Market participants are the investors, traders, analysts, and institutions who buy, sell, and analyze securities in the market.
A market becomes more efficient when a large number of participants actively follow and trade securities. More participants means more analysis, more trading activity, and faster price correction.
Example:
Suppose a stock is trading at ₹500, but based on new information, its fair value should be ₹550.
If many investors and analysts follow the stock, they may quickly buy it. Due to this buying pressure, the price may rise from ₹500 to ₹550 in a short time.
But if only a few investors follow the stock, the price may remain around ₹500 for longer. This delay shows lower market efficiency.
So, more market participants usually lead to faster price adjustment and better market efficiency.
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