Stock market is a broad term, which involves a number of markets in which securities are brought and sold. Stock markets often rise and fall. Before knowing why the stock markets are so volatile, let us understand about stock market and the investment options available to a potential investor. Stock exchanges are intricately inter-woven in the fabric of a nation's economic life. Without a stock exchange, the savings of the community- the sinews of economic progress and productive efficiency- would remain underutilized. The task of mobilization and allocation of savings could be attempted in the old days by a much less specialized institution than the stock exchange. But as business and industry expanded and the economy assumed more complex nature, the need for "permanent finance" arose. Entrepreneurs needed money for long-term whereas investors demanded liquidity- the facility to convert their investments into cash at any given time. The answer was ready market for investments and this was how the stock exchange came into being. The stock exchange is a highly organized market for the purchase and sale of second hand quoted and listed securities. The Securities Contracts (Regulations) Act, 1965 defines a stock exchange as, "an association organized or body of individuals, whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.
[...] ADVANTAGES OF LISTING ON STOCK EXCHANGE Detailed information about the company is available. Information increases the activity of purchase and sale of the security of that organization. Continuous dealing raises the value of security. Convenience of sale of security, lending liquidity to the shares. There is safety in dealing. It ensures credit worthiness. Creates a favorable impression on the investor. Listing gives collateral value in making loans and advances from banks that prefer quoted securities. Widens the market of security. [...]
[...] The Securities Exchange Board of India (SEBI) along with the Institute of Chartered Accountants of India (ICAI) jointly monitor the markets and announces the regulatory measures thus making the Indian companies more transparent and more disciplined. According to the April 2001 report on corporate governance by CLSA Emerging Markets, India ranks fourth with a score of 55.6 percent. Banaji (2000) emphasizes that the capital market reforms like improved market transparency, automation, dematerialization and regulations on reporting and disclosure standards were initiated because of the presence of Morgan Stanley the FIIs. [...]
[...] Beta tells the investor about the stock in which he plans to invest is more or less volatile than the overall market NEED AND IMPORTANCE OF THE STUDY The research subject is concentrated mainly on two aspects. One is to understand the information technology, cement and automobile sectors growth in India. And another is to know with the help of risk analysis through standard deviation and beta why the investors prefer one company to another company in the same sector for investment purpose. [...]
[...] The Securities and Exchange board Of India (SEBI) has been set up in Bombay by the government to oversee the orderly development of stock exchanges in the country. All the companies wishing to raise the capital from the public are required to list their securities on at least one stock exchange. Thus the ordinary shares, preference shares and debentures of publicly held companies are listed in one or more stock exchanges. STOCK EXCHANGE IN INDIA The origin of the stock market goes back to the time when securities representing this property or promise to pay were first issued and made transferable from one person to another. [...]
[...] Having described how the stock market indices are constructed, let us look at the nature of the more popular stock market indices in India: The Economic Time Index of ordinary share prices On trading days, the economic times publishes the all India index of ordinary share prices. The base year for this index is the financial year 1984-85, the sample used for this index consists of 72 actively traded shares, and the average employed in the constitution of this index is a simple arithmetic average of price relatives. [...]
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