Stoc exchange

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Overview of Stock market andStock exchanges in India


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Introduction

the financial market

divided into two parts,Money market andcapital market

Securities market is

an important,organized capitalmarket wheretransaction of capitalis facilitated bymeans of directfinancing usingsecurities as acommodity


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Securities market can be dividedinto a primary market andsecondary market. The primary market

is an intermittent anddiscrete marketwhere the initiallylisted shares aretraded first time,changing hands fromthe listed company tothe investors.

The secondarymarket is an on-goingmarket, which isequipped andorganized with aplace, facilities andother resourcesrequired for tradingsecurities after their

initial offering.


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Stock exchangeStock exchangemeans any body of

individuals, whetherincorporated or not,constituted for thepurpose of regulatingor controlling thebusiness of buying,selling or dealing insecurities. Thesesecurities include:

(i) Shares, stocks,bonds, debenturesstock or othermarketable securities

(ii) Governmentsecurities and


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History

The world's foremost

marketplace New YorkStock Exchange(NYSE), started itstrading under a tree

(now known as 68Wall Street) over 200years ago?

Similarly, India'spremier stockexchange BombayStock Exchange (BSE)can also trace back itsorigin to as far as 125

years when it startedas a voluntar non-


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ORIGIN OF INDIAN STOCK MARKET

The origin of the stock

market in India goesback to the end of theeighteenth centurywhen long-term

negotiable securitieswere first issued.However, for allpractical purposes,the real beginning

occurred in themiddle of thenineteenth centuryafter the enactment

of the companies Actin 1850


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An important early

event in thedevelopment of thestock market in Indiawas the formation of

the native share andstock brokers'Association atBombay in 1875, theprecursor of the

present day BombayStock Exchange

Then the formation ofassociations/exchang

es in Ahmedabad1894 , Calcutta


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The Bombay Stock

Exchange (BSE) andthe National StockExchange of India Ltd(NSE) are the two

primary exchanges inIndia. In addition,there are 22 RegionalStock Exchanges.

the BSE and NSE haveestablishedthemselves as the twoleading exchangesand account for about

80 per cent of thee uit volume traded


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The NSE and BSE are

equal in size in termsof daily tradedvolume.

The average daily

turnover at theexchanges hasincreased from Rs 851crore in 1997-98 to Rs1,284 crore in 1998-99 and further to Rs2,273 crore in 1999-2000 (April - August1999).


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NSE has a market

capitalization ofaround US$1.59trillion and over 1,552listings .

The equity marketcapitalization of thecompanies listed onthe BSE was US$1.63trillion.

There are over 5,034listed Indiancompanies and over7700 scrips on the

BSE


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The markets are

closed on Saturdaysand Sundays.

Both the exchangeshave switched over

from the open outcrytrading system to afully automatedcomputerized mode oftrading known asBOLT (BSE on LineTrading) and NEAT(National ExchangeAutomated Trading)

System.


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Market Basics

Electronic trading-

Brokers can trade fromtheir offices, usingfully automatedscreen-basedprocesses. Theirworkstations areconnected to a StockExchange's centralcomputer via satellite

using Very SmallAperture Terminus(VSATs).

NSE was the first to

introduce electronicscreen based trading.


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The Stock Exchange,

Mumbai (BSE) and theNational StockExchange (NSE) arethe country's two

leading Exchanges.There are 20 otherregional Exchanges,connected via theInter-Connected Stock

Exchange (ICSE). TheBSE and NSE allownationwide trading viatheir VSAT systems.


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Index An Index is a

comprehensive

measure of markettrends

Each stock is given aweightage in the

Index equivalent to itsmarket capitalization.

At the NSE, thecapitalization of NIFTY(fifty selected stocks)is taken as a basecapitalization, withthe value set at 1000.Similarly, BSE

Sensitive Index orSensex com rises 30


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Broker-As per SEBI

(Securities andExchange Board ofIndia.) regulations,one can trade by

executing a deal onlythrough a registeredbroker of a recognizedStock Exchange orthrough a SEBI-

registered sub-broker. Contract note-A

contract notedescribes the rate,

date, time at whichthe trade was


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Settlement cycle

The accounting period

for the securitiestraded on theExchange.

On the NSE, the cycle

begins on Wednesdayand ends on thefollowing Tuesday

On the BSE the cyclecommences onMonday and ends onFriday.


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Rolling settlement

The rolling settlement

ensures that eachday's trade is settledby keeping a fixedgap of a specified

number of workingdays between a tradeand its settlement. Atpresent, this gap isfive working days

after the trading day.


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Stock & Exchange Board of India

Under the SEBI Act,

1992, the SEBI hasbeen empowered toconduct inspection ofstock exchanges. The

SEBI has beeninspecting the stockexchanges once everyyear since 1995-96.


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SEBI is made to ascertain whether:

the exchange

provides a fair,equitable and growingmarket to investors

the exchange's

organization, systemsand practices are inaccordance with theSecurities Contracts(Regulation) Act

(SC(R) Act), 1956 andrules


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the exchange has

implemented thedirections, guidelinesand instructionsissued by the SEBI

from time to time The exchange has

complied with theconditions, if any,imposed on it at the

time of renewal/ grantof its recognitionunder section 4 of theSC(R) Act, 1956.


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Dematerialization and itsadvantage Dematerialization in

short called as 'demat'is the process bywhich an investor canget physicalcertificates converted

into electronic formmaintained in anaccount with theDepository Participant.

Lower interest chargesfor loans taken againstdemat shares ascompared to theinterest for loan

against physical

Save 0.5% in stampduty

Avoids the cost ofcourier/ notarization/the need for furtherfollow-up with your

broker for sharesreturned for companyobjection

No loss of certificates

in transit and savessubstantial expensesinvolved in obtainingduplicate certificates,when the original share

certificates become

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