IMPACT OF FINANCIAL FACTORS ON STOCK MARKET

Financial factors indicate flourishing of any economy and they decide the fortune of
investments. The Financial factors influence price determination process in any economy.
The delusion of financial factors affects stock and commodity market significantly causing
motility in the prices. The stock market promotes economic growth by providing avenue to
pool large and long term capital through issuing of shares and stocks and other equities for
industries in dire need of finance to expand their clientele. Thus, the overall growth of the
economy is a function of how well the stock market performs and empirical evidences have
proved the development of the capital market is crucial for economic growth. No doubt, a
relationship exists between stock market development and growth of the economy and stock
prices are generally believed to be influenced by some fundamental financial factors such as
lending rate, inflation, money supply and exchange rate. Empirical evidences have shown
that changes in stock prices are linked with financial behaviour in advanced nations.

 Financial Factors
A factor that is pertinent to a broad economy at the regional or national level and affects a
large population rather than a few select individuals, financial factors such as inflation,
savings and investment are key indicators of economic performance and financial
performance indicators of listed companies are closely monitored by governments, businesses
and consumers. The interplay or relationship between various financial factors is the subject
of a great deal of work in the field of Business .Financial factors played a significant role in
the growth of the economy as well as economic decision-making.

 Stock Exchange
A stock exchange is a form of exchange which provides services for stock brokers and traders
to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for the
issue and redemption of securities and other financial instruments, and capital events
including the payment of income and dividends. Securities traded on a stock exchange
include shares issued by companies, unit trusts, derivatives, pooled investment products and
bonds.
To be able to trade a security on a certain stock exchange, it must be listed there. Usually,
there is a central location at least for record keeping, but trade is increasingly less linked to
such a physical place, as modern markets are electronic networks, which gives those
advantages of increased speed and reduced cost of transactions. Trade on an exchange is by
members only.
The initial offering of stocks and bonds to investors is by definition done in the primary
market and subsequent trading is done in the secondary marketplace. A stock exchange is
often the most important component of a stock market. Supply and demand in stock markets
are driven by various factors that, as in all free markets, affect the price of stocks.
 London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London in the United
Kingdom. As of December 2011, the Exchange had a market capitalization of US$3. 266
trillion (short scale), making it the fourth-largest stock exchange in the world by this
measurement (and the largest in Europe) The Exchange was founded in 1801 and its current
premises are situated in Paternoster Square close to St Paul’s Cathedral in the City of London.
The Exchange is part of the London Stock Exchange Group.
 New York Stock Exchange
The New York Stock Exchange (NYSE), sometimes known as the “Big Board”, is a stock
exchange located at 11 Wall Street, Lower Manhattan, New York City, New York, and
United States. It is the world’s largest stock exchange by market capitalization of its listed
companies at US$16. 613 trillion as of May 2013. Average daily trading value was
approximately US$153 billion in 2008.

 Indian stock exchange
Indian stock exchange may refer to the Bombay Stock Exchange and National Stock
Exchange of India. Bombay Stock Exchange, commonly referred to as the BSE, (Bombay
Śhare Bāzaār) is a stock exchange located on Dalal Street, Mumbai, and Maharashtra, India.
It is the 10th largest stock exchange in the world by market capitalization. Established in
1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.), is Asia‟s first Stock
Exchange and one of India‟s leading exchange groups.
The National Stock Exchange (NSE) (Hindi: Rashtriya Śhare Bāzaār) is a stock exchange
located in Mumbai, India. It is the 11th largest stock exchange in the world by market
capitalization and largest in India by daily turnover and number of trades, for both equities
and derivative trading. NSE has a market capitalization of around US$1 trillion and over
1,652 listings as of July 2012.

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