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Stock Exchange

Stock exchanges facilitate transactions between traders and buyers of financial instruments. They provide a platform for buyers and sellers to trade stocks, bonds, and other financial tools during business hours according to regulatory guidelines. Only companies listed on an exchange are permitted to have their shares traded there. Major Indian stock exchanges include the National Stock Exchange, Bombay Stock Exchange, and Metropolitan Stock Exchange.

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16 views2 pages

Stock Exchange

Stock exchanges facilitate transactions between traders and buyers of financial instruments. They provide a platform for buyers and sellers to trade stocks, bonds, and other financial tools during business hours according to regulatory guidelines. Only companies listed on an exchange are permitted to have their shares traded there. Major Indian stock exchanges include the National Stock Exchange, Bombay Stock Exchange, and Metropolitan Stock Exchange.

Uploaded by

Anirudh Victor
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Establishment of Stock Exchanges

It facilitates the transaction between traders of financial instruments and targeted buyers. 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.

Famous stock exchanges in India

1. National Stock Exchange


2. Bombay Stock Exchange
3. Metropolitan Stock Exchange

Investment methods of investing in the stock exchange:

1. Primary Market – initial issue of shares by the company when it releases its IPO.
These shares are to be directly purchased from the company itself.
2. Secondary Market – trading that happens later between investors for buying and
selling of shares, debentures or bonds without involving the company. Shares on the
secondary market can be only traded via the stock exchange.

Benefits of Listing on Stock Exchange:

1. Increased value - Companies can cash in on their market reputation in the stock
exchange market by increasing their number of shareholders.
2. Accessing capital - One of the most effective ways of availing cheap capital for a
company is by issuing company shares in the stock exchange market for shareholders
to acquire.
3. Collateral value - A listed company is more likely to avail a faster approval for their
credit request; as they are deemed more credible in the stock exchange market.
4. Liquidity - Listing helps shareholder avail the advantage of liquidity by offering them
ready marketability.
5. Fair price - The fact that the prices of listed securities are set as per the forces of
demand and supply and are disclosed publicly, investors are assured to acquire them
at a fair price.
Process:

Seller – Broker – Stock Exchange – Broker – Buyer

^This whole transaction happens within seconds in real time. This is what ensures the trading
cycle to stay limited to merely 1 day.

The seller or the buyer cannot directly go to the stock exchange and engage in the trading
transaction. It has to be done through registered members of the stock exchange known as the
depository participants who act as stock brokers.

Famous brokers: Zerodha, Groww, Kotak Securities, HDFC Securities etc.

Index

In order to gauge the direction of the market, index is important. It is impossible to track so
many 1000s companies on an everyday basis to judge if the prices of the stocks are going
high or low. This index helps us get a short view to understand how the market is performing,
thus making it easier for investors to make investment decisions.

BSE – Sensex (Sensitivity Index) – It represents the weighted average of 30 Indian


companies’ (based on market capitalization – so these top 30 companies keep changing as per
their varying performance) stock in different sectors like real estate, pharma, banking, IT etc.

NSE – Nifty (National Fifty) – It represent the weighted average of 50 Indian companies’
stock of varying sectors. NIFTY also has sector specific indices, such as NIFTY Auto,
NIFTY IT etc. which tells us the specific directions of market of these industry segments.

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