Explain the functions of a Stock Exchange.

Question

Accepted Answer

A stock exchange performs a set of closely-linked functions. It provides liquidity and marketability, allowing investors to convert securities into cash quickly at a fair price. Continuous trading by a large number of buyers and sellers enables price discovery — the market price reflects genuine demand and supply. Because trading is confined to registered members operating under exchange rules, backed by a clearing corporation, transactions are safe. By channelling scattered individual savings into shares and debentures, the exchange helps mobilise savings into productive investment, supporting capital formation and industrial growth. It also spreads the equity cult by making share ownership simple and accessible to the wider public, permits healthy speculation within SEBI's limits to add market depth, and acts as a barometer of the economy, since index movements mirror business conditions.

✓Final answer

Key functions: providing liquidity, enabling price discovery, ensuring safety of transactions, mobilising savings, spreading share ownership, and acting as an economic barometer.

Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

CBSE 2024Set ANNUAL2 marks
$Q. Write a short note on: NIFTY$
›Reveal solutionSolution

NIFTY (Nifty 50) is the key index of the National Stock Exchange (NSE), based on 50 large, well-established and actively traded companies across sectors; its rise or fall indicates the overall trend of the Indian stock market.

NIFTY

NIFTY, short for the National Stock Exchange Fifty (Nifty 50), is the flagship benchmark index of the National Stock Exchange of India. It is computed from the share prices of 50 of the largest companies listed on the NSE, selected from various sectors of the economy, using a free-float market-capitalisation method. When NIFTY goes up it shows that share prices in general are rising (a bullish market), and when it falls it shows a general decline (a bearish market). Along with the BSE Sensex, NIFTY is widely used to judge the mood and performance of the Indian capital market.

✓Final answer
$NIFTY (Nifty 50) is the benchmark index of the National Stock Exchange (NSE), based on the share prices of 50 large, actively traded companies across sectors. It reflects the overall movement of the Indian stock market — a rise indicates a bullish market and a fall a bearish market.$
CBSE 2023Set ANNUAL2 marks
$Q. Write a short note on: SENSEX$
›Reveal solutionSolution
SENSEX, short for "Sensitive Index," is the benchmark index of the Bombay Stock Exchange (BSE). It is computed from the share prices of 30 large, well-established and financially sound companies and is used as a barometer of the overall movement of the Indian stock market.

Meaning of SENSEX

SENSEX (the word is formed from "Sensitive" + "Index") is the oldest and best-known stock-market index in India, maintained by the Bombay Stock Exchange (BSE). It is also called the BSE 30.

It is based on a selected group of 30 large, financially sound and frequently traded companies from various sectors listed on the BSE. The index value moves up and down with the share prices of these companies:

A rise in SENSEX indicates that share prices are generally increasing — a sign of a rising (bullish) market and investor confidence.

A fall in SENSEX indicates that share prices are generally declining — a sign of a falling (bearish) market.

Because it summarises the mood of the whole market in a single figure, SENSEX is regarded as a barometer of the Indian economy and stock market. (The corresponding index of the National Stock Exchange is the NIFTY.) It is studied in the AP Intermediate 2nd-year Commerce Stock Exchange and SEBI chapter.

✓Final answer
$SENSEX (Sensitive Index), the benchmark index of the Bombay Stock Exchange, is based on 30 large, well-established companies and acts as a barometer of the Indian stock market — a rise shows generally rising share prices (bullish market) and a fall shows the opposite.$
CBSE 2019Set ANNUAL2 marks
$Q. Write a short note on: SENSEX.$
›Reveal solutionSolution

SENSEX is the benchmark index of the Bombay Stock Exchange (BSE), based on 30 leading companies; its rise or fall reflects the general trend of the share market and the economy.

SENSEX

SENSEX, short for Sensitive Index (popularly the BSE Sensex), is the oldest and most widely followed stock-market index in India and is maintained by the Bombay Stock Exchange (BSE). It is made up of 30 of the largest, most actively traded and financially strong companies listed on the BSE, selected across major sectors. The index is calculated from the weighted market value of these companies with reference to a base year. When the Sensex rises, it indicates that share prices in general are going up (a bullish market) and investor confidence is high; when it falls, it indicates a bearish trend. Because it mirrors the mood of trade and industry, the Sensex acts as a barometer of the stock market and the economy. This aligns with the NCERT/CBSE commerce treatment of stock-market indices.

✓Final answer
$SENSEX (the Sensitive Index of the Bombay Stock Exchange) is India's benchmark share-market index, made up of 30 large, actively traded and financially sound companies; its movement reflects the general trend of the stock market and acts as a barometer of the economy.$

> [!ANSWER]
> Key functions: providing liquidity, enabling price discovery, ensuring safety of transactions, mobilising savings, spreading share ownership, and acting as an economic barometer.

Q.Explain the functions of a Stock Exchange.

Concept understanding — Stock Exchange

NIFTY

Meaning of SENSEX

SENSEX

Q.Explain the functions of a Stock Exchange.

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