INTRODUCTION

STOCK MARKET:

Stock market is a place where people buy and sell shares of publicly listed companies. It
offers a platform to facilitate seamless exchange of shares. In simple 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 is important to note that a person can trade in the
stock market only through a registered intermediary known as a stock broker. The buying and
selling of shares take place through electronic medium.

The stock market refers to public markets that exist for issuing, buying, and selling stocks
that trade on a stock exchange or over-the-counter. Stocks, also known as equities, represent
fractional ownership in a company, and the stock market is a place where investors can buy
and sell ownership of such. An efficiently functioning stock market is considered critical to
economic development, as it gives companies the ability to quickly access capital from the
public.

Major Stock Exchanges in India

There are two main stock exchanges in India where majority of the trades take place -
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Apart from these
two 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.

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National Stock Exchange (NSE)

NSE is the leading stock exchange in India where one can buy and sell shares of publicly
listed companies. It was established in the year 1992 and is located in Mumbai. NSE has a
flagship index named as NIFTY50. The index comprises of the top 50 companies based on its
trading volume and market capitalisation. This index is widely used by investors in India as
well as globally as the barometer of the Indian capital markets.

Bombay Stock Exchange (BSE)

BSE is Asia’s first as well as the oldest stock exchange in India. It was established in 1875
and is located in Mumbai. It has a total of 5,295 companies listed out of which 3,972 are
available for trading as of August 21, 2017. BSE Sensex is the flagship index of BSE. It
measures the performance of the 30 largest, most liquid, and financially stable companies
across key sectors.

Two kinds of Share Market:

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Share market is categorized into two namely:

 Primary Market
 Secondary Market

1.Primary Market:

 A company or government raises money by issuing shares in the primary market by

the process of IPO.

 The issue can be either through public or private placement.

 Issue is public when the allotment of shares is made to more than 200 persons; Issue
is private when the allotment is made to less than 200 persons.

 Price of a share can be based on Fixed price or Book building issue; Fixed price is
decided by the issuer and mentioned in offer document; Book building is where the
price of an issue is found out based on the demand from the investors.

2.Secondary Market:

On the other hand, the secondary market is the stock market where existing stocks are
bought and sold by the retail investors through the brokers. It is the secondary market that
controls the price of the stocks. Generally, when we speak about investing or trading at the
stock market, we mean trading at the secondary stock market. It is the secondary market
where we can invest and trade in the stocks to get the profit from our stock market
investment.

What is the minimum age to invest in the Indian stock markets?

As such there is as such no age restriction for investing in stock markets of India.

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It’s just that you should be more than 18 years old to create a Demat account and a trading
account. To open your Demat and trading account a PAN card is a must. And you can only
apply for a PAN card if you are18 years or older.

Investing in the stock market for minors/under 18 years of age

Even if your age is less than 18 years, it is still possible to open Demat and trading accounts.
You can do so by submitting the documents of your guardian.

You can open a Demat and trading account at a brokerage in the name of a minor by the
natural guardians (like parents) or the court-appointed guardian.

After verifying all the necessary documents, the depository participant will allow you to trade
in Indian stock markets.

Can a student invest in stock markets in India?

Yes. If the student is more than 18 years old, then he will be treated as a regular investor. If
he is a minor, then the rules for minors will apply.

Can I invest in the stock market in India Without a Stockbroker?

Any person who wishes to invest in Indian stocks, cannot go directly to the stock markets to
buy or sell shares. Buying and selling of stocks have to be done through stockbrokers.

A stockbroker is an individual or a financial institute, licensed and authorised by SEBI to

trade in stock markets. They also have direct access to the share market. They can act as your
agent in share transactions of companies.

A stockbroker can also offer additional services like advice on stocks, debentures,
government bonds, and listed property trusts, and non-listed investment options. For the
services provided, stockbrokers charge a brokerage fee. Also, a stockbroker can plan,
implement, and monitor your investment portfolio, conduct research, and help you optimize
your returns in stock markets.

AFFECTS OF STOCK MARKET ON INDIAN ECONOMY

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The fluctuating stock prices make equity investments risky. Risk-averse investors usually
prefer to stay away from the share market. Whereas, the risk-takers invest aggressively in
stocks to create wealth in the long-run. The dynamic nature of the share market makes it an
intriguing prospect to venture into. One cannot predict the future performance of the stock
market.

1.Government Policies:
Economy and business are largely affected by Government policies. The Government
has to implement new policies in regard to the economic condition of the country. Any
new change in policy can be profitable for the economy or tighten the grip around. This
creates a possibility of the stock market being affected due to any change or
introduction of the new policy by the Government. For instance, the increase in
corporate taxes impacts the industry severely as their profits will take a hit and at the
same time the stock price will fall.

2.Monetary Policy of RBI and Regulatory Policies of SEBI:

Reserve Bank of India (RBI) is the apex body which regulates the monetary policy in
India. RBI keeps on reviewing its monitory policy. Any increase or decrease in Repo
and Reverse Repo rates impacts the stock prices. If RBI raises the key rates it reduces
the liquidity in the banks. This makes borrowing costlier for them and in turn, they
increase the lending rates. Ultimately, this makes borrowing highly expensive for the
business community and may find it difficult to service their debt obligations.
Investors see it as a barrier in the expansion of business activities and start selling the
shares of the company which reduces its stock price. A reverse of this happens when
RBI follows a dovish monetary policy. Banks reduces the lending rates which leads to
credit expansion. Investors consider it as a positive step and stock price starts
improving.
Similarly, any changes in trading and investment policies done by the Securities
Exchange Board of India (SEBI) who keeps an eye on the entire stock market activities
impacts the performance of the shares of the listed companies on the stock exchanges
(NSE, BSE). Nifty50 and Sensex are two major benchmark indices in India.

3.Exchange Rates:
The exchange rates of Indian Rupee keep fluctuating vis-à-vis other currencies.

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When the rupee hardens in respect to other currencies it causes Indian goods to become
expensive in foreign markets, Companies that are highly affected are the ones involved
in overseas operations. Companies dependent on exports experience a drop in demand
for their goods abroad. Thus, revenue from exports decline and stock prices of such
companies in the home country fall.
On the other hand, softening of rupee vis-à-vis other currencies results in opposite
effect, in this, the stock price of exporters rises whereas, that of importer drops.

4.Interest Rate and Inflation:

Whenever the interest rates go up, banks raise the lending rates which increases the
cost for corporates and individuals alike. The rising cost will tend to create an impact
on the profit levels of the business affecting the stock prices of the company.
Inflation is a surge in the pricing of goods and services over a period of time. High
inflation discourages investment and long-term economic growth. The listed companies
in the stock market may postpone their investment and halt production, leading to
negative economic growth. The fall in the value of money could also lead to a fall in
the value of savings. The stocks of luxurious companies also tend to suffer as nobody
will want to invest in them. This not only adversely affects one's purchasing power but
also the investing power.

5.Foreign Institutional Investors (FIIs) and Domestic Institutional Investors

(DIIs):
FIIs and DIIs activities highly impact the stock market. As they have a prominent
role in the stocks of the company, their entry or exit will create a huge impact on the
equity market and will influence the stock prices.

6.Politics:
Factors like election, budget, government intervention, stability, and other factors
have an impact on the economy and the financial markets. The political events and
budget announcements create tremendous levels of volatility in the market influencing
the stock market deeply.

7.Natural Disasters:
Natural disasters hamper the lives and the market equally. It impacts the company’s

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 performance and the capacity of people to spend the money. This will lead to lower
levels of consumption, lower sales and revenues ultimately hitting the company’s stock
performance.

8.Economic Numbers:
Various economic indicators affect the overall economy, ultimately creating an impact
on the financial market. The movement of oil prices and GDP have a huge impact on
the stock market. A country that is dependent on imported oil, any price change is
likely to impact the economy. The movement of oil prices is one of the key
determinants of the stock market. As and when the prices rise, the expenses will
increase and will lower the buyers’ ability to invest in the market.
Similarly, Gross Domestic Product (GDP) looks at the aspect of total economic
production of the country and its overall economic health. It helps to showcase the
economic developments and the future direction of the market. A healthy GDP status
will create a positive impact on financial markets and investment.

9.Gold Prices and Bonds:

There is no established theory that expresses the relationship between stock price and
gold & Bonds. Usually, stocks are considered a risky investment whereas gold & bonds
are considered as a safe investment. So, at the time of any major crisis in the economy,
investor prefers to invest in safe instruments. As a result, gold and bond prices increase
while the stock price tumbles.

Stock prices of the company may rise or fall due to different factors. Ideally, the investor
should have a solid allocation strategy in place after a thorough understanding of the above
factors. It will ensure that the investor makes the right investment decision and generate
magnificent returns in the long-run.

Effect of COVID-19 Lockdown on Indian Economy | Stock Market:

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Corona virus was first reported at China and due to pandemic emergency, China’s market got
crashed. This wave had impact on Indian Economy because India is closer to China in
geographical condition and most of the electronic goods of India are imported from China,
due to this outbreak China markets are closed and all the factories are shut, so it cannot do
Indo-China Trade.

As we clearly see Indian markets, there was a huge crash in Stock Market. On 28th February,
more than Rs. 5 lakh crores in investor’s wealth were wiped out, due to the Corona virus
panic. The Indian indices registered a 3.5% fall which was the second-biggest fall in the
history of the Sensex. The Indian stock market recovered its losses on 2 nd March, but with
recent cases of coronavirus being reported in India, the markets again ended on a negative.
As of 9th March 2020, the Sensex crashed by over 1900 points in one day. This is considered
the most significant intra-day decline since August 2015.

Automobile and Healthcare stocks

The automobile and healthcare industry are significant stakeholders in the Indian stock
market. If their operations and production get affected due to the Corona virus outbreak and
China’s lock down, it could lead to reduced investor faith in the market.

When we talk about automobile sector, some of the companies which import raw materials
from China, keep a stock aside due to the approaching China’s Lunar New year and it will be
a holiday in China. Companies like this had some supplies and didn’t run out of supplies.

However, if the self-imposed trade restrictions continue, the supply of vital raw materials
could stop, with major companies like Tata Motors, Eicher Motors, Bajaj Auto, M&M, Hero
MotoCorp, and TVS Motors feeling the heat.

Pharmaceutical stocks

Similarly, the pharmaceutical industry in India could be affected. These companies import up
to 67% of the active pharmaceutical ingredients needed for manufacturing their products. It is
common for pharmaceutical companies to stock up on at least 2-3 months’ worth of raw
material so that they won’t face an immediate struggle.

But, if the supply disruption from China continues into the next quarter, these companies
could end up having to import from elsewhere. This will either increase the costs of

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production or reduce supply. Either way, it bears implications on the pharmaceutical
industry’s standing in the stock market.

Crude oil stocks

China’s economic lockdown has reduced its crude oil consumption. The drastically reduced
demand for oil from China means a global reduction in crude oil price. India has registered a
25% decrease in its oil price since the end of January.

As an economy that depends on oil imports to meet 80% of its oil needs, it has come as a
welcome relief for India’s already struggling economy, which also affected the stock market.

Listed companies which reply on crude oil for their production and transportation will benefit
from the drop in crude oil prices. Subsequently, this will improve their standing in the stock
market.