Indian Share Market

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A Share market/stock markets is an open market for fiscal operations such as trading of a firm's share and derivatives at a fixed cost. These securities are further listed on a stock exchange. A Share market does not offer any corporeal service and is not a separately owned business entity.

It was in 1875 that the Indian Share Market first started functioning. The first share trading association in India was known as the Native Share and Stock Broker's Association, only to become the Bombay Stock Exchange (BSE) later on. This trading association started off its operations with around 318 members.

Main components of Indian Share Market

Bombay Stock Exchange (BSE)

Bombay Stock Exchange is known to be the oldest stock exchange in the entire Asian region. If someone wants to know about the history of the India share market, it becomes synonymous with the history of the Bombay Stock Exchange. It started functioning in 1875 with the name 'The Native Share and Stock Broker's Association'. Under the Securities Contracts (Regulation) Act, 1956, the association got its recognition as a stock exchange in 1956. When it started, it was just an association of persons but with the recognition it got transferred to a corporate and demutualised entity.
  • Trading items in Bombay Stock Exchange -
  • Equity or Shares
  • Derivatives (Futures and Options)
  • Debt Instruments

The main index of BSE is known as the BSE SENSEX or simply SENSEX (Sensitivity Index). It is an index which comprises of 30 financially sound company scrips, with an option to be reviewed and modified from time-to-time. The index calculation is based on the 'Free-float Market Capitalization' methodology. Leading bourses like the Dow-Jones also follow this methodology. Currently the Sensex is hovering around the 17,000 mark, all expected to touch 20K by 2010. But then volatility has its important role to spoil the entire game.

National Stock Exchange (NSE)

National Stock Exchange (NSE) is considered to be the leader in the stock exchange scenario in terms of the total volume traded. The market capitalisation the National Stock Exchange touched about $921.31 billion at the end of May 2009. The National Stock Exchange received the recognition of a stock exchange in July 1993 under Securities Contracts (Regulation) Act, 1956. The products that are traded in the National Stock Exchange are:-
  • Equity or Share
  • Futures (both index and stock)
  • Options (Call and Put)
  • Wholesale Debt Market
  • Retail Debt Market
NSE has a fully automated screen based trading system which is known as the NEAT system. The transactions are carried on with speed, efficiency, and are all transparent. The risk management system of the National Stock Exchange is world class and can be considered as the benchmark for other bourses.

The leading index of NSE is known as Nifty 50 or just Nifty. It comprises of 50 diversified benchmark Indian company scrips and is constructed on the basis of weighted average market capitalization method.

Regulatory Authority of Indian Share Market

SEBI or Securities and Exchange Board of India is the market watchdog and has the responsibility of protecting the investors' interests, develops regulatory norms and helps in the development of the securities market in India.

Why to invest in Indian share market ?

  • An investor does not require a lot of money to start investing in India share market unlike buying property and paying off a monthly mortgage.
  • Time of trading involved spans from small to big. One can trade for a short period of time or even a lengthy span.
  • It helps you to see 'fast' cash if the market is in robust mood and helps in fast liquidation.

Essential rules of Indian Share Market

  • Whenever share market is at its crest it is bound to dip at some point of time.
  • If the share market is down, it will only increase if there are no external aspects influencing it.
  • Unlike the common belief of investing in booming share market, it is advisable not to block your hard earned money in already flourishing Sensex and NIFTY. It is better to wait for market bottom trend and then purchase shares at lower cost in order to trade it later.
  • The excellent time for investment is when the market is low keeping the basics in consideration.
  • Seek the advice of professionals who will not only provide you tips on best investment options but also on favorable market conditions.
  • Update yourself on the prevailing market conditions
  • Whenever market witness an upward trend always purchase first and then sell the securities, and when the market dips always buy later and sell first.

Tips on investing intelligently in Indian Share Market

  • Consider selling the shares which you have bought long time back and are indicating gains. Even if they are not willing to offer you considerable gains then its time to get rid of them are invest your money in productive schemes.
  • Diversify your shares buy investing in different sectors. Also consider investing in equity funds and to stabilize your equity investments invest a part in fixed income options like the bonds, Public Provident Fund, National Savings Certificates and post office deposits. You can also consider a balanced or debt fund if you have restrained budget.
  • Do not consider the shares based on layman's advice. Stride carefully and invest in shares that you are comfortable investing in. Judge the firm by its past records and assess it personally. Take the advice of the fund manager who manages that specific fund.
  • If you have allocated more than half of your investments in equity, then stick to your plan. Do not surpass that pre-decided perimeter and believe in the performance of the market.

Last Updated on 07/07/2011

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