Notes for UPSC Exam about Stock Exchanges of India- Indian Economy

Introduction 

Stock market is a type of secondary market where the transactions of old and existing shares and securities are made.

About Shares

Shares refer to the shared capital of the company.It represents the portion of the ownership of the shareholder in the company and also describes the right of the holder to the specified amount of the share capital of the company.

Capital of a Company

To be established under Company Act, every company has to prepare a detailed document, which is called MOA (Memorandum of Association). All the external affairs of the Company are regulated according to the MOA. Therefore, it is regarded as Constitution of the Company.To deal with the internal issues of the company, another document is prepared called Articles of Association (AOA).Under MOA apart from other information, company also declares its maximum capital and on behalf of this capital it raises more funds in Capital Market. Declared capital is known as Authorize Capital.Issued Capital – It is that part of Authorized Capital for which shares are issued.It is either equal to or less than authorized capital.Subscribed Capital – It is that part of issued Capital which is subscribed by the public.Oversubscription: Number of shares is 100 crores and demand is high. i.e., demand for the shares is more than number of shares.Undersubscription – Demand of share is less than the number of shares. If the subscript is less than 90% of the total share, Company is not allowed to launch its IPO.Paid-Up Capital: it is that capital which is acquired by the Company at the end of the process.Dividend is the profit distributed on the basis of face value of the company.

Types of Shares

Public Issue or Equity ShareIssued for all.Preference ShareThe holders of such shares get the dividend first.Bonus ShareWhen dividend is given in the form of shares instead of cash.Sweat Equity ShareThese are specific type of shares issued only for the employees of the company on behalf of their Extra-Ordinary achievements on behalf of Company.Blue – Chip SharesThose companies that have strong fundamentals and business models as well as profit making are known as blue-chip companies and their shares blue chip shares.Alpha – SharesLargely transacted shares are called Alpha Shares.Right IssueIt is issued only for old and existing shareholders.It is one of the ways to raise funds.

Indian Stock Exchanges

At national level there are 4 important stock exchanges 

Bombay Stock Exchange (BSE)It was established in 1875At present 7,300 companies are listed with it.National Stock Exchange (NSE)It was established in 1992, on the recommendation of Pherwani Committee.At present 2,300 Companies are listed with it.Over the Counter Stock Exchange of India (OTCEI)It is the Stock Exchange of Small Companies which are not established on the pattern of NASDAQ (National Association of Securities Dealors Automated Quotations). NASDAQ is in USA.Multi Commodity Exchange (MCX-SX)It has got permission to function in share and securities in 2017.

Commodity Exchange in India

Under Commodity Exchange, more than 90 primary products like – Gold, Silver, Metals, Food Grains, Pulses etc are transacted through Electronic mode of delivery.

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