Key Points
Key Points: Secondary Market/Stock Exchange
- Secondary market is the stock exchange / stock market.
- It deals in existing or second-hand securities.
- Stock exchange is a platform for trading securities.
- Companies Act 1850 was introduced to promote investment in corporate securities.
- First stock exchange: Bombay, 1875, later called BSE.
- Other exchanges came up in Ahmedabad, Calcutta and Madras.
- Post-1991, Indian secondary market has a three-tier structure: Regional Stock Exchanges, NSE and OTCEI.
Key Points: Functions of Stock Exchange
- Stock exchange provides liquidity and marketability by allowing easy buying and selling of securities.
- Security prices are determined by the forces of demand and supply.
- It provides a fair, safe and legally regulated platform for trading.
- It promotes economic growth by directing savings into productive investments.
- It encourages investment in securities, leading to the spreading of equity cult.
- It provides scope for healthy speculation, helping maintain market activity.
- Overall, a stock exchange makes trading in securities easy, safe and efficient.
Key Points: Securities and Exchange Board of India (SEBI)
- SEBI was established in 1988 and became a statutory body in 1992 under the SEBI Act, 1992.
- SEBI regulates, supervises and promotes the securities market while protecting investors' interests.
- The main objectives of SEBI are regulation, investor protection, prevention of malpractices and enforcement of a code of conduct.
- SEBI performs three major functions: Protective, Developmental and Regulatory.
- The major intermediaries regulated by SEBI are stock exchanges, stock brokers, merchant bankers, depositories, credit rating agencies and mutual funds.
- The two major depositories in India are NSDL and CDSL, while the major stock exchanges are BSE and NSE.
- The leading credit rating agencies are CRISIL and ICRA, and the oldest mutual fund in India is UTI.
Important Questions [12]
- Distinguish between the following: Primary market and Secondary market
- Correct the underlined word/s and rewrite the following sentence. Companies sell fresh shares for the first time to the public in the secondary market.
- Explain the following term/concept. Primary market
- Select the Correct Answer from the Possible Choices Given Below and Rewrite the Statement :
- State whether the following statement is True or False: The securities market is an unorganized marketplace in India.
- Correct the underlined word and rewrite the following sentence. A stock market is an important constituents of money market.
- Explain the following term/concept. Broker
- Correct the underlined word and rewrite the following sentence. A Bear expects the prices of shares to rise in the future.
- Explain the following term/concept. Bull
- Explain the following term/concept. Bear
- Distinguish between the following. Jobber and Broker.
- The Company Has to Obtain Consent of ............................ If Issue of Debentures Exceeds Rs. 1 Crore.
