The stock market is a mechanism for channeling funds from investors to Companies thereby enabling raising of non-debt resources. The primary market for equities consists of IPO (Initial Public Offerings) by new as well as existing listed companies who are looking to raise funds by offering equity to the public. During 2006-07, 124 companies accessed the primary market and raised Rs. 33,508 crore through public and rights issues. Apart from the conventional modes, Qualified Institutions’ Placement (QIP) was also used by many listed companies to meet their financing requirements.

In India, trading in the Equity market is facilitated through the leading Stock Exchanges such as NSE and BSE. NSE facilitates trading in Equity and Preference Shares, Partly Convertible Debentures, Fully Convertible Debentures, Non Convertible Debentures, Warrants / Coupons / Secured Premium Notes/ other Hybrids and Units of Mutual Funds. The exchange also provides a trading platform for the derivative contracts (futures and options) on six equity indices and 224 stocks.

NSE operates on the 'National Exchange for Automated Trading' (NEAT) system, a fully automated screen based trading system, which adopts the principle of an order driven market. Through this technology, members can trade remotely from their offices located in any part of the country. NSE trading terminals are present in various cities and towns all over India.

Buoyant secondary market performance, supported by strong macro-economic fundamentals, favourable investment climate and encouraging corporate results, has attracted domestic as well as international investors to Indian equity market. It has also encouraged a number of companies to raise capital from the primary market. Besides several large companies, many small and medium-sized corporates accessed the primary market and mobilized resources through public and rights issues

Market capitalisation is a leading indicator of the health of the stock market. The market capitalisation of an exchange is a summation of market capitalisation of all the individual stocks listed on the exchange. As such, market capitalisation of BSE has been higher than that of NSE due to larger number of shares being listed at BSE. The market capitalisation of BSE increased to Rs. 35,45,041 crore in 2006- 07 from Rs. 12,01,206 crore in 2003-04. Whereas, the market capitalisation of NSE rose to Rs. 33,67,350 crore at the end of 2006-07 from Rs. 11,20,976 crore in 2003-04.

Market capitalisation to GDP ratio is a good indicator of the health of stock market of an economy. Leading economies of the world have market capitalisation far in excess of their gross domestic product (GDP). This indicates not only the investor confidence, but also the strength of their economies. The market capitalisation to GDP ratio of Indian stock market increased over the last four years. It rose from 23.2 per cent of GDP in 2002-03 to 85.9 per cent in 2006-07. At the end of 2005-06, it was 84.7 per cent.

Liquidity of the stock market indicates the ease with which stocks can be traded. One way to gauge the liquidity is to look at the ratio of value of shares traded to GDP at current market prices. This ratio increased from 67.0 per cent in 2005-06 to 70.4 per cent in 2006-07. The traded value-GDP ratio for the derivatives segment rose from 135.2 per cent in 2005-06 to 178.3 per cent in 2006-07.

Data and information source: Annual Report 2006-07 SEBI