Introduction
Source: https://indianmarketview.com/indian-stock-market-ends-mixed-after-a-volatile-trading-session/
Hi friends, hope all of you are fine and safe.
This month it’s going to be a stock market series. So, I hope you guys will enjoy it.
Indian stock exchanges (NSE, BSE) are something we watch on a regular basis in the news/papers about how it has performed on a particular day.
There are many people who trade in markets as intraday or keeping shares on long term.
But before going in-depth about the stock market, we will see the main concepts related to it so it will be easy to understand in the later blogs.
National stock exchange (NSE)
National Stock Exchange of India Limited (NSE) is the leading stock exchange of India, located in Mumbai, Maharashtra.
It is the world’s largest derivatives exchange in 2021 by number of contracts traded based on the statistics maintained by Futures Industry Association (FIA), a derivatives trade body.
NSE is ranked 4th in the world in cash equities by number of trades as per the statistics maintained by the World Federation of Exchanges (WFE) for the calendar year 2021.
It is under the ownership of leading financial institutions, banks, and insurance companies.
Source: https://enterslice.com/learning/nse-listing-process-in-india/
NSE was established in 1992 as the first dematerialized electronic exchange in the country.
NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system.
Vikram Limaye is the Managing Director and Chief Executive Officer of NSE.
NSE (National Stock Exchange) Listing Process
Listing of securities can be done in either Capital Market or Wholesale Debt Market.
Basic Eligibility Requirement
- Company must be registered as a Public Company under Companies Act 1956 or Companies Act 2013
- Company should be at least 3 years old, and 2 years should be positive net worth
- Post issue paid-up capital should not be more than 25 Cr
Documents requirement for NSE Listing
- A profile of the promoters and company management.
- Company profile with details of project undertaken
- Certified Copies of Annual Report for the last 3 years.
- Certified Copies of Draft Offer Document.
- Certified copies of Memorandum & Articles of Association of the company
- 5 years projected business plan with the balance sheet, PL & Cashflow
Source: https://fundsbase.com/national-stock-exchange/
Bombay stock exchange (BSE)
Source: https://in.pinterest.com/pin/1067071705430419767/
BSE Limited, also known as the Bombay Stock Exchange (BSE), is an Indian stock exchange located on Dalal Street in Mumbai.
Established in 1875 by cotton merchant Premchand Roychand, a Rajasthani Jain businessman, it is the oldest stock exchange in Asia.
It is also the tenth oldest stock exchange in the world.
The BSE is the 9th largest stock exchange with an overall market capitalization of more than ₹276.713 lakh crore, as of January 2022.
Source: https://forum.valuepickr.com/t/bse-bombay-stock-exchange-bet-on-financialization/13699
Eligibility Criteria
The following eligibility criteria have been prescribed for listing of companies on BSE, through Initial Public Offerings (IPOs) & Follow-on Public Offerings (FPOs):
Minimum Listing Requirements for New Companies
- The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as “the Company”) shall be Rs. 10 crore for IPOs & Rs.3 crore for FPOs.
- The minimum issue size shall be Rs. 10 crore.
- The minimum market capitalization of the Company shall be Rs. 25 crore (market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price).
NSE vs BSE
Source: https://in.pinterest.com/pin/bse-vs-nse–808044358136387233/
NIFTY50
Nifty 50 is the benchmark in the Indian Stock Market.
It is an index that represents the average of 50 of the largest Indian companies listed on the National Stock Exchange.
The Index tracks the behavior of a portfolio of blue-chip companies, the largest and most liquid Indian securities.
Source: https://www.indian-share-tips.com/2021/06/sector-weightage-in-nifty-50.html
The Index has been trading since April 1996 and is well suited for benchmarking, index funds and index-based derivatives.
The NIFTY 50 is owned and managed by India Index Services and Products Ltd. (IISL).
IISL is India’s first specialized company focused on an index as a core product.
NIFTY50 Calculation method
The NIFTY 50 is computed using a float-adjusted, market capitalization weighted methodology.
It reflects the total market value of all stocks in the index relative to a base period value (November 3, 1995)
Market capitalization, or market cap, is the total value of a company’s shares held by all investors, including the organization itself.
Free-float market capital is the total market value of those shares which are available for public trading, that is, that are not held by company owners or the government.
Weighted method means that the component of each stock in calculating the index is assigned a weight according to the total value of its outstanding shares.
The total market cap of each stock is computed by multiplying it with a float-factor or Investible Weight Factor (IWF).
Market capitalization = Shares Outstanding * Current Price
Free-float Market Capitalization = Market Cap * IWF
Index Value = (Current Market Value/Base Market Capital) * 1000
The current market value is the weighted aggregate market cap of all the 50 companies. The base market capital is the weighted aggregate market cap of all 50 companies as in the base period.
Base Date: The base period for the NIFTY 50 index is November 3, 1995, which marked the completion of one year of operations of NSE’s Capital Market Segment.
The base value of the index has been set at 1000, and a base capital of Rs 2.06 trillion.
SENSEX
The term Sensex refers to the benchmark index of the BSE in India.
The Sensex comprises 30 of the largest and most actively traded stocks on the BSE and provides a gauge of India’s economy.
It is float-adjusted and market capitalization-weighted.
The Sensex is reviewed semi-annually each year in June and December.
Created in 1986, the Sensex is the oldest stock index in India and is operated by Standard & Poor’s (S&P).
Analysts and investors use it to observe India’s economy and the development and decline of industries.
Source: https://twitter.com/bseindia/status/1352100012281405441
Formula for calculating Sensex
Sensex = (total free float market capitalisation/ base market capitalisation) * Base index value
Free-Float Market Capitalisation = Market Capitalisation x Free Float Factor
- Free float is that proportion of total shares issued by the company that is readily available for trading to the public. It does not consider promoters’ holding, government holding, and other shares that will not be available in the market for trading in the ordinary course of events.
- ‘Market capitalisation’ is the valuation of the company. It can be determined by multiplying the price of a share with the number of shares issued.
The base year to calculate Sensex is 1978-79 and the base value is static.
According to BSE, Rs. 2501.24 crore is to be used as the base market capitalisation.
The base index value is 100.
So, Sensex = free float market capitalisation of 30 firms /25041.24 crores*100
Public limited companies
A public company is a company that has sold all or a portion of itself to the public via an initial public offering.
Public Limited Company is a company that has limited liability and acts as a separate legal entity.
The main advantage public companies have is their ability to tap the financial markets by selling stock (equity) or bonds (debt) to raise capital (i.e., cash) for expansion and other projects.
Source: https://www.taxhelpdesk.in/product/public-limited-company-registration-online-in-india/
Source: https://swaritadvisors.com/public-limited-company-registration
Source: https://www.iedunote.com/public-limited-company
Conclusion
NSE and BSE play a major role in determining the overall growth of various sectors and the economy.
NIFTY50 and SENSEX indexes help the traders in determining whether it’s bull or bear at the end of the day in the stock market.
We will see part by part of the Indian Stock market in this month so that you can understand it well.
Concepts are more important to understand how a stock market functions.
So, hope you enjoyed reading this. See you soon!!!