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Key Features of the Stock Market
The distinguishing features of the Indian stock market make it spectacularly unique. Here are the most important features of different types of stock markets:
Main Stock Exchange:
The Bombay Stock Exchange (BSE), founded in 1875, is the oldest in Asia. The National Stock Exchange (NSE) started in 1992 computerised trading in India.
Market Regulation
The Securities and Exchange Board of India (SEBI) guarantees the protection of investors and fair trading. It ensures compliance with the Companies Act of 2013 and other financial legislation.
Market Indices:
The Sensex index tracks 30 large well-established corporations while the Nifty 50 has 50 big stakes companies from several sectors.
Mechanism of Trading:
A fully electronic and automated trading system is in place. A T+1 settlement day is provided for trades on the business day
Shares are Dematerialised
No physical share certificates are issued to investors only electronic versions are offered.
Different Market Segments:
There are different market segments in the stock market which are as follows -
- The equity market is where the shares and securities of listed companies are traded.
- The derivatives market deals in Futures and Options trades
- The commodity markets, MCX and NCDEX, are available for trading gold, silver, oil, and agricultural products.
- The currency market is for forex trade, mainly trading INR for other currencies and vice-versa. For example GBP- INR is the value of Great Britain's currency in Indian currency.
Market Participants:
There are different market participants which include -
- Retail investors are individual traders and investors
- Institutional investors include banks, mutual funds, and insurance firms
- FIIs (Foreign Institutional Investors) and FPIs (Foreign Portfolio Investors) will invest in the Indian markets from overseas.
Trade Timings
The trade timings are as follows -
- Normal Market Timing- Monday to Friday, 9:15 AM to 3:30 PM
- The pre-market session commences from 9:00 a.m. till 9:15 a.m
- Aftermarket: trading after the market closes is allowed.
Investment Opportunities:
The types of investments available on the stock market are as follows -
- Shares or equities, are ownership stakes in a corporation
- Mutual fund - professionally managed funds
- Exchange-traded funds , passive funds that are traded on the stock exchange shares
- IPOs- the company will raise funds by selling stock to the public
- Fixed Income: debt securities and bonds.
Volatility and the Influencing Factors:
The sensitivity of the market is great about world or national happenings. Inflation, interest rates, policy on the government level, foreign investments, and geopolitical incidents influence the commodity market.
Investment Protection and Risk Management:
Regulations enforced by the SEBI are meant to check all malpractices of fraud and unfair trading. Circuit breakers are being used to curb excessive price changes. Since margin trading is furthermore resorted to, risk management comes in handy in minimising losses.
FAQS - FREQUENTLY ASKED QUESTIONS
How can investors participate in both primary and secondary markets ?
The primary market helps companies raise the required capital through IPOs, where the investors can invest by applying for shares through the IPO process.
After the process of IPO is completed and the shares are floating in the market then the investors can trade in the secondary market via stock exchanges.
How does the primary market function in the share market ?
The primary market in the stock market paves the way for companies to raise capital by issuing new securities like stocks and bonds to the public through an IPO or follow-on offering.
How many types of stock exchanges are there in India ?
India mainly has two types of stock markets: BSE (Bombay Stock Exchange) and NSE (National Stock Exchange).
What are the four main types of stocks ?
In terms of stock, there are four main types of stock in the market: common stock, preferred stock, growth stock, and value stock.
What is the role of the secondary market in trading shares ?
The secondary market permits investors to buy or sell already existing shares and thus provides liquidity and price discovery after the main market has issued the securities.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.