BASICS OF INDIAN EQUITY MARKET

What is equity market?

Indian equity markets are emerging as one of the most promising markets of the world. Equity market or a stock market is a place where companies raise money from investors, and investors in return get a stake in the ownership of the company. Shares of the company are issued and traded in stock exchanges. The two major stock exchanges where Indian securities or stocks are listed — BSE and NSE.

The BSE and NSE

BSE, Bombay stock exchange, is the oldest stock exchange in India with its establishments dated back to the year 1875. Whereas, National stock exchange was established in the year 1992. Both exchanges have similar trading mechanisms and over 1000 firms listed with them. Each of the stock exchanges has a separate market index which is Sensex and Nifty. Sensex is a representation of top 30 firms listed on BSE, whereas Nifty represents top 50 firms listed on NSE.

How does it work?

Trading of stocks in both the exchanges takes places through an electronic procedure. Orders of both buyers and sellers are matched by trading computer and shares are issued in a dematerialised or electronic form. Investors place all orders through brokers and any order placed is settled by t+2 rolling settlement procedure, which means if you place an order on Monday, your trade will be settled on Wednesday.

Factors affecting stock prices

There are various factors that result in rise and fall of stocks. Some of the factors include the fiscal state of the nation, interest rates, inflation, valuation of the currency, etc.

Bull and bear

These are the two terms that are used to describe the position of stock markets. If stock prices are rising and markets are performing well then it is referred as a bull market. Whereas if stock prices are showing sluggish behaviour then it is referred to as a bear market.

With the increase in foreign investments, equity market in India have emerged as one of the most profitable stock markets of the world.