Stock Exchange

Introduction

• A stock exchange is a marketplace where different types of existing securities such as shares, debentures and bonds, government securities can be bought and sold on a regular basis.
• The Securities Contract (Regulation) Act has defined stock exchange as an “association, organization or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling the business of buying, selling and dealing in securities”.

Characteristics of a Stock Exchange

• It is an organized market.
• It provides a place where existing and approved securities can be bought and sold easily.
• In a stock exchange, transactions take place between its members or their authorized agents.
• All transactions are regulated by the rules and bylaws of the concerned stock exchange.
• It makes complete information available to the public in regard to pricing and volume of transactions taking place every day.

Major Stock Indices In India

• NIFTY 50 : It is a diversified 50 stock index of National Stock Exchange (NSE),  accounting for 13 sectors of the economy.
• BSE SENSEX: It is also referred to as BSE Sensitive Index, which is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange.  
• S&P CNX 500: It is India’s first broad-based stock market index. The S&P CNX 500 represents about 96% of total market capitalization.
• MCX: It is known as Multi Commodity Exchange -Stock Exchange,  India’s third national stock exchange after the Bombay Stock Exchange and the National Stock Exchange. It allows  trading in the shares of 1,116 listed companies. 
• Other stock indices are NIFTY India Consumption, NSE Midcap, etc.
  
  

What is a stock index ?

• A stock index is a statistical measure which shows change in the prices of stocks of companies registered in the stock market. 
• It also reflects overall market sentiment and direction of price movements of products in the financial, commodities or any other markets. 
• The stock market index acts like a barometer which shows the overall conditions of the market. They facilitate the investors in identifying the general pattern of the market. Investors take the stock market as a reference to decide which stocks to go for investing.

Important Terms related to Stock Exchange

• Bear Market: The time period when a stock market follows a downward trend or a period of falling stock prices.
• Bull Market: When the stock market as a whole is in a prolonged period of increasing stock prices or stock market follows an upward trend, it is a bull market.
• Blue chip stocks: Blue chip stocks are shares of very large and well-recognised companies with a long history of sound financial performance. Blue chip stocks generally cost high, as they have a good reputation and are often market leaders in their respective industries.