The stock market by definition is a place where shares of different firms or collective shares are traded. It is an open market for fiscal operations like trading of company’s derivatives and shares at fixed cost. These securities are further listed on stock exchange. The share market doesn’t provide any corporeal service and isn’t separately owned business entity. It was in the year 1875 that Indian stock market first started functioning. The first share trading association in India was called Native Share and Stock Broker’s Association, only to become BSE (Bombay Stock Exchange) later on. This trading association started its operations with about 318 members.
Variations of Indian Stock Market
Markets for Derivatives
Commodities Market
Bond Market
Derivatives don’t have any specific market of their own. Nonetheless, like bonds, the majority of their markets are over the counter types. Bond markets are a traditional form of stock markets. They are mainly informal over the counter markets where bonds are marketed. Commodities are marketed in commodity market.
Main Components of Indian Stock Market
NSE (National Stock Exchange) is considered to be one of the leaders in stock exchanges, in terms of total volume traded. The market capitalization, NSE touched around $921.31 billion at the end of 2009 and received the recognition of stock exchange in 1993 under Securities Contracts Regulation ACT, 1956. The products, which are traded in NSE include:
Retail Debt Market
Wholesale Debt Market
Options (Call & Put)
Futures (Both Stock and Index)
Share or Equity
National Stock Exchange has a completely automated screen based trading system that’s called NEAT system. The transactions are carried on with efficiency, speed and are all transparent. NSE’s risk management system is best-in class and can be regarded as the benchmark for other bourses. NSE’s leading index is called Nifty or Nifty 50 and consists of 50 diversified benchmark Indian company scrips. It is constructed on the basis of weighted average market capitalization method.
BSE (Bombay Stock Exchange) is one of the oldest stock exchanges in the entire Asian region. If someone wants to know the history of Indian stock market, it becomes synonymous with the history of BSE. It began functioning in the year 1875 with the name Native Share and Stock Broker’s Association. Under Securities Contracts Regulation Act, 1956, the association got its recognition as stock exchange in 1956. The products traded in Bombay Stock Exchange include:
Debt Instruments
Derivatives (Options & Futures)
Shares or Equity
The main index of BSE is called Sensex or BSE Sensex and is an index that consists of 30 financially sound company scrips with option to modified and reviewed from time to time. Leading bourses such as Dow Jones also follow this methodology.
Regulatory Authority of Indian Stock Market
SEBI (Securities and Exchange Board of India) is the market watchdog and has the responsibility of protecting investors’ interests, helps in the development of securities market in the country and develops regulatory norms.
Why to invest in Indian Stock Market?
A trader doesn’t need bags of money to begin investing in the share market unlike purchasing property and paying off a monthly mortgage.
Time of trading involved spans from small to big. One can trade for a short period of time or even a lengthy span.
It helps you to see ‘fast’ cash if the market is in robust mood and helps in fast liquidation.
Essential rules of Indian Share Market
Whenever stock market is at its crest it is bound to dip at some point of time.
Unlike common belief of investing in booming stock market, it is advisable not to block your hard-earned money in already flourishing NIFTY and Sensex. It is better to wait for market bottom trend and then buy stocks at lower cost in order to trade it later.
If share market is down, it will only increase if there are no external aspects influencing it.
Seek the advice of professionals who will not only offer tips on best investment options, but also on favorable market situations.
Excellent time for investment is when the market is low, keeping the basics in consideration.
Whenever market witness an upward trend always buy first and then sell securities, and when the market dips always purchase later and sell first.
Update yourself on prevailing market situations.
Tips on investing cleverly in Indian Stock Market
Consider selling shares which you have purchased long time back and are indicating gains. Even if they are not willing to provide you considerable gains then it’s time to get rid of them.
Diversify your shares and try investing in different sectors. Also consider investing in equity funds and for stabilizing your equity investments. Invest a part in fixed income options like Public Provident Fund, bonds, post office deposits and National Savings Certificates. You can also consider a balanced or debt fund if you have restrained budget.
If you have allocated more than half of your investments in equity, then stick to your plan. Don’t surpass that pre-decided perimeter and believe in the performance of market.
Don’t consider the shares based on layman’s advice. Stride carefully and invest in shares which you are comfortable investing in. Judge the company by its past records and assess it personally.
Nonetheless, if Indian stock market grows or remains steady, this reveals the company is holding its own better than others and is likely to be well-positioned to take the advantage of business opportunities when economic situations enhance.
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