(Sample Material) IAS PRE GS Online Coaching : Economic & Social Development - Stock Markets in India

Sample Material of Our Online Coaching Programme

Subject: Economic & Social Development
Topic: Stock Markets in India

Ques. 1 : Give an account of Stock Markets (Specially in Indian context).

Ans. A stock exchange is an organization which provides a platform for trading shares- either physical or virtual. The origin of the stock, market dates back to the year 1494, when the Amsterdam Stock Exchange was first set up. In a stock exchange, investors through stock brokers buy and sell shares in a wide range of listed companies. A given company may list in one or more exchanges by meeting and maintaining the listing requirements of the stock exchange.

In financial terminology, stock is the capital raised by a corporation, through the issuance and sale of shares. In common parlance, however, stocks and shares are used interchangeably. A shareholder is any person or organization which owns one or more shares issued by a corporation. The aggregate value of a corporation’s issued shares, at current market prices, is its market capitalization. Stock broker buys and sells for an investor and does the work of arranging the transfer of stock from a seller to a buyer.

Importance of Stock Exchanges

For efficient working of the economy and for the smooth functioning of the corporate form of organization, the stock exchange is an essential institution.
an efficient medium for raising long term resources for business
Help raise savings from the general public by the way of issue of equity debt capital
attract foreign currency
exercise discipline on companies and make them profitable
investment in backward regions for job generation
another vehicle for investors’ savings

Stock Exchanges in India

The first company that issued shares was the VOC or Dutch East India Company in. the early 17th century (1602). Since then we have come a long way. With over 25m shareholders today, India has the third largest investor base in the world after the USA and Japan. Over 9,000 companies are listed on the stock exchanges, which are serviced by approximately 7,500 stockbrokers. The Indian capital market is significant in terms of the degree of development, volume of trading and its tremendous growth potential.

Stock exchanges provide an organised market for transactions in securities and other securities. There are 24 stock exchanges in the country, 21 of them being regional ones with allocated areas. Three other are set up in the reforms era, viz. National Stock Exchange (NSE), the Over the Counter Exchange India Limited (OTCEI) and Inter-connected Stock Exchange of India Limited (1SE) Important Stock Exchanges in India are Bombay Stock Exchange, popularly known as BSE and National Stock Exchange located in Bombay.