Lets go with the benefit that a well developed stock market brings to the country, economy, businessmen, investors and common man.
1) Helping the economy grow:
Developing nations need more capital to fund the new projects, set up plans and to grow and expand the operations. A well developed stock market like India encourages the promoters to tap the stock market for these much needed funds.
This is the reason why a lot of companies tap the primary market during the bull run.
2) Banks do not like risk:
A banker is a guy who lends you an umbrella on a fine sunny day, but takes it back the moment clouds appear on the horizon.
However investors are known to be much more patient and show overwhelming support to good enterprises which are in distress.
3) Corporate governance (Keeps businesses in check):
Stock market ruthlessly punish the rogues.
The market and analysts often demand a higher standards of efficiency and management than what the Governments can even dream of asking via laws.
These days the stock holders even force the companies to take CSR, and morals more seriously than what their B-Schools would have taught.
eg: Recently the investors of Berkshire Hathaway forced Warren Buffet to sell his stake in PetroChina because of its alleged links with the atrocities in Darfur.
4) Curb Corruption.
Stock holders wants records, audits and paper trail of every transaction. They stay away from companies which deal in grey market for these companies tend to make the promoters richer at the cost of the investors. Hence stock markets makes a friendly environment to do business in.
5) Reward Ingenuity:
Gone are the days when the revenues and profits increased by a fixed predictable percentage every year. In a knowledge based economy, the best companies do not think about capturing 1-2% more of the market share, but creating a whole new market. The only way to value these companies is the stock market… for the companies are many times more than their book value.
6) Mobilizing the savings:
It gives a common man to relax and let his investments work for him.
7) Redistribution of wealth:
Everybody knows the age old sage: Money attracts money.
A common man like you and me cannot hope to start a whole new industry and reap the benefits, but through stock markets, we can definitely become a partner 🙂
Now for every buyer, there needs to be a seller. And FII with their deep pockets and risk appetite fill exactly this void. They enhance the liquidity of the stock market, they have developed the market so much that its almost impossible for a punter/group to do large scale manipulations.
Hence, Even though I agree that government should check the PN (participatory notes) and check them for laundering, I strongly oppose those people who think FIIs should be kicked out completely.