Stock Exchange in India Commerce YouTube Lecture Handouts

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Topics to be covered are:

  • What Is the Stock Exchange
  • Regulation of Stock Exchange in India
  • Features of Stock Exchange
  • Functions Of Stock Exchange
  • Major stock exchanges in India
  • Participants of the Stock Market
  • Bull Market and Bear Market
  • Trading and Settlement Procedure
  • Pros and Cons investing in Stock Exchange

What is the Stock Exchange?

  • The stock exchange in India serves as a market where financial instruments like stocks, bonds and commodities are traded.
  • It is a platform where buyers and sellers come together to trade financial tools during specific hours of any business day while adhering to SEBI՚s well-defined guidelines. However, only those companies who are listed in a stock exchange are allowed to trade in it.

Regulation of Stock Exchange in India

  • Entire stock exchange of India is regulated by the Securities and Exchange Board of India (SEBI) which was established in 1992 as an independent authority.
  • SEBI has the power to impose fines and penalties in case of violation of rules and regulations.
  • It plays a pivotal role and protects the interest of investors in the stock exchange of India.
  • SEBI promotes education and training of intermediaries of the stock market.

Features of Stock Exchange

  • A market for securities
  • Dealings only in registered securities
  • Transaction through brokers and members
  • Recognition
  • Operates as per rules

Functions of Stock Exchange

  • Economic Growth
  • Valuation of Securities
  • Transactional Safety
  • Making the public aware of equity investment
  • Offers scope for speculation
  • Facilitates liquidity
  • Better Capital Allocation
  • Encourages investment and savings

Major Stock Exchanges in India

There are two major types of Stock Exchanges in India, namely the –

  • Bombay Stock Exchange (BSE) : This particular stock exchange was established in 1875 in Mumbai at Dalal Street. It renowned as the oldest stock exchange not just in Asia and is the ‘World՚s 10th largest Stock Exchange’ . The estimated market capitalization of Bombay Stock Exchange as of April stands at $ 4.9 Trillion and has around 6000 companies publicly listed under it. The performance of BSE is measured by the Sensex, and it reached its all-time high in June in 2019, when it touched 40312.07.
  • National Stock Exchange (NSE) : National stock exchange began its operations in 1994 at the behest of the Indian government to bring a level of transparency to the country՚s capital market and is accredited as the pioneer among the demutualized electronic stock exchange markets in India. This stock exchange market was established with the objective to eliminate the monopolistic impact of the Bombay Stock exchange in the Indian stock market. The estimated market capitalization of National Stock Exchange as of March 2016 was US $ 4.1 trillion and was acclaimed as the 12th largest stock exchange in the world. NIFTY 50 is NSE՚s index, and it is extensively used by investors across the globe to gauge the performance of the Indian capital market.

Note: National Stock Exchange was incorporated in 1992 and commenced its operations in 1994 as a step in reforming.

Participants of the Stock Market

  • Securities and Exchange Board of India (SEBI)
  • Stock exchanges
  • Stock brokers/brokerages
  • Investors and traders

Bull Market and Bear Market

  • Bull Market: Bull markets are defined by the market going up aggressively over a period of time. As the market starts to rise, there becomes more and more greed in the stock market.
  • Bear Market: The bear market definition is exactly the opposite of a bull market. it՚s a market where quarter after quarter the market is moving down about 20 percent. That signals a bear market, and when that happens people start to get really scared about putting money into the stock market.

Trading and Settlement Procedure

  • Selecting a Broker or Sub-broker
  • Opening a Demat Account
  • Placing Orders
  • Execution of the Order
  • Settlement

Pros and Cons of Investing in Stock Market

Pros

  • Higher returns
  • Acquired ownership
  • Well-protected by a regulatory body
  • Cash in on opportunities

Cons

  • High brokerage fees
  • Impacted by the global economy
  • Never completely risk free

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