Stock Market Stock Market (Stock exchange)(Stock exchange)

Meaning:

Stock exchange is a place where any body who wants to buy a particular “security” can find an immediate seller or any body who wants to sell his holdings can find a buyer at a reasonable and fair place.

The securities contracts Regulation Act 1956 defines stock exchange as an association, organization or body of individuals whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.

Features of Stock Market

Stock Market is an organized market, where securities of govt. and semi govt. bodies and corporate enterprises or bought and sold.

Stock Market deals in second hand or existing securities.

Individuals alone can buy and sell securities.

The Stock Market does not provide this facility to corporation and partnership firms.

In the Stock Market only those securities which are listed in the Stock Market or transacted.

Unlisted Securities or not permitted to be dealt in the market.

The Stock Exchange to regulate its day-to-day operations.

Functions & Services of Stock Exchange:

Provides ready and continuous market

Facilitates regular violation of securities

Encourages capital formation

Provides proper direction to invest capital

Ensure wide ownership of securities

Facilitates distribution of new securities

Ensure safety of funds

Regulates company management and performance

Disseminates information

Facilitates speculation

Mirror of Business cycle

Stock exchange in India

The organized Stock Exchange in the country started at Bombay in 1877. By 1939 there were 8 Stock Exchanges. By 1945 they increased to 21, operation of too many Stock exchanges was considered undesirable.

Following are some of the Stock Following are some of the Stock

exchangesexchanges::► Bombay Stock exchangeBombay Stock exchange

► Calcutta Stock exchangeCalcutta Stock exchange

► Madras Stock exchangeMadras Stock exchange

► Delhi Stock exchangeDelhi Stock exchange

► Ahmadabad Stock exchangeAhmadabad Stock exchange

► Hyderabad Stock exchangeHyderabad Stock exchange

► Indore Stock exchangeIndore Stock exchange

► Bangalore Stock exchange Bangalore Stock exchange

Membership of the Stock exchange

Trading in Securities on any Stock exchange is open to members only.

Who can become members and how..?

Only men of integrity and competence are admitted as members of Stock exchange.

Members have to buy a share if the Stock exchange concerned is a corporate body having a share capital.

He also to pay Rs.5,000/- as an entrance fee and deposit Rs.20,000/- either in cash or approved Securities.

The application for membership is to be made in prescribed form sponsored by two members of five years standing as members.

S/E : After, the Board decides upon accepting his application, a membership Card is issued to the applicant.

Methods of Trading:Methods of Trading:

A person who wants to purchase or A person who wants to purchase or sell Securities cannot do it himself. sell Securities cannot do it himself. He is not allowed to enter into the He is not allowed to enter into the hall of the Stock exchange and thus hall of the Stock exchange and thus he can not carry a transaction he can not carry a transaction personally.personally.

He has to depend up on the Brokers.He has to depend up on the Brokers.

There are 2 types of Trading in There are 2 types of Trading in the Stock exchange viz,the Stock exchange viz,

Ready Delivery ContractsReady Delivery Contracts

Forward Delivery ContractsForward Delivery Contracts

These are also called as Cash transaction or Cash trading and These are also called as Cash transaction or Cash trading and forward or dealing for the account.forward or dealing for the account.

There are some important points of distinction between R.D.C & There are some important points of distinction between R.D.C & F.D.CF.D.C

The R.D.C are settled either on the date of the transaction or with The R.D.C are settled either on the date of the transaction or with in 14days from the date of contract.in 14days from the date of contract.

The R.D.C must be settled with in the specified time limit where as The R.D.C must be settled with in the specified time limit where as the forward contracts can be carried forward to the next the forward contracts can be carried forward to the next settlement day.settlement day.

Trading Procedure:

It is of four types

Choice of a Broker

Placing the Order

Settlement Transaction

Executing the Order

Meaning of Speculation:Meaning of Speculation:

Anticipation changes in prices of securities in future is Anticipation changes in prices of securities in future is known as Speculation.known as Speculation.

Different types of Speculation activities:Different types of Speculation activities:

BullBull

BearBear

Lame DuckLame Duck

StagStag

Bull:Bull:

A Bull is Speculator who excepts a rise A Bull is Speculator who excepts a rise in the price of shares of a company. in the price of shares of a company.

He is an optimist.He is an optimist.He aims at making profit out of He aims at making profit out of

expected rise in the price of a expected rise in the price of a particular share.particular share.

For this purpose he purchases the For this purpose he purchases the security for future delivery.security for future delivery.

Bear:Bear:

A Bear is Speculator who expects a A Bear is Speculator who expects a fall in the price of a Securityfall in the price of a Security

He is pessimist He is pessimist He aims at making profit out of an He aims at making profit out of an

expected fall in the price of a expected fall in the price of a particular shareparticular share

For this purpose he sell the security For this purpose he sell the security for future deliveryfor future delivery

Lame Duck:Lame Duck:

In case the Bear is unable to In case the Bear is unable to strike the bargain strike the bargain immediately, he is said to be immediately, he is said to be struggling like a Lame Duckstruggling like a Lame Duck

Stag:Stag:

Stag is person who applies Stag is person who applies for shares of a new company for shares of a new company with a view to selling the with a view to selling the shares allotted to him at a shares allotted to him at a profit.profit.

The First Stock exchange

In 11th century France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers.

NATIONAL STOCK EXCHANGE

The National Stock exchange is the centralized Stock exchange of India situated in Delhi

National Stock Exchange of India

National Stock Exchange Limited

Type Stock Exchange

Location Mumbai, India

Coordinates 19°3′37″N 72°51′35″E19.06028°N 72.85972°E

Founded 1992

Owner National Stock Exchange of India Limited

Key people Mr.RAVI NARAIN Managing Director

Currency INR

No. of listings 1587

MarketCap Rs 47,01,923 crore(2009 August)

IndexesS&P CNX Nifty

CNX Nifty JuniorS&P CNX 500

Website http://www.nse-india.com/

Bombay Stock exchange

The Bombay/Mumbai Stock Exchange, or BSE) is the oldest stock exchange in Asia and has the greatest number of listed companies in the world. It is located Dalal street, Mumbai, India.

Type Stock Exchange

Location Mumbai, India

Coordinates 18°55′47″N 72°50′01″E18.929681°N 72.833589°E

Founded 1875

Owner Bombay Stock Exchange Limited

Key peopleMadhu Kannan (CEO)

Mahesh L. Soneji (COO)

Currency INR

No. of listings 4,700

MarketCap US$ 1.1 trillion (Aug 29, 2009)

Volume US$ 980 billion (2006)

Indexes BSE Sensex

Website http://www.bseindia.com/