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Stock Market is a place where shares of public listed companies are traded. A stock exchange facilitates stock brokers to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange.
A stock exchange facilitates stock brokers to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the stock buyers and sellers. India's premier stock exchanges are the Bombay Stock Exchange and the National Stock Exchange.
Security trading in India goes back to the 18th century when the East India Company began trading in loan securities. Corporate shares started being traded in the 1830s in Bombay (now Mumbai) with the stock of Bank and Cotton presses. The simple and informal beginnings of stock exchanges in India take one back to the 1850s when 22 stockbrokers began trading opposite the Town Hall of Bombay under a banyan tree. The tree still stands in the area which is now known as Horniman Circle.
The venue then shifted to banyan trees at the Meadows Street junction, which is now known as Mahatma Gandhi Road, a decade later. The shift continued taking place as the number of brokers increased, finally settling in 1874 at what is known as Dalal Street. This as yet informal group known as the Native Share and Stockbrokers Association organized themselves as the Bombay Stock Exchange (BSE) in 1875. The BSE is the oldest stock exchange in Asia and was the first to be granted permanent recognition under the Securities Contract Regulation Act, 1956.
The BSE was followed by the Ahmedabad Stock Exchange in 1894 which focused on trading in shares of textile mills. The Calcutta Stock Exchange began operations in 1908 and began trading shares of plantations and jute mills. The Madras Stock Exchange followed, being set up in 1920.
In the post-independence era, the BSE dominated the volume of trading. However, the low level of transparency and undependable clearing and settlement systems, apart from other macro factors, increased the need of a financial market regulator, and the SEBI was born in 1988 as a non-statutory body. It was made a statutory body in 1992.
After the Harshad Mehta scam in 1992, there was a pressing need for another stock exchange large enough to compete with the BSE and bring transparency to the stock market. This gave birth to the National Stock Exchange (NSE). It was incorporated in 1992, became recognized as a stock exchange in 1993, and trading began on it in 1994. It was the first stock exchange on which trading took place electronically. In response to this competition, BSE also introduced an electronic trading system known as BSE On-line Trading (BOLT) in 1995.
BSE and NSE are not the only stock exchanges in India. After the country gained independence, 23 stock exchanges were added not including the BSE. However, at present, there are only seven recognized stock exchanges. Apart from the BSE and NSE, they are:
There are two major stock exchanges in India:
Bombay Stock Exchange (BSE). National Stock Exchange (NSE).
Types of Share markets: There are two types of share markets in the country:
Primary share market: This is the market where companies or businesses register themselves. Companies enter the primary share market to raise funds by offering their stocks. When a company registers itself in the primary share market and offers to sell its shares for the first time, it is known as Initial Public Offering (IPO). Here, you must understand that shares are a physical representation of a small value of the company, and owning the shares means that you are a part-owner of the company.
Secondary share market: The actual trading of a company’s shares occurs in the secondary share market. After a company’s share is listed on a stock exchange, investors can engage in trading, i. the sale or purchase, on prices that are governed by market movements. You can trade in shares in the secondary share market only through a broker. In the present digital age, you can easily open a Demat Account and a Trading Account, following which you are allowed to trade in stock markets via broking platforms.
Securities and Exchange Board of India (SEBI), constituted in 1992 under the SEBI Act, regulates and monitors stock markets in India. Along with the overall administrative control of stock markets, SEBI is also entrusted with the role of conducting inspections and formulating rules for stock markets.
Who are Stockbrokers?
It is imperative for you to understand that you can trade in stock markets only through a broker. Stockbrokers are financial intermediaries, who enable you to trade while charging brokerage fees for their services. Stockbrokers/ Brokerage firms are registered with SEBI and act as a link between the investor and stock markets.
How can you Trade in the Stock Market?
Before the advent of the internet, you were required to physically visit brokers, and instruct them for transactions. But now stockbrokers provide digital trading platforms, where you can trade through:
A bull market occurs when securities are on the rise, while a bear market occurs when securities fall for a sustained period of time. It's important to understand the differences between bull and bear markets and how they impact your investment decisions.
After providing the details of your Demat Account and Trading Account to the broker, you need to specify the amount of stocks to be sold or purchased.
The broker checks whether your account has the requisite funds.
Your order is now passed for execution in the stock exchange. For instance, if you have issued a purchase order, it will be matched with a similar sell order. You have to finalize a price, following which the seller will confirm it.
The exchange then confirms the transfer of ownership of shares. You then receive an intimation about the settlement, and the shares will be reflected in your account in two working days.
Depending upon the market movement, you either make a profit or loss from the transaction.
You can evaluate stocks through:
Technical analysis: This involves a minute examination of the market for intraday trading. Here you have to analyze a slew of factors like movement average, Regarding Strength Index (RSI), etc. You can use the trends, patterns, analysis, and reports provided by stockbroking companies to analyze the stock movements.
Fundamental analysis: Here, you can yourself study some key factors, like Returns on Equity, Earnings Yield, GP Margin, Debt to Equity Ratio, Interest Cover Ratio, Market Capitalisation, etc. This will provide you with greater clarity regarding stock prices.
