- Name: Investing in Stock Market (G.E Commerce 3rd Sem)
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Page 1
What is NSE? National Stock Exchange (NSE) was founded in 1992 and is in Mumbai. Electronic trading platform was first introduced by the NSE.
Nifty50: Nifty is the abbreviation of National Stock Exchange 50. It is the benchmark index of NSE comprising 50 stocks. What is BSE? BSE (Bombay Stock Exchange) was founded in 1875 and is the oldest stock exchange in Asia.
Sensex is the benchmark index of BSE and it is derived from the words sensitive and index. Sensex comprises of 30 stocks.Sensex and Nifty are the face of the Indian stock market as these either go up or down depending on various political and economic factors.
NSE and BSE are the major national exchanges in India. You can trade in stocks by opening a demat or trading account with a depository participant or stockbroker.
Why do companies get listed on exchanges? 1. Transparency and automated trading: High end technology in terms of trading provides a seamless experience for the investors.
The high volume of trading over the exchanges results in lower impact cost for the investor. Automation leads to transparency in dealings thereby increasing investor’s confidence.
2. Huge Reach: Online trading platforms can be accessed from any part of the country. The company gets greater visibility after its listing on the exchange and the public get equal opportunity to use this platform for investment purpose.
3. High transaction speed: There was huge delay in trade executions before the invention of online trading system and this has been completely done away with high speed trading platforms. Efficiency of transactions have increased manifold due to the high speed in which they happen over the exchange.
Role of exchanges: Market where securities are traded: Any investor can buy or sell securities depending on his need. There is no specific time period till which one has to wait so as to trade in shares. Liquidity is high which is not the case with investment avenues like land or gold.
Page 2
2. Responsible for evaluation of stock prices: Based on demand and supply, the price of stock either increases or decreases. If the company progresses well, there is increase in demand for its shares and in turn its price increases.
Whereas if the company does not perform well, demand for its shares decreases and in turn its price also decreases. Evaluation of the stock’s price happens in the exchange.
3. Safeguards investors: There is a thorough check and balance in the kinds of companies that get listed on the exchange and hence investors’ money is protected as there are several regulations and norms the companies need to follow.
4. Acts as barometer for a country’s economy: The health of the stock market is an indicator of the country’s economic condition. Usually a strong government results in better performance of the markets and vice versa.
5. Broader range of investment avenues: An investor or trader can invest according to his/her financial goals and also risk appetite. A wide range of financial products are available for wealth creation.
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