Some are apprehensive about involving in it; some others’ stake their entire life’s fortune in it, while a third class of onlookers simply enjoys the gambling. Share market is a massive ground for trading company stocks and derivatives at a predetermined or agreed price. These stocks are listed as securities in a stock exchange. A Stock exchange is a kind of secure platform for the stock brokers and traders for trading in stocks, bonds and other instruments. They also provide a platform for capital events such as payment of income and dividends. Securities traded on a stock exchange include shares of by companies, unit trusts, derivatives to pooled investment products and bonds. Every stock exchange has a key index which keeps track of the most important or most traded stocks in that exchange.
The two prominent stock exchanges in India are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Though other stock exchanges too exist, BSE and NSE account for the majority of equity trading in India (about $1.6 trillion). National Stock Exchange is located at Maharashtra, India and it is regarded as the 9th largest in the world while taking in to consideration the market capitalization. To trade a company’s shares over a stock exchange, it has to be listed there. There are over 1552 listings in NSE. However the top 50 most traded companies’(by means of market capitalization) shares are kept track of using NSE’s key index called NIFTY (National Stock Exchange Fifty). The Bombay Stock Exchange (BSE) is located in the renowned Dalal Street, Mumbai. It is the 8th largest stock exchange in the world and fourth largest in Asia by means of equity market capitalization of the companies listed there($1.63 trillion as of December 2010). With the maximum number of companies listed this is supposed to be the oldest stock exchange in Asia as well. The key index for BSE is SENSEX (“Sensitive Index”). Alike NIFTY which tracks the progress of top 50 companies’ shares, SENSEX tracks the progress of the top 30 company share values. SENSEX is regarded as the driver of the stock markets in India domestically.
Way back in 1850s, for discussing the prices of stock around foru gujarati men and a parsi met at the banyan trees. Over time, the location of these meetings changed many times and consummately the number of brokers constantly increased. The nomadic movement ended in Dalal Street in 1874 and in 1875 became an official organization known as ‘The Native Share & Stock Brokers Association’. The BSE was the first recognized stock exchange as per the Securities Contract Regulation Act by the Indian Government. The BSE SEnsex was created with the intention of regulating as well as measuring the performance of the BSE. Contrast to this, the National Stock Exchange, however, doesn’t have a long lineage. Some of the leading financial institutions promoted the BSE alongwith at the Government of India, and was incorporated in the name of a tax paying company in November 1992. Only after a year the BSE came to be recognized as a full fledged stock exchange.
Free Float capitalization method has been adopted for calculating the index values in case of both the NSE as well as the BSE. The float and shares are used for trading other than the company’s outstanding shares. The advantage of this method is its rationality. By not including restricted stocks and it eliminates their effect on the index calculation. While BSE is owned by the government,a group of financial institutions like banks,insurance companies and others mutually own the NSE. NSE’s ownership and management operate as two disparate entities.
Now if both BSE and NSE perform the same task, why do we require both? They are like two different grocery stores; the trader may go to whichever one he prefers. A company can have its listing in both BSE and NSE, or only in either one. Moreover, if a company has its listing in both, the prices of its share value in BSE and NSE can be different. Number of listings is higher in BSE whereas trade volume is more in NSE. As a result, NSE is more liquid, i.e. there are more buyers and sellers at a particular time for any listed stock in NSE than in BSE.