National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)

Context: Continuing its slide against the dollar, the rupee ended at a new low recently due to risk-off sentiment among investors following an aggressive rate hike announcement by the US Federal Reserve.

The weakness in the rupee also affected sentiment of equity market investors, as the benchmark Sensex at the BSE tanked 953 points, or 1.6 per cent, to close at 57,145.22. The broader Nifty at NSE lost 311 points, or 1.8 per cent, to end at 17,016.

About National Stock Exchange (NSE):

• It was incorporated in 1992, become recognized as a stock exchange in 1993, and trading began on it in 1994.
• It was the first stock exchange on which trading took place electronically.
• In the year 1995-96, NSE launched NIFTY 50 Index and commenced trading and settlement in dematerialised securities.

About Bombay Stock Exchange (BSE):

• BSE is the oldest stock exchange in Asia established in 1875.
• In 1986, Sensex was introduced, as the first equity index to provide a base for identifying the top 30 trading companies of the exchange.
• It ranks amongst the top 10 most valued exchanges globally.
• It offers trading in equities, derivatives, and Commodities.

Current Stock Exchanges in India:

• After the country gained independence, 23 stock exchanges were added apart from the BSE
• However, at present, there are only seven recognized stock exchanges, along with BSE & NSE as follows:
  • Calcutta Stock Exchange Ltd.
    • The Calcutta Stock Exchange began operations in 1908 and began trading shares of plantations and jute mills
  • Magadh Stock Exchange Ltd
  • Metropolitan Stock Exchange of India Ltd
    • Opened in January 2017, India INX is India’s first international stock exchange
    • It is also a subsidiary of BSE and is located at the International Financial Services Centre (IFSC), GIFT City in Gujarat
    • Currently, INX offers only derivative products including equity, currency and commodities derivatives and debt instruments including masala bond and foreign currency bond
  • India International Exchange (India INX)
    • Opened in January 2017, India INX is India’s first international stock exchange
    • It is also a subsidiary of BSE and is located at the International Financial Services Centre (IFSC), GIFT City in Gujarat
    • Currently, INX offers only derivative products including equity, currency and commodities derivatives and debt instruments including masala bond and foreign currency bond
  • NSE IFSC Ltd
    • NSE IFSC Limited (NSE International Exchange) incorporated on 29th November 2016, is a wholly owned subsidiary of the National Stock Exchange (NSE) and is located at the International Financial Services Centre (IFSC), GIFT City in Gujarat.
    • Products offerings are similar to India INX.

Importance of Stock Exchanges:

Determining the fair price:

• The stock exchanges facilitate in discovering fair prices of the publicly listed securities. Relentless trading of securities helps in determining the price of the listed securities.

Facilitating industrial advancement:

• The industrialisation of a nation is reliant on capital availability. This is ensured by the stock exchanges as the public can invest directly in the companies through stock exchanges.

Protecting investors’ interest:

• The stock exchanges lay down guidelines for the operation of the listed entities. These norms have to be strictly followed by the companies, thereby protecting investors’ interest as they would have financed the operations.

Act as secondary markets:

• Stock exchanges will help investors of certain bonds, such as sovereign gold bonds (SGBs), to sell their holdings within the lock-in period or maturity.

Reduce the dependency on loan for corporates:

• The existence of stock exchanges has helped listed companies avoid availing a loan as they could raise capital by issuing securities. This has helped them save a significant amount in the form of regular interest outgo.

Source: Indian Express                 

Q.1) Convertible Bonds, consider the following statements:

1. As there is an option to exchange the bond for equity, Convertible Bonds pay a lower rate of interest.
2. The option to convert to equity affords the bondholder a degree of indexation to rising consumer prices.

Which of the statements given above is/are correct? (2022)

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2