Comment on the following and support your answer with necessary reasons: The capital market and the stock exchange in particular are referred to as the barometer of the economy.

The stock exchanges play a cardinal role in promoting the level of capital formation through effective mobilization of savings and ensuring investment safety. The capital market and in particular the stock exchange is referred to as the barometer of the economy. Government's policies are so moulded that creation of wealth through products and services is facilitated and surpluses and profits are channelized into productive uses through capital market operations. Capital market plays an extremely important role in promoting and sustaining the growth of an economy. It is an important and efficient conduit to channel and mobilize funds to enterprises, both private and government. Reasonable opportunities and protection are afforded by the Government through special measures in the capital market to get new investments from the public and the Institutions and to ensure their liquidity. Higher new investments from public and institutions lead to higher liquidity and ultimately higher stock market indices. That is why, it is said that changes in the stock market index is indicative of the concurrent changes in the economy and hence, termed as "barometer" of an economy. Stock index is taken to be the benchmark both for investors as well as corporate entities. On one hand where movement in stock indices reflect investment avenues at the disposal of investors, on the other hand, indices also reflect the scope of business opportunities for the corporate players for their prospective ventures and business proposals. All and all, stock exchanges are upheld as the barometer of the economy.