stock exchange bse, nse
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STOCK EXCHANGE
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SECURITIES MARKET IN INDIA- AN OVERVIEW
Basically, Securities markets provide a channel for allocation
of savings by an individual or an organization to those whohave a productive need for them.
A security market can be said a location where the savers
meet the real investors who need the fund. The savers and
investors are constrained by the economys abilities to investand save respectively which thus helps market in enhancing
savings and investment in the economy.
The Security market denotes buyers and sellers of
securities and agencies which help in the marketing of
securities.
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SECURITIES MARKET IN INDIA- AN OVERVIEW
Securities are broadly categorized into debt securities (such
as banknotes, bonds and debentures) and equity securities,e.g., common stocks; and derivative contracts, such as
forwards, futures, options and swaps.
http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Banknoteshttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Debenturehttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Common_stockhttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Swapshttp://en.wikipedia.org/wiki/Swapshttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Forward_contracthttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Common_stockhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Debenturehttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Banknoteshttp://en.wikipedia.org/wiki/Debt -
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WHAT IS STOCK EXCHANGEStock exchange is that place where trading of shares is done in
terms of sale and purchase.
An organized market where securities issued by companies,
government organizations and semi government organizations aresold and purchased.
Securities include shares, bonds, debentures.
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DEFINITION OF STOCK EXCHANGE
According to Securities Contracts Regulation Act, 1956 : Stockexchange means any body of individuals whether incorporated ornot, constituted for the purpose of assisting, regulating orcontrolling the business of buying, selling or dealing in securities.
FEATURES:
1. Organised Market
2. Dealings in securities issued by various concerns
3. Dealing only through authorised members
4. Necessary to obey rules
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Name of Indian stock exchanges:
1.Bombay stock exchange
2.National stock exchange(Mumbai)
3.Banglore stock exchange
4.Utter pradesh stock exchange(kanpur)
5.Magadh stock exchange(Patna)
6.Ahmedabad stock exchange
7.vadodara stock exchange(Baroda)
8.Bhubaneswar stock exchange
9.Calcutta stock exchange(kolkata)
10.madras stock exchange
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There are 23 stock exchanges inthe India. Mumbai's (earlier knownas Bombay), Bombay Stock
Exchange is the largest, with over6,000 stocks listed. The BSEaccounts for over two thirds of thetotal trading volume in the country.Established in 1875, the exchange
is also the oldest in Asia. Amongthe twenty-two Stock Exchangesrecognised by the Government ofIndia under the SecuritiesContracts (Regulation) Act, 1956, itwas the first one to be recognisedand it is the only one that had theprivilege of getting permanentrecognition ab-initio.
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Cont.
11.Cochin stock exchange
12.coimbatore stock exchange
13.Gauhati stock exchange
14.Hydrabad stock exchange
15.Madhya pradesh stock exchange(indore)
16.Jaipur stock exchange
17.Ludhina stock exchange
18.Mangalore stock exchange
19.Pune stock exchange
20.saurashtrakutch stock exchange
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FUNCTIONS
Provides a ready market for buying and selling of securities.
Performs an act of magic as it enables long term investments to befinanced by funds provided by individuals who are otherwise
interested in short term or medium term investment.
Directs the flow of capital in the most profitable channels.
Includes corporate enterprises to raise their standards of
performance.
Offers and easily understood evaluation of the financial conditions
and prospects of listed firms
Facilitates speculation,
Promotes the habit of saving and investment thereby helping incapital formation.
Promotes industrial growth and economic development.
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The Security market includes :
1. The market for new securities
2. The market for existing securities.
Activities in originating, distributing and trading in securities.
Organizations which facilitate and contribute to activities in the
securities market.
Persons and organizations who buy and sell securities. Regulations, practices and customs which influence and control the
conduct of business in securities market.
It will be convenient to study the securities market under twoheads:
1. The New Issues Market
2. The Stock Exchange
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The market for new securities
The new issue market directs the demand for fresh capital by expressing it in the form
of securities.
It comprises companies, individual, institutional investors, intermediaries ie
underwriters, stock brokers etc.
It is concerned with the floatation and disposal of new issue of shares and debentures
through their allotment to persons and organizations.
It facilitates transfer of investible funds from their owners to productive channels.
An effective new issue market encourages savings and flow of savings into industrialenterprises.
Its primary role to play in mobilizing the savings of the individual investors and
institutional investors.
The market for existing securities
Stock exchange is concerned with re sale of securities.
It is the market where stocks or securities are exchanged for investment or speculative
purposes.
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FUNCTIONs OF STOCK EXCHANGE
1. To create liquidity into securities:whenever required investor caninvest his money through this market into securities and canreconvert this investment into cash.
2. To facilitate better allocation of capital: it provides properdirection to flow of capital. When co.s having profitable securitiesenter capital market to meet out the funds, their previous record
helps in raising additional capital.3. To facilitate the valuation of securities: The prices of sec. changes
every day due to the sale & purchase. Stock exchanges evaluatethe market value of various sec.
4. To promote habit of saving & investment:investors earn interest& dividends as permanent income from such investment. Theyget 2 benefits from this : advantage can be taken of changingprices and at the time of need sec. can be sold anytime at theirmarket price.
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FUNCTIONs OF STOCK EXCHANGE
5. To provide safety of dealing: these markets fully protects theinterest of the investors. They have their own bye-laws whicheach member has to follow. Violation may lead to cancellation ofmembership.
6. To provide full information regarding listed co.s: it collectsimportant information about the co.s listed, while collecting such
information main emphasis is on information related to financialstrength.
7. To educate the investors: a public relation office is established inevery exchange, this office publishes the dailhy quotations ofvarious sec., weekly reports,annual reports etc. Investors can take
intelligent decisions about their investment so that maximumprofit can be generated.
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BENEFITS OF STOCK EXCHANGE
FROM THE POINT OF VIEW OF COMMUNITY:
1.It assist the economic development by providing a body ofinterested investors.
2.it uploads the position of superior enterprises and assist
them in raising further funds. 3.It encourages capital formation
4.Government can undertake projects of national importanceand social value raising funds through the sale of its securities
on the stock exchange. 5.It is the stock exchanges that central bank of a country can
control credit by undertaking open market operations(purchase and sale of securities)
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FROM THE COMPANY POINT OF VIEW
1.A company whose shares quoted on stock
exchange they enjoy better reputation and credit.
2.The market for the shares of such a company is
naturally widened. 3.The market price of securities is likely to be higher
in relation to its earnings,dividends and property
values.This raises the bargaining power of the
company in the event of a takeover,merger or
amalgamation.
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FROM THE INVESTORS POINT OF VIEW
1.Liquidity of the investment is increased
2.The securities dealt on a stock exchange are good collateral
security for loans.
3.The stock exchange safeguards interests of investors through
strict enforcement of rules and regulations.
4.The present net worth of investments can be easily known
by the daily quotations.
5.His risk is considerably less when he holds or purchases
listed securities.
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BOMBAY STOCK EXCHANGE (BSE)
ABOUT BSE:The oldest exchange in Asia and the first exchange in the country to be granted
permanent recognition under the Securities Contract Regulation Act, 1956,Bombay Stock Exchange Limited (BSE) has had an interesting rise toprominence over the past 130 years.
The Stock Exchange, Mumbai, popularly known as "BSE" was established in1875 as "The Native Share and Stock Brokers Association", as a voluntary non-profit making association.
Governing Board comprising of 9 elected directors (one third of them retire every
year by rotation), two SEBI nominees, a Reserve Bank of India nominee, sixpublic representatives and an Executive Director is the apex body, which decidesthe policies and regulates the affairs of the Exchange
BSE SENSEX
The BSE SENSEX, short form of Sensitive Index, first compiled in 1986 is amarket Capitalization-Weighted index of 30 component stocks representing asample of large, well-established and financially sound companies. The index iswidely reported in both, the domestic international, print electronic media and iswidely used to measure the used to measure the performance of the Indian stockmarkets.
The BSE SENSEX is the benchmark index with wide acceptance among
individual investors, institutional investors, foreign investors, foreign investors andfund managers. The objectives of the index are:
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BSE
Bombay stock exchange : it has 30
companies scripted.
ACC
2.BAJAJ
3.AIRTEL 4.BHEI
5.CIPLA
6.DLF
7.GRASIM
8.GUJRAT AMBUJA
9.HDFC
10.HDFC BANK
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CONT
11.HERO HONDA
12.HINDALCO
13.HUL
14.ICICI BANK
15.INFICYS
16.ITC
17.L&T
18.MARUTI
19.NTPC
20.ONGC
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CONT
21.RANBAXY
22.RELIANCE COMMUNICATION
23.RELIANCE ENERGY
24.RIL
25.SATYAM
26.SBI
27.TCS
28.TATA MOTERS
29.TATA STEEL
30.WIPRO
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NATIONAL STOCK EXCHANGE (NSE)
On its recognition as a stock exchange under the Securities Contracts(Regulation) Act, 1956 in April 1993, NSE commenced operations in the
Wholesale Debt Market (WDM) segment in June 1994. The National Stock Exchange (NSE) is India's leading stock exchange
covering around 400 cities and towns all over India. NSE introduced forthe first time in India, fully automated screen based trading.
It provides a modern, fully computerized trading system designed tooffer investors across the length and breadth of the country a safe andeasy way to invest or liquidate investments in securities.
NSE started equity trading on November 3, 1994 and within a short spanof 1 year became the largest exchange in India in terms of volumestransacted.
One of the objectives of NSE was to provide a nationwide trading facility
and to enable investors spread all over the country to have an equalaccess to NSE.
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SPECULATION :
Definition : it involves the buying,holding,selling,short-term
selling of stocks,bonds.commodities,currencies,collectibles or
any valuable financial instrument to profit from fluctuations in
its price as opposed to buying it for use or for income via
method like dividends or interest.
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Kinds of speculation
Bull Market (Tejiwala): In case of that they purchase the
shares at current prices to sell at a higher price in the near
future and makes a profit if his expectations come true.he is
also called a long buyer.
Bear Market (Mandiwala) : He sells security in the hope that
he will be able to buy them back at lesser price.It is also called
short selling.
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Cont
Lame duck : When a bear has made contracts to sell
securities,find it difficult to meet his commitment due to non-
availability of security,,they always struggling..
Stag : He is that type of speculator who applies for a large
number of a shares in a new issue with the intention of selling
them at a premium.He is bullish and very cautious.
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INTERNAL PLAYERS
The members of the stock exchange can be divided intotwo parts:
A.Broker: He is a commission agent who transactsbusiness in securities on behalf of non-members.They
may have number of sub-brokers to canvass and securebusiness for them.
B.Jobber: He is an independent dealer securities.He
purchase and sells securities in his own name. He is notallowed to deal with non-members directly.He works forprofit.
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Tarawaniwala
Non-members : The following categories of non
members are also permitted to enter trading hall and
transact business on the behalf of members.
Authorized clerks: They are the assistant oragents.They buy or sell on the behalf of
employers.They can not transact business on their
own account.
Remisers: They are the sub-brokers. He is also called
the half commission men.
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THE REGULATORY AUTHORITY: SEBI
The rise in number of investors was also leading to an increase in
malpractices on part of the companies, brokers, merchant bankers,investment consultants and various other agencies involved in new
issues. This led to erosion of investor confidence. The Government
and the stock exchanges were helpless as the existing legal
framework was just not enough. Realizing this, Securities Exchange
Board of India (SEBI) was constituted by the Government of India in
April 1988.
It was constituted and made a statutory body by SEBI act 1992.With
the coming into effect of SEBI, some of the powers and functionexercised by the central government, in respect of regulation of
stock exchanges were transferred to the SEBI.
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OBJECTIVES OF SEBI
1.Registring and regulating the working of stock brokers, sub-brokers,share transfer agents, underwriters.who may be associated
securities market in any manner.
2.Registering and regulating the working of collective investmentscheme including mutual funds.
3.Prohibiting insider trading in securities.
4.Regulating substantial acquisition of shares and takeovers ofcompanies.
5.Calling for information from, undertaking inspection, conductinginquiries and audits of stock exchanges and intermediaries andself regulatory organizations in the securities market.
6.Prohibiting fraudulent and unfair trade practices related to sec.market.
7.Promoting investors knowledge and training of intermediaries .
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The major functions of SEBI are:
1Protecting interest of investor in securities
a) Prohibiting fraudulent & unfair practicesb) Prohibiting misleading statements, inducing purchase &
sale of securities.c) Educating investors
d) Promoting fair practices and code of conducte) Stopping preferential allotment
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The major functions of SEBI are:
2 Promoting development of securities market
a) Registration of FIIb) Promoting training of intermediaries of market.c) Making underwriting optionald) Debenture trustees to be registered with SEBI
e) Permitting internet trading through registered broker.
3 Regulating securities market
a) Regulating business in stock marketb) Regulating intermediariesc) Registering and regulating working of stock brokersd) Regulating takeover of companies.
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