Introduction to stock market Essay
Introduction to stock market, 496 words essay example
INTRODUCTION TO STOCK MARKET
The Capital Market is a medium through which small and disorganized savings of investors are directed into productive activities of corporate entities. It also provides the essential aspects of liquidity, marketability and safety of investments to the investors. A well- organized and well-regulated capital market promotes sustainable development of the economy by catering long- term funds in exchange for financial assets to investors.
Capital Market Operations consist mainly of Primary Market Operations and Secondary Market Operations or Stock Market. The Origin of Stock Market in India can be outlined to the later part of the Eighteenth Century. The earliest security dealings were transactions in loan securities of the East Indisa Company, the leading institution of those days. The introduction of limited liability noticed the beginning of the era of modern joint stock enterprises. The American Civil War followed this in 1860-65. However, the bubble burst with the end of the Civil War and a disastrous slump followed which lasted for a long time and also resulted in complete expulsion of the broker community. The dreadful social pressure on the brokers led to their forming on informal association, "The Native Share and Stock Brokers Association" (now known as the Bombay Stock Exchange) in 1887.
This Stock Exchange played a considerable role during the phase of recovery from the seven-year depression. It continued to expand in statute and size of operations and became the focal point of all financial activity and the first to be recognized by the government of India. This advancement also contributed to the development of the Ahmadabad share and stock brokers' Association in 1984 that was organized as a voluntary non-profit making association with trust deed and a deed of association on the identical lines as the stock exchanges in Mumbai by following the Mumbai rules and practices. The stock exchanges at Mumbai and Ahmadabad were well set up, properly organized associations at the commencement of the 20th century, but the Calcutta stock exchange was not so constituted regardless the fact that stock business in an organized way had existed since 1830.
In fact, in Mumbai, it was a boom in coal followed by the crises that featured the need for an organized body for the mutual protection and safety of the brokers and the trade. Hence, an association was formed by some prominent brokers on 15th June 1908 under the name and style of the 'Calcutta Stock Exchange Association'.
In order to cater to the needs and govern the stock exchanges, the government came out with a comprehensive legislation called the 'Securities Contract (Regulation) Act'. This legislation made it obligatory on the part of the stock exchanges to secure perception from the central government. Only the well-established stock exchanges in Bombay, Ahmadabad, Calcutta, and madras, Delhi, Hyderabad and Indore were recognized under the act. More stock exchanges were recognized subsequently. At present, there are twenty-three recognized stock exchanges in India, including the Over the Counter Exchange of India (OTCEI) and National Stock Exchange (NSE).