Meaning and History of Share Market:
In India we generally call stock market as Share Market. The marketplace or bazaar to trade shares or stocks is called Share Market. The history of Indian share market started way back in the year 1830, when 5 stockbrokers assembled in Bombay and started trading on corporate stocks and shares in Bank and Cotton presses. On July 9, 1875, ‘The Native Share & Stock Broker's Association’ was created and this group was latter known as the Bombay Stock Exchange Limited (BSE).
Formal Beginning of Share Market:
On August 31, 1957 the Government of India granted recognition to the BSE, under the Securities Contracts (Regulation) Act (SCRA). According to a report of November 2012, the BSE has 5,174 companies listed on its market platform. This makes BSE the largest stock exchange in the world in terms of listed companies. Although in India, there are several regional stock markets like Ahmedabad Stock Exchange, Calcutta Stock Exchange, and Delhi Stock Exchange etc. but BSE was the synonyms for Share Market for many years.
SENSEX the Index of BSE:
An index is the barometer of a share market. Rise or fall in an index is normally called the rise or fall in share market. BSE developed its market index named ‘SENSEX’ on January 1, 1986 with a base price of 100 and a base year of 1978-1979. SENSEX comprise of 30 largest market capitalization companies. Now-a-days, as leading indices Dow Jones Industrial Average and S&P 500 has adopted free-float market capitalization method, SENSEX also adopt this method.
Introduction of a New Share Market the NSE:
On November 4, 1994, Government of India launched a new Share Market called, National Stock Exchange (NSE). ‘NIFTY’ is the index of NSE and there are 50 largest free-float market capitalization companies in it.
The new share market, NSE started its operations with fully automated screen-based trading system. NSE was the first stock exchange, where you can trade in shares from any where in India. A latest report of World Federation of Exchanges tells that, NSE is the largest bourse in world, in terms of volumes in equity market segment.
Introduction of Derivatives in Share Market:
The NSE introduced derivative market with the launch of its index NIFTY Futures on June 12, 2000. Index Options were commenced on June 4, 2001 and options on individual shares were launched on July 2, 2001. November 9, 2001 was the day, when stock futures were allowed to trade in market. Now the derivatives market has the major share in the total turnover of the share market. Latest report of September 16, 2013 tells that the derivatives market turnover is 12.6 times of the cash market segment.
Trading timing on Share Market is as follows:
· Pre-open market: 9 a.m. to 9:15 a.m.
· Normal market trading session: 9:15 a.m. to 3:30 p.m.
· After market closing session: 3:40 p.m. to 4 p.m.
Like all stock markets our share market has many participants. These are Domestic Institutional Investors (DII) i.e. Insurance Companies; Banks; and Mutual Funds, Foreign Institutional Investors (FII), High Net-worth Individuals (HNI), Inside Traders i.e. corporate trading in their own shares, Arbitragers, Retail Investors, Intraday Traders. These all makes market or they are called market makers. Our share market is mainly affected by the activity of DIIs and FIIs. Some HNI clients influence the movement of midcap and small cap market shares. Short term trades like Arbitragers’ trade, intraday trades, and overnight trades provides liquidity and depth to the overall market.
Modern Trading Tools in Share Market:
Now-a-days, our share market has many modern trading instruments. A trader or investor can purchase shares and keep them in dematerialized form in their demat account. A trader has access to the market with modern derivative products like future and options. We call it usually f&o market.
Currency market is very closely related to the share market. It is difficult to understand share market, without understanding the relation of currency market and share market.
In share market investors makes their investment decision on the basis of fundamental analysis, technical analysis, astrology etc. In fundamental analysis, profit & loss account and the balance sheet of the company is put under scanner. Future projects of the company are also taken under consideration. In technical analysis the past performance of the share prices is the main criteria for deciding the future price of the share. There are many mathematical tools available in the market, which help in technical analysis. Most of you will not believe, but astrology is one of oldest method of predicting the future trend in shares and other financial markets.
Bull Market and Bear Market Trend:
Our share market like all financial markets moves in a trend. This trend is called bull market trend or bear market trend. When financial market moves upward for some times it is called bull market and in case of downward movement it is called bear market.
Requirements for Trading in Share Market:
Every investor, who wants to become a market participate in share market, has to open a trading and demat account with a broker. Demat account has annual maintenance charges and transaction charges. For a trading account, your broker charges brokerage for trading in shares.