8/6/2019 Concept of Stock Markets-India

1/11

CONCEPT OF STOCK

MARKETS

8/6/2019 Concept of Stock Markets-India

2/11

Function

Stock markets exist to trade securities of companies. This is economically usefulbecause financial capital should not be wastedon companies that are doomed to beunsuccessful. Capital is always flowing tocompanies that show themselves to besuccessful by ensuring high returns at low riskfor their investors.

8/6/2019 Concept of Stock Markets-India

3/11

Effe cts

Ideally, this means that when the stock marketgoes through its daily fluctuations, it is movingresources from areas of low yield to areas of high yield. As capital moves away fromcompanies that cannot guarantee investorsreturns, it moves toward companies that can.Companies are thus rewarded for beingprofitable by the chance to increase profits.

8/6/2019 Concept of Stock Markets-India

4/11

B ombay Stock Exchange

Established in 1875, the B ombay StockExchange is Asia's first stock exchange

8/6/2019 Concept of Stock Markets-India

5/11

L ist o f stockex

change

s(Indian)B ombay Stock Exchange ( B SE) National Stock Exchange of India (NSE) United Stock Exchange of India (USE) Multi Commodity Exchange (MCX) MCX Stock Exchange (MCX-SX) Over the Counter Exchange of India

(OTCE I)

8/6/2019 Concept of Stock Markets-India

6/11

Inter-connected Stock Exchange of India ( ISE) Ahmedabad Stock Exchange (ASE) Hyderabad Stock Exchange (HSE) Calcutta Stock Exchange (CSE) Delhi Stock Exchange (DSE)

B angalore Stock Exchange Madhya Pradesh Stock Exchange, Indore Jaipur Stock Exchange (JSE)

8/6/2019 Concept of Stock Markets-India

7/11

C ommodity Ex chang e

Multi Commodity Exchange of IndiaLimited (MCX)

National Commodity & DerivativesExchange Limited (NCDEX)Indian National Multi-CommodityExchange (NMCE)

Commodity Exchange Limited ICEX.

8/6/2019 Concept of Stock Markets-India

8/11

PR IMARY MARKET

8/6/2019 Concept of Stock Markets-India

9/11

The primary market is that part of the capital markets thatdeals with the issuance of new securities. Companies,governments or public sector institutions can obtain fundingthrough the sale of a new stock or bond issue. This istypically done through a syndicate of securities dealers.The process of selling new issues to investors is calledunderwriting. In the case of a new stock issue, this sale isan initial public offering ( IPO). Dealers earn a commission

that is built into the price of the security offering, though itcan be found in the prospectus. Primary markets createslong term instruments through which corporate entitiesborrow from capital market.

8/6/2019 Concept of Stock Markets-India

10/11

Features of primary markets This is the market for new long term equity capital. The primary market is

the market where the securities are sold for the first time. Therefore it is alsocalled the new issue market (N IM).In a primary issue, the securities are issued by the company directly toinvestors.

The company receives the money and issues new security certificates tothe investors.

Primary issues are used by companies for the purpose of setting up newbusiness or for expanding or modernizing the existing business.

The primary market performs the crucial function of facilitating capitalformation in the economy. The new issue market does not include certain other sources of new longterm external finance, such as loans from financial institutions. B orrowers inthe new issue market may be raising capital for converting private capitalinto public capital; this is known as "going public."

The financial assets sold can only be redeemed by the original holder.

8/6/2019 Concept of Stock Markets-India

11/11

METHODS OF ISSU ING SECUR ITIES INTHE PR IMARY MARKET

Initial public offering; Rights issue (for existing companies); Preferential issue.