Functions of Stock Market

Stocks and shares are collectively referred to as 'equities' or 'securities' and represent an ownership stake in a company. Stock markets are the place where buyers and sellers exchange these securities.

A stock market may be physical or entirely virtual. The Bombay Stock Exchange (BSE) is physically located on Dalal Street in Mumbai City. Trading was traditionally done in person, but the option to buy/sell most stocks electronically was added later. Earlier, trading was initially done by telephone but is now primarily done by computer.

The process of exchange is generally for buyers to name a price they are willing to pay for a particular stock and for sellers to name their selling price. In physical markets, brokers and specialists match buyers and sellers, but this can be done entirely by the computer in virtual markets. 

Popular Stock Exchanges 

The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are two of the largest and most significant stock exchanges in India, playing crucial roles in the country's financial market landscape.

● Bombay Stock Exchange (BSE):

Established in 1875, the BSE is the oldest stock exchange in Asia and was the first in India. It is located in Mumbai, Maharashtra. The BSE has over 5,000 listed companies and is known for its index, the SENSEX, which is a benchmark index of 30 of the largest and most actively traded stocks on the BSE. The SENSEX is widely used to track the performance of the Indian stock market.

● National Stock Exchange (NSE): 

Founded in 1992 and also based in Mumbai, the NSE is the largest stock exchange in India by trading volume and market capitalization. It introduced electronic trading in India, which was a significant advancement over the open outcry system used by the older BSE. The NSE's benchmark index, the NIFTY 50, includes 50 of the largest and most liquid stocks listed on the exchange. It provides a broad indication of the Indian stock market's overall performance.

Both exchanges are integral to the Indian financial system, offering a variety of instruments like stocks, bonds, and derivatives. They play a vital role in helping companies raise capital and providing investors with a platform for trading securities efficiently and transparently.

Following are some of the essential functions of a Stock Exchange:

● Providing liquidity and Marketability to Existing Securities: Stock Exchange provides a ready and continuous market for buying and selling securities. It provides a platform where shares can be sold and bought by buyers and sellers.

● Pricing of Securities: Based on the forces of demand & supply, Stock Exchange helps in putting a value on the securities which provide instant data to both buyers and sellers and thus helps in the pricing of securities.

● Safety of Transaction: All participants associated with a stock exchange are well regulated, and are required to work within the legal framework given by the regulator. Such a system ensures the safety of transactions. In India, all trading is regulated by SEBI.

● Contributes to Economic Growth: People get a chance to buy and sell their shares, letting them invest money. Stock exchange provides a platform by which savings get channelized into the most productive investment proposals, which leads to capital formation & economic growth.

● Spreading of Equity Culture: Stock exchanges have extensive information on the listed companies, which is further available to the public. This data helps in educating the public about investments in securities which leads to spreading of wider ownership of shares.

● Providing Scope for Speculation: Securities, when purchased solely with a view of gaining profit through price movement to a target is called speculation. Stock exchanges provide scope within the provisions of law for speculating in a restricted and controlled manner.

Conclusion

Stock markets play a crucial role in the economic landscape by facilitating the exchange of securities, which helps in capital formation and economic growth. They provide a structured platform where securities can be bought and sold, ensuring liquidity and enabling price discovery based on demand and supply. 

By offering a regulated environment, they ensure transaction safety and help in spreading equity culture among the public. Overall, stock exchanges like BSE and NSE not only support the growth of industries by helping them raise capital but also empower individuals and institutions to invest and grow their wealth, contributing significantly to the broader economy.