A stock market or equity market is a public entity (a loose network of economic transactions, not a physical facility or discrete entity)

for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds. Alternatively, an index may also be considered as an instrument (after all it can be traded) which derives its value from other instruments or indices. The index may be weighted to reflect the market capitalization of its components, or may be a simple index which merely represents the net change in the prices of the underlying instruments. The movements of the prices in a market or section of a market are captured in price indices called stock market indices, of which there are many, e.g., the S&P, the FTSE and the Euronext indices. Such indices are usually market capitalization weighted, with the weights reflecting the contribution of the stock to the index. The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment.
Types of indices

Stock market indices may be classed in many ways. A 'world' or 'global' stock market index includes (typically large) companies without regard for where they are domiciled or traded. Two examples are MSCI World and S&P Global 100. A 'national' index represents the performance of the stock market of a given nationand by proxy, reflects investor sentiment on the state of its economy. The most regularly quoted market indices are national indices composed of the stocks of large companies listed on a nation's largest stock exchanges, such as the American S&P 500, the Japanese Nikkei 225, the Russian RTSI, the Indian SENSEX and the British FTSE 100.
List of stock market indices Commonly used stock market indices include: Global

Wilshire Global Index BBC Global 30 FTSE/Mondo Visione Exchanges Index MSCI World S&P Global 100 S&P Global 1200 Russell Global 10000 Launched 17/01/07 FTSE Global 100 The Global Dow - Global version of the Dow Jones Industrial Average Dow Jones Global Titans 50 Index

Dow Jones Global Total Stock Market Index

India

Bombay Stock Exchange(BSE) - Sensex National Stock Exchange of India(NSE) - Nifty

National indexes

India
Bombay Stock Exchange(BSE) - Sensex National Stock Exchange of India(NSE) - Nifty

History

Established in 1875, the Bombay Stock Exchange is Asia's first stock exchange

In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred;[8] the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam. In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. Italian companies were also the first to issue shares. Companies in England and the Low Countries followed in the 16th century. The Dutch East India Company (founded in 1602) was the first joint-stock company to get a fixed capital stock and as a result, continuous trade in company stock emerged

on the Amsterdam Exchange. Soon thereafter, a lively trade in various derivatives, among which options and repos, emerged on the Amsterdam market. Dutch traders also pioneered short selling - a practice which was banned by the Dutch authorities as early as 1610.[9] There are now stock markets in virtually every developed and most developing economies, with the world's largest markets being in the United States, United Kingdom, Japan, India, China, Canada, Germany (Frankfurt Stock Exchange), France, South Korea and the Netherlands.[10]

Importance of stock market

[edit] Function and purpose

The main trading room of the Tokyo Stock Exchange,where trading is currently completed through computers.

The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional financial capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.[citation needed] Some companies actively increase liquidity by trading in their own shares.[11][12] History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up-and-coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development.[citation needed] Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general,

on the smooth operation of financial system functions. Financial stability is the raison d'tre of central banks.[citation needed] Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.[citation needed] The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as possibly employment. In this way the financial system is assumed to contribute to increased prosperity.

The Bombay Stock Exchange building located on Dalal Street, Mumbai

The BSE SENSEX, also called the BSE 30 or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX is taken as 100 on April 1, 1979, and its base year as 1978-79. On 25 July, 2001 BSE launched DOLLEX-30, a dollarlinked version of SENSEX. As of 21 April 2011, the market capitalisation of SENSEX was about 29,733 billion (US$654 billion) (42.34% of market capitalization of BSE), while its freefloat market capitalization was 15,690 billion (US$345 billion).

History
The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history to the 1850s, when four Gujarati and one Parsi stockbroker would gather under banyan trees in front of Mumbai's Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as 'The Native Share & Stock Brokers Association'. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act. The Bombay Stock Exchange developed the BSE SENSEX in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading SENSEX futures contracts. The development of SENSEX options along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform. Historically an open outcry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition. This automated, screen-based trading platform called BSE On-line trading (BOLT) currently has a capacity of 8 million orders per day. The BSE has also introduced the world's first centralized exchange-based internet trading system, BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE platform.[5] The BSE is currently housed in Phiroze Jeejeebhoy Towers at Dalal Street, Fort area.

Calculation
The Bombay Stock Exchange (BSE) regularly reviews and modifies its composition to be sure it reflects current market conditions. The index is calculated based on a free float capitalization methoda variation of the market capitalisation method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors.[1] Initially, the index was calculated based on the full market capitalization method. However this was shifted to the free float method with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice.

As per free float capitalization methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also referred as adjustment factor. Free float factor represent the percentage of shares that are readily available for trading. The calculation of SENSEX involves dividing the free float market capitalization of 30 companies in the index by a number called index divisor.The divisor is the only link to original base period value of the SENSEX. It keeps the index comparable over time and is the adjustment point for all index adjustments arising out of corporate actions, replacement of scrips, etc. The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE SENSEX works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.[2]

[edit] Constituents
Main article: List of BSE SENSEX companies

The BSE Sensex currently consists of the following 30 major Indian companies as of 17 February 2012.[3]
# 1 Company Housing Development Finance Corporation Industry Real estate Pharmaceuticals Electrical equipments Banking Banking Automotive Information Technology Oil and gas Oil and gas Scrip 50001 0 50008 7 50010 3 50011 2 50018 0 50018 2 50020 9 50031 2 50032 5

2 Cipla 3 Bharat Heavy Electricals 4 State Bank Of India 5 HDFC Bank 6 Hero Motocorp 7 Infosys 8 Oil and Natural Gas Corporation 9 Reliance Industries

# 10 Tata Power

Company

Industry Power Metals and Mining Iron ore and Steel Conglomerate Automotive Automotive Consumer goods Conglomerate Metals and Mining Information Technology Pharmaceuticals Oil and gas Banking Steel and power Telecommunication Automotive

Scrip 50040 0 50044 0 50047 0 50051 0 50052 0 50057 0 50069 6 50087 5 50090 0 50768 5 52471 5 53215 5 53217 4 53228 6 53245 4 53250

11 Hindalco Industries 12 Tata Steel 13 Larsen & Toubro 14 Mahindra & Mahindra 15 Tata Motors 16 Hindustan Unilever 17 ITC 18 Sterlite Industries 19 Wipro 20 Sun Pharmaceutical 21 GAIL 22 ICICI Bank 23 Jindal Steel & Power 24 Bharti Airtel 25 Maruti Suzuki

Company

Industry

Scrip 0

26 Tata Consultancy Services 27 NTPC 28 DLF 29 Bajaj Auto 30 Coal India

Information Technology Power Real estate Automotive Metals and Mining

53254 0 53255 5 53286 8 53297 7 53327 8

Some of the historical replacements were:

DLF replaced Dr. Reddy's Lab on November 19, 2007. Jaiprakash Associates Ltd replaced Bajaj Auto Ltd on March 14, 2008. Sterlite Industries replaced Ambuja Cements on July 28, 2008. Tata Power Company replaced Cipla Ltd. on July 28, 2008. Sun Pharmaceutical Industries replaced Satyam Computer Services on January 8, 2009 Hero Honda Motors Ltd. replaced Ranbaxy on June 29, 2009 Cipla to replace Sun Pharma from May 3, 2010 Grasim replaced JSPL in 2010 Bajaj Auto replaced ACC from Dec 6th, 2010 Coal India replaced Reliance Infrastructure and Sun Pharmaceutical replaced Reliance Communications from Aug 8th, 2011

The National Stock Exchange (NSE) (Hindi: Rashtriya hare Bzar) is a stock exchange located at Mumbai, Maharashtra, India. It is the 16th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading.[2] NSE has a market capitalization of around US$985 billion and over 1,640 listings as of December 2011.[3] Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalisation. NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management

operate as separate entities.[4] There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE.[5] As of 2006[update], the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India.[6] NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities.[7] It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%.
[8]

National Stock Exchange

Type Location

Stock Exchange Mumbai, India

Coordinat es

19337N 725135E / 19.06028N 72.85972E / 19.06028; 72.85972 1992 National Stock Exchange of India Limited

Founded

Owner

Key peopl e Currency No. of listi ngs MarketCa p

Ravi Narain

(MD)

Indian rupee ( )

1,640

US$985 billion

(Dec 2011)

[1]

S&P CNX Nifty Indexes CNX Nifty Junior S&P CNX 500 Website www.nseindia.com

NSE building at BKC, Mumbai

The National Stock Exchange (NSE) (Hindi: Rashtriya hare Bzar) is a stock exchange located at Mumbai, Maharashtra, India. It is the 16th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading.[2] NSE has a market capitalization of around US$985 billion and over 1,640 listings as of December 2011.[3] Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalisation.

NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities.[4] There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE.[5] As of 2006[update], the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India.[6] NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities.[7] It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%.[8]

[edit] Origins
The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000.

[edit] Innovations
NSE pioneering efforts include:
Being the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in India. Since the success of the NSE, existent market and new market structures have followed the "NSE" model. NSE is also the first exchange to propose an investor grievance cell and an investor protection fund a[9] Setting up the first clearing corporation "National Securities Clearing Corporation Ltd." in India. NSCCL was a landmark in providing innovation on all spot equity market (and later, derivatives market) trades in India. Co-promoting and setting up of National Securities Depository Limited, first depository in India[10] Setting up of S&P CNX Nifty. NSE pioneered commencement of Internet Trading in February 2000, which led to the wide popularization of the NSE in the broker community. Being the first exchange that, in 1996, proposed exchange traded derivatives, particularly on an equity index, in India. After four years of policy and regulatory debate and formulation, the NSE was permitted to start trading equity derivatives Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in India. NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBC-TV18. NSE.IT Limited, setup in 1999 , is a 100% subsidiary of the National Stock Exchange of India. A Vertical Specialist Enterprise, NSE.IT offers end-to-end Information Technology (IT) products, solutions and services.

NSE (National Stock Exchange) was the first exchange in the world to use satellite communication technology for trading, using a client server based system called National Exchange for Automated Trading (NEAT). For all trades entered into NEAT system, there is uniform response time of less than one second.

[edit] Markets
Currently, NSE has the following major segments of the capital market:
Equity Futures and options Retail debt market Wholesale debt market Currency futures Mutual fund Stocks lending and borrowing

In August 2008 currency derivatives were introduced in India with the launch of Currency Futures in USD INR by NSE. Currently it has also launched currency futures in euros, pounds and yen. Interest Rate Futures were introduced for the first time in India by NSE on 31 August 2009, exactly one year after the launch of Currency Futures. NSE became the first stock exchange to get approval for interest rate futures, As recommended by SEBI-RBI committee, on 31 August 2009, a futures contract based on 7% 10 Year Government of India (Notional) was launched with quarterly maturities.[11]

Hours
NSE's normal trading sessions are conducted from 9:15 am India Time to 3:30 pm India Time on all days of the week except Saturdays, Sundays and Official Holidays declared by the Exchange (or by the Government of India) in advance.This timings is not valid for currency segment of National Stock Exchange.[12] The exchange, in association with BSE (Bombay Stock Exchange Ltd.), is thinking of revising its timings from 9.00 am India Time to 5.00 pm India Time.

A
ABG Shipyard ACC Limited Adani Group Adani Power Ador Welding Aftek Ajanta Pharma Allahabad Bank Ambuja Cements Aptech Archies Ltd Arvind Mills Ashok Leyland Asian Paints Aurobindo Pharma Aventis Pharma Axis Bank Bajaj Auto Bharat Earth Movers Berger Paints India BGR Energy Systems Ltd Bharat Bijlee Bharat Limited Electronics

F cont.
Financial Technologies Group Finolex Cables Firstsource GAIL Geometric Limited Gitanjali Group GlaxoSmithKline Pharmaceuticals Ltd Glenmark Pharmaceuticals Global Vectra Helicorp Limited Godrej Consumer Products Limited Godrej Industries Ltd Godrej Limited Granules Limited Great Shipping Gujarat Company Properties India

M cont.
Max Healthcare Mercator Lines MMTC Ltd MOIL Limited Motherson Systems MphasiS Mukand Ltd National Aluminium Company National Fertilizers National Mineral Development Corporation National Peroxide National Stock Exchange of India NDTV Nectar Lifesciences Network 18 Neyveli Corporation NHPC Limited NIIT Nilkamal Plastics NTPC Limited Oando Oberoi Realty Oil and Natural Gas Corporation Oil India OnMobile Onward Technologies Opto Circuits Oriental Bank of Lignite Sumi

Grasim Industries Eastern Gas

Bharat Forge Bharat Heavy Electricals Limited Bharat Petroleum Bharati Shipyard Bharti Airtel BHEL Jhansi Biocon Blue Star Infotech Bokaro Steel Plant

Gujarat Mineral Development Corporation Limited Hathway HCL Enterprise HCL Technologies HDFC Bank Hero MotoCorp Hexaware Technologies Hindalco Industries Hindustan

Indices

Graph of S&P CNX Nifty from January 1997 to March 2011

NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices, including:[14]
S&P CNX Nifty(Standard & Poor's CRISIL NSE Index) CNX Nifty Junior CNX 100 (= S&P CNX Nifty + CNX Nifty Junior) S&P CNX 500 (= CNX 100 + 400 major players across 72 industries) CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)