What is a stock market/ exchange ?

Stock Exchanges are structured marketplace where affiliates of the union gather to sell firm's shares
and other securities. India Stock Exchanges can either be a conglomerate/ firm or mutual group. The
affiliates act as intermediaries to their patrons or as key players for their own accounts.

Stock Exchanges in India also assist the issue and release of securities and other monetary tools
incorporating the fortification of revenues and dividends. The book keeping of the trade is
centralized but the buying and selling is associated to a particular place as advanced marketplaces
are mechanized. The buying and selling on an exchange is only open to its affiliates and brokers.

Different Stock Exchanges in India :

a) National Stock Exchange (NSE) of India
b) Bombay Stock Exchange (BSE) of India
c) Regional Stock Exchanges (RSE) of India

 Ahmedabad Stock Exchange

 Bangalore Stock Exchange
 Bhubaneshwar Stock Exchange
 Calcutta Stock Exchange
 Cochin Stock Exchange
 Coimbatore Stock Exchange
 Delhi Stock Exchange
 Guwahati Stock Exchange
 Hyderabad Stock Exchange
 Jaipur Stock Exchange
 Ludhiana Stock Exchange
 Madhya Pradesh Stock Exchange
 Madras Stock Exchange
 Magadh Stock Exchange
 Mangalore Stock Exchange
 Meerut Stock Exchange
 OTC Exchange Of India
 Pune Stock Exchange
 Saurashtra Kutch Stock Exchange
 Uttar Pradesh Stock Exchange
 Vadodara Stock Exchange

National Stock Exchange (NSE) of India

Integrated in November 1992, the National Stock Exchange of India (NSE) was initially a
tariff forfeiting association. In 1993, the exchange was certified under Securities Contracts
(Regulation) Act, 1956 and in June 1994 it started its business functioning in the Wholesale
Debt Market (WDM). The Equities division of NSE began its operations in 1994 while in
2000 the corporation incorporated its Derivatives division.

Some NSE Figures and Facts

 The equities division of NSE covers around 300 Indian cities, while its derivates
section covers 305 cities.
 The number of securities accessible for buying and selling in NSE exchange in its
equities and derivates section are 1,383 and 3,143 respectively.
 The total amount of Settlement warranty fund in NSE equities division and derivates
section are Rs 2,085.25 crores and Rs 6,018.30 crores respectively.
 The daily turnover of NSE equities division is Rs 10,336.52 crores, for derivates
segment is Rs 32,809.96 crores and for Whole sale debt division is Rs 13,911.57
crores.
 NSE uses satellite communication expertise to strengthen contribution from around
400 Indian cities.
 The exchange administers around rs 1 million of buying and selling on daily basis.
 It is one of the biggest VSAT incorporated stock exchange across the world.
 Currently more than 8,500 customers are doing online exchange business on NSE
application.

NSE Corporate Office

National Stock Exchange of India Ltd.

Exchange Plaza
Plot no. C/1, G Block
Bandra-Kurla Complex
Bandra (E)
Mumbai - 400 051
India
E-mail: cc_nse@nse.co.in

Bombay Stock Exchange (BSE) of India

The oldest stock market in Asia, BSE stands for Bombay Stock Exchange and was initially
known as "The Native Share & Stock Brokers Association." Incorporated in the 1875, BSE
became the first exchange in India to be certified by the administration. It attained a
permanent authorization from the Indian government in 1956 under Securities Contracts
(Regulation) Act, 1956.

Over the year, the exchange company has played an essential part in the expansion of Indian
investment market. At present the association is functioning as corporatised body integrated
under the stipulations of the Companies Act, 1956.

Some BSE Figures and Facts

  BSE exchange was the first in India to launch Equity Derivatives, Free Float Index,
USD adaptation of BSE Sensex and Exchange facilitated Internet buying and selling
policy
 BSE exchange was the first in India to acquire the ISO authorization for supervision,
clearance & Settlement
 BSE exchange was the first in India to have launched private service for economic
training
 Its On-Line Trading System has been felicitated by the internationally renowned
standard of Information Security Management System.

BSE Corporate Office

Bombay Stock Exchange Limited

Phiroze jeejeebhoy towers
Dalal Street,
Mumbai- 400001,
India
Website: www.bseindia.com

Regional Stock Exchanges (RSE) of India

The Regional Stock Exchanges in India started spreading its business operation from 1894. The first
RSE to start its functioning in India was Ahmedabad Stock Exchange (ASE) followed by Calcutta Stock
Exchange (CSE) in 1908.

The stock exchange in India witnessed a flourishing phase in 1980s with the incorporation of many
exchanges under it. In early 60s, it has only few certifies RSEs under it namely Hyderabad Stock
Exchange, Indore Stock Exchange, Madras Stock Exchange, Calcutta Stock Exchange and Delhi Stock
Exchange. The recent to join the list was Meerut Stock Exchange and Coimbatore Stock Exchange.

HISTORY
History of the Indian Stock Market - The Origin
One of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old
history.

18th East India Company was the dominant institution and by end of the century,
Century busuness in its loan securities gained full momentum
1830's Business on corporate stocks and shares in Bank and Cotton presses started in
Bombay. Trading list by the end of 1839 got broader
1840's Recognition from banks and merchants to about half a dozen brokers
1850's Rapid development of commercial enterprise saw brokerage business attracting
more people into the business
1860's The number of brokers increased to 60
1860-61 The American Civil War broke out which caused a stoppage of cotton supply
 from United States of America; marking the beginning of the "Share Mania" in
India
1862-63 The number of brokers increased to about 200 to 250
1865 A disastrous slump began at the end of the American Civil War (as an example,
Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs.
87)

Pre-Independance Scenario - Establishment of Different Stock Exchanges

1874 With the rapidly developing share trading business, brokers used to gather at a
street (now well known as "Dalal Street") for the purpose of transacting
business.
1875 "The Native Share and Stock Brokers' Association" (also known as "The
Bombay Stock Exchange") was established in Bombay
1880's Development of cotton mills industry and set up of many others
1894 Establishment of "The Ahmedabad Share and Stock Brokers' Association"
1880 - 90's Sharp increase in share prices of jute industries in 1870's was followed by a
boom in tea stocks and coal
1908 "The Calcutta Stock Exchange Association" was formed
1920 Madras witnessed boom and business at "The Madras Stock Exchange" was
transacted with 100 brokers.
1923 When recession followed, number of brokers came down to 3 and the Exchange
was closed down
1934 Establishment of the Lahore Stock Exchange
1936 Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange
1937 Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.)
Limited led by improvement in stock market activities in South India with
establishment of new textile mills and plantation companies
1940 Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited
was established
1944 Establishment of "The Hyderabad Stock Exchange Limited"
1947 "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks
and Shares Exchange Limited" were established and later on merged into "The
Delhi Stock Exchange Association Limited"

Post Independance Scenario

The depression witnessed after the Independance led to closure of a lot of exchanges in the country. Lahore
stock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock
Exchange. Bangalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most
of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities
Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were:

1. Bombay
2. Calcutta
3. Madras
4. Ahmedabad
5. Delhi
 6. Hyderabad
7. Bangalore
8. Indore

Trading Pattern of the Indian Stock Market

Indian Stock Exchanges allow trading of securities of only those public limited companies
that are listed on the Exchange(s). They are divided into two categories:

Types of Transactions
The flowchart below describes the types of transactions that can be carried out on the Indian
stock exchanges:
Indian stock exchange allows a member broker to perform following activities:

1. Act as an agent,
2. Buy and sell securities for his clients and charge commission for the same,
3. Act as a trader or dealer as a principal,
4. Buy and sell securities on his own account and risk.

Over The Counter Exchange of India (OTCEI)

Traditionally, trading in Stock Exchanges in India followed a conventional style where
people used to gather at the Exchange and bids and offers were made by open outcry.

This age-old trading mechanism in the Indian stock markets used to create many functional
inefficiencies. Lack of liquidity and transparency, long settlement periods and benami
transactions are a few examples that adversely affected investors. In order to overcome these
inefficiencies, OTCEI was incorporated in 1990 under the Companies Act 1956. OTCEI is
the first screen based nationwide stock exchange in India created by Unit Trust of India,
Industrial Credit and Investment Corporation of India, Industrial Development Bank of India,
SBI Capital Markets, Industrial Finance Corporation of India, General Insurance Corporation
and its subsidiaries and CanBank Financial Services.

Advantages of OTCEI

1. Greater liquidity and lesser risk of intermediary charges due to widely spread trading
mechanism across India
2. The screen-based scripless trading ensures transparency and accuracy of prices
3. Faster settlement and transfer process as compared to other exchanges
4. Shorter allotment procedure (in case of a new issue) than other exchanges

National Stock Exchange

In order to lift the Indian stock market trading system on par with the international standards.
On the basis of the recommendations of high powered Pherwani Committee, the National
Stock Exchange was incorporated in 1992 by Industrial Development Bank of India,
Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of
India, all Insurance Corporations, selected commercial banks and others.

NSE provides exposure to investors in two types of markets, namely:

1. Wholesale debt market

2. Capital market

Wholesale Debt Market - Similar to money market operations, debt market operations
involve institutional investors and corporate bodies entering into transactions of high value in
financial instrumets like treasury bills, government securities, commercial papers etc.

Trading at NSE

1. Fully automated screen-based trading mechanism

2. Strictly follows the principle of an order-driven market
3. Trading members are linked through a communication network
4. This network allows them to execute trade from their offices
5. The prices at which the buyer and seller are willing to transact will appear on the
screen
6. When the prices match the transaction will be completed
7. A confirmation slip will be printed at the office of the trading member

Advantages of trading at NSE

1. Integrated network for trading in stock market of India

2. Fully automated screen based system that provides higher degree of transparency
3. Investors can transact from any part of the country at uniform prices
4. Greater functional efficiency supported by totally computerized network
Below is the detail comparison of major Online Stock Market Trading websites in India. This
comparison is to help investor to take calculated decision while searching for new trading
portal.
1. ICICIDirect 

2. Sharekhan 

3. Indiabulls 

4. 5Paisa 

5. Motilal Oswal Securities 

6. HDFC Securities 

7. Reliance Money 

8. IDBIPaisaBuilder 

9. Religare 

10. Geojit 

11. Networth Stock Broking 

12. Kotak Securities 

13. Standard Chartered-STCI Capital Markets Ltd 

14. Angel Trade 

15. HSBC InvestDirect 

8. IDBIPaisaBuilder

Demat Account Definition

Demat refers to a dematerialised account.

Though the company is under obligation to offer the securities in both physical and demat mode, you have
the choice to receive the securities in either mode.

If you wish to have securities in demat mode, you need to indicate the name of the depository and also of
the depository participant with whom you have depository account in your application.

It is, however desirable that you hold securities in demat form as physical securities carry the risk of being
fake, forged or stolen.

Just as you have to open an account with a bank if you want to save your money, make cheque payments etc,
Nowadays, you need to open a demat account if you want to buy or sell stocks.

HOW TO OPEN A DEMAT ACCOUNT ?

Opening an individual Demat account is a two-step process: You approach a DP and fill up the Demat
account-opening booklet. The Web sites of the NSDL and the CDSL list the approved DPs. You will then
receive an account number and a DP ID number for the account. Quote both the numbers in all future
correspondence with your DPs.

So it is just like a bank account where actual money is replaced by shares. You have to approach the DPs
(remember, they are like bank branches), to open your demat account. Let's say your portfolio of
shares looks like this: 150 of Infosys, 50 of Wipro, 200 of HLL and 100 of ACC. All these will show in your
demat account. So you don't have to possess any physical certificates showing that you own these shares.
They are all held electronically in your account. As you buy and sell the shares, they are adjusted in
your account. Just like a bank passbook or statement, the DP will provide you with periodic statements of
holdings and transactions.

Is a demat account a must? Nowadays, practically all trades have to be settled in dematerialised
form. Although the market regulator, the Securities and Exchange Board of India (SEBI), has allowed
trades of upto 500 shares to be settled in physical form, nobody wants physical shares any more.

So a demat account is a must for trading and investing.

Most banks are also DP participants, as are many brokers.

You can choose your very own DP.

To get a list, visit the NSDL and CDSL websites and see who the registered DPs are.

A broker is separate from a DP. A broker is a member of the stock exchange, who buys and sells shares on
his behalf and on behalf of his clients.

A DP will just give you an account to hold those shares.

You do not have to take the same DP that your broker takes. You can choose your own.

     

Banks are also advantageous because of the number of branches they have. Some banks give the option of
opening a Demat account in any branch, while others restrict themselves to a selected set of branches.

Some private banks also provide online access to the Demat account. So, you can check on your holdings,
transactions and status of requests through the net banking facility. A broker who acts as a DP may not be
able to provide these services.

DEMAT ACCOUNT OPENING COST AND OTHER CHARGES

The cost of opening and holding a Demat account. There are four major charges usually levied on a Demat
account: Account opening fee, annual maintenance fee, custodian fee and transaction fee. All the charges
vary from DP to DP.

Depending on the DP, there may or may not be an opening account fee. Private banks, such as ICICI Bank,
HDFC bank and UTI bank, do not have it. However, players such as Karvy Consultants and the State Bank
of India charge it. But most players levy this when you re-open a Demat account, though the Stock Holding
Corporation offers a lifetime account opening fee, which allows you to hold on to your Demat account over
a long period. This fee is refundable.

Annual maintenance fee: This is also known as folio maintenance charges, and is generally levied in
advance.

Custodian fee: This fee is charged monthly and depends on the number of securities (international
securities identification numbers – ISIN) held in the account. It generally ranges between Rs. 0.5 to Rs. 1 per
ISIN per month.

DPs will not charge custody fee for ISIN on which the companies have paid one-time custody charges to the
depository.

Transaction fee: The transaction fee is charged for crediting/debiting securities to and from the account on
a monthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC Bank and ICICI
Bank peg the fee to he transaction value, subject to a minimum amount.

The fee also differs based on the kind of transaction (buying or selling). Some DPs charge only for debiting
the securities while others charge for both. The DPs also charge if your instruction to buy/sell fails or is
rejected.

In addition, service tax is also charged by the DPs.