 Introduction of Stock Exchange

 Functions of Stock Exchange

 Bombay Stock Exchange
 SENSEX
 National Stock Exchange
 NIFTY
 Stock Exchange

 definition : the Securities Contracts (Regulation) Act

1956, defines a SE as “ an association, organization or
body of individuals, whether incorporate or not,
established for the purpose of assisting, regulating
and controlling the business in buying, selling and
dealing in securities.”

 meaning : an organized market which provides

services to stock broker and traders to purchase and
sell listed securities for investment and speculation.
 Stock Market Indices

 An index is used to give information about the

price movements in a financial market.
 Stock market’s performance and overall behavior
is quantified by calculating an index.
 It’s a measurement of the value of a section of
stock market.
 It’s computed from the prices of selected stocks
that are representative of the whole market (typically
a weighted average).
 its a tool used by investors and financial managers
to describe the market.
 Provides central and convenient meeting places for sellers
and buyers of securities.
 Providing liquidity and marketability to existing securities
: a ready and continuous market where shares can be sold
and bought.
 Equalization of pricing of securities :based on the forces
of demand & supply, it helps in putting a value on the
securities which provide instant data to buyers and sellers
and helps in the pricing of securities.
 Safety of Transaction:All participants are well regulated,
and are required to work within the legal framework given
by SEBI, hence ensures the safety of transactions.
 Contributes to economic growth: SE provides a platform by
which savings get channelized into the most productive
investment proposals, which leads to capital formation &
economic growth.

 Spreading of equity culture: SE have extensive information on

the listed companies. This data helps in educating public about
investments in securities which leads to spreading of wider
ownership of shares.

 Promotes the habit of saving and investment.

 Helps companies and Govt. to raise funds from investors.

 Providing Scope for Speculation: Securities when purchased

solely with a view of gaining profit through price movement to a
target is called speculation. SE provide scope for speculating in a
controlled manner within the provisions of law .
 The oldest and one of the largest securities market in
India, the BSE was established in 1875 as the Stock Brokers'
Association.
 Based in Mumbai, the BSE lists over
5,000 companies.
 It accounts for over 2/3 of the total trading volume in the
country.
 top 30 companies at BSE : Bajaj Auto, Axis Bank, Asian paints,
Coal India, Hero motocorp, Indusind, Kotak Mahindra bank,
Vedanta Ltd, Yes bank, Airtel, HDFC Bank, HUL, ICICI Bank,
Infosys, Sun Pharma Ltd., ITC, L&T, Maruti Suzuki, Mahindra
and Mahindra, NTPC, ONGC, Reliance Industries, SBI, TCS, Tata
Motors, Tata Steel, Tata Power company, Wipro, Adani ports ltd
 It is based on a free-float market
capitalization methodology of 30 well-
established and financially sound companies
listed on Bombay Stock Exchange, it covers
12 sectors.
 it is calculated for every 15 seconds.
 it is regarded as the pulse of the domestic
stock markets in India.
 Calculation methodology of SENSEX

SENSEX is calculated using Free float market

capitalization method where the level of index at any
point of time reflects the free float market.
The market capitalization is determined by
1. multiplying the price of its stock by the number of
shares issued by the company to public.
2.It is further multiplied by index factor.

Formula : sum of free flow market cap of 30 benchmark

stocks X index factor [which is 100/market cap value in
1978-79].
 The National Stock Exchange is India's largest financial
market.
 Established in 1992, the NSE has developed into a
sophisticated, electronic market, which ranks third in the
world for transacted volume.
 The NSE conducts transactions in the wholesale debt, equity
and derivative markets.
 The instruments traded are, treasury bills, govt security, and
bonds issues by public companies.
 objectives : facilitating nationwide trading for all type of
securities, ensuring equal access to investors allover the
country through an appropriate communication network,
meeting international standards, enabling shorter
settlements cycles and book entry settlements.
 NSE has launched several indices : S&P CNX Nifty, CNX Nifty
Junior, CNX 100, S&P CNX 500, CNX Midcap.
 the S&P CNX Nifty also called as Nifty 50 or nifty is a
benchmark market index for Indian equity market .
 Nifty is owned and managed by India Index Services and
Products Ltd (IISL)
 The CNX Nifty index is a free float market capitalisation
weighted index.
 The CNX Nifty is a well-diversified 50 stock index accurately
reflecting overall market conditions.
 It covers 22 sectors of indian economy and offers investment
managers exposure to indian market in one portfolio.
 Nifty 50 Companies : UPL ltd, HUL, L&T, Adani Ports, Zee
entertainment, Bharti Infratel, Airtel, Bharti Airtel, Reliance industries,
Power grid, ONGC, NTPC, IOC, GAIL, HPCL, BPCL, Vedanta, Tata
Steel, Hindalco, Coal india, India bulls houding finance, HDFC, Bajaj
finance, Yes bank, SBI, Kotak mahindra bank, ICICI bank, IndusInd
back, Axis bank, Tata Motors, Maruti suzuki, Eicher, Mahindra and
Mahindra, Hero motocorp, bajaj auto, Ultratech cement, Grasim,
Wipro, TCS, Infosys, HCL, Tech Mahindra, Sun pharma, Dr Reddy’s,
Lupin, Cipla, ITC.

 Nifty Calculation :
It involves the total market capitalization of the companies weighted
by their effect on the index. Key points :
Market Capitalization = Shares outstanding * Market Price Per Share
Free Float Market Capitalization = Shares outstanding * Price * IWF
(Investible Weight Factor)
Index Value = Current Market Value / Base Market Capital * Base
Index Value (1000)