1. Stock Market1.1 Stock Plain and simple, a stock is a share in
the ownership of a company. A stock represents a claim on the
company's assets and earnings. As you acquire more stocks, your
ownership stake in the company becomes greater. (Note: Sometimes
different words like shares, equity, stocks etc. are used. All
these words mean the same thing.)
1.2 Share MarketA Share market or Stock market, is a private or
public market for the trading of companystock and derivatives of
company stock at an agreed price; these are securities listed on a
stock exchange as well as those only traded privately.
The stocks are listed and traded on stock exchanges which are
entities a corporation or mutual organization specialized in the
business of bringing buyers and sellers of the organizations to a
listing of stocks and securities together.Stock market is known as
the cradle of capitalism. It is a place where companies come to
raise their share capital and investors go to invest their surplus
funds. Stock market essentially discharges the functions of "the
invisible hand" that channels investment into the most productive
ventures so as to optimize the overall productivity of the economy.
Stock Market is a place where financial instruments like shares,
debentures, commercial papers, bonds etc. are bought and sold.
Stock markets are popularly known as stock exchanges. There are
many popular stock markets in the world. NASDQ, Tokyo Stock
Exchange, London Stock Exchange are the most popular of the lot.
There are many participants in a stock market. Investors,
Speculators, Arbitrators, Traders are different type of
participants of a Stock Market Brokers are intermediaries who bring
together various participants in a Stock Market.Shares in the Share
Market are either traded through:-(a) Stock Exchange(b) Over-the
-Counter (OTC)(a) Stock ExchangeThese are organized market places
where stocks, bonds are other equivalents are traded between the
buyers and sellers where exchange acts as counter-party to both the
participants in case of any default. The contracts are standardized
and not customized ones. For example, NYSE, NASDAQ, NSE, NIKKEI,
etc.
(b) Over-the -Counter (OTC)These are not centralized exchanges.
Here, the trade takes place through a network of dealers.
Generally, the OTC contracts are bilateral customized contracts and
not standardized ones. Important Participants of Share Market
Trading are :-Buyer An investor who buys a script in the belief
that the market will rise. If his hinge becomes right then he makes
profit otherwise he suffers loss. Seller of a stock sells in the
hope that the stock price will go down. Stock Broker Brokers are
persons or firms who execute buy/sell order on behalf of the
investors and charge a commission for rendering the service.
Share Trading are done in three ways:-(a) Offline Share
Trading(b) Online Share Trading(c) Open Outcry Trading
(a) Offline Share TradingIn this form of trading the customer
either goes to the share broker's place and sits before the share
trading terminal and asks the dealer to place orders in his
account. or rings the share broker, asks the share quotes and other
relevant informations, and accordingly places orders over the
phone.
(b) Online Share TradingThe client could avail the share market
and could place his order on his own from any place he wants,
provided he has a computer with an Internet connection. (c) Open
Outcry Trading Here, the investors put their orders through the
brokers and these share brokers in turn place and execute orders on
behalf of them on the floor of the exchange. These brokers gather
in a particular place on the trading floor known as Trading Post.
There is a person called as the Specialist present in the trading
post who does the matching of the buy and sell orders. This type of
auction method is called Open Outcry Method.2. Online Share
TradingOnline Share Trading is becoming the order of the day in
share trading. Now-a-days one could hardly see a person going to
the stock exchange floor and placing his order. Electronic media
has played an important role in flourishing the share market. In
case of online share trading an investor could place his order from
his own house if he has internet connection.
There are two types of trading that can be done through online
share trading1. Intra-day Trading 2. Delivery Trading2.1 Intra-day
Trading They enter and exit out of the market like the thief in the
night. Traders continuously have a watch on the market during the
trading hours and the moment they see any opportunity arising they
pounce on it for scalping the profit out. These types of trading
generally are risky in nature. They buy and sell stocks during the
same day. Intraday Traders are of two types:- a. Scalp Traders b.
Momentum Tradersa. Scalp Traders :Investors who perform many trades
per day for scalping out small profits out of the bid-ask spread
from each trade are known as scalp traders. b. Momentum Traders
:Investors who pounce on those stocks which move significantly in
one direction and book desired profit are called momentum traders.
They do this within a day.
2.2 Delivery trading :The investor buys the share for holding
purposes. The brokerage charges are a bit more than the intraday
ones. Delivery Traders are :a.Technical Traders b. Fundamental
Tradersc. Swing Traders
a. Technical Traders :They believe that buying/selling signals
are present within the graphs and charts of the stock. b.
Fundamental Traders :They perform trade on the basis of study of
fact-sheets of the company like historical profit graph, balance
sheet, anticipated earning reports, stock splits, mergers and
acquisitions, etc. c. Swing Traders They are basically fundamental
traders who take delivery of trades for a span of short period
generally more than one day. In this electronic form of trading,
the shares are not in the physical form for their inconvenience to
handle. So, they are now converted to dematerialized form . So, one
investor does not have to worry about the safety of the physical
shares because the bought shares get transferred to the respective
D-mat account. Thus, online share trading has helped the investors
a lot as it is hassle-free and time efficient.For the intraday
traders the brokerage costing is minuscule in comparison to the
delivery trades.
STOCK EXCHANGEWhat is Stock Exchange?Definition of Stock
Exchange: The securities regulations act of 1956 defined stock
exchange as an association, organisation, or an individual which is
established for the purpose of assisting, regulating, and
controlling business in buying, selling and dealing and dealing in
securities.Meaning: This comes under treasury sector, which
provides service to stock brokers & traders to trade stocks,
bonds and securities. A stock exchange helps the companies to raise
their fund. Therefore the companies needs to list themselves in the
stock Exchange and the shares will be issued which is known as
equity or a ordinary share and these shareholders are the real
owners of the Board of Directors of the Company are elected out of
these Equity Shareholders only.FEATURES OF STOCK EXCHANGE It is an
organised market. It is a securities market. It is an important
constituent of capital market i.e. market for long term finance It
is a voluntary association of person desirous of dealing in
securities. In a Stock Exchange, only the members can deal in i.e.
buy and sell securities The members of a stock exchange can buy and
sell securities as brokers for & on behalf of their clients.
The dealings in a stock exchange are under certain accepted code of
conduct i.e. rules and regulations
IMPORTANT FUNCTION OF STOCK EXCHANGE Provide central and
convenient meeting places for sellers and buyers of securities
Increase the marketability and liquidity of prices of securities
Contribute to stability of prices of securities Equalization of
price of securities Smoothen price movement Help the investor to
know the worth of their holdings Promote the habit of saving and
investment Help capital formation help companies and government to
raise funds from the investors Provide forecasting service
HISTORY OF STOCK EXCHANGEThe Stock Exchange was established by
East India Company in 18th century. In India it was established in
1850 with 22 stock brokers opposite to town hall of Bombay. This
stock exchange is known as oldest exchange of Asia.
BROKER AND JOBBER BROKER: He is one act as aintermediary on
behalf of others. A broker in a stock exchange is a commission
agent who transacts business in securities on behalf of
non-members. JOBBER: He is not allowed to deal with the public
directly .He deals with brokers who are engaged with the investors.
Thus, the securities are bought by the jobber from members and
sells to members who are operating on the stock exchange as broker.
SPECULATION AND SPECULATOR SPECULATION: It is the transaction of
members to buy or sell securities on stock exchange with a view to
make profits to anticipated raise or fall in price of securities.
SPECULATOR: The dealer in stock exchange who indulge in speculation
are called speculator. They do not take delivery of securities
purchased or sold by them, but only pay or rescue the difference
between the purchase price and sale price. The different types of
speculators are BULL BEAR STAG LAME DUCK
BULL (TEJIWALA)He is speculator who expects the future raise in
price of securities he buys the securities to sell them at future
date at the higher price. He is called as bull because his
activities resembles as a bull, as the bull tends to throw its
victims up in the air through its horns. In simple the bull
speculator tries to raise the price of securities by placing a big
purchase orders.
BEAR {MANDIWALA}He is speculator who expects future fall in
prices; he does an agreement to sell securities at future date at
the present market rate. He is called as bear because his altitude
resembles with bear, as the bear tends to stamp its victims down to
earth through its paws. In simple the bear speculator forces of
prices of securities to fall through his activities.
STAG {DEER} He operates in new issue of market. He is just like
a bull speculator. He applies large number of shares in the issue
market only by paying, application money, and allotment money. He
is not a genuine investor because; he sells the allotted securities
at the premium and makes profit. In simple he is cautious in his
dealings. He creates an artificial rise in prices of new shares and
makes profits.
LAME DUCKHe is speculator when the bear operator finds it
difficult to deliver the securities to the consumer on a particular
day as agreed upon, he struggles as a lame duck in fulfilling his
commitment. This happens when the prices do not fall as expected by
the bear and the other party is not willing to postpone the
settlement to the next period.
Largest stock exchanges
IN THE WORLD
LONDON STOCK EXCHANGE NEW YORK STOCK EXCHANGE SHANHAI STOCK
EXCHANGE AUSTRALIA STOCK EXCHANGE TOKYO STOCK EXCHANGE HONG KONG
STOCK EXCHANGE TORONTO STOCK EXCHANGE DEUTSCHE BORSE BM&F
BOVESPA NASDAQ OMX STOCK EXCHANGE
IN INDIA
List of Stock Exchange in India
Sr. No.Name of the ExchangeValid Upto
1Ahmedabad Stock Exchange Ltd.
Address: Kamdhenu Complex Opp, Sahajanand College, Panjarapole,
Ambawadi, Ahmedabad - 380001PERMANENT
2BSE Ltd.
Address: P J Tower, Dalal Street, Mumbai 400023PERMANENT
3Bangalore Stock Exchange Ltd.
Address: Stock Exchange Towers, 51, 1st Cross, J C Road,
Bangalore - 560027PERMANENT
4Bhubaneswar Stock Exchange Ltd
Address: Stock Exchange Bhavan, P- 2, Jayadev Vihar, P. O. -
Chandrasekharpur, Bhubaneswar - 75102304-JUN-2014
5Calcutta Stock Exchange Ltd.
Address: 7, Lyons Range, Kolkata - 700001PERMANENT
6Cochin Stock Exchange Ltd
Address: MES Dr P. K. Abdul Gafoor Memorial Cultural Complex,
36/1565, 4th Floor, Judges Avenue, Kaloor, Cochin 682017
07-NOV-2013
7Delhi Stock Exchange Ltd.,The
Address: DSE House, 3/1, Asaf Ali Road, New Delhi -
110002PERMANENT
8Gauhati Stock Exchange Ltd.,The
Address: Saraf Building Annexe, A T Road, Gauhati -
78100130-APR-2013
9Inter-Connected Stock Exchange of India Limited
Address: International Infotech Park, Tower 7, 5th Floor, Sector
30, Vashi, Navi Mumbai - 40070317-NOV-2013
10Jaipur Stock Exchange Ltd
Address: Stock Exchange Building, JLN Marg, Malviya Nagar,
Jaipur - 30201708-JAN-2014
11Ludhiana Stock Exchange Ltd.,The
Address: Feroze Gandhi Market, Ludhiana - 14100127-APR-2014
12MCX SX Exchange Limited
Address: 102A Land Mark, SurenRoad,Chakala,Andheri (East),
Mumbai - 40009315-SEP-2014
13Madhya Pradesh Stock Exchange Ltd
Address: Palika Plaza, Phase II, 201, 2nd Floor, MTH Compound,
Indore - 452001PERMANENT
14Madras Stock Exchange Ltd.
Address: P O Box no 183, New No: 30 (old No: 11) Second Line
Beach, Chennai - 600001PERMANENT
15Magadh Stock Exchange Ltd.
"SEBI vide order dated September 3, 2007 refused to renew the
recognition granted to Magadh Stock Exchange Ltd."
16Mangalore Stock Exchange
As per Securities Appellete Tribunal order dated October 4,
2006, the Mangalore Stock Exchange is a de-recognized Stock
Exchange under Section 4 (4) of SCRA
17National Stock Exchange of India Ltd.
Address: BandraKurla Complex, Bandra (East) Mumbai
400051PERMANENT
18OTC Exchange of India
Address: 92, Maker Towers 'F', Cuffe Parade, Mumbai -
40000522-AUG-2014
19Pune Stock Exchange Ltd.
Address: Shivleela Chambers, 752, SadashivPeth, RB KumthekarMarg
Pune - 41103001-SEP-2014
20The Vadodara Stock Exchange Ltd.
Address: Fortune Tower, Sayajigunj, Vadodara -
39000503-JAN-2014
21U.P. Stock Exchange Limited
Address: Padam Towers, 14/113, Civil Lines, Kanpur -
20800102-JUN-2014
22United Stock Exchange of India Limited
Address: 25th Floor, Phirozejeejeebhoy Towers, Dalal Street,
Fort, Mumbai - 40000121-MAR-2014
BOMBAY STOCK EXCHANGE
It is oldest and first stock exchange of India established in
the year 1875. First it was started under banyan tree opposite to
town hall of Bombay over 22 stock brokers. The top gainer in BSE is
100 companies in that GMR infra is first.
Evolution of the Bombay Stock Exchange and its Size The Bombay
Stock Exchange was established in 1875 as the Native Share and
Stock Brokers Association in 1875. It earned a formal status under
the Securities and Exchange Board of India (SEBI) in 1956. Market
Capitalization of the BSE was about Rs 33.4 trillion as on 2006,
October. The Bombay Stock Exchange uses the Bombay Stock Exchange
Sensex as the market index in Asia and India. The Bombay Stock
Exchange deals with trading in derivatives, equity and other debt
instruments. The Bombay Stock Exchange Limited has the greatest
number of listed companies in the world, with 4700 listed as of
August 2007. It is located at Dalal Street, Mumbai, India. On 31
December 2007, the equity market capitalization of the companies
listed on the BSE was US$ 1.79 trillion, making it the largest
stock exchange in South Asia and the tenth largest in the world.
The Bombay Stock Exchange was established in 1875. Around 6,000
Indian companies list on the stock exchange, and it has a
significant trading volume. The BSE SENSEX (Sensitive index), also
called the "BSE 30", is a widely used market index in India and
Asia. Though many other exchanges exist, BSE and the National Stock
Exchange of India account for most of the trading in shares in
India.
NATIONAL STOCK EXCHANGE OF INDIA(NSE OR NSEI)In the year 1991
Pherwani Committee recommended to establish National Stock Exchange
(NSE) in India. In 1992 the Government of India authorized IDBI for
establishing this exchange. In National Stock Exchange there is
trading of equity shares, bonds and government securities. India's
Stock Exchanges particularly National Stock Exchange has achieved
world standards in the recent years. The NSE India ranked its 3rd
position since last four years in terms of total number of trading
per calendar year.
Presently there are 24 stock exchanges in India, out of which 20
have exchanges National Stock Exchange (NSE), over the Counter
Exchange of India Ltd, (OTCEI) and Inter-connected Stock Exchange
of India limited (ISE) have nationwide trading facilities.The NSE
of India is the leading stock exchange of India, covering 370
cities and towns in the country. It was established in1994 as a TAX
company. It was established by 21 leading financial institutions
and banks like the IDBI, ICICI, IFCI, LIC, SBI, etc.
The National Stock Exchange of India Limited or S&P CNX
NIFTY (NSE) is a Mumbai-based stock exchange. It is the largest
stock exchange in India in terms of daily turnover and number of
trades, for both equities and derivative trading... Though a number
of other exchanges exist, NSE and the Bombay Stock Exchange are the
two most significant stock exchanges in India and between them are
responsible for the vast majority of share transactions. The NSE's
key index is the S&P CNX Nifty, known as the Nifty, an index of
fifty major stocks weighted by market capitalisation.
NSE is mutually-owned by a set of leading financial
institutions, banks, insurance companies and other financial
intermediaries in India but its ownership and management operate as
separate entities. There are at least 2 foreign investors NYSE
Euronext and Goldman Sachs who have taken a stake in the NSE. As of
2006, the NSE VSAT terminals, 2799 in total, cover more than 1500
cities across India. In October 2007, the equity market
capitalization of the companies listed on the NSE was US$ 1.46
trillion, making it the second largest stock exchange in South
Asia. NSE is the third largest Stock Exchange in the world in terms
of the number of trades in equities. It is the second fastest
growing stock exchange in the world with a recorded growth of
16.6%.
5.1 OriginsThe National Stock Exchange of India was promoted by
leading Financial institutions at the behest of the Government of
India, and was incorporated in November 1992 as a tax-paying
company. In April 1993, it was recognized as a stock exchange under
the Securities Contracts (Regulation) Act, 1956. NSE commenced
operations in the Wholesale Debt Market (WDM) segment in June 1994.
The Capital Market(Equities) segment of the NSE commenced
operations in November 1994, while operations in the Derivatives
segment commenced in June 2000.
5.2 NSE has the following major segments of the capital
market:(a) Equity (b) Futures and Options (c) Retail Debt Market
(d) Wholesale Debt Market (e) Currency futures
5.3 Working HoursNSE's normal trading sessions are from 09:55am
to 03:30pm on all days of the week except Saturdays, Sundays and
holidays declared by the Exchange in advance.
Features of NSEI
Nationwide coverage i.e., investors from all over country
Ringless i.e., it has no ring or trading floor Screen-based trading
i.e., trading in this stock exchange is done electronically.
Transparency, i.e., the use of computer screen for trading makes
the dealings in securities transparent. Professionalization in
trading, i.e., it brings professionalism in its functions
OVER-THE-COUNTER EXCHANGE OF INDIA(OTCEI
The OTCEI is a national,ringless and computerized stock
exchange. It was established in October, 1990.it started its
operation in September, 1992.Features of OTCEIIt is a nation-wide
stock exchange. Its operational areas cover entire India.It is a
ringless stock exchange. The trading ring (i.e., trading place)
commonly found in a traditional stock exchange is not found in the
OTCEI.It is a computerized stock exchangeAdvantages of OTCEI1. It
helps the investors to have easy and direct access to the stock
exchange2. It helps investors to get fair prices for their
securities3. It provide safety to the investors4. To provide
computerized trading system5. To provide investors a
convenient,effcient and transparent mode of investment
1 IntroductionSEBI is the Regulator for the Securities Market in
India. Originally set up by the Government of India in 1988, it
acquired statutory form in 1992 with SEBI Act 1992 being passed by
the Indian Parliament. Chaired by C B Bhave, SEBI is headquartered
in the popular business district of Bandra-Kurla complex in Mumbai,
and has Northern, Eastern and Southern regional offices in New
Delhi, Kolkata and Chennai. It is in the news that a new Western
Regional Office has been proposed at Ahmedabad.3. Securities and
Exchange Board of India
The SEBI was constituted on 12th April,1988 under a resolution
of the Government of India. On 31st January, 1992, it was made a
statutory body by the Securities and Exchange board of India Act,
1992.The Companies (Amendment) Act, 2000 has given certain powers
to SEBI as regards the issues and transfer of securities and
non-payment of dividend3.2 Function of SEBISEBI has to be
responsive to the needs of three groups, which constitute the
market: The issuers of securities The investors The market
intermediaries.
SEBI has three functions rolled into one body quasi-legislative,
quasi-judicial and quasi-executive. It drafts regulations in its
legislative capacity, it conducts investigation and enforcement
action in its executive function and it passes rulings and orders
in its judicial capacity. Though this makes it very powerful, there
is an appeals process to create accountability. There is a
Securities Appellate Tribunal which is a three member tribunal and
is presently headed by a former Chief Justice of a High court - Mr.
Justice NK Sodhi. A second appeal lies directly to the Supreme
Court.SEBI has enjoyed success as a regulator by pushing systemic
reforms aggressively and successively (e.g. the quick movement
towards making the markets electronic and paperless rolling
settlement on T+2 bases). SEBI has been active in setting up the
regulations as required under law.
Function Of SEBIRegulating the business in stock exchange and
any other securities markets.Promoting and regulating
self-regulatory organization.Registering and regulating the work of
collective investment scheme, including mutual funds.Prohibiting
fraudulent and unfair trade practices relating to securities
market.Promoting education, and training of intermediaries of
securities market
Power of SEBI Power to approve the bye-laws of stock exchange
Power to inspect the books of accounts Power to grant license to
any person for the purpose of dealing in certain areas. Power to
delegate powers exercisable by it. Power to try directly the
foliation of certain provision of the company Act
6. Sensex & NiftyThe Sensex is an "index". What is an index?
An index is basically an indicator. It gives you a general idea
about whether most of the stocks have gone up or most of the stocks
have gone down.
The Nifty is an indicator of all the major companies of the
NSE.If the Sensex goes
The Sensex is an indicator of all the major companies of the
BSE. If the Sensex goes up, it means that the prices of the stocks
of most of the major companies on the BSE have gone up. If the
Sensex goes down, this tells you that the stock price of most of
the major stocks on the BSE have gone down. Just like the Sensex
represents the top stocks of the BSE, the Nifty represents the top
stocks of the NSE. Just in case you are confused, the BSE is the
Bombay Stock Exchange and the NSE is the National Stock Exchange.
The BSE is situated at Bombay and the NSE is situated at Delhi.
These are the major stock exchanges in the country. There are other
stock exchanges like the Calcutta Stock Exchange etc. but they are
not as popular as the BSE and the NSE. Most of the stock trading in
the country is done though the BSE & the NSE.
Besides Sensex and the Nifty there are many other indexes. There
is an index that gives you an idea about whether the mid-cap stocks
go up and down. This is called the BSE Mid-cap Index. There are
many other types of indexes.How to see the value of shares in stock
exchangeSENSEX is an indicator to checkout in BSE
NIFTY is an indicator to checkout in NSEWorking hours: From 9:30
to 3:30 from Monday to FridayHow stock exchanges get moneyThey get
their money by listing fees paid by the corporation to have their
company traded.HOW TO DEAL AND INVEST IN STOCK EXCHANGEIn order to
deal with a securities one as to have an account called Demat a/c
or trading a/c.Demat accountIn India, a demat account, the
abbreviation for dematerialised account, is a type of banking
account which dematerializes paper-based physical stock shares. The
dematerialised account is used to avoid holding physical shares:
the shares are bought and sold through a stock broker.
This account is popular in India. The Securities and Exchange
Board of India (SEBI) mandates a demat account for share trading
above 500 shares. As of April 2006, it became mandatory that any
person holding a demat account should possess a Permanent Account
Number (PAN), and the deadline for submission of PAN details to the
depository lapsed on January 2007.
Procedure1.Fill demat request form (DRF) (Obtained from a
depository participant or DP with whom your depository account is
opened).2.Deface the share certificate(s) you want to dematerialise
by writing across Surrendered for dematerialisation.3.Submit the
DRF & share certificate(s) to DP. DP would forward them to the
issuer / their R&T Agent.4.After dematerialisation, your
depository account with your DP would be credited with the
dematerialised securities.
Required Documents for Demat AccountThe extent of documentation
required to open a demat account may vary according to your
relationship with the institution. If you plan to open a demat
account with a bank, a savings, current and, or other account for
which the holder have been issued a check book, such holder has an
edge over the non-account holder. In fact, banks usually offer
additional incentives to customers who open a demat account with
them. Along with the application form, your photographs (with
co-applicants) and proof of identity/residence/date of birth have
to be submitted. The DPs also ask for a DP-client agreement to be
executed on non-judicial stamp paper. Here is a broad list:1.A
canceled check, preferably MICR2.Proof of Identification3.Proof of
Address4.Proof of Pan card (mandatory)5.Recent photographs (one
and/or more)
For proof of identification and, or address self-attested
facsimile copies of PAN card, Voters ID, Passport, Ration card,
Drivers license, Photo credit card, Employee ID card, Bank
attestation, latest IT returns and, or latest Electricity/Landline
phone bill are sufficient. While they only ask for photocopies of
the documents, they will need the originals for verification.
The benefits of Demat Account1.A safe and convenient way to hold
securities.2.Immediate transfer of securities.3.No stamp duty on
transfer of securities.4.Elimination of risks associated with
physical certificates such as bad delivery, fake securities,
delays, thefts etc.5. Reduction in paperwork involved in transfer
of securities;6.Reduction in transaction cost;7.No odd lot problem,
even one share can be sold;8.Nomination facility;9.Change in
address recorded with DP gets registered with all companies in
which investor holds securities electronically eliminating the need
to correspond with each of them separately;10.Transmission of
securities is done by DP eliminating correspondence with companies
Automatic credit into demat account of shares, arising out of
bonus/split/consolidation/merger etc.11.Holding investments in
equity and debt instruments in a single account.
15