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Unit 6: Secondary Market

(ii) Because of the assured safety in dealings at the stock exchange the investors are free Notes
from any anxiety about the delivery and payment problems.
(iii) Availability of regular information on prices of securities traded at the stock
exchanges helps them in deciding on the timing of their purchase and sale.
(iv) It becomes easier for them to raise loans from banks against their holdings in
securities traded at the stock exchange because banks prefer them as collateral on
account of their liquidity and convenient valuation.
3. To the Society:
(i) The availability of lucrative avenues of investment and the liquidity thereof induces
people to save and invest in long-term securities. This leads to increased capital
formation in the country.
(ii) The facility for convenient purchase and sale of securities at the stock exchange
provides support to new issue market. This helps in promotion and expansion of
industrial activity, which in turn contributes, to increase in the rate of industrial
growth.
(iii) The Stock exchanges facilitate realisation of financial resources to more profitable
and growing industrial units where investors can easily increase their investment
substantially.
(iv) The volume of activity at the stock exchanges and the movement of share prices
reflect the changing economic health.

6.3.3 Speculations in Stock Exchange

The buyers and sellers at the stock exchange undertake two types of operations, one for speculation
and the other for investment. Those who buy securities primarily to earn a regular income from
such investment and possibly make some long-term gain on account of price rise in future are
called investors. They take delivery of the securities and make full payment of the price. Such
transactions are called investment transactions.

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