Impact of globalization on Indian Capital markets Essay

Impact of globalization on Indian Capital markets - Essay Example The paper tells that the stock markets in the developing economies like India account for a significant share of the activities in the global markets. Lowering the barriers relating to the flow of international capital in the post liberalization period has enhanced the stock market liquidity. Liquidity plays an important role in spurring the long term growth opportunities. In the absence of liquidity many profitable opportunities had to be foregone as people were unwilling to block their funds for long span of time. The increased liquidity in the Indian capital markets has been facilitated through foreign participation in the form of equity. Increased capital flows in the country have helped in improving the production base of the country. By way of this the total savings is distributed across countries with high potential that lack the necessary financial back-up. As a result of globalization the economic progress of a country is not affected by fund constraints. Studies have shown that an active capital market complemented by a sound banking system stimulate economic growth. The foreign participation in a country can take various forms like foreign institutional investment or foreign direct investment. In India the bulk of the foreign investment is in the form of foreign portfolio investment. The growth rate in GDP is an important indicator of the impact of the strengthened capital markets and stable financial system. The GDP growth rate of India has increased from the lows to the extent that the country ranks among the fastest growing nations in the world.