Stock Exchanges and Stock Indices--National and International

Handout No.14
Stock Market
A stock market / share market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy.
Brief History of Stock Market:
In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. In 1602, the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. The Amsterdam Stock Exchange is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. There are now stock markets in virtually every developed and most developing economies, with the world's biggest markets being in the United States, United Kingdom, Japan, India, China, Canada, Germany, France and the Netherlands.
Stock market crash:
A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges. In parallel with various economic factors, a reason for stock market crashes is also due to panic and investing public's loss of confidence. Often, stock market crashes end speculative economic bubbles.
There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, the stock market crash of 1973–4, the Black Monday of 1987, the Dot-com bubble of 2000, and the Stock Market Crash of 2008.
One of the most famous stock market crashes started October 24, 1929 on Black Thursday. Another famous crash took place on October 19, 1987 – Black Monday.

Stock Market Indices:
International
BBC Global 30 - world stock market index of 30 of the largest companies by stock market value in Europe, Asia and the Americas.
iShares MSCI EAFE Index (EFA) - provides investment results generally equivalent to publicly traded securities in the European, Australasian and Far Eastern markets. Maintained by Morgan Stanley Capital International.
MSCI World - free-float weighted equity index. Index includes stocks of all the developed markets. Common benchmark for world stock funds.
S&P Global 1200 - global stocks index covering 31 countries and around 70 percent of global market capitalization.
United States
AMEX Composite - composite value of all of the stocks traded on the American Stock Exchange.
Dow Jones Indexes - leading global index provider.
Dow Jones Industrial Average - one of the most widely quoted of all the market indicators. Consists of 30 of the largest publicly traded firms in the U.S.
Dow Jones Wilshire 5000 - designed to track the performance of all publicly traded companies based in the U.S.
NASDAQ Composite - broad market index of all of the common stocks and similar securities traded on the NASDAQ stock market.
NYSE Composite - covers all common stocks listed on the New York Stock Exchange.
Russell Indexes - leading U.S. equity index family for institutional investors.
Russell 3000 Index - measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market.
S&P 500 - stock market index containing the stocks of 500 Large-Cap corporations. Comprises over 70% of the total market cap of all stocks traded in the U.S. Owned by Standard & Poor's.
Africa
Egypt
Case 30 - index of the Cairo & Alexandria Stock Exchange; includes the top 30 companies in terms of liquidity and activity.
Morocco
MASI Index - stock index of the Casablanca Stock Exchange.
South Africa
Johannesburg All Share Index
Asia and Pacific
S&P ASIA 50
Australia
All Ordinaries - index of shares listed on the Australian Stock Exchange (ASX).
S&P/ASX 200
China
SSE Composite - index of all listed stocks (A shares and B shares) at Shanghai Stock Exchange.
Hong Kong
Hang Seng Indexes - record daily changes of the largest companies of the Hong Kong stock market (represent about 67% of capitalization of the Hong Kong Stock Exchange).
India
BSE SENSEX 30 - includes the 30 largest and most actively traded stocks on the Bombay Stock Exchange.
S&P CNX Nifty - index for 50 large companies on the National Stock Exchange of India.
Indonesia
JSX Composite - index of all stocks traded on the Jakarta Stock Exchange.
Japan
Nikkei 225 - stock market index for the Tokyo Stock Exchange.
Malaysia
FTSE Bursa Malaysia Index
New Zealand
NZX 50
Pakistan
KSE 100 - index acting as a benchmark to compare prices on the Karachi Stock Exchange.
Philippines
PSEi Index - index acting as a benchmark to compare prices on the Karachi Stock Exchange.
Singapore
ST Index
South Korea
KOSPI - index of all common shares on the Korean Stock Exchanges.
Taiwan
TSEC - capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange.


Canada
S&P/TSX Composite - index of the stock prices of the largest companies on Toronto Stock Exchange.
Europe
Dow Jones Euro Stoxx 50 - free-float market capitalization-weighted index of 50 Eurozone stocks. Provides a blue-chip representation of Supersector leaders in the Eurozone.
FTSEurofirst Index Series - provides pan-European indices. Joint product of FTSE Group, the leading global index provider, and Euronext, an integrated cross border European exchange.
FTSEurofirst 300 Index - free-float capitalization-weighted price index. Measures the performance of Europe's largest 300 companies by market capitalization. Covers 70% of Europe's market cap.
OMX Baltic Index - covers stock exchanges in Estonia, Latvia and Lithuania.
OMX Nordic 40 - market value-weighted index of the 40 most-traded stock classes of shares in Copenhagen, Helsinki, Reykjavik and Stockholm.
S&P Europe 350 - free float market cap weighted index. Covers at least 70% of European equity market capitalization.
Belgium
BEL20
Czech Republic
PX Index
Denmark
OMX Copenhagen 20
Finland
OMX Helsinki 25
France
CAC 40 - contains 40 stocks selected among the top 100 market capitalisation and the most active stocks listed on Euronext Paris.
Germany
DAX - measures the performance of the Prime Standard’s 30 largest German companies in terms of order book volume and market capitalization.
Ireland
ISEQ 20 - represents the 20 most liquid and largest capped equities quoted on the Irish Stock Exchange.
Italy
S&P/MIB Index - capitalization weighted index developed by S&P and Borsa Italiana.

Netherlands
AEX Index - index of Euronext Amsterdam, consists of the 25 most active securities in the Netherlands.
Poland
Warsaw Stock Exchange WIG Index
Portugal
PSI-20
Russia
MICEX Index - capital-weighted price index of the 30 major and most liquid Russian stocks traded at the Moscow Interbank Currency Exchange.
RTS Index - index of 50 Russian stocks traded on the RTS Stock Exchange.
Spain
IBEX 35
Sweden
OMX Stockholm 30 Index
Switzerland
Swiss Market Index (SMI) - includes the twenty largest and most liquid SPI stocks; represents about 85% of the free- float market capitalization of the Swiss equity market.
United Kingdom
FTSE 100 Index (Financial Times Stock Exchange Index) - capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange.
Middle East
Israel
TA-25 - index tracks the prices of the shares of the 25 companies with the highest market capitalization on the Tel-Aviv exchange.
Jordan
ASE Market Capitalization Weighted Index
Oman
MSM 30
South America
iShares S&P Latin America 40 Index (ILF)
Argentina
MERVAL - index of the Buenos Aires Stock Exchange.
Brazil
Bovespa Index - index of about 50 stocks that are traded on the Sao Paulo Stock Exchange.

Mexico
Indice de Precios y Cotizaciones (IPC) - index of 35 stocks traded on the Bolsa Mexicana de Valores.
Bombay Stock Exchange:
Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage of over 136 years of existence. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875.

BSE is the first stock exchange in the country which obtained permanent recognition (in 1956) from the Government of India under the Securities Contracts (Regulation) Act (SCRA) 1956. It migrated from the open out-cry system to an online screen-based order driven trading system in 1995. Earlier an Association Of Persons (AOP), BSE is now a corporatised and demutualised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). With demutualisation, BSE has two of world's prominent exchanges, Deutsche Börse and Singapore Exchange, as its strategic partners.

Over the past 136 years, BSE has facilitated the growth of the Indian corporate sector by providing it with cost and time efficient access to resources. There is perhaps no major corporate in India which has not sourced BSE's services in raising resources from the capital market.

Today, BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in handling of transactions through its electronic trading system. The companies listed on BSE command a total market capitalization of USD Trillion 1.06 as of July, 2009. BSE reaches to over 400 cities and town nation-wide and has around 4,937 listed companies, with over 7745 scrips being traded as on 31st July 09.

The BSE Index, SENSEX, is India's first and most popular stock market benchmark index. Sensex is tracked worldwide. It constitutes 30 stocks representing 12 major sectors. The SENSEX is constructed on a 'free-float' methodology, and is sensitive to market movements and market realities. Apart from the SENSEX, BSE offers 23 indices, including 13 sectoral indices. It has entered into an index cooperation agreement with Deutsche Börse and Singapore Stock Exchange. These agreements have made SENSEX and other BSE indices available to investors across the globe. Moreover, Barclays Global Investors (BGI), at Hong Kong, the global leader in ETFs through its iShares® brand, has created the exchange traded fund (ETF) called 'iShares® BSE SENSEX India Tracker' which tracks the SENSEX. The ETF enables investors in Hong Kong to take an exposure to the Indian equity market.

The BSE On-line Trading (BOLT): BSE On-line Trading (BOLT) facilitates on-line screen based trading in securities. BOLT is currently operating in 25,000 Trader Workstations located across over 359 cities in India.

BSEWEBX.com: In February 2001, BSE introduced the world's first centralized exchange-based Internet trading system, BSEWEBX.com. This initiative enables investors anywhere in the world to trade on the BSE platform.

Surveillance: BSE's On-Line Surveillance System (BOSS) monitors on a real-time basis the price movements, volume positions and members' positions and real-time measurement of default risk, market reconstruction and generation of cross market alerts.

Scrip-wise Weights in SENSEX:

Company Weight in Index (%)
RELIANCE
12.74
INFOSYS TECH
10.20
ICICI BANK L
7.92
LARSEN & TOU
6.77
HOUSING DEVE
5.21
I T C LTD
5.10
HDFC BANK LT
5.04
STATE BANK O
4.50
ONG CORP LTD
3.77
TCS LTD.
3.55
BHEL
3.30
BHARTI ARTL
3.06
TATA STL
3.00
STERLITE IN
2.43
HIND UNI LT
2.03
NTPC LTD
1.99
TATA MOTORS
1.82
HINDALCO IN
1.80
MAHINDRA & M
1.75
MARUTISUZUK
1.71
TATA POWER
1.67
WIPRO LTD.
1.63
GRASIM INDUS
1.48
HEROHONDA M
1.42
JAIPRAK ASSO
1.27
REL INFRA
1.15
SUN PHARMACE
1.02
DLF LIMITED
0.98
REL COM LTD
0.91
ACC LTD
0.79
S&P CNX Nifty:
S&P CNX Nifty is a well diversified 50 stock index accounting for 23 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused upon the index as a core product. IISL has a Marketing and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services.
• The total traded value for the last six months of all Nifty stocks is approximately 44% of the traded value of all stocks on the NSE
• Nifty stocks represent about 63% of the Free Float Market Capitalization as on Dec 31, 2010.
• Impact cost of the S&P CNX Nifty for a portfolio size of Rs.50 lakhs is 0.06%.
• S&P CNX Nifty is professionally maintained and is ideal for derivatives trading


SEBI:
Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992. The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as “…..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto” SEBI is headquartered in the popular business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.
Chairmen of SEBI:
Shri U. K. Sinha, February 18 2011—till date
Shri C.B.Bhave Feb, 2008—February 17, 2011
Shri M.. Damodaran February 18, 2005 to February 18, 2008
Shri G. N. Bajpai February 20, 2002 to February 18, 2005
Shri D. R. Mehta 21, 1995 to February 20, 2002
Shri S. S. Nadkarni January 17, 1994 to January 31, 1995
Shri G. V. Ramakrishna August 24, 1990 to January 17, 1994
Dr. S. A. Dave April 12, 1988 to August 23, 1990