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Infrastructural Financial Marketing

Assignment

On

Introduction of Stock Exchange

Submitted to

CA Nitesh Nanavati

Prepared By

Mahek Raval

Semester 2(B)

Roll no. 20190401058

Batch 2019-2024
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Declaration
The text reported in the project is the outcome of my own
efforts and no part of this project assignment has been copied
in any unauthorized manner and no part of it has been
incorporated without due acknowledgement

____________________
Mahek Raval
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Table of Contents
Topic: Introduction of Stock Exchange.....................................................................................5
Meaning of Stoke...................................................................................................................5
What are main Function of Stock exchange?.........................................................................5
Providing liquidity and Marketability to Existing Securities:............................................5
Pricing of securities:...........................................................................................................5
Safety of Transaction:........................................................................................................5
Contributes to Economic Growth:.....................................................................................6
Spreading of Equity Culture:.............................................................................................6
Providing Scope for Speculation:.......................................................................................6
Why do Companies go Public?..............................................................................................6
What are shares?....................................................................................................................6
History of stock exchange:.....................................................................................................7
Birth of formal stock markets................................................................................................7
History of Stock Exchange in India:......................................................................................8
Objective of Stock Exchange:................................................................................................8
To Supply Capital..............................................................................................................9
To trade financial instruments............................................................................................9
To develop economy:.........................................................................................................9
TO present information:.....................................................................................................9
To do long-term financing.................................................................................................9
To raise awareness:............................................................................................................9
To have a fair operation:....................................................................................................9
To protect fraudulently:....................................................................................................10
Convenience:....................................................................................................................10
Security and Transparency:..............................................................................................10
Importance of Stock Exchange:...........................................................................................10
Importance to the economy:.............................................................................................10
Importance to the corporate houses/sectors:....................................................................11
Importance to Investor:....................................................................................................11
Legal and Regulatory Framework of Stock Exchange:.......................................................11
The Regulators.....................................................................................................................12
1. Securities and Exchange Board of India (SEBI)...................................................12
2. Reserve Bank of India (RBI).................................................................................12
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3. National Stock Exchange (NSE) - Rules and Regulations....................................12

Conclusion:..........................................................................................................................12
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Topic: Introduction of Stock Exchange

Meaning of Stoke
A stock may be a sort of investment that represents an ownership share during a
company. Investors buy stocks that they think will go up in value over time. Stoke of
corporation, is all of the shares into which ownership of the corporation is divided. In
American English, the shares are collectively referred to as “Stock”. A single share of the
stock represents fractional ownership of the corporation in proportion to the entire number of
shares. This typically entitles the stockholder thereto fraction of the company’s earnings,
proceeds from liquidation of assets (after discharge of all senior claims like secured and
unsecured debt), or voting power, often dividing these up in proportion to amount of money
each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock
could also be issued for instance without voting rights, with enhanced voting rights, or with a
particular priority to receive profits or liquidation proceeds before or after other classes of
shareholders.
Stocks are securities that represent an ownership share during a company. For companies,
issuing stock may be a thanks to raise money to grow and invest in their business. For
investors, stock are a way to grow their money and outpace inflation over time. When
investor own stock in a company, they are called a shareholder because they share in the
company’s profits.
Public companies sell their stock through a stock exchange, just like the NASDAQ or the
stock market. Investors can then buy and sell these shares among themselves through
stockbrokers. The stock exchanges track the availability and demand of every company’s
stock, which directly affects the stock’s price.

What are main Function of Stock exchange?

Following are some of the essential function of a Stock Exchange:

Providing liquidity and Marketability to Existing

Securities:
Stock Exchange provides a ready and continuous marketplace for buying and selling
securities. It provides a platform where shares are often sold and purchased by buyers and
sellers.

Pricing of securities:
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Based on the forces of demand and provide. Stock market helps in putting a worth on
the securities which give instant data to both buyers and sellers and thus helps within the
pricing of securities.

Safety of Transaction:
All participants related to a stock market are well regulated and are required to figure
within the legal framework given by the regulator. Such a system ensures the security of
transactions. In India, all trading is regulated by SEBI.

Contributes to Economic Growth:

People get an opportunity to shop for and sell their shares, letting them invest money. Stock
market provides a platform by which savings get channelized into the foremost productive
investment proposals, which results in capital formation and economic process.

Spreading of Equity Culture:

Stock exchanges have extensive information on the listed companies, which is further
available to the general public. This data helps in educating public about investments in
securities which results in spreading of wider ownership of shares.

Providing Scope for Speculation:

Securities when purchased solely with a view of gaining profit through price
movement of a target is named speculation. Stock exchanges provide scope within the supply
of law for speculating during a restricted and controlled manner.

Why do Companies go Public?

The primary purpose for companies to be publicly listed at the exchange is to cost-
effectively raise capital. It reduces the company’s reliance on the normal financiers like
financial institutions and individuals. Listing allows business expansion without increasing
borrowings or draining the company’s cash reserves. History of listed companies indicate that
companies that convert to public ownership are more likely to become successful than control
companies that remain private. Companies that go public also are more likely to become
acquirers than control companies. IPO (Initial Public Offering) companies grow faster than
control companies after going public. However, both public and personal companies must
disclose financial information to regulators.

What are shares?

Shares, because the name says, are shares in company. Each shareholder may be a
partial-owner of the corporate during which they need bought shares and investors can
purchase and sell their shares on the stock exchanges. Companies on incorporation issue
shares, (also called equities) and later perhaps once they are build up a business. The first
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shareholders might still own them, or they'll have sold them to somebody else through the
stock exchange. If the corporate makes a profit, the shareholder normally have a number of it
passed to them within the sort of dividends. The quantity paid in dividends varies year by
year, counting on how profitable the corporate has been and therefore the way much money
the administrators and the company management want to stay in reserve for future expansion.
There are different way during which you'll participate within the stock market: 1. Directly:
by buying and selling shares; 2. Indirectly: through a collective vehicle, during which shares
are grouped together, like an open-end fund or Exchange Traded Funds (ETFs).

History of stock exchange:1

In 12th century France, the courretiers de change were concerned with managing and
regulating on behalf of the banks. Because these men also traded with debts, they might be
called the primary brokers. a standard misbelief is that, in late 13th century Bruges,
commodity traders gathered inside the house of an individual called van der Beurze had a
building in Antwerp where those gathering occurred; the Van der Beurze had Antwerp, as
most of the merchants of that period, as their primary place for trading. The thought quickly
spread around Flanders and neighbouring countries and “Bertzen” soon opened in Ghent and
Rotterdam.
Within the centre of the 13th century, Venetian bankers began to trade government
securities. In 1351 the Venetian government outlawed spreading rumours intended to lower
the worth of state funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in
government securities during the 14th century. This was only possible because these were
independent city-states not ruled by duke but a council of influential citizens. Italian
companies were also the primary to issue shares. Companies in England and therefore the
Low Countries followed within the 16th century. Around this point, a joint stock company
one whose stock is owned jointly by the shareholders emerged and become important for
colonization of what Europeans called the “New World”.

Birth of formal stock markets2

Replica of an East Indiaman of the Dutch Malay Archipelago company/United ease
Indies Company (VOC). The Dutch Malay Archipelago Company was the primary
corporation to be listed on a politician stock market. In 1611, the world’s first stock market
(in its modern sense) was launched by the VOC was “the first real important stock” within
the history of finance. One among the oldest known stock certificates, issued by the VOC
chamber of Enkhuizen, dated 9 September 1606. The primary formal stock exchange in its
modern sense together of the indispensable elements of recent capitalism was a pioneering
innovation by the VOC managers and shareholders within the early 1600s.
A 17th century engraving depicting the Amsterdam stock market built by Handrick de
Keyser. The Amsterdam stock market was the world’s first official stock market when it
began trading the VOC’s freely transferable securities, including bonds and shares of stock.
Courtyard of the Amsterdam stock market by Emanuel de Witte, 1653. The
Amsterdam stock market is claimed to possess been the primary stock market to introduce
1
https://en.m.wikipedia.org/wiki/Stock_market
2
https://en.m.wikipedia.org/wiki/Stock_market
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continuous trade the first 17th century. The method of shopping for and selling the VOC’s
shares, on the Amsterdam stock market, became the idea of the world’s first official (formal)
stock exchange.

History of Stock Exchange in India:3

The stock market or market may be a place where stock, shares and other long-term
commitment or investment are bought and sold. The economic significance of a stock market
results from the increased marketability resulting from a stock exchange share quotation. The
stock market is an important institution for the existence of the capitalist system of the
economy and for the graceful functioning of the company sort of organisation.
The securities contracts (regulation) Act of 1956 defines, a stock market as “an association,
organisation or body of people , whether incorporated or not, established for the aim of
assisting, regulating and controlling, business in buying, selling and dealing in securities.”
Stock Exchanges are noted as “an essential concomitant of the Capitalism system of
economy. It’s indispensable for the right functioning of corporate enterprise. It brings
together large amounts of capital necessary for the economic progress of a rustic. It’s a
citable of capital and pivot of cash market. It provides necessary mobility to capital and
indirect the flow of capital into profitable and successful enterprises. It the barometer of
general economic progress during a country and exerts a strong and significant influence as a
depressant or stimulant of commercial activity.”
The primary organised stock market in India was started in 1875 at Bombay and it's stated to
be the oldest in Asia. In 1894 the Ahmedabad stock market was began to facilitate dealings
within the shares of textile mills there. The Calcutta stock market was started in 1908 to
supply a marketplace for shares of plantations and jute mills. Then the Madras stock market
was started in 1920. At the present there are 24 stock market within the country, 21 of them
being regional ones with allotted areas. Two others found out within the reform era, viz., the
National stock market (NSE) and Over the Counter Exchange of India (OICEI), have
mandate to possess mandate nation-wise trading.
They’re located at Ahmedabad, Vadodara, Bangalore, Bhubaneswar, Mumbai, Kolkata,
Kochi, Coimbatore, Delhi, Guwahati, Hyderabad, Indore, Jaipur, Kanpur, Ludhiana, Chennai,
Mangalore, Meerut, Patna, Pune, and Rajkot. The Stock Exchanges are being administered by
their government boards and executive chiefs. Policies concerning their regulation and
control are laid down by the Ministry of Finance. Government also constituted Securities and
Exchange Board of India (SEBI) in April 1988 for orderly development and regulation of
market and Stock Exchanges.

Objective of Stock Exchange:4

The stock market is that the index of the economy of a rustic. It’s the middle of the
capital market. It’s called the economic mirror of a rustic. It’s called share market
interchangeably. In developing trade, commerce and industries during a country stock market
play a crucial role. The target of building a stock market are mentioned below:
3
http://www.yourarticlelibrary.com/stock-exchange/history-of-stock-exchange-in-india/23488
4
https://www.qsstudy.com/business-studies/objectives-stock-exchange
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To Supply Capital
The main function of a stock market is to assist companies elevate money. It’s
established to provide the specified capital for companies of a rustic. To realize their task,
ownership during a closed corporation is sold to the general public within the sort of shares of
stock. Funds received from the sale of stock contribute to the firm’s capital formation.

To trade financial instruments

It is established to trade the financial instruments for individual investment and
company collect capital. It provides a daily forum where people can convert their money into
securities and securities into money. Buying and selling of securities are confined to at least
one particular place and therefore the investors are saved the difficulty of getting to different
places to shop for or sell securities.

To develop economy:
It helps economic development b supplying the capital to the industries. Unregulated
markets can have an unenthusiastic impact on capital formation. Close regulation of stock
exchanges allows strangers from all parts of the planet to honour contracts executed within
the daily trading of shares. It’s a crucial objective of the stock market.

TO present information:
Another objective of the stock exchanges is to present information about transactions
and financial conditions of the businesses. It reflects changes happening within the country’s
economy. Price trends on stock market indicate trade cycles i.e. boom, recession, depression,
recovery, etc.

To do long-term financing
Commercial banks generally disburse the short-term loan. So, supplying long-term
finance is an objective of the stock market. Any company which wants to urge its securities
listed has got to undergo these rules and regulations.

To raise awareness:
It raise awareness among the overall people by giving information than to take a
position and gain take advantage of the market. Thus, stock exchanges exercise a healthy
influence on the working and management of companies.

To have a fair operation:

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To transact the financial instruments easily and fairly stick exchanges is established.
A stock market channelizes the investible fund in additional productive industries. a
corporation with better performance and prospects has no difficulty in raising its capital. So,
it's a requirement of stock market to secure both investors and borrower.

To protect fraudulently:
It is also to make sure that no fraudulence occurs during a transaction. A stock market
functions exactingly consistent with established rules and regulations. These rules and
regulations provide a check on overtrading in securities and manipulation of costs. The govt,
too; exercises supervision and control over a stock market. By this suggests the evils can
deceit the tender investors and therefore the stock are responsible for protecting that.

Convenience:
The objective of the stock market is to formulate policies for straightforward
transaction and therefore the safety of the investors and corporations. A stock market informs
investors which way the investment wind is blowing. By directing the flow of capital into
worthwhile projects, it gives an impetus to the economic development of the country.

Security and Transparency:

The lawful sale of stock on any exchange requires dependable and proper
information. By requiring a high level of transparency from all trading companies, the stock
market creates a more protected environment for investors, which helps them to verify the
risks of investing. So, the objectives of the stock market are great and efficient operations of
stock market are such a lot required for the economic development of country.

Importance of Stock Exchange:

The importance of stock exchanges has gained momentum especially since the last
deed. They supply a readymade marketability and liquidity to the securities. With this sprit,
such markets also helps in channel sing the funds. To the foremost profitable and growth
ventures by their price mechanism. It can rightly be said that to determine the health of
economy, analysing the present trends at stock market would be the lucrative indicator. Here
some importance of stock market are given, which are following:

Importance to the economy:

Stock Exchange has been described because the heartbeat of the economy. In real
term, it's been considered a mirror of economic situation of the country. The importance of
such markets are often assured by means of following noteworthy benefits it owes to the
economy of any country across the world .
It accelerates the economic development of any country.
Aids in expansion and modernization of capital business enterprises.
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Promotes industrial development.

Importance to the corporate houses/sectors:

It has resulted in great value to the business enterprises. As such the listed companies
enjoy the following benefits:
It facilitates minimized fluctuations and avoids the excessive bullish and bearish tendencies,
as a result protecting the situation of speculations, insider trading and also prevents the
securities prices from rampant fluctuations by means of maintaining price band limits.
Diversified market operations as the securities are regularly quated and traded in the markets
across the country, within the ease to the large investors by means of making the fairest deal
through interest based online trading of securities in such markets.

Importance to Investor:
The real benefit of such markets is reaped by the investors, whether large or small:
Liquidity of Investments: Investors are sell securities in these markets during the trading
days. Thus, commanding liquidity of investment.
Security to the Investors: By means of SEBI guidelines of investor protection is a ready guide
for the stock exchanges so as to ensure the security to the diversified investors.

Legal and Regulatory Framework of Stock Exchange:

Indian Capital Market are regulated and monitored by the Ministry of Finance, The
Securities and Exchange Board of India and the Reserve Bank of India. The Ministry of
Finance regulates through the Department of Economic Affairs – Capital Markets Division.
The division is responsible for formulating the policies related to the orderly growth and
development of the securities markets (i.e. share, debt and derivatives) as well as protecting
the investors. In particular, it is responsible for following:
Institutional reforms in the securities markets,
Building regulatory and market institutions,
Strengthening investor protection mechanism, and
Providing efficient legislative framework for securities markets.
The Division administers legislations and rules made under the
Depositories Act, 1996,
Securities Contracts (Regulation) Act, 1956 and
Securities and Exchange Board of India Act, 1992.
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The Regulators

1. Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) is the regulatory authority established
under the SEBI Act 1992 and is the principal regulator for stock exchange in India. SEBI’s
primary functions include protecting investor interests, promoting and regulating the Indian
securities markets. All financial intermediaries permitted by their respective regulators to
participate in the Indian securities markets are governed by SEBI regulations, whether
domestic or foreign. Foreign Portfolio Investors are required to register with DDPs in order to
participate in the Indian securities markets.

2. Reserve Bank of India (RBI)

The Reserve bank of India (RBI) is governed by the Reserve Bank of India Act, 1934. The
RBI is responsible for implementing monetary and credit policies, issuing currency notes,
being banker to the government, regulator of the banking system, manager of foreign
exchange, and regulator of payment and settlement system, working towards the development
of Indian financial markets. The RBI regulates financial markets and systems through
different legislations. It regulates the foreign exchange markets through the Foreign
Exchange Management Act, 1999.

3. National Stock Exchange (NSE) - Rules and

Regulations
In the role of a securities market participate, NSE is required to set out and implement rules
and regulations to govern the securities market. There rules and regulation extend to member
registrations, securities listing, transaction monitoring, compliance by members to SEBI/RBI
regulations, investor protection etc. NSE has a set of Rules and Regulations specifically
applicable to each of its trading segments. NSE as an entity regulated by SEBI undergoes
inspections by them to ensure compliance.

Conclusion: