WHAT IS SHARE (STOCK) MARKET?
Definition: It is a place where shares of pubic listed companies are traded. The primary market is where companies float shares to the general public in an Initial Public Offering (IPO) to raise capital.
Description: Once new securities have been sold in the primary market, they are traded in the secondary market—where one investor buys shares from another investor at the prevailing market price or at whatever prices both the buyer and seller agree upon. The secondary market or the stock exchanges are regulated by the regulatory authority. In India, the secondary and primary markets are governed by the Security and Exchange Board of India (SEBI).
A stock exchange facilitates stock brokers to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the stock buyers and sellers. India's premier stock exchanges are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
Bombay Stock Exchange (BSE)
Bombay Stock Exchange is an Indian stock exchange located at Mumbai, Maharashtra.
It was established in 1875 and is Asia’s oldest Stock Exchange.
It is the world’s fastest Stock Exchange, with a medium trade speed of 6 microseconds.
The BSE is the World’s 11th Largest Stock Exchange with an overall market capitalization of $1.43 Trillion as of March, 2016.
More than 5500 companies are publicly listed on the BSE.
The Sensex, also called the BSE 30, is a stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange (BSE).
30 companies are selected on the basis of the free float market capitalization.
These are different companies from the different sectors representing a sample of large, liquid and representative companies.
The base year of Sensex is 1978-79 and the base value is 100.
It is an indicator of market movement.
If Sensex go up, it means that most of the stocks in India went up during the given period. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down.
National Stock Exchange (NSE):
The National Stock Exchange (NSE) is the leading Stock Exchange of India, located in Mumbai, Maharashtra, India. NSE was started to end the monopoly of the Bombay stock exchange in the Indian market.
NSE was established in 1992 as the first demutualized 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 facility to the investors spread across the length and breadth of the country.
NSE has a total market capitalization of more than US$1.41 trillion, making it the World’s 12th-Largest Stock Exchange as of March 2016.
NSE’s index, the NIFTY 50, is used extensively by investors in India and around the world as a barometer of the Indian capital markets.
The NIFTY 50 index is National Stock Exchange of India’s benchmark stock market index for Indian equity market. Nifty is owned and managed by India Index Services and Products (IISL).
The base year is taken as 1995 and the base value is set to 1000.
Nifty is calculated on 50 stocks actively traded in the NSE
50 top stocks are selected from 24 sectors.
The Sensex and Nifty are both indicators of market movement. If the Sensex or Nifty goes up, it means that most of the stocks in India went up during the given period. If the Nifty goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down.
Importance of Market Index:
The market indexes are the barometer for the market behavior.
It gives a general idea about whether most of the stocks has gone up or gone down.
It is used as a benchmark portfolio performance.
It is used as a reflector of investor’s sentiments.
Market indexes are used for sorting and comparison of the various companies.
They are used in passive fund management by Index funds.