Q.Explain any four functions performed by financial markets.

Financial markets chiefly mobilise savings, aid capital formation, enable price discovery, and provide liquidity to investors — any four functions from this list fully answer the question.

Financial markets perform several distinct functions for the economy, of which any four fully answer this question:

1. Mobilisation of savings — provides a safe, organised channel through which scattered individual and institutional savings are gathered and directed towards those who need funds.
2. Facilitates capital formation — channels mobilised savings into productive long-term investment and short-term working-capital needs, supporting a business's ability to set up, run and expand production.
3. Price discovery — through continuous buyer-seller interaction, particularly in the secondary market, helps establish a fair price for a financial instrument reflecting available information and prevailing demand/supply.
4. Provides liquidity — allows an investor to convert an instrument back into cash relatively quickly by selling it to another investor, without waiting for its maturity. …