1. Introduction to the Indian Stock MarketStock markets form the largest avenues for investments. There are primarily two stock exchanges in India, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Companies list their shares for the first time in the primary market and in the secondary markets investors can buy and sell their shares during an Initial Public Offering. The two stock exchanges in India have on some occasions witnessed stocks worth INR 6,00,000 crores being traded. The uninitiated in India often consider investing in stocks markets gambling, but a basic understanding of the share market can change that perception.
2. Regulation of the Indian Stock MarketsThe regulation and supervision of the stocks markets in India rest with the Securities and Exchange Board of India. SEBI was formed as an independent identity under the SEBI Act of 1992 and has the power to conduct inspections of the stock exchanges. The inspections review the operations of the market and the organizational structure along with aspects of administrative control.
The main role of SEBI includes:
- Ensuring a fair and equitable market for investors to grow in
- Compliance of the exchange organization, the system its practices in accordance with the rules framed under the Securities Contracts (Regulation) Act (SC(R) Act), 1956
- Ensure implementation of the guidelines and directions issued by the SEBI
- Check if the exchange has complied with all the conditions and has renewed the grants, if needed, under Section 4 of the SC(R) Act of 1956.
3. Types of Share MarketsThere are two kinds of share markets namely the Primary and the Secondary Markets.
a. Primary Share MarketIt is in the primary market that companies register themselves to issue their shares and raise money. This process is also known as listing on the stock exchange. The purpose of entering into the primary market is to raise money and if the company is selling their shares for the very first time it is referred to as the Initial Public Offering (IPO). Through this process, the company becomes a public entity.
b. Secondary MarketThe shares of a company are traded in the secondary market once the new securities are sold in the primary market. This way investors can exit by selling their shares. These transactions that take place in the secondary market are called trades. It involves the activity of investors buying from each other and selling amongst themselves at an agreed upon price. A broker is the intermediary that facilitates these transactions.
4. How do the Share Markets work
- Understanding the Stock Exchange Platform
- Listing of the Company in the Primary Market
- Trading in the Secondary Market
- Stock Brokers