Indian Stock Market-An Introduction

The Indian Equity market is divided in to two parts Primary market - where the share is first issued in the form of IPO(Intial Public Offering) and after issuing the share it is listed on exchange and share is traded on exchange where shares can be bought and sold this is secondary market.In India mainly there are two exchange -NSE(National Stock Exchange) BSE-Bombay Stock Exchange.The BSE is the oldest exchange in India(started in 1875).NSE started operation on 1994.Before 2000 shares was held in Physical form But the main difficulty with Physical shares is meathod of transaction which is open out cry system and process is not transparent to investor also Physical shares were prone to duplication and fraud.So in 2000 NSE intoduced the electronic screen based trading system further the introduction of Dematerilization(Conversion of physical share in to electronic form) and depository(where the electronic form of share is kept) revelutionized the Indian Stock market.Currently there are mainly two Depository(DP) -NSDL and CDSL and these DP are like bank of share.Individual/Firm can deal through Broker(who is registered and having membership in Exchanges and Depository) for buying and selling securities.Today NSE outpaced BSE in volume of trade.Then what is the purpose of stock market? Stock market serves the company by providing company the finance for long term needs and for investor an opportunity to park there savings in corporate world and in turn give their hand in Nation's development so stock exchage have a very vital role in country's economic development.
.To buy the shares investor has to open a trading and demat account.So investor has to approach a broker/sub broker who has memeber ship in Exchange(where the share is listed mainly NSE and BSE) and depository(where share is kept in Demat form-Electronic form[mainly CDSL and NSDL).Then Investor has to give necessary identity proof,Adress proof,Bank proof and fill the KYC form afetr reading it carefully.broker will ask for power of attorney for smooth transaction but this is not mandatory and if POA is not given investor had to fill the delivery instruction slip after selling the share.After opening the account the investor can do trading/investing Directly,Through Phone Internet form broking office and he will contract note(similar to bill that we got when we purchase something and contract note include all minute detail of transaction including brokerage[commision of briking house] STT and Ohter taxes) for the transaction done by him within 24 hr of transaction and he has to give cheque to Broker in the name of broking office(no cash transaction is permitted) and current settlement is rolling settlement (The rolling settlement ensures that each day's trade is settled by keeping a fixed gap of a specified number of working days between a trade and its settlement. At present, this gap is 3 working days after the trading day. So transaction entered into on Day 1 has to be settled on the Day 1 + 3 working days, when funds pay in or securities pay out takes place.If investor is selling the security he will get money in 3 working days.If investor failed to deliver the security within time his share will get auctioned and investor has to borne the penalty.If the investor has old physical share he can fill the dematerialization form and send it for converting it to demat form.The reverse can also be done.
.Now hope investor had learned about the exchages and demat.Every one had heard about SENSEX and NIFTY what is this? SENSEX and NIFTY are Index of BSE and NSE Blue chip share.SENSEX consist of 30 share and NIFTY 50 share(of top most comapnies) what is the purpose of INDEX? Index is the barometer of stock exchage for ex in NSE there are about 1350 listed comapnies listed and we cannot say in general form market was up or down without fully looking all companies.INDEX serve this purpose.INDEX is constructed by taking top companies across different sector in different weightage and INDEX movement will reflect the overall movement of market.So if NIFTY or SENSEX is up we can generally assume market was up(does not mean all shares was up) and vice versa.Now there are index in some sectors which can catch the movement of that sector like CNXIT-IT sector,BANKNIFTY-Banking sector etc. Generall purpose of Stock Market is for Investment but bulk of activities done in market is day trading.Day trading means BUYING/SELLING of shares and offsetting the position on same day.Day traders serves the purpose of bringing the liquidity to market and they help the market movement and more than 80% of the volume from market is coming from day trading.Introduction of derivative market had made the day trading to grow more and introduction of advanced day trading technique.The main tool for Stock market investment/trading are Fundamental analysis -which studies about the fundamental of companies and economy and Technical Analysis-which studies the market by analysing the past movement of share and market.
The investment scenario in India is now is at par with global Market.The intoduction of Derivative,Currency,Commodity market now helped the Indian Investor to Invest in almost anything like Share,Commodity,Currency,Bonds and complex thing like Interest rate future,Weather Derivative,Volatality Index and more and Stock market are giving various product to invest in with various amount of risk like bonds,Gold ETF,Equty and Prefernce Share,Commodities(metal and Agriculture) Currency to high risk Derivative product.

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