STOCK MARKET

A stock market, equity market or share market is the aggregation of buyers and sellers (a loose network of economic transactions, not a physical facility or discrete entity) of stocks (also called shares); these may include securities listed on a stock exchange as well as those only traded privately.

SIZE OF THE MARKET:-

Stocks can also be categorized in various ways. One common way is by the country where the company is domiciled. For example, Nestle and Novartis are domiciled in Switzerland, so they may be considered as part of the swiss stock market, although their stock may also be traded at exchanges in other countries.

At the close of 2012, the size of the world stock market (total market capitalization) was about US$55 trillion. By country, the largest market was the United States (about 34%), followed by Japan (about 6%) and the United Kingdom (about 6%). This went up more in 2013.

There are a total of 60 stock exchanges in the world with a total market capitalization of $69 trillion. Of these there are 16 exchanges that have a market capitalization of $1 trillion each and they account for 87% of global market capitalization. Apart from the Australian Securities Exchange, all of these 16 exchanges are divided between three continents: North America, Europe and Asia.

Overview of the Industry

In general, the financial market divided into two parts, Money market and capital market.

Introduction to the Money & Capital Market:-

The money market is used by participants as a means for borrowing and lending in the short term, from several days to just under a year. There a several money market instruments including treasury bills, Bills of exchanges, deposits, Certificates of Deposit, federal funds.

The capital market is the market for securities, where Companies & governments can raise long-term funds. It is a market in which money is lent for periods longer than a year. A nation's capital market includes such financial institutions as banks, insurance companies, & stock exchanges that channel long-term investment funds to commercial & industrial borrowers. Unlike the money market, on which lending is ordinarily short term, the capital market typically finances fixed investments like those in buildings & machinery.

The capital market consists of number of individuals & institutions (including the government) that canalize the supply & demand for long term capital & claims on capital. The stock exchange, commercial banks, co-operative banks, saving banks, development banks, insurance companies, investment trust or companies, etc., are important constituents of the capital markets.

The capital market, like the money market, has three important Components, namely the suppliers of loan able funds, the borrowers & the Intermediaries who deal with the leaders on the one hand & the Borrowers on the other.

Introduction to the Stock Market:-

The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly & easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate, Fixed Deposit (FD), Saving A/c.

History has shown that the price of shares & other assets is an important part of the dynamics of economic activity. An economy where the stock market is on the rise is considered to be an up-and-coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength & development. Rising share prices, for instance, tend to be associated with increased business investment & vice versa. Share prices also affect the wealth of households & their consumption. Therefore, central banks tend to keep an eye on the control & behaviour of the stock market &, in general, on the smooth operation of financial system functions.

Do you know that the world's foremost marketplace New York Stock Exchange (NYSE), started its trading under a tree (now known as 68 Wall Street) over 200 years ago?

Similarly, India's premier stock exchange Bombay Stock Exchange (BSE) can also trace back its origin to as far as 130 years when it started as a voluntary non-profit making association.

Shares in the stock market are either traded through:-

Stock Exchange:-

A stock exchange is a place or organization by which stock traders (people and companies) can trade stocks. Companies may want to get their stock listed on a stock exchange. Other stocks may be traded "over the counter" (otc), that is, through a dealer. A large company will usually have its stock listed on many exchanges across the world.

Exchanges may also cover other types of security such as fixed interest securities or interest derivatives.

Over the Counter (OTC):- these are not centralized exchanges & the trade take place through a network dealers.

Two Major Stock Exchanges are:-

·         NSE (National Stock Exchange)

·         BSE (Bombay Stock Exchange)

1) The Bombay Stock Exchange (BSE) is an Indian stock exchange located at Dalal Street, Kala Ghoda, Mumbai, Maharashtra, India. Established in 1875, the BSE is Asia’s first stock exchange and the world's fastest stock exchange with a median trade speed of 6 microseconds.

2) India's other major stock exchange National Stock Exchange (NSE), promoted by leading financial institutions, and was established in April 1992. 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.

Securities market is an important, organized capital market where transaction of capital is facilitated by means of direct financing using securities as a commodity. Securities market can be divided into a primary market and secondary market.

The primary market deals with newly issued securities & is responsible for generating new long-term capital. The secondary market handles the trading of previously-issued securities, & must remain highly liquid in nature because most of the securities are sold by investors.