Types of stock exchange in India and its Functions Upsc

Types of stock exchange in India

  • Bombay stock exchange (BSE)
  • National stock exchange (NSE)
  • Calcutta Stock Exchange (CSE)
  • India International Exchange (India INX)
  • Metropolitan Stock Exchange (MSE)
  • NSE IFSC Ltd (NSE International Exchange)

Stock Exchange in India

According to the Securities Contracts (Regulation) Act 1956, a stock exchange means any body of individuals, whether incorporated or not, constituted for the purpose of helping, regulating, or controlling the buying, dealing, and selling of securities.

A Stock Market or Stock Exchange is an institution that provides a platform for buying and selling existing securities.

As a market, the stock exchange helps the exchange of a security (share, debenture, etc) into money and vice versa.

Stock exchanges help the company to raise funds, provide liquidity and safety of investment to the investors.

It also helps to enhance the creditworthiness of individual companies.

Stock exchange in India and its functions
Stock Exchange By BSEINDIA – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=31126278

Functions of a Stock Exchange

Providing Liquidity and Marketability to Existing Securities.

Creation of a continuous market where securities are bought and sold.It provides the investor to dis-invest and reinvest.

It provides both liquidity and easy marketability to already existing securities in the market.

Price of Securities

Share prices on a stock market are determined by the forces of demand and supply. The stock exchange is the mechanism of constant valuation by which the prices of securities are determined.

It provides instant information to both buyers and sellers in the market.

Safety of Transaction

The membership of a stock exchange is well regulated and its dealings are well defined according to the already existing legal framework. It makes sure that the investing public gets a safe and fair deal on the market.

Economic Growth

The process of disinvestment and reinvestment savings get channelized into their most productive investment avenues. This leads to capital formation and economic growth.

Spreading of Equity Cult

It plays an important role in ensuring wider share ownership by regulating new issues and taking effective steps in educating the public about investment.

Scope for Speculation

It provides sufficient scope within the provisions of law for speculative activity in a restricted and controlled manner.

It is generally accepted to a certain degree of healthy speculation is necessary to ensure liquidity and price continuity in the stock market.

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* * All the Notes in this blog, are referred from Tamil Nadu State Board Books and Samacheer Kalvi Books. Kindly check with the original Tamil Nadu state board books and Ncert Books.
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