Prelims level : Economy – Share Market Mains level : GS III - Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
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  • The Indian benchmark equity indices staged a smart recovery to gain more than 1% to reverse a two-day losing streak that saw indices fall below psychological levels.

What is an ‘Equity’/Share?

  • Total equity capital of a company is divided into equal units of small denominations, each called a share. (Equity capital is the invested money that, in contrast to debt capital, is not repaid to the investors in the normal course of business.) For example, in a company
  • the total equity capital of Rs 5,00,00,000 is divided into 50,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is said to have 50,00,000 equity shares of Rs 10 each.

What is meant by a Stock Exchange?

  • The Securities Contract (Regulation) Act, 1956 [SCRA] defines ‘Stock Exchange’ as any body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. Stock exchange could be a regional stock exchange or national exchanges.

Why do companies need to issue shares to the public?

  • Most companies are usually started privately by their promoter(s). However, the promoters’ capital and the borrowings from banks and financial institutions may not be sufficient for setting up or running the business over a long term. So companies invite the public to contribute towards the equity and issue shares to individual investors. The way to invite share capital from the public is through a ‘Public Issue’. Simply stated, a public issue is an offer to the public to subscribe to the share capital of a company. Once this is done, the company allots shares to the applicants as per the prescribed rules and regulations laid down by SEBI.

Bull Market vs Bear Market

  • A bull market is a financial market of a group of securities in which prices are rising or are expected to rise. Bull markets are characterized by optimism, investor confidence and expectations that strong results will continue.
  • Bear market refers to a market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. A bear market should not be confused with a correction, which is a short-term trend that has a duration of less than two months.

Bombay Stock Exchange:

  • BSE is the oldest stock exchange in Asia formed by eight native stock brokers association in 1875 located at Dala street, Mumbai.
  • It had received temporary approval from Bombay government in 1927 and permanent approval by Indian Government on 31 Aug 1957.
  • Today it is 10th largest stock market in the world by market capitalization at $1.7 trillion and has more than 5,000 companies listed in it.
  • Its iconic building named Phiroze Jeejeebhoy Towers, Dalal Street in Mumbai, Maharashtra has received image trademark under Trade Marks Act, 1999.

National Stock Exchange of India (NSE)

  • NSE is an All india level stock exchange. It was incorporated in November 1992. It offers online trading system matching to international standards.
  • The main features of National Stock Exchange are as follows
  • It has nationwide coverage. The investor can make dealing through NSEI dealer.
  • NSE is the first stock exchange in the world which uses communication technology for trading its securities. It is fully computerised, screen based and ringless system.
  • It allows the investors to trade their securities from their offices or homes through the network with direct satellite link up.
  • There are transparency dealings. The investor can check the exact price at which their transactions took place.
  • National Stock Exchange is a company promoted BY IDBI, ICCI, LIC and GIC and its subsidiaries, commercial banks. SBI capital market limited.
  • The establishment of the NSE is a major step in upgrading trading facilities for investors and bringing Indian Financial markets in line with international markets.
  • The index of the NSE is called as the Broader 50 share – Nifty.
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