The history of the stock market in India goes back to the end of the eighteenth century when long-term negotiable securities were first issued. In 1850 the Companies Act was introduced for the first time bringing with it the feature of limited liability and generating investor interest in corporate securities. The first stock exchange in India was set-up in 1875 as The Native Share and Stock Brokers Association in Bombay. Today it is known as the Bombay Stock Exchange (BSE). This was followed by the development of exchanges in Ahmedabad (1894), Calcutta(1908) and Madras(1937). It is interesting to note that stock exchanges were first set up in major centers of trade and commerce. Until the early 1990s, the Indian secondary market comprised regional stock exchanges with BSE heading the list. After the reforms of 1991, the Indian secondary market acquired a three tier form. This consists of: • Regional Stock Exchanges • National Stock Exchange (NSE) • Over the Counter Exchange of India (OTCEI)

A stock market is an institution which provides a platform for buying and selling of existing securities. According to you, which of the following is a function of stock exchange?

• Providing liquidity and marketability to all the new securities being issued in the economy.
• Helps in the determination of price of the securities with the help of demand and supply of the same.
• Contributes to the economic growth of the country.
• The stock market provides enough scope for speculation beyond the provisions of law for speculative activities in restricted and controlled manner.

2 and 3

The correct answer is Option 3: 2 and 3

Statement 1:  Providing liquidity and marketability to all the new securities being issued in the economy. It is incorrect. Stock exchanges primarily deal with existing securities (not new securities). While some new issues might be listed, it's not the main function.

Statement 4:The stock market provides enough scope for speculation beyond the provisions of law for speculative activities in restricted and controlled manner. It is incorrect. The stock exchange provides sufficient scope within the provisions of law for speculative activity (not beyond the provisions of law as mentioned in the statement) in a restricted and controlled manner.

"The secondary market is also known as the stock market or stock exchange. It is a market for the purchase and sale of existing securities.  Following are the functions of a stock exchange:

• Providing Liquidity and Marketability to Existing Securities
• Pricing of Securities: Share prices on a stock exchange are determined by the forces of demand and supply
• Safety of Transaction: The membership of a stock exchange is well- regulated and its dealings are well defined according to the existing legal framework
• Contributes to Economic Growth: A stock exchange is a market in which existing securities are resold or traded. Through this process of disinvestment and reinvestment savings get channelized into their most productive investment avenues. This leads to capital formation and economic growth.
• Providing Scope for Speculation: The stock exchange provides sufficient scope within the provisions of law for speculative activity in a restricted and controlled manner."