An Introduction to the Stock Market
This chapter can assist you perceive the essential ideas of a stock exchange, stock brokers, completely different market participants and also the restrictive body that regulates the stock exchange.
Stock market could be a place wherever individuals buy/sell shares of publically listed corporations. It offers a platform to facilitate seamless exchange of shares. In straightforward terms, if A wants to sell shares of Reliance Industries, the stock market will help him to meet the seller who is willing to buy Reliance Industries. However, it’s vital to notice that someone will interchange the stock exchange solely through a registered intercessor called a stock broker. The shopping for and commerce of shares come about through electronic medium. We will discuss a lot of concerning the stock brokers at a later purpose.
Major Stock Exchanges in India
There ar 2 main stock exchanges in Republic of India wherever majority of the trades come about – city stock market (BSE) and also the National stock market (NSE). Apart from these 2 exchanges, there are some other regional stock exchanges like Bangalore Stock Exchange, Madras Stock Exchange etc but these exchanges do not play a meaningful role anymore.
National Stock Exchange (NSE)
NSE is that the leading stock market in Republic of India wherever one will buy/sell shares of publically listed corporations. It was established in the year 1992 and is located in Mumbai. NSE has a flagship index named as NIFTY50. The index contains of the highest fifty corporations supported its commercialism volume and market capitalization. This index is wide utilized by investors in Republic of India additionally as globally because the measuring system of the New Delhi markets.
Bombay Stock Exchange (BSE)
BSE is Asia’s initial additionally because the oldest stock market in Republic of India. It was established in 1875 and is located in Mumbai. It has a complete of ~5,295 companies listed out of which ~3,972 are available for trading as on August 21, 2017. BSE Sensex is the flagship index of BSE. It measures the performance of the thirty largest, most liquid and financially stable companies across key sectors.
Different Market Participants
There ar heaps of people and company homes WHO interchange a stock exchange. Anyone WHO buys/sells shares in a very stock exchange is termed as a market participant. Some of the classes of market participants ar as follows:
- Domestic Retail Participants-These ar people WHO interact within the markets.
- NRI’s and Overseas Citizen of India (OCI)-These are people of Indian origin who reside outside India.
- Domestic Institutions-These ar massive company entities primarily based in Republic of India (for example: LIC of India).
- Domestic plus Management corporations (AMC)-The market participants during this class would be open-end investment company corporations like HDFC AMC, SBI open-end investment company, DSP Black Rock and lots of a lot of similar entities.
- Foreign Institutional Investors-FIIs ar Non-Indian company entities like foreign plus management corporations, hedge funds and different investors.
Regulator of the Indian Stock Market
Securities Exchange Board of India
Securities Exchange Board of Republic of India (SEBI) is that the restrictive body of the Indian Stock Markets. The main objective of SEBI is to safeguard the interest of retail investors, promote the development of stock exchanges, and regulate the activities of financial intermediaries and investors in the market. SEBI ensures the following:
- The stock exchanges (BSE and NSE), brokers and sub-brokers conduct their business fairly.An Introduction to the Stock Market
- Corporate homes mustn’t use markets as a mean to below the belt profit themselves
- Small retail investors’ interest is protected.
- Large investors with immense money mustn’t manipulate markets.
Types of Financial Intermediaries in the Stock Market
From the time associate capitalist places his order to shop for shares until the time it’s transferred to his Demat account, a number of corporate entities are involved to ensure smooth transaction. These entities ar called monetary intermediaries and that they work in step with the foundations and rules prescribed by SEBI. Some of the financial intermediaries are discussed below: An Introduction to the Stock Market
A stock broker conjointly called a dealer could be a skilled individual WHO buys/sells shares on behalf of its purchasers. A stock broker is registered as a commercialism member with the stock market and holds a stock broking license. They operate under the guidelines prescribed by SEBI. An individual has to open trading/DEMAT account to interact within the monetary market.
Depository and Depository Participants
A installation could be a monetary intercessor that gives the service of DEMAT account. A DEMAT account can have all the shares that associate capitalist owns in electronic format. In India, there ar solely 2 depositaries that offers DEMAT account services – National Securities installation restricted (NSDL) and Central installation Services (India) restricted (CDSL). An capitalist cannot directly head to the depositary to open the DEMAT account. He needs to appoint a Depository Participant (DP). According to SEBI tips, banks, financial institutions and members of stock exchanges registered with SEBI can become DPs.An Introduction to the Stock Market
Banks help to transfer funds from a bank account to a trading account. The consumer has to unconditionally mention that checking account must be connected to the commercialism account to the stock broker at the time of gap the commercialism account.
National Security Clearing Corporation Ltd (NSCCL) and Indian Clearing Corporation Ltd (ICCL)
NSCCL and ICCL ar 100% subsidiaries of National stock market and city stock market severally. They guarantee warranted settlement of transactions carried available exchanges. The clearing corporation ensures there aren’t any defaults either from patrons or sellers aspect.
DEMAT Account and Trading Account
In order to interchange equities, it is mandatory to have a DEMAT account as well as the Trading account.
DEMAT account or dematerialized account permits holding shares in electronic type rather than taking physical possession of certificates. It is obligatory to own a DEMAT account to interchange shares. DEMAT account holds all the investments a private makes in shares, exchange listed funds, bonds, government securities, and mutual funds in one place.An Introduction to the Stock Market