Chap 6- Stock exchange on indian financial system

Chap 6- Stock exchange on indian financial system

1. Stock Exchange

2. HOW DOES STOCK MARKET WORK? If you start investing in the stock market you probably wondered

3. Stock Exchange Stock exchange is defined as “ A centralised market for buying and selling stocks, where the price is determined through supply and demand mechanisms” . Stock exchange is any body of individuals which is constituted for the purpose of Assisting Regulating Controlling the business of buying and selling of securities

4. Functions of Stock Exchange Motivates individual to save and invest funds. A safe and productive channels for investment of savings. Provides liquidity to the savings of the investors, by developing a secondary capital market. Meeting the large capital needs of organized industry, trade and business. Stock exchange play the role of a Barometer

5. It provides a trading place for securities. Listing of securities Distribution of new securities. Mobilization of savings. Flow of capital to profitable ventures. Economic barometer. Capital formation. Motivating for improved performance.

6. HOW TO DEAL AND INVEST IN STOCK EXCHANGE In order to deal with a securities one hast to have an account called DEMAT A/c or Trading A/c. it is just like a bank account. Same procedure od opening the bank account is followed to open the account. But all the banks do not give this facility. After DENAT A/c is opened then securities is bought and sold. This banks which gives facility of DEMAT A/c in India are: ICICI Bank Citi Bank Bank of Baroda

7. Method of trading in a stock exchange Choice of a broker Placement of order Execution of orders Preparation of contract notes Settlement of transactions

8. 1. Choice of a Broker Investors who want to buy or sell his securities, he need to transact only through the brokers. They can also appoint Banker for this transaction, Bankers can also become a member of stock exchange.

9. 2. Placement of order The next step is placing an order by telegram, telephone, letter, fax, in recent days through online. Order is placed in abbreviations are : At Best order Limit order Immediate or cancel order Discretionary order Open order

10. 3. Execution of orders : orders are executed in the trading ring of a stock exchange, if the buyer order matches with the seller order then the order is executed. The floor of the stock exchange is divided into number of markets according to the nature of the security is called pits

11. 4. Preparation of contract note Once the order is executed and all the transaction are recorded and make ready of contract note and delivered to respective investors. A contract note is a written agreement between the broker and the investor for the transactions executed and contains the details like Purchase/Sale of securities Name of the company Number of shares bought/sold and price Brokerage commission

12. 5. Settlement of transactions Finally the settlement is made by delivering the shares certificates along with the transfer deed. The transfer deed is duly signed by the transferor that is seller. It bears the stamp of the selling broker The buyer then fills up the particulars in the transfer deed

13. How to see the value of the shares in Stock Exchange SENSEX is an indicator to checkout in BSE. NIFTY is an indicator to checkout in NSE.

14. SPECULATION AND SPECULATOR SPECULATION: It is the transaction of members to buy or sell securities on stock exchange with a view to make profits to anticipated raise or fall in prices of securities. SPECULATOR: The dealer in stock exchange who indulge in speculation are called speculators. They do not take delivery of securities purchased or sold by them, but only pap or rescue the difference between the purchase price and sale price. The different types of speculators are: BULL BEAR STAG LAME DUCK

15. BULL (TEJIWALA) He is a speculator who expects the future raise in price of securities to sell them at future date at higher price. He is called as bull because his activities resembles as a bull, as the bull tends to throw his victims up in the air through its horns. In simple the bull speculator tries to raise the price of securities by placing a big purchase orders.

16. BEAR (MANDIWALA) He is speculator who expects future fall in prices. He does an agreement to sell securities at future date at the present market rate. He is called as bear because his attitude resembles with bear, as the bear tends to stamp its victims down to earth through its paws. In simple the bear speculator forces of prices of securities to fall through his activities.

17. STAG He operates in new issue of market. He is just like a bull speculator. He applies large number of shares in the issue market only by paying application money, allotment money. He is not a genuine investor because, he sells the allotted securities at the premium and makes profit. In simple he is cautious in his dealings. He creates an artificial rise in prices of new shares and makes profits.

18. LAME DUCK He is speculator when the bear operator finds it difficult to deliver the securities to the customer on a particular day as agreed upon, he struggles as a lame duck fulfilling his commitment. This happens when the prices do not fall as expected by the bear and the other party is not willing to postpone the settlement to next period.

19. BSE- Bombay Stock exchange It was the 1 st ever stock exchange in Asia established in the year 1875. First in the country to be granted permanent recognition under the Securities Contract Regulation Act, 1956 Vision : "Emerge as the premier Indian stock exchange with best-in-class global practice in technology, products innovation and customer service."

20. NSE-National Stock Exchange FEATURES OF NSE National wide coverage i.e., investors from all over country. Ringless i.e., it has no ring or trading floor. Screen-based trading i.e., trading in this stock exchange is done electrically. Transparency, i.e., the use of computer screen for trading makes the dealings in securities transparent. Professionalization in trading, i.e., it brings professionalism in its functions. The NSE of India is the leading stock exchange of India, covering 370 cities and towns in the country. It was established in 1994 as TAX company. It was established by 21 leading financial institutions and banks like the IDBI, ICICI, IFCI, LIC, SBI, ETC.

21. Securities and Exchange Board Of India ( SEBI ) The SEBI was constituted on 12 th April, 1988 under a resolution of the Government of India. On 31 st January 1992, it was made a STATUTORY BODY by the Securities and Exchange Board Of India Act, 1992. The Companies (Amendment) Act,2000 has given certain powers to SEBI as regards the issue and transfer of securities and non- payment of dividend. Functions of SEBI Regulating the business in stock exchange and any other securities markets. Promoting and regulating self-regulatory organization. Registering and regulating the work of collective investment scheme, including mutual funds. Prohibiting fraudulent and unfair trade practices relating to securities market. Promoting education, and training of intermediaries of securities market.

22. What is Intraday Trading? 9:15 am 3:15 pm Buy Sold

23. What is Delivery Trading? Buy Sold

24. Major Stock Exchanges (Top 20) Rank Exchanges Economy 1 New York Stock Exchange United States 2 NASDAQ United States 3 JAPAN Exchange Group- Tokyo Japan 4 Euronext Netherlands France Belgium Portugal 5 London Stock Exchange Group United kingdom Italy 6 Hon g K ong Stock Exchange Hong Kong 7 Shanghai Stock Exchange China 8 TMX Group Canada 9 Shenzhen Stock Exchange China 10 Deutsche Bourse Germany

25. Rank Exchanges Economy 11 SIX Swiss Exchange Switzerland 12 Bombay Stock Exchange India 13 National Stock Exchange India 14 Australian Securities Exchange Australia 15 Korea Exchange South Exchange 16 NSDAQ OMX Nordic Exchange Northern Europe Armenia 17 BME Spanish Exchanges Spain 18 BM&F Bo Vespa Brazil 19 JSE Limited South Africa 20 Taiwan Stock Exchange Taiwan

26. LARGEST STOCK EXCHANGE IN INDIA National Stock Exchange Bombay Stock Exchange Calcutta Stock Exchange Cochin Stock Exchange Multi Commodity Exchange Derivative Exchange OTC Exchange Pune Stock Exchange Interconnects Exchange

27. NSE Certifications NCFM: NSE’s Certification in Financial Markets MDP: Management Development Programs @ NSE NISM: National Institution of Securities Markets.

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