Interesting facts about Indian stock market

Since your question can be interpreted in multiple ways, let me approach it in a different manner- Indian equity markets have evolved substa...

Since your question can be interpreted in multiple ways, let me approach it in a different manner-

• Indian equity markets have evolved substantially in the last 20 years in terms of risk management, settlement cycles, efficiency of operations, etc. Domestic investors have also recently begun veering around to the view that only equities can generate wealth for them in the long run. This is why, retail participation is still fairly low, albeit it is picking up through the equity mutual funds route.
• Volatility is an inherent quality of the stock markets, there is no two ways about it. However, Indian stock markets are a lot more volatile when you compare it to its developed peers like the US and Europe. The reason being that India is a developing country as yet and its stock markets are underpenetrated. Indian stock markets are largely driven by Foreign Institutional Investors (FIIs). Thus, any disruption in the global markets tends to affect flows into the domestic markets as well. Additionally, investors participating in the markets also tend to affect the tone of markets. Given the under penetration, there is an asymmetry of information that causes a lot of uncertainty in the markets and prompts many investors to react emotionally rather than rationally.
• With day trading, you end paying 15% short-term capital gains tax on every profit transaction you make since your holding period of the stock is definitely less than 1 year. Whereas, with long term investing, your capital gains tax is 10% if you make a profit over Rs1 lakh post holding shares for more than one year.
• The stock market pricing theory assumes that all investors have equal access to the information to make informed decisions. This is not necessarily true for the Indian stock markets. Given the under-penetration of the domestic equity markets, there is a lot of asymmetry of information, which slows price discovery.
• In Indian stock markets, value investing may feel like contrarian investing. Herd mentality is a reality among stock market investors, especially domestic investors. However, value investors do not follow the herd. Value investors usually do not invest in the most popular stocks because they are in all probability overpriced. They are cautious about investing in companies that are household names and take a second look at these stocks only when their stock prices have plummeted.
• Sensex was introduced by the Bombay stock exchange (BSE). The term Sensex has been derived from two words ‘Sensitive Index’. More than 5000 companies are listed on BSE, of which only a select 30 companies are represented by Sensex. The index consists of the top 30 largest and most actively traded stocks on the BSE. Sensex is nothing but the calculated weighted average of the performance of 30 companies from various sectors. The Sensex is actually calculated every 15 seconds and the value of the index is made available in real-time.
• Nifty50 index was introduced by the National Stock Exchange (NSE). The term Nifty has been coined from two words ‘National and Fifty’. Nifty50 comprises of the top 50 and largest most actively traded stocks on NSE. Nifty50 is nothing but the calculated weighted average of the performance of 50 companies from various sectors.
• There are thousands of companies listed on the BSE (Sensex) and NSE (Nifty). And there is too much information on some companies, while too little on some others. Research on both kinds of stocks requires equal due diligence.
• Focus on high returns is overrated, capital protection is underrated. The greater the fall in price, the more significant the required return must be just to reach an overall return of nil. As your losses grow on a particular investment, the subsequent gain required to get back to where you started, grows exponentially.
• The indices Sensex and Nifty are considered indicators of stock markets in the general sense. These indices broadly represent the stock markets. This means that there are some, if not many scenarios, that cannot be represented by the Sensex and Nifty per se. Which also means that there are several stocks/companies that tend to buck market trend. In the broad sense of the term, stock markets tend to go up over the long term. However, this statement is not true for all individual stocks that the equity markets comprise of.