BUSINESS STUDIES
Project
Stock
Exchange
P.M Taran Balram
Introduction
A stock exchange is a marketplace where securities, such
as stocks and bonds, are bought and sold. Bonds are typically
traded Over-the-Counter (OTC), but some corporate bonds can be
traded on stock exchanges.
Stock exchanges allow companies to raise capital and investors to make
informed decisions using real-time price information. Exchanges can be a
physical location or an electronic trading platform. Though people are
typically familiar with the image of the trading floor, many exchanges now
use electronic trading
Securities traded on a stock exchange include stock issued by listed
companies, unit trusts, derivatives, pooled investment products and
bonds. Stock exchanges often function as "continuous auction" markets
with buyers and sellers consummating transactions via open outcry at a
central location such as the floor of the exchange or by using an electronic
system to process financial transactions.
History
Tradable bonds as a commonly used type of security were a more recent
innovation, spearheaded by the Italian city-states of the late medieval and
early Renaissance periods.
Bombay Stock Exchange was started by Prem Chand Roy Chand in
1875.While BSE Limited is now synonymous with Dalal Street, it was not
always so. In the 1850s, five stock brokers gathered together under a
Banyan tree in front of Mumbai Town Hall, where Horniman Circle is now
situated.A decade later, the brokers moved their location to another leafy
setting, this time under banyan trees at the junction of Meadows Street
and what was then called Esplanade Road, now Mahatma Gandhi Road.
With a rapid increase in the number of brokers, they had to shift places
repeatedly. At last, in 1874, the brokers found a permanent location, the
one that they could call their own. The brokers group became an official
organization known as "The Native Share & Stock Brokers Association" in
1875.
Indian Stock Exchange
Indian stock exchange may refer to one of the 7 official operating stock
and commodity exchanges by SEBI or the numerous defunct ones.
Bombay Stock Exchange (BSE) in Mumbai, founded in erstwhile Bombay, is
the oldest and one of the two principal large stock exchanges in India. It
has a market cap of $3.3 trillion.
India Commodity Exchange ICEX short for Indian Commodity Exchange
Limited, is a leading commodity derivatives exchange in India. Established
in 2009, ICEX facilitates trading in a variety of commodities, including
metals, energy, and agricultural products. It provides a platform for price
discovery and risk management for market participants, contributing to
the development of India's commodity markets.
Metropolitan Stock Exchange of India Ltd. (MSE) in Mumbai.
National Stock Exchange of India (NSE) in Mumbai, one of the two principal
large stock exchanges of India,with the Market cap of 3.27 trillion dollars.
National Commodity & Derivatives Exchange Ltd. (NCDEX) in Mumbai.
Multi Commodity Exchange of India Ltd. (MCX) in Mumbai.
Two Major Exchanges of India
BSE Bombay Stock Exchange
BSE provides an efficient and transparent market for trading in equity,
currencies, debt instruments, derivatives, mutual funds. BSE SME is India’s
largest SME platform which has listed over 250 companies and continues
to grow at a steady pace. BSE StAR MF is India’s largest online mutual fund
platform
BSE has been granted approval from Securities and Exchange Board of
India (SEBI) for Administration and Supervision of Investment Advisers
(IAs) under Regulation SEBI (Investment Advisers) Regulation 2013 and
Research Analyst (RAs) under SEBI Regulation (Research Analysts)
Regulations, BSE's popular equity index - the BSE SENSEX - is India's most
widely tracked stock market benchmark index. It is traded internationally
on the EUREX as well as leading exchanges of the BRCS nations (Brazil,
Russia, China and South Africa)
Launch a special platform for trading in SME securities
Introduce Equity Derivatives
Launch a Free Float Index - S&P BSE SENSEX
Launch Exchange Enabled Internet Trading Platform
Obtain ISO certification for a stock exchange
Exclusive facility for financial training – BSE Institute Ltd
NSE NATIONAL STOCK EXCHANGE
NSE (National Stock Exchange) is an institution of national importance with
international stature. We are a trusted market infrastructure institution
with high standards of corporate governance.
A homegrown brand with a global vision, NSE is counted as one of the
world’s largest exchanges and a catalyst for driving India’s economic
growth. NSE was the first exchange in India to implement electronic or
screen-based trading which began its operations in 1994; a pioneer in
technology which ensures the reliability and performance of its systems
through a culture of innovation and investment in technology. NSE
operates a market ecosystem to bring in transparency & efficiency.
Robust state-of-the-art technology platform offers high levels of
robustness, safety and resilience for trading and investment opportunities
across all asset classes and for all categories of investors. NSE is focused
on investor protection and disciplined development of the Indian capital
market landscape
NSE was incorporated in 1992. It was recognised as a stock exchange by
SEBI in April 1993 and commenced operations in 1994 with the launch of
the wholesale debt market, followed shortly after by the launch of the cash
market segment
NSE is committed to core values - Integrity, Customer Focused Culture,
Trust, Respect and Care for the Individual, Passion for Excellence,
Teamwork.
Terms Of Stock Market
Annual Report
An annual report is a yearly report that every company prepares to
impress the shareholders of their company. The annual report consists of
lots of information about a company, from cash flow to management
strategy.
Several people read the annual report to look at the company’s solvency
and judge their financial position
Bear Market
It is a market where investors talk about the stock market performing in a
downward trend, or it is a certain period where the prices of multiple
stocks are falling.
Broker
A broker is a person who buys and sells investment on your behalf and, in
exchange, takes a certain amount of money called commission or fee.
Dividend
A dividend means when the company earns profit, a particular portion of
their earnings is distributed to shareholders or the people who own the
company stock on a quarterly or annual basis. Not every company pays
dividends, and if you’re after penny stocks, you’ll likely not get any
dividends.
Sensex
Sensex is a figure that indicates all the relative share prices that are listed
on the Bombay Stock Exchange.
Nifty
The Nifty 50 Index, called the National Stock Exchange of India, is the
primary and brad based stock market index for the equity market of India.
The Nifty 50 consists of 50 Indian company stocks in 12 different sectors,
and it is one out of two stock indices that are mainly used in the stock
market.
Share Market
A share market is a market in which shares of a particular company are
purchased and sold. The stock market is a definite example of a share
market.
Bull Market
It is a market where investors talk about the stock market performing in an
upward trend, or it is a certain period where the prices of multiple stocks
are increasing.
Intra-Day Trading
Intraday trading means buying and selling your desired stocks on the same
day so that before trading hours get over, all your trading positions will be
closed within the same day
Portfolio
The portfolio is a collection of all the investments that an investor has
made right from purchasing a share for the first time.
Liquidity
Liquidity means how stocks can be sold off quickly. Shares that get sold
consist of high trade volumes quickly and are called highly liquid.
IPO
IPO means a private company is turning into a public company by issuing
its shares to the public for the first time. In the case of an IPO, the investor
can buy the shares directly from the company
Derivatives: Financial securities whose value depends on, or derives from,
an underlying asset or group of assets.
Futures: Contracts to buy or sell an asset at a predetermined future date
and price.
Options: Contracts that give the buyer the right, but not the obligation, to
buy or sell an underlying asset at a set price before a certain date.
Short Selling: The sale of a security not owned by the seller, typically
borrowed and then bought back later at a lower price. Read How to Make
Money from Short Selling to better understand short selling.
Margin Trading: Borrowing funds from a broker to purchase stocks, using
the bought stocks as collateral.
Prerequisites Of Stock Trading
. Open a demat account
To enter the share market as a trader or an investor, you must open a
demat or a brokerage account. Without a demat account, you cannot trade
in the stock market. A demat account works like a bank account where you
hold money for trading. The securities you buy are maintained
electronically in the demat account.
2. Understand stock quotes
Stock prices move as per demand and supply, economic reports,
fundamental factors like company profitability and trader sentiment. By
gaining knowledge about these aspects, you can enhance your
understanding of stocks and stock markets. This will help you determine
the right price to enter or exit a trade.
3. Bids and asks
A bid price is the maximum price you are willing to pay to buy a stock. The
ask price is just the opposite. It represents the minimum price at which the
seller is willing to sell the stock. To ensure a profitable trade, it is important
to decide on the correct bid and ask price.
4. Fundamental and technical knowledge of stock
Study the fundamental and technical analysis of the stock to plan your
trading.Fundamental analysis evaluates security by measuring its intrinsic
value. It considers various dynamics, including earnings, expenses, assets
and liabilities. Technical analysis evaluates the stock based on its past price
and volume chart to predict future potential.
5. Learn to stop the loss
Volatility is an implicit characteristic of the share market. So, a beginner
needs to understand how to prevent a heavy loss. While executing a trade,
you must set a stop loss price to minimise the loss. Failure to put a stop to
loss may heavily affect your capital.
6. Ask an expert
The share market is unpredictable. Nobody can predict a stock price
accurately. However, taking advice from an expert helps beginners make
the right trading decision. It guides you to make the right choice.
7. Start with safer stocks
A big capital loss in the beginning may bring your confidence down. A wise
choice is to start with the less volatile stocks. This may give you a slow
start, but these stocks are more likely to sustain a good performance even
in adverse conditions.
Linked Bank Account
As you are choosing to invest in the securities market, you will be buying
and selling securities over time through your trading account. Linking your
bank account to your trading account ensures that money flows in and out
of your account seamlessly while you trade. Linking a bank account is
mandated by the regulator SEBI to bring transparency in trading.
So, securities are purchased through a trading account, held in a Demat
account, and payments are done through the linked bank account.
Trading Account
So, a Demat account is a must to hold the securities you buy. To buy and
sell shares, you need a trading account. A trading account is a common
platform to purchase or sell securities. You can open a trading account
with a registered broker as you cannot directly buy or sell securities on any
stock exchange.
To open a trading account with a registered broker, either you need to link
your existing Demat account with your trading account or you can open a
new Demat account.
SEBI Securities and Exchange Board Of India
SEBI or the Securities and Exchange Board of India was first established as
a no-statutory body in the year 1988. It was established with the aim to
regulate the Indian securities and capital markets. SEBI gained statutory
powers and was declared an autonomous body when the SEBI Act of 1992
was passed by the parliament on 30th January 1992.
SEBI is a regulatory body under the Ministry of Finance division of
government of India. SEBI has its head office located in Bandra Kurla
Complex, Mumbai. The SEBI has regional offices in North, South, West, and
East regions of the country. These offices are situated in New Delhi,
Chennai, Ahmedabad, and Kolkata respectively.
Before SEBI, the Indian financial markets were regulated by the Controller
of Capital Issue which was established under the Capital Issues Act of 1947
Functions of SEBI
SEBI was established for performing various functions. Some of the
primary functions of SEBI include:
Protecting the interest of investors in the Indian capital markets.
Registering and regulating stockbrokers, investment advisors, portfolio
managers, merchant bankers, underwriters, registrars, share transfer
agents and other associated professionals and entities.
Inspecting the books of accounts of recognized stock exchanges and
financial intermediaries.
Development and evolution of the Indian Securities Markets to the latest
standards.
Enforcing various rules and regulations for smooth functioning of the
capital markets and also approving by-laws of stock exchanges.
Prohibit unfair and fraudulent trade practices in the securities markets.
Provide a Complaint and Redressal Platform (SCORES) for investors and
other players of the Indian financial markets.
Regulating the operations of intermediaries like depositories, credit rating
agencies, foreign portfolio investors, custodians etc.
Portfolio
Defined as a collection of financial assets and investment tools that are
held by an individual, a financial institution or an investment firm. To
develop a profitable portfolio, it is essential to become familiar with its
fundamentals and the factors that influence it.
Imaginary Portfolio
TCS Nestle Reliance Axis ITC
Total sum invested = Rs 50000, in 5 different companies of 96 shares
TCS
Tata Consultancy Services (TCS) is an Indian multinational technology
company specializing in information technology services and consulting.
Headquartered in Mumbai, it is a part of the Tata Group and operates in
150 locations across 46 countries. It is the second-largest Indian company
by market capitalization.
As of 2024, TCS is ranked seventh on the Fortune India 500 list. In
September 2021, TCS recorded a market capitalization of US$200 billion,
making it the first Indian IT company to achieve this valuation.In 2012, it
was the world's second-largest user of U.S. H-1B visas.
In 2024, parent company Tata Sons owned 71.74% of TCS, and close to
80% of Tata Sons' dividend income came from TCS.
Nestle India
The company was incorporated on 28 March 1959 and was promoted by
Nestle Alimentana S.A. via a subsidiary, Nestle Holdings Ltd. As of 2020,
the parent company Nestlé owns 62.76% of Nestlé India.The company has
9 production facilities in various locations across India.
Nestlé India is one of the largest players in India's fast-moving consumer
goods sector and has a long history in the country.
Nestlé India Limited was incorporated at New Delhi on 28 March 1959 and
was promoted by Nestle Alimentana S.A. via a wholly owned subsidiary,
Nestle Holdings Ltd., Nassau, Bahamas.
The company built their first production facility in 1961 at Moga, in the
Indian state of Punjab.
Nestlé's second plant was set up at Choladi in Tamil Nadu, the plant was
built primarily to process the tea grown in the area.
Reliance
Reliance Industries Limited is an Indian multinational conglomerate
headquartered in Mumbai, India. Its businesses include energy,
petrochemicals, natural gas, retail, entertainment, telecommunications,
mass media, and textiles. Reliance is the largest public company in India by
market capitalisationand revenue,and the 100th largest company
worldwide.It is India's largest private tax payerand largest exporter,
accounting for 7% of India's total merchandise exports. The company's
equity shares are listed on the National Stock Exchange of India Limited
(NSE) and the BSE Limited. The Global Depository Receipts (GDRs) issued
by the company are listed on London Stock Exchange.It has issued approx.
5.6 crore (56 million) GDRs wherein each GDR is equivalent to two equity
shares of the company. Approximately 3.46% of its total shares are listed
on Luxembourg Stock Exchange
Axis Bank
Axis Bank Limited, formerly known as UTI Bank (1993–2007), is an Indian
multinational banking and financial services company headquartered in
Mumbai, Maharashtra. It is India's third largest private sector bank by
assets and fourth largest by market capitalisation. It sells financial services
to large and mid-size companies, SMEs and retail businesses. Axis Banks's
equity shares are listed on the Bombay Stock Exchange (BSE) and National
Stock Exchange of India (NSE). The company's global depository receipts
(GDRs) are listed on the London Stock Exchange.The Bonds issued by the
bank under the MTN program are listed on the Singapore Stock Exchange.
ITC
TC Limited is an Indian conglomerate company, headquartered in
Kolkata.It has a presence across six business segments, namely FMCG,
hotels, agribusiness, information technology, paper products, and
packaging.It generates a plurality of its revenue from tobacco products.
In terms of market capitalization, ITC is the second-largest FMCG
company in India and the third-largest tobacco company in the world.
TC's equity shares are listed on Bombay Stock Exchange (BSE), National
Stock Exchange of India (NSE) and Calcutta Stock Exchange (CSE).The
company's Global Depository Receipts (GDRs) are listed on the
Luxembourg Stock Exchange. ITC is a constituent of two major stock
market indices of India: BSE SENSEX and NIFTY 50 of NSE.In July 2023, ITC
Ltd.'s board of directors approved in principle the demerger of its hotel
business and the formation of a wholly owned subsidiary called ITC Hotels.
Conclusion
