A stock (or share) market is an integral part of a modern financial system. Stock market is a platform for making investment in corporate securities. The securities are chiefly in the form of equity shares and debentures. The purpose of these securities is to raise long-term funds for companies engaged in production. The function of a stock market is two-fold: (a) to arrange for the raising of new capital (primary market function) and (b) to provide liquidity against existing securities (secondary market function). Corporate enterprises raising fresh capital may be new companies or existing companies planning expansion of their operations. Sometimes, existing private firms also go public, i.e. become public limited companies. Stock market helps in the floatation of new issues by providing a variety of services like underwriting, distribution, and listing of the issue. Stock market contributes in raising capital in order to strengthen the industrial base of an economy. Thus, stock market plays an most important role in supporting the growth of industry and commerce in the country. Ever since the initiation of economic reforms in the early 1990s, the Indian stock market has undergone a sea change. Development of information technology in general and digital technology in particular, has changed the approach of people towards the stock market. As a chief regulator, Securities and Exchange Board of India (SEBI) has brought transparency along with friendly access for investors across the country. Indian stock market is also an attraction for foreign portfolio investors. This book explains and examines various aspects of stock market in India. It is designed to help a cross-section of readers―particularly teachers and students of economics, commerce and management―to understand the intricacies of the functioning of Indian stock market in a non-technical language. CONTENTS 1. Stock Market: Conceptual Framework 1.1 Role of Stock Market in Economic Development 1.2 Characteristics of Stock Market 1.3 Is Stock Market a Science or a Manipulation? 1.4 Investment versus Trading 1.5 Stock Exchange: An Integral Part of the Stock Market 2. Theories of Stock Market 2.1 Efficient Market Hypothesis (EMH) 2.2 Expectations in Stock Market 2.3 Animal Sprit and Stock Market 2.4 Behavioural Finance 2.5 Other Theories 2.6 Allocation of Personal Savings 2.7 Why Invest in Stock Market? 3. Stock Market in India: An Overview 3.1 Structure of Indian Capital Market 3.2 Brief History of Indian Stock Market 3.3 Present Position of Indian Stock Market 3.4 Refinements in Indian Stock Market 3.5 Indian Stock Market in the Globalized Era 4. Basics of Primary Stock Market 4.1 Significance of a Primary Market 4.2 Features of Primary Market 4.3 Economic Functions of Primary Market 4.4 Organisational Functions of the Primary Market 4.5 Different Type of Issues in Primary Market 4.6 Investors in Primary Market 4.7 Pricing of Public Issues 4.8 Face Value of Shares 4.9 Market Value of Shares 4.10 Book Value of Shares 5. Primary Stock Market in India 5.1 Reforms in Indian Primary Market 5.2 IPO Grading and Credit Rating 5.3 Offer Documents in Primary Market 5.4 Scams and Anomalies in Primary Market 6. Secondary Stock Market and Stock Exchanges in India 6.1 Financial Markets in India 6.2 Meaning and Features of Stock Exchange 6.3 Economic Role of Stock Exchange 6.4 India’s Premier Stock Exchanges 6.5 Stock Market Indices 6.6 Depository System 6.7 Application of Circuit Breakers in Stock Market 6.8 Debt Market Segment of Stock Exchange 6.9 NSCCL and ICCL 6.10 Derivative Market Segment of Stock Exchange 7. Stock Market Scams in India 7.1 Harshad Mehta Scam 7.2 Ketan Parekh Scam 7.3 Satyam Scam 7.4 Dabba Trading in Indian Stock Market 8. Fundamental Analysis of Stock Market 8.1 Fundamental Analysis 8.2 Features of Fundamental Analysis 8.3 Concept of Intrinsic Value of Shares 8.4 Components of Fundamental Analysis 8.5 Analysis of Financial Statements 8.6 Limitations of Fundamental Analysis 9. Technical Analysis of Stock Market 9.1 History of Technical Analysis 9.2 Tools and Techniques of Technical Analysis 9.3 Simple Moving Average (SMA) 9.4 Exponential Moving Average (EMA) 9.5 Moving Average Convergence Divergence (MACD) 9.6 Relative Strength Index (RSI) 9.7 Average Directional Index (ADX) 9.8 Stochastic Oscillator Indicator 9.9 Aroon Indicator 9.10 Fear Index 9.11 Bull and Bear Phases in Stock Market 9.12 Trading Strategies 9.13 Application of Artificial Intelligence (AI) and Algorithm Trading (AT) 9.14 Major Limitations of Technical Analysis 10. Measurement of Returns, Risks and Volatility in Stock Market 10.1 Measurement of Stock Returns 10.2 Measurement of Risk 10.3 The Concept of Volatility 10.4 Seasonality in Stock Market 11. Macroeconomic Variables and Stock Market 11.1 Gross Domestic Product (GDP) and Stock Market 11.2 Interest Rates and Stock Market 11.3 Inflation and Stock Market 11.4 Index of Industrial Production (IIP) and Stock Market 11.5 Foreign Capital and Stock Market 11.6 Exchange Rate and Stock Market 11.7 Money Supply and Stock Market 11.8 Fiscal Policy and Stock Market 12. Regulatory Framework for Stock Market 12.1 Ministry of Finance 12.2 Reserve Bank of India (RBI) 12.3 Securities and Exchange Board of India (SEBI) 12.4 Stock Exchanges (NSE/BSE) 13. Legal Framework for Stock Market 13.1 Securities Contracts (Regulation) Act (SCRA), 1956 13.2 Depositories Act, 1996 and Depositories and Participants Regulations, 2018 13.3 Companies Act, 2013: Main Provisions 13.4 Limited Liability Partnership (LLP) Act, 2008 13.5 Insolvency and Bankruptcy Code (IBC), 2016 14. Foreign Portfolio Investment in Indian Stock Market 14.1 Foreign Investment: New Strategy for Faster Growth 14.2 Portfolio versus Direct Investment 14.3 Foreign Institutional Investors (FIIs) 14.4 Advantages of Portfolio Investment Inflows 14.5 Disadvantages of Portfolio Investment Inflows 14.6 Liberalisation of Portfolio Investment Flows into India 15. Mutual Funds in Indian Stock Market 15.1 Meaning and Advantages of a Mutual Fund 15.2 Legal and Regulatory Framework 15.3 Operations of a Mutual Fund 15.4 Organisation of Mutual Fund 15.5 History of Mutual Funds 15.6 Features of Mutual Fund Industry in India 15.7 Types of Mutual Funds 15.8 Problems of Mutual Funds 15.9 Mutual Funds and the Stock Market 15.10 Measures to Evaluate Portfolio Performance Bibliography Index ABOUT THE AUTHOR Dr. Anil R. Chougule is presently working as Associate Professor, Department of Business Economics, Sydenham College of Commerce and Economics, Mumbai. He completed his Post-graduation, M.Phil. and Ph.D. from the Department of Economics, Shivaji University, Kolhapur. He specialises in finance and stock market. He has published a number of research papers in national and international journals of repute. With more than 17 years of teaching experience to graduate and post-graduate students, he is a member of board of studies of various universities and autonomous colleges. Dr. Chougule has participated and presented papers at various national and international conferences and seminars.