Stock exchange

This is the secondary market which is highly organised market for the purchase and sale of Second hand quoted or listed securities. The Securities Contract (Regulation) Act 1956, defines Stock Exchange as an association, organisation 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.

Stock exchange or share market plays a dominant role in mobilizing resources for corporate sector. It is a market for dealing in shares, debentures and financial securities. In the stock exchange, shares and debentures are bought and sold for investment as well as for speculative purposes.

There are 24 stock exchanges in the country:

  • UP Stock Exchange, Kanpur
  • Vadodara Stock Exchange, Vadodara
  • Koyambtour Stock Exchange, Coimbatore
  • Meerut Stock Exchange, Meerut
  • Bombay Stock Exchange, Mumbai
  • Over the Counter Exchange of India, Mumbai
  • National Stock Exchange, Mumbai
  • Ahmedabad Stock Exchange, Ahmedabad
  • Bangalore Stock Exchange, Bangalore
  • Bhubhaneshwar Stock Exchange, Bhubhaneshwar
  • Calcutta Stock Exchange, Kolkata
  • Cochin Stock Exchange, Cochin
  • Delhi Stock Exchange, Delhi
  • Guwahati Stock Exchange, Guwahati
  • Hyderabad Stock Exchange, Hyderabad
  • Jaipur Stock Exchange, Jaipur
  • Canara Stock Exchange, Mangalore
  • Ludhiana Stock Exchange, Ludhiana
  • Chennai Stock Exchange, Chennai
  • MP Stock Exchange, Indore
  • Magadh Stock Exchange, Patna
  • Pune Stock Exchange, Pune
  • Saurashtra Stock Exchange, Rajkot
  • Capital Stock Exchange Kerala Ltd. Thiruvananthapuram

Three Stock Exchanges having power to have nation-wide trading network are

  • National Stock Exchange (NSE)
  • Over The Counter Exchange of India Limited(OTCEI)
  • Interconnected Stock Exchange of India Ltd(ISE)

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

SEBI (Securities and Exchange Board of India) was initially constituted on Apr 12,1988 as a non statutory body through a resolution of the Government for dealing with all matters relating to development and regulation of securities market and investor protection and to advise the Government on all these matters. SEBI was given statutory status and powers through an ordinance promulgated on Jan 30, 1992.

The statutory powers and functions of SEBI were strengthened through the promulgation of the Securities Laws (Amendment) ordinance on Jan 25, 1995 which was subsequently replaced by an Act of Parliament. In terms of this Act, SEBI has been vested with regulatory powers over corporates in the issuance of capital, the transfer of securities and other related matters. Besides, SEBI has also been empowered to impose monetary penalties on capital market intermediaries and other participants for a range of violations.

SEBI is managed by six members - one chairman (nominated by Central Government), two members (officers of central ministries), one member (from RBI) and remaining two members nominated by Central Government. The office of SEBI is situated at Mumbai with its regional offices at Calcutta, Delhi and Chennai. In 1988, the initial capital of SEBI was Rs. 7.5 crore which was provided by its promoters (IDBI, ICICI, IFCI). This amount was invested and with its interest amount day-to-day expenses of SEBI are met. All Statutory powers for regulating Indian capital market are vested with SEBI itself.

Functions of SEBI:

  • To safeguard the interests of investors and to regulate capital market with suitable measures.
  • To regulate the business of stock exchanges and other securities market.
  • To regulate the working of Stock Brokers, Sub-brokers, Share Transfer Agents, Trustees, Merchant Bankers, Underwriters, Portfolio Managers etc. and also to make their registration.
  • To register and regulate collective investment plans of mutual funds.
  • To encourage self-regulatory organizations.
  • To eliminate malpractices of security markets.
  • To train the person associated with security markets and also to encourage investors education.
  • To check insider trading of securities.
  • To supervise the working of various organizations trading in security market and also to ensure systematic dealings.
  • To promote research and investigations for ensuring the attainment of above objectives.

Bombay Stock Exchange (BSE)

It is the first stock exchange to be established in India in July 1875 by the brokers in Bombay named as Native Shares Stock Brokers Association. It is second biggest stock exchange of India after NSE. Bombay Stock Exchange (BSE) is one of the oldest-stock exchanges in the world and the oldest of Asia. The share sensex of BSE includes 30 shares. National Stock Exchanges (NSE) share sensex includes 50 shares.

National Stock Exchange (NSE):

In 1991, Pherwani Committee recommended the establishment of the National Stock Exchange. It was established in November 1992, and it started trading operations from June 30, 1994. It was established with an equity capital of 25 crores and it was promoted by IDBI, ICICI, LIC, GIC, SBI and some other institutions. It is a country wide, on-line, screen based trading system conforming international standards. Its control centre is at Mumbai. It is the first demutualised stock exchange in India.

Companies  minimum capital of Rs. 10 crore or more are eligible for listing in NSE and BSE. It is the biggest Stock Exchange of India and  ranked 3rd in the World Stock Exchange Ranking based on the total transaction held NASDAQ is ranked first while New York Stock Exchange is ranked second.

Global Depository Receipts (GDRs)

These are a dollar denominated instrument traded on the stock exchanges in Europe or USA or both. Normally, these represents certain number of equity shares. These represents a fixed ratio of Indian shares. These are issued by a depository which is denominated in the US Dollars, while actual Indian shares are held by the custodian in India (typically and Indian Institution as ICICI). These are negotiable instruments. These are also called Euro Equity shares, since 1992, government allowed Indian companies to access international capital markets through it.

American Depository Receipts (ADRs):

These are US-Dollar denominated instruments issued by a depository bank in USA representing ownership in non-USA securities, usually referred to as underlying equity shares. These are also negotiable instruments. These are usually listed in New York Stock Exchange.

Euro Convertible Bonds (ECB):

It is an equity linked security which can be converted into shares or into depository receipts. It is a foreign currency debt instrument issued by an Indian company.

MUTUAL FUNDS (MFS)

It is a financial institution that aims at continuously garnering investible resources from individuals and managing these resources professionally to create a portfolio of securities (and sometimes even bullion or real estate) in order to provide uninitiated small investor a reasonable return on his investment through dividends and capital appreciation.

On the basis of the structure, MFs can be divided

(i) Open ended Mutual Funds : Funds which are available  for subscription through the year and can be sold and purchased any time. They are highly liquid.

(ii) Close ended Mutual Funds : These have stipulated maturity period prior to which these cannot to be sold and purchased except on the stock exchanges. They have maturity period usual form 3 years to 15 years.


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