Stock exchange

 STOCK EXCHANGE

A stock exchange is arr instrution which provides a platform for buying and selling of existing securities. Stock exchanges help companies raise finance, provide liquidity and safety of investment to the investors and enhance the credit worthiness of individual companies.

DEMAT Account (Dermaterialisation of securities): Problems of theft, forgery, transfer delays and time involved in paperwork existed before DEMAT came into being. To eliminate these problems an electronic book entry form of holding and transferring securities has been introduced. This is referred to as dematerialisation of securities'.

Functions of a Stock Exchange:

 (i) Providing Liquidity and Marketability 

(ii) Pricing of Securities;

 (iii) Safety of Transaction;

 (iv) Contributes to Economic Growth;

 (v) Spreading of Equity Cult and so on.

Bombay Stock Exchange (BSE): The first stock exchange in India was set-up in 1875 as The Native Share and Stock Brokers Association in Bombay. Today it is known as the Bombay Stock Exchange (BSE).

 (i) Regional Stock Exchanges; (ii) National Stock Exchange (NSE) and (iii) Over the Counter Exchange of India (OTCEI).

National Stock Exchange of India (NSE): The latest, most modern and technology driven exchange; Incorporated in 1992 was recognised as a stock exchange in April 1993; It started operations in 1994, with trading on the wholesale debt market segment. Subsequently, it launched the capital market segment in November 1994 as a trading platform for equities and the futures and options segment in June 2000 and NSE has set up a nationwide fully automated screen based trading system.

> Øver the Counter Exchange of India (OTCEI): A company incorporated under the Companies Actm, 1956. Set-up to provide small and medium companies an access to the capital market which commenced trading in 1992.

MCX SX Stock Exchange: It is a private stock exchange headquartered in Mumbai, which was founded in 2008. Now it is a MCX-SX Full Fledged Stock Exchange. Securities and Exchange Board of India (SEBI) on 10th July, 2012 granted permission to MCX Stock Exchange (MCX-SX) to operate as full fledged stock exchange.

India's Credit Rating Agencies

The credit rating market takes a definite shape in India after the SEBI made in mandatory for any debenture that has maturity of more than 18 months.

CRISIL (Credit Rating Information Services of India Limited) is India's first credit rating agency, incorporated in 1987 and was promoted by the erstwhile ICICI Ltd, along with UTI and other financial institutions. In 1995, in partnership with National Stock Exchange, CRISIL developed CRISIL 500 Equity Index. In 1996, it made a strategic alliance with the Standard & Poor's (S&P) Ratings Groups.

ICRA (Investment Information and Credit Rating Agency): India's second credit rating agency is ICRA which was set up in 1991. It was promoted by Industrial Finance Corporation of India (IFCI), other leading financial/investment institutions, commercial banks and financial services companies.

➤CARE (Credit Analysis and Research Ltd): The third credit rating agency in India was CARE, that started working in 1993. It was mainly promoted by the IDBI.

ONICRA: Later, another credit rating agency ONICRA was established which is now known as Onicra Credit Rating Agency of India Ltd. This is a private sector agency set up by Onida Finance. It provides assessment, grading and rating models for individuals and MSMEs.

CIBIL (Credit Information Bureau of India Limited): CIBIL maintains records of an individual's payments related to credit cards and loans.

ICRA Limited: ICRA Limited is a joint venture between Moody's Investors and various financial services companies and is a part of ICRA groups.

SMERA: SMERA a joint venture of SIDBI, several private sector banks in the country and Dun & Bradstreet Information Services India Pvt. Ltd. (D & B)

Global Depository Receipts (GDR) Global

GDRs are negotiable instruments. GDRs are also known as Euro Equity Shares. It allows companies to access international capital markets through it. It is a Euro dominated instrument traded on the stock exchanges in Europe. The GDR represents a fixed ratio of India shares.

American Depository Receipts (ADR)

➤ ADRs are also negotiable instruments. ADRs are usually listed in the New York stock exchange. These are US dollar denominated instruments issued by a depository bank in the USA representing ownership in the non-USA securities, usually referred to as underlying equity shares.

Euro Convertible Bonds (ECB)

i ECB is a equity linked security which can be converted into shares or into depository receipts. ECB is a foreign currency debt instrument issued by an Indian company.

Mutual Funds (MFs)

A mutual fund (this is a term usually used in the USA for the securities which are known as Unit Trust in the UK) is a financial institution that aims at continuously garnering investable resources professionally to create a portfolio of securities and sometimes even bullion or real estate) in order to provide uninitiated small investors a reasonable return on his investment through dividends and capital appreciation.

On the basis of structure, the MFs can be divided into:

Open Ended MFs: Funds which are available for subscription through the year and can be sold and purchased any time. They are highly liquid.

2 Close Ended MFs: These have stipulated maturity period prior to which these cannot be sold and purchased except on the stock exchange. They have maturity period usually from three years to fifteen years.

On the basis of investment profile it can be classified as:

(i) Growth funds, (ii) Income funds and (iii) Balanced funds.