Title: Stock Exchanges of India- Indian Economy For UPSC CSE Exam
1Notes 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).
2- 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 Share
- Issued for all.
- Preference Share
- The holders of such shares get the dividend
first. - Bonus Share
- When dividend is given in the form of shares
instead of cash. - Sweat Equity Share
- These are specific type of shares issued only for
the employees of the company on behalf of their
Extra-Ordinary achievements on behalf of
Company.
3- 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. - There are 4 important Commodity Exchanges in
India - MCX
- It is the largest commodity exchange in the
country. - It is in Mumbai
- NCDX
- National Commodity and Derivative Exchange
- It is in Mumbai
Stock Exchange for Crude Oil
- NYMEX
- Brent
- Regulators of Commodity Exchange Forward Market
Commission (FMC) - It is regulator of Commodity Exchange.
- Other Regulators
- IRDA Insurance Regulator Development Authority
- TRAI - Telecom Sector
- PFRDA Provident Fund
- Share Index
4- These are prepared to track the fluctuations in
the prices of shares and for the purpose various
types of indices are prepared, but some of them
are very sensitive, like in India sensitive
indices are - SENSEX belongs to BSE
- NIFTY belongs to NSE
- SENSEX
- It is based upon the value of 30 blue chip
companies listed under BSE. - It was started in 1986 with base 100
- At present its value is around 49,398.29 (19th
Jan, 2020) - 250 to 3 Lakh crore transactions per day.
- NIFTY
- There are 50 companies listed in NIFTY Important
Miscellaneous - SEBI
- Bull/Bear
- Credit Ratings
5- Credit Ratings
- Its a mechanism to evaluate the financial
position and credit worthiness of an individual,
company or of a country. - In India following agencies are involved
- CRISIL
- ICRA
- CARE
- ONCRA
- CIBIL
- International credit rating companies
- S P (Standard and Poors)
- Moody
- Fitch Rating
- Depository
- It is a kind of database where shares and
securities are maintained in electronic format or
D- mat form. - In India there are 2 depositories
- NSDL National Stock Depository Limited
- CDSL Central Depository Securities Limited
- Shares of all the listed companies are handled or
stored by these two. ADR/GDR - ADR American Depository Receipt
- GDR Global Depository Receipt
- ADR are issued by American Depositories to allow
any foreign company to function in American
Capital market. - GDR is used for the same purpose by the countries
other than America. VCF Venture Capital Fund - It is a kind of specific fund which is available
for those entrepreneurs, those who have much
experience, ideas and capacity to earn profit but
lack of capital.
6Merchant Banks These are Capital market
intermediaries and arrange funds for other
companies, also functions like under-writers.
(If shares not purchased by Public, these
companies will buy it). Mutual Funds These are
professionally-managed trust that pools the
savings of many investors and invests them in
securities like stocks, bonds, short-term money
market instruments and commodities. It is the
most suitable investment for the cautious
investor as it offers an opportunity to invest
in a diversified professionally managed basket of
securities at a relatively low cost. Mutual fund
industry in India started in 1963 with the
formation of Unit Trust of India, at the
initiative of Government of India and Reserve
Bank of India. In 1987, the entry of non-UTI
public sector mutual funds was set up by public
sector banks. SBI Mutual Fund was the first
non-UTI mutual fund. Net Asset Value It is the
amount which a unit holder would receive if the
mutual fund is wound up. It is the value of all
assets less liabilities. New Fund Offer (NFO)
Net Asset Value (NAV) Economics holds special
importance in civil services exam be it UPSC and
other State PSC exams. Economy question
specially related to Indian economy are asked in
prelims, mains as well as in interviews.
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