Share market or exchange is a place
where stocks and shares and other long term investments are bought and sold. it
is a market where savers can buy and dispose of securities as and when
they like. In capitalist economics joint stock companies issue stocks and bonds
to raise capital. For an investor who puts his savings in a company cannot get
the amount back from directly. The stock exchange facilities the sale and
purchase of these securities. Thus stock exchange is an organization for
orderly buying and selling of listed (approved) existing securities (listed
securities are those that appear on that appear list of the stock exchange).the
organization includes an association of persons or firms to regulate and
supervise all transaction. An organized stock exchange is an auction type
market where pieces of trades stocks are settled by open bids and offers on the
floor of the exchange. In a stock exchange only members-stock brokers-are
entitled to transact business. The client will place his order with the broker
either to buy or to sell or both at fixed prices or at best market prices. As
soon as the order is received from the client, the broker approaches that part
of the stock exchange in which the particular share is traded. As soon as the
deal is transacted, the details of the transaction are recorded and a contract
is prepared and sent to the client. The contract note gives details of the
security bought or sold, the price, the broker’s commission etc. Accordingly
settlement is done.
two types of transactions in a stock exchange, viz, investment transactions and
speculative transactions. Investment transactions refer to purchase or sale of
securities undertaken with a long-term prospect relating to their yield and
price. It involves the actual delivery of security and payment of its full
price. In a speculative transaction the delivery of the security and the
payment of the full price is rare, instead only the differences in prices a
OBJECTIVES OF THE STUDY
To analyze the view of
To make understand the
process of future Indian stock market.
To know the investment
pattern of equity share traders and people.
To understand the concept
of Indian stock market.
To analyses the different
stock market in India.
To discuss regarding in
Indian stock market.
FUNCTION OF STOCK MARKET
The main function of the stock
market is to provide liquidity to securities. Liquidity of an asset means its
easy convertibility into cash at short notice and with minimal loss of capital
value. This liquidity is provided by a continuous market for securities.
The function of providing liquidity to old stocks is important for attracting
new finance. It encourages prospective investors to invest in securities, both
old and new. In the absence of any organized securities market this will not be
easily feasible. Many people make investment in new issues in the hope of
making capital gain later. With their funds released from sale of their old
holdings, they can move into other issues coming into the market. Thus
investment in new issues in new issues is facilitated by the stock market.
The new investments are influenced
in another way by what is happening in the stock market. Stock market acts as
an important indicator of the investment climate in the economy. When stock
prices are raising and the volume of trading goes up, new issues also tend to
increase. This is a good time for companies to come forward with new issues.
When the secondary market is inundated the primary market also languishes.
The stock exchange provides a
mechanism for fixing the prices of securities through the interaction of supply
and demand. Stock market prices the means for evaluation of securities in terms
of their real worth in the market. The prices quoted make a market evaluation
of his holdings from time to time it also provides the tax authorities with a
criterion for assessing capital gains tax, wealth tax and estate tax.
STOCK MARKET & SEBI
organized stock exchange in India started in Bombay towards the latter part of the
19th century. With both B.S.E and N.S.E., Mumbai leads the stock
market operations in the country. The funding of the stock exchanges in India
has shown many weaknesses, with long delays, lack of transparency in procedures
and vulnerability to price rigging and insider trading. To counter these
shortcomings and deficiencies to regulate the capital market, the government of
India set up the Securities Exchange Board of India (SEBI) in 1988. SEBI was
authorized to regulate all merchant banks on issue activities, lay guidelines
and supervise and regulate the working of mutual funds and oversee the working
of stock exchanges in India. SEBI in consultation with the government has taken
a number of steps to introduce improved practices and greater transparency in
the capital markets in the interests of involving the public and the healthy
development of the capital markets. It has started the process of registration
of intermediaries such as brokers and sub-brokers. It has also made rules for
making client/broker relationships more transparent. It has also modified
regulation on insider trading.
SEBI has been
empowered to take complaints in courts and to notify its regulation. It is
proved with regularity powers over companies in the issuance of capital. The
transfer of securities and other related matters. It is also empowered to
impose monetary penalties on capital markets intermediaries and other
participants further it has to someone the attendance of and call for documents
from all categories of market intermediaries.
EVOLUTION OF STOCK EXCHANGES
major stock exchange was established in Amsterdam in 1602 in order to trade the
stocks of the Dutch East India Company. Since then, the spread of stock markets
globally has been spectacular. In 1980, of the 154 member-countries in the
United Nations (UN), 59 countries had a stock exchange and another 13 were
covered by a regional stock exchange arrangement, such as East Caribbean
Securities Exchange and West Africa Regional Exchange. Currently, only 21 countries
with a population of over one million do not have a stock exchange and notable
among them are Ethiopia, Congo, North Korea, Yemen, Madagascar, Angola, Chad,
THE MARKET AND THE SECTORS: NATIONAL STOCK EXCHANGE
The NSE is
the stock exchange located at Mumbai, India. In terms of market capitalization,
it is the 11th index in the world. By daily turnover and number of
traders, for both equities and derivative trading it is the largest index in
India. NSE has a market capitalization of around US$1 trillion and over1652
listings as of July 2012. NSE is mutually owned by set leading financial
institutions, banks, insurance companies, and other financial intermediaries in
India but its ownership and management operate as separate entities. In 2011,
NSE was the third largest stock exchange in the world in terms o the number of
contracts traded in equity derivatives. It is the second fastest growing stock
exchange in the world with a recorded growth of 16.6%. As far as the sect oral
indexes are concerned, we select some market capitalization weighted sect oral
indexes introduced by NSE. These are CNX BANK, CNX COMMO, CNX ENGRGY, CNX
FINANCE, CNX FMCG, CNX IT, CNX METALS, CNX MNC, CNX PHARMA, CNX PSU BANK.CNX
PSE, CNX INFRA and CNX SERVICES. The indexes represent different sectors in the
Indian economy namely Bank, Consumptions sector, Energy, finance, FMCG, IT,
Metal, MNC, Pharmaceutical, Public sector unit, Infrastructure, and Services.
The study is
conducted and market trends are analyzed over three phases in the Indian stock
entire period: 2005 January to September. The trends obtained for this entire
period could be taken as the ‘average’ market trend.
prologue of crisis: 2005 January to 2008 January.
aftermath of crisis: 2008 February to 2012 September.
are constructed using the methods of detecting a structural break in financial
time series. Any financial crisis could well be thought of as a switch in
regime that is often reflected in a structural break in the market volatility
break or regime switches that might lead to financial crises.
THE MARKET AND THE SECTORS: BOMBAY STOCK EXCHANGE
considers BSE SENSEX or BSE sensitive index or BSE 30 as the market index from
BSE. BSE SENSEX, which started in January 1986 is a value weighted index
composed of largest and most actively traded stocks in BSE. The SENSEX is
regarded as the pulse of the domestic stock market in India. These companies
account for around 50% of the market capitalization of the BSE. The base value
of the SENSEX is 100mon April 1, and the base year of BSE SENSEX is 1978-1979.
Initially, the index was calculated on the ‘full market capitalization’ method.
However, it has switched to the free float method since September 2003. The
stocks represent different sectors such as housing related, capital goods,
telecom diversified, finance, transport equipment, metal, metal products and
mining, FMCG, information technology, power, oil and gas, and healthcare.
As far as the
sect oral indexes are concerned, we select 11 market capitalization weighted
sect oral indexes introduced by BSE in1999. These are BSE AUTO, BSE BANKEX, BSE
CD, BSE CG, BSE FMCG, BSE IT, BSE HC, BSE PSU, BSE METAL, BSE ONG, and BSE
POWER. Of these indexes, only BANKEX has its base year in 2000. All the others
have base year in1999 with base value of 100 in February 1999. The indexes
represent different sectors in the Indian economy namely, automobile, banking,
consumer durables, capital goods, fast moving consumer goods, information technology,
healthcare, public sector unit, metal, oil and gas, power, respectively.
TRENDS AND LATENT STRUCTURE IN INDIAN STOCK MARKET
the trends in the Indian stock market around the financial crises of 2007-2008,
the study uses some benchmark stock market indexes along with different sect
oral indexes. The Bombay stock exchange (BSE) and the National stock exchange
(NSE) are the two oldest and largest stock market exchanges in India and hence,
could be taken as representative of the Indian stock market. The study analyses
the trends, their similarities and dissimilarities, in the two exchanges to get
a complete description of Indian stock market movements. While analysing the
market trends the study concentrates on the following:
market has behaved over the period of study.
been any latent structure in the market?
the trends at sect oral level? Are they similar, or otherwise, to the market
Are the trends independent of the selection of the
stock market exchanges?
Whether and how financial crises
could affect the market trends?
we go into the detailed analysis let us briefly report on the market index and
the sectorial indexes that the study picks up from the two exchanges. The study
uses daily price data for all the market and sectorial indexes for the period
ranging from January 2005 to September 2013. The price data are then used to
calculate daily return series using the formula Rt=ln (Pt/Pt_1), where Pt is
the price on t’ th day.
trends in stock market
Listing of securities in foreign markets
trading system is established.
system is changed from outcry system to onscreen based system.
Derivative trading started.
Dematerialization of shares allowed.
Depositories Limited started.
Foreign institutional investment in securities
Companies are allowed to buy back their shares.
Emergence of Credit Rating Agencies.
market edifice, covering both primary and secondary segments is today vastly
superior to the one that obtained till early 1990’s. Yet the progress has been
uneven. The secondary market has shown greater resilience and absorbed
technology to the extent that it can now be compared to the best stock exchange
systems in the world. The new issues market or the primary market on the other
hand has languished. Far-reaching changes in the primary market procedures are
likely if the first report of the Securities Market Infrastructure Leveraging
Expert Task Force (SMILE, Sept. 2004) is implemented.