Stock Market

Shares

A share is the division of the total capital of the company in certain number of units. The owners of these shares are the owners of the company. The person having shares in a particular company are termed as the shareholders of that company. The amount required by the company to start the business is acquired by these shareholders. The denominated value of a share is called its face value. The total of the face value of issued shares represent the capital of a company, which may not reflect the market value of those shares. The income received from the ownership of shares is a dividend.  The shares are collectively known as “stock”.

Stocks –

Stock is all of the shares into which ownership of the corporation is divided. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company’s earnings, proceeds from liquidation of assets, or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders.

Stock Market –

A stock market is the aggregation of buyers and sellers of stocks, which represent ownership claims on businesses. These may include securities listed on a public stock exchange, as well as stock that is only traded privately by stock holder, such as shares of private companies which are sold to investors through equity crowd-funding platforms. Investment in the stock market is most often done via stockbrokerages and electronic trading platforms. Investment is usually made with an investment strategy in mind. Stocks can be categorized by the country where the company is domiciled.

A stock exchange is an exchange where stockbrokers and traders can buy and sell shares (equity stock), bonds, and other securities. Many large companies have their stocks listed on a stock exchange. This makes the stock more liquid and thus more attractive to many investors. The exchange may also act as a guarantor of settlement. These and other stocks may also be traded “over the counter” (OTC), that is, through a dealer. Some large companies will have their stock listed on more than one exchange in different countries, so as to attract international investors.

Stock exchanges may also cover other types of securities, such as fixed-interest securities (bonds) or (less frequently) derivatives, which are more likely to be traded OTC. Trade in stock markets means the transfer (in exchange for money) of a stock or security from a seller to a buyer. This requires these two parties to agree on a price.  Equities (stocks or shares) confer an ownership interest in a particular company.

Participants in the stock market range from small individual stock investors to larger investors, who can be based anywhere in the world, and may include banks, insurance companies, pension funds and hedge funds. Their buy or sell orders may be executed on their behalf by a stock exchange trader.

Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This method is used in some stock exchanges and commodities exchanges, and involves traders shouting bid and offer prices. The other type of stock exchange has a network of computers where trades are made electronically. A potential buyer bids a specific price for a stock, and a potential seller asks a specific price for the same stock. Buying or selling at the market means you will accept any ask price or bid price for the stock. When the bid and ask prices match, a sale takes place, on a first-come, first-served basis if there are multiple bidders at a given price.

The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace. The exchanges provide real-time trading information on the listed securities, facilitating price discovery.

NSE –

National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai, Maharashtra. NSE was established in 1992 as the first dematerialized electronic exchange in the country. NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system which offered easy trading facilities to investors spread across the length and breadth of the country. Vikram Limaye is Managing Director and Chief Executive Officer of NSE.

National Stock Exchange has a total market capitalization of more than US$2.27 trillion, making it the world’s 11th-largest stock exchange as of April 2018.  NSE’s flagship index, the NIFTY 50, a 50 stock index is used extensively by investors in India and around the world as a barometer of the Indian capital market. The NIFTY 50 index was launched in 1996 by NSE.  However, Vaidyanathan (2016) estimates that only about 4% of the Indian economy / GDP is actually derived from the stock exchanges in India.

The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with the launch of index futures on 12 June 2000. The futures and options segment of NSE has made a global mark. In the Futures and Options segment, trading in NIFTY 50 Index, NIFTY IT index, NIFTY Bank Index, NIFTY Next 50 index and single stock futures are available. Trading in Mini Nifty Futures & Options and Long term Options on NIFTY 50 are also available.  The average daily turnover in the F&O Segment of the Exchange during the financial year April 2013 to March 2014 stood at ₹1.52236 trillion (US$21 billion).

On 29 August 2011, National Stock Exchange launched derivative contracts on the world’s most-followed equity indices, the S&P 500 and the Dow Jones Industrial Average. NSE is the first Indian exchange to launch global indices. This is also the first time in the world that futures contracts on the S&P 500 index were introduced and listed on an exchange outside of their home country, USA. The new contracts include futures on both the DJIA and the S&P 500 and options on the S&P 500.

On 3 May 2012, the National Stock exchange launched derivative contracts (futures and options) on FTSE 100, the widely tracked index of the UK equity stock market. This was the first of its kind of an index of the UK equity stock market launched in India. FTSE 100 includes 100 largest UK listed blue chip companies and has given returns of 17.8 per cent on investment over three years. The index constitutes 85.6 per cent of UK’s equity market cap.

On 10 January 2013, the National Stock Exchange signed a letter of intent with the Japan Exchange Group, Inc. (JPX) on preparing for the launch of NIFTY 50 Index futures, a representative stock price index of India, on the Osaka Securities Exchange Co., Ltd. (OSE), a subsidiary of JPX.

Moving forward, both parties will make preparations for the listing of yen-denominated NIFTY 50 Index futures by March 2014, the integration date of the derivatives markets of OSE and Tokyo Stock Exchange, Inc. (TSE), a subsidiary of JPX. This is the first time that retail and institutional investors in Japan will be able to take a view on the Indian markets, in addition to current ETFs, in their own currency and in their own time zone. Investors will therefore not face any currency risk, because they will not have to invest in dollar denominated or rupee denominated contracts.

In August 2008, currency derivatives were introduced in India with the launch of Currency Futures in USD–INR by NSE. It also added currency futures in Euros, Pounds, and Yen. The average daily turnover in the F&O Segment of the Exchange on 20 June 2013 stood at ₹419.2616 billion (US$5.9 billion) in futures and ₹273.977 billion (US$3.8 billion) in options, respectively.

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