STOCK EXCHANGE IN INDIA:

WHAT IS STOCK EXCHANGE :

WHAT IS STOCK EXCHANGE Stock exchange is that place where trading of shares is done in
terms of sale and purchase.

DEFINITION: :

A stock exchange is a mutual organization which provides "trading" facilities for stock brokers
and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the
issue and redemption of securities as well as other financial instruments and capital events
including the payment of income and dividends. DEFINITION:

THE ROLE OF STOCK EXCHANGES: :

Raising capital for businesses. Mobilizing savings for investment. Facilitating company growth.
Profit sharing. Corporate governance. Creating investment opportunities for small investors.
Government capital-raising for development projects. THE ROLE OF STOCK EXCHANGES:

HISTORY STOCK EXCHANGE :

HISTORY STOCK EXCHANGE The first organized stock exchange in India was started in
Bombay. the native share stock brokers association known as the Bombay stock exchange (BSE)
BSE was Asia's oldest stock exchange Ahmedabad stock exchange was started to facilitate
dealings in the shares of textile mills. The Calcutta stock exchange was started in 1908 to
provide a market for shares of plantation and jute mills. The second world war saw great
speculative activity in the country and the number of stock exchanges rose- 7 in 1939 to 21 in
1945. There where also illegal “dabba’ market in which stocks and shares were also bought and
sold

At present, there are twenty one recognized stock exchanges in India which does not include
the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of
India Limited (NSEIL). Government policies during 1980's also played a vital role in the
development of the Indian Stock Markets. There was a sharp increase in number of Exchanges,
listed companies as well as their capital, which is visible from the following table:

Name of Indian stock exchanges: :

Name of Indian stock exchanges: 1.Bombay stock exchange 2.national stock exchange(Mumbai)
3.Banglore stock exchange 4.Utter Pradesh stock exchange(kanpur) 5.Magadh stock
exchange(Patna) 6.Ahmedabad stock exchange 7.vadodara stock exchange(Baroda)
8.Bhubaneswar stock exchange 9.Calcutta stock exchange(kolkata) etc…
BSE: The Bombay Stock Exchange :

BSE: The Bombay Stock Exchange Mumbai's (earlier known as Bombay), Bombay Stock
Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of
the total trading volume in the country. Established in 1875, the exchange is also the oldest in
Asia. Among the twenty-two Stock Exchanges recognized by the Government of India under the
Securities Contracts (Regulation) Act, 1956, it was the first one to be recognized and it is the
only one that had the privilege of getting permanent recognition ab-initio.

NSE: National Stock Exchange :

NSE: National Stock Exchange The National Stock Exchange (NSE), located in Bombay, is
India's first debt market. It was set up in 1993 to encourage stock exchange reform through
system modernization and competition. It opened for trading in mid-1994. It was recently
accorded recognition as a stock exchange by the Department of Company Affairs. The
instruments traded are, treasury bills, government security and bonds issued by public sector
companies

BENEFITS OF STOCK EXCHANGE :

BENEFITS OF STOCK EXCHANGE FROM THE POINT OF VIEW OF COMMUNITY: 1.It

assist the economis development by providing a body of interested investors. 2.it uploads the
position of superior enterprises and assist them in raising further funds. 3.It encourages capital
formation 4.Government can undertake projects of national importance and social value raising
funds through the sale of its securities on the stock exchange. 5.It is the stock exchanges that
central bank of a country can control credit by undertaking open market operations (purchase and
sale of securities)

FROM THE COMPANY POINT OF VIEW :

FROM THE COMPANY POINT OF VIEW 1.A company whose shares quoted on stock
exchange they enjoy better reputation and credit. 2.The market for the shares of such a company
is naturally widened. 3.The market price of securities is likely to be higher in relation to its
earnings, dividends and property values. This raises the bargaining power of the company in the
event of a takeover, merger or amalgamation.
FROM THE INVESTORS POINT OF VIEW :

FROM THE INVESTORS POINT OF VIEW 1.Liquidity of the investment is increased 2.The
securities dealt on a stock exchange are good collateral security for loans. 3.The stock exchange
safeguards interests of investors through strict enforcement of rules and regulations. 4.The
present ROLE PLAYER :

ROLE PLAYER EXTERNAL 1.SHAREHOLDER 2.DEBENTURE HOLDER INTERNAL The

members A.Broker B.Jobber Non-members Authorized clerks Remisers

EXTERNAL PLAYERS :

EXTERNAL PLAYERS SHAREHOLDER Shareholders are divided into two parts 1.Preference
shareholder: Preference shareholder are those which have preferential right to the payment of
dividend during the life time of the company, and a preferential right to the return of the capital
when the company is wound up. CHARACTERISTICS OF PREF.SHAREHOLDER 1.The
dividend on them is fixed by the articles of the company. 2.They get their fixed rate of dividend
before any dividend is distributed among the other class of shareholders. 3.At the time of
winding up of the company, the preference shareholder must be paid back their capital before
anything is paid to the ordinary shareholders.

EQUITY SHARES All shares which are not preference shares are equity shares. These shares do
not have a fixed rate of dividend, they are always irredeemable and their holders have normal
voting rights. They are also the owners of the company. They take dividend

DEBENTURES A document under the company seal which provides for the payment of a
principal sum and interest there on at regular intervals which is usually secured by a fixed or
floating charge on the company’s property or undertaking which acknowledges a loan to the
company.

INTERNAL PLAYERS :

INTERNAL PLAYERS The members of the stock exchange can be divided into two parts:
Broker: He is a commission agent who transacts business in securities on behalf of non-
members. They may have number of sub-brokers to canvass and secure business for them.
Jobber: He is an independent dealer securities. He purchase and sells securities in his own name.
He is not allowed to deal with non-members directly. He works for profit. Non-members : The
following categories of non members are also permitted to enter trading hall and transact
business on the behalf of members. Authorized clerks: They are the assistant or agents. They buy
or sell on the behalf of employers. They can not transact business on their own account.
Remisers: They are the sub-brokers. He is also called the half commission men.

net worth of investments can be easily known by the daily quotations. 5.His risk is considerably
less when he holds or purchases listed securities.
MODESS OF REPURCHASE :
MODESS OF REPURCHASE BASICALLY THERE ARE TWO MODES OF REPURCHASE:
1.Open market repurchase: company makes an announcement regarding the repurchase of a
specified number of shares.The purchases are made anonymously through a broker from the
secondary market over a specified period of time. 2.tender offers: this is basically two types
A.Fixed price tender offers: company announces a fixed price at which it is willing to buy its
shares,a maximum number of shares that it will commit to buy and an expiration date for the
offer.The offer price is premium over the market price to encourage the shareholder.

HOW RATING IS GIVEN TO THE COMPANY? Basically rating is given after see the
company 'image,management quality, assets quality, auditors quality, accounting accuracy.
Rating is not fixed, it may be change. The rating grades are: AAA: HIGHEST SAFTY AA:
HIGH SAFTY A: ADEQUATE SAFTY BBB: MODERATE SAFTY BB: IN ADEQUATE
SAFTY BC&D: HIGH RISK AND DEFAULT

SECURITIES: :

The securities traded on a stock exchange include: shares issued by companies, unit trusts,
derivatives, pooled investment products and bonds. To be able to trade a security on a certain
stock exchange, it has to be listed there. SECURITIES:

HOW ARE INDICES OF SENSEX AND NIFTY CALCULATED??? :

HOW ARE INDICES OF SENSEX AND NIFTY CALCULATED???

How are the SENSEX 30 Stocks are selected? :

How are the SENSEX 30 Stocks are selected? Listing History Trading Frequency Rank based on
the Market Cap (Should be Among top 100) Market Capitalization weight Industry / sector they
belong Historical Record.

SENSEX :

SENSEX SENSEX has been calculated since 1986 and initially it was calculated based on the
Total Market Capitalization methodology and the methodology was changed in 2003 to Free
Float Market Capitalization. Hence, these days, the SENSEX is based on the Free Floating
Market cap of 30 SENSEX Stocks traded on the BSE relative to the base value which is
100(1978-79) and it is calculated for every 15 seconds.

NIFTY :

NIFTY The National Stock Exchange (NSE) is associated with NIFTY and it is also calculated
by the same methodology but with two key differences. 1. Base year is 1995 and base value is
1000. 2. NIFTY is calculated based on 50 stocks. Everything else remains the same in NIFTY
Index calculation as well.
 Mr. S. Ramadorai
Public Interest Director
Vice Chairman
Tata Consultancy Services Ltd

Managing Director &

Chief Executive Officer

Mr.Madhu Kannan

Public Interest Director

Mr. S. N. Menon - IAS (Retd.) Dr. Sanjiv Misra - IAS (Retd.)

Chairman
Nicco Parks & Resorts Ltd

Shareholder Directors

Mr.Vivek Kulkarni-IAS
(Retd.)
Chairman and CEO
Brickwork India Pvt. Ltd.
TOCK EXC
Mr. Sudipto Sarkar Mr. Andreas Preuss Mr. Keki M. Mistry
Senior Advocate Deputy CEO Vice-Chairman &
Kolkata High Deutsche Borse AG CEO
Court HDFC Limited