MBA Aspirants are expected to know on what is new in economy and what is that impacting it? How our stock exchanges work? Today, you will read on Dalal Street
Dalal Street is the Indian version of the US Wall Street. Dalal Street is essentially the address of the Bombay Stock Exchange and other related financial firms. So, in short, Dalal Street is the metonymy for the Indian financial establishment.
There are two stock exchange houses in India – the National Stock Exchange and the Bombay Stock Exchange, which publishes its index of stocks called Sensex.
So, when we talk about Dalal Street, we are essentially referring to the Bombay Stock Exchange and Sensex. Investors in the stock market are named after four animals – bull, bear, stag and lame duck.
To understand what happens at Dalal Street, it is important to know what these four animals refer to in the world of stock exchange.
A bull is an investor or a market operator who expects the market price of a share to go up. So, a bull gains by buying shares first and selling them later at a higher price. A bullish market is strong and a rising market, where there are more buyers than sellers.
A bear is a market operator or an investor who expects the market price of a share to fall. So, a bear will make money by selling the shares first, in the hope of buying them back later at a lower price.
A bearish market is a weak or falling market and here, there are more sellers than buyers. These are some of the common terms used by those who work at Dalal Street.
A lame duck is a stock player who makes a number of bad decisions over a period of time that he ends up losing money. In such a case, he would be struggling to meet his debt obligations.
On the other hand, a stag is a market operator or an investor who trades on a frequent basis and makes quick profits in a short period of time. So, essentially, he is a short term speculator.
At Dalal Street, there are a number of participants in the stock market, including financial institutional investors, retail investors, mutual funds, corporations, and Indian financial institutions.
Many people, especially those who are clueless about the financial industry, believe that all stock market operators do the same job – carry out trade in stock exchanges by either selling or buying shares.
This is partly true. However, there are a number of categories of stock market operators – long term investors, short term investors, traders, speculators, and jobbers.
Long term investors purchase shares with the intention of holding them for more than one year. In this manner, they hope to make profits from the rise in the price of shares.
A short term investor, on the other hand, buys shares with the intention of selling them within a year. Sometimes, the holding period can be less than three months.
A trader either purchases shares in the morning and sells them in the evening or purchases shares in the evening and sells them in the morning. He is interested in the intra-day fluctuations in the stock prices and gains from these variations.
Next, the speculator buys shares without the intention of taking delivery of the shares. He sells the shares even before the time of delivery of the shares. Last but not least, a jobber is a market operator or investor who buys and sells quotes; a jobber is responsible for maintaining the liquidity in the market.
These are the everyday events at Dalal Street. Throughout the day, Dalal Street is bustling with activities, with investors buying and selling shares, in an attempt to make as much profit as possible.