Bombay Stock Exchange (BSE)

India's leading stock exchange, listing over 5000 companies. The main index is the BSE Sensex of 30 representative stocks. Derivatives have been traded since 2000.

What is the Bombay Stock Exchange (BSE)?

The Bombay Stock Exchange (BSE) is India’s premier stock exchange and one of the largest exchanges globally, both in terms of number of listings and market capitalization. With over 5,000 companies listed, BSE operates a platform that facilitates trading in various financial instruments including equities, derivatives, debt instruments, and mutual funds. The exchange was established in 1875, making it one of the oldest exchanges in Asia.

Key Highlights:

  • Main Index: BSE Sensex (comprising 30 of the largest and most actively traded stocks on the exchange).
  • Established: 1875.
  • Instruments Traded: Equities, derivatives, debt instruments, and mutual funds.
  • Number of Listed Companies: Over 5000.
  • Headquarters: Mumbai, Maharashtra, India.
  • Derivatives Trading: Introduced in the year 2000.

Examples

  1. Company Listing Example: TCS (Tata Consultancy Services) is one of the numerous companies listed on the BSE, showcasing the exchange’s wide scope and inclusivity in the Indian market.
  2. BSE Sensex Constituents: Stocks like Reliance Industries, Infosys, and HDFC Bank are representative of the diverse industrial sectors influencing the BSE Sensex.
  3. Derivative Trading Example: Futures and options contracts for the BSE Sensex were introduced to enhance liquidity and provide hedging opportunities.

Frequently Asked Questions

What is BSE Sensex?

The BSE Sensex is the flagship index of BSE, consisting of 30 well-established and financially sound companies across key sectors.

When was derivatives trading introduced on the BSE?

Derivatives trading commenced at BSE in 2000, allowing for advanced financial instruments like futures and options.

How does the BSE support small and medium-sized enterprises (SMEs)?

BSE SME platform caters to the capital-raising needs of small and medium enterprises, providing them with access to a broader market.

Is the BSE Sensex limited to Indian companies only?

Yes, the BSE Sensex primarily includes large-cap Indian companies, representing a cross-section of the economy.

What is the role of BSE in the Indian economy?

BSE facilitates investment and enables the mobilization of resources, contributing significantly to the growth and development of the Indian economy.

National Stock Exchange (NSE)

The National Stock Exchange (NSE) is another major stock exchange in India, founded in 1992, which operates similarly to the BSE.

Market Capitalization

Market capitalization refers to the total market value of a company’s outstanding shares of stock.

Initial Public Offering (IPO)

An Initial Public Offering (IPO) is the process through which a private company offers its shares to the public for the first time to raise capital.

Financial Derivatives

Financial derivatives are contracts whose value is derived from an underlying asset, such as stocks, bonds, or indices.

Online References

Suggested Books for Further Studies

  1. “Investing in India: A Value Investor’s Guide to the Biggest Untapped Opportunity” by Rahul Saraogi.
  2. “Understanding Options” by Michael Sincere.
  3. “The Intelligent Investor” by Benjamin Graham.

Accounting Basics: “Bombay Stock Exchange” Fundamentals Quiz

### How many companies are listed on the Bombay Stock Exchange (BSE)? - [ ] Over 10000 - [x] Over 5000 - [ ] Around 2000 - [ ] Under 1000 > **Explanation:** The BSE has over 5000 companies listed, making it one of the largest exchanges by company listings. ### What is the main index of the BSE? - [x] BSE Sensex - [ ] Nifty 50 - [ ] S&P 500 - [ ] FTSE 100 > **Explanation:** The BSE Sensex is the primary index of the Bombay Stock Exchange, comprising 30 of the largest and most actively traded stocks. ### In what year was derivatives trading introduced on the BSE? - [ ] 1995 - [ ] 2010 - [x] 2000 - [ ] 1985 > **Explanation:** Derivatives trading on the BSE was introduced in the year 2000. ### What is the BSE Sensex comprised of? - [ ] 50 stocks - [x] 30 stocks - [ ] 100 stocks - [ ] 20 stocks > **Explanation:** The BSE Sensex is composed of 30 of the largest and most technically sound companies listed on the BSE. ### Which industry does NOT contribute to the BSE Sensex? - [ ] Information Technology - [ ] Banking - [ ] Energy - [x] Agriculture > **Explanation:** The BSE Sensex primarily includes companies from information technology, banking, energy, and other key sectors, but not directly from agriculture. ### What role does the BSE play in the Indian economy? - [ ] Only facilitates banking operations - [ ] Only caters to government bonds - [x] Mobilizes capital and supports investment - [ ] Primarily manages foreign currency exchange > **Explanation:** BSE facilitates investment and enables the mobilization of resources, playing a critical role in the Indian economy. ### Which type of companies are primarily listed on the BSE? - [ ] Only international companies - [x] Domestic and multinational companies operating in India - [ ] Government agencies and institutions only - [ ] Private unlisted companies > **Explanation:** The BSE lists both domestic and multinational companies operating within India, providing a diverse market. ### What does 'market capitalization' refer to in context of BSE? - [x] Total market value of a company's outstanding shares - [ ] Total revenue of the company - [ ] Company’s annual profit - [ ] Value of company’s assets > **Explanation:** Market capitalization refers to the total market value of a company's outstanding shares. ### How does BSE support SMEs? - [x] BSE SME platform - [ ] By providing direct loans - [ ] By offering tax reductions - [ ] Through agricultural subsidies > **Explanation:** BSE supports Small and Medium Enterprises (SMEs) through its dedicated SME platform. ### Which other major stock exchange operates alongside the BSE in India? - [x] National Stock Exchange (NSE) - [ ] New York Stock Exchange (NYSE) - [ ] Tokyo Stock Exchange (TSE) - [ ] Shanghai Stock Exchange (SSE) > **Explanation:** The National Stock Exchange (NSE) is another major stock exchange operating in India alongside the BSE.

Thank you for exploring the nuances of the Bombay Stock Exchange and enhancing your knowledge with our comprehensive quiz!


Tuesday, August 6, 2024

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