A MICROECONOMIC STUDY OF THE INDIAN STOCK MARKET

by Hakimuddin Rassiwala Subhojyoti Baksi Parikshit Basu Sourav Chakraborty

The Bombay Stock Exchange (BSE) (established as native share and stock brokers 'Association at Bombay in 1875) and the National Stock Exchange of India Ltd (NSE) ( which started operations in 1994) are the two primary exchanges in India. In addition, there are 22 Regional Stock Exchanges.

A BRIEF OVERVIEW OF THE INDIAN STOCK MARKET

The purpose of the stock exchange is to regulate or control the business of buying, selling or dealing in securities. These securities include: Shares, scrip, stocks, bonds, debentures stock or other marketable securities of a like nature in or of any incorporated company or other body corporate. Government securities,and Rights or interest in securities.

PURPOSE OF THE STOCK EXCHANGE

The prices of stocks are determined by their individual supply-demand equilibrium. Factors affecting the supply and demand of a companys stock: The current prices of the stock Current earnings/profits/dividends Expected future earning. Expected future stock price. The price of substitutes like bonds or other stocks

ROLE OF SUPPLY AND DEMAND ON THE STOCK PRICE MOVEMENT

A breakout above a resistance level is evidence of an upward move as more buyers (demand) are willing to buy at higher prices. Similarly, the failure of a support level indicates that more supply (seller) is available and ready to sell at lower levels. In a bull market, we see strong demand and weak supply for shares which pushes up the market price of the share.

MANIFESTATION OF SUPPLY-DEMAND CHANGES