The Securities Market in India – Pt.2

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In the last article, I introduced the securities market. The primary and secondary market, NSE and BSE, SEBI, etc. In this article, I would like to explain a few more concepts.

Who are the Bears and Bulls?

There are mainly two types of investors in the stock market; Bulls and Bears. The markets are Bullish are Bearish.

Bulls are the investors who are optimistic about the market. It means, they speculate or believe that the prices will rise. They earn profit out of a rising market. When a market shows an increasing trend of stock prices, it’s called a “bull market” or, the market is “bullish”. When a bull market prevails, the market shows a sustained and increased price of stocks. A bull denotes a rising trend or positive nature because, when a bull attacks, he lifts the target upwards. In a bull market scenario, the investors buy more and create a scarcity of shares in the stock market. Hence, the prices rise. Bears are exactly the opposite of bulls. They are pessimistic and believe that the stock market will show a falling trend and they make profits when a market falls. Such a market of investors is called a “bear market” or, the market is “bearish”.  The bears increase the number of shares in the market and hence, the prices go down. When the bear market prevails, it simply means there is a sustained or decreased price of stocks. When a bear attacks, he pushes the target downwards. Hence the terms bulls and bears.

Participants in the stock market:

Here are some of the participants in the stock market:

  • Brokers: This term is commonly heard. A broker is a person who helps the investors with the transactions. They are registered members on the stock exchange.
  • Investors: These are simply people who buy and sell the securities.
  • Investment advisors: These are individuals or companies who help the investor with investment advice, issuing reports, security related analyses, etc.
  • Depositories: It is an institution or an organization which holds the securities of the investors in an electronic or dematerialized form. There are two depositories in India at present; namely, National Securities Depository Limited – NSDL and Central Depository Services (India) Limited. – CDSL. Both NSDL and CDSL are registered with SEBI.
  • Mutual Funds and Financial Institutions.

The other participants include Transfer agents, Stock Exchanges, Underwriters, and many more.

Terminologies:

IPO: IPO stands for Initial Public Offering. When a company goes public for the very first time, it comes with an IPO to raise funds in a primary market.

Book Building: “Book Building is basically a process used in Initial Public Offer (IPO) for efficient price discovery. It is a mechanism where, during the period for which the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The offer price is determined after the bid closing date.” – NSE.

Price Band: It is a process of public issue. The concerned company gives a price band to the share applicants. It is basically a price range and the ones with the highest bids are issued shares.

Rolling settlement: In simple words, when a trade of securities takes place, it requires a specific period for that trade to settle. After the trade is settled, it reflects in the Demat account. At NSE, the period for rolling settlement is T+2 days, i.e., the second working day. Hence, if a trade takes place say on Tuesday, it will settle on Thursday. Rolling settlements exclude all the Bank holidays, NSE holidays, Saturdays, and Sundays.

Demutualization: This process was started by SEBI in 2002. It is meant to segregate the ownership, management, and trading membership from each other. It states that no broker can be a part of the Board of Directors or an office-bearer in the stock exchange. This is followed by all the stock exchanges except the three regional stock exchanges.

References:

Investment Analysis and Portfolio Management – Fourth Edition by Prasanna Chandra.

INDIAN ECONOMY FOR CIVIL SERVICES, UNIVERSITIES, AND OTHER EXAMINATIONS – by Ramesh Singh

https://www.forbes.com/advisor/investing/bear-market-vs-bull-market/

https://www.investor.gov/introduction-investing/investing-basics/how-stock-markets-work/market-participants

https://www.reliancesmartmoney.com/Insights/classroom-detail/stock-market-participants

https://www1.nseindia.com/products/content/equities/ipos/about_ipos.htm

https://www1.nseindia.com/emerge/trading/content/sme_mkt_segment.htm

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