Trading Activity in the Indian Stock Markets: A Historical Comparison of the Bombay Stock Exchange and the National Stock Exchange

Abstract

The efficient functioning of a security market has assumed greater importance in recent years, as the policies of liberalisation and globalisation initiated in the Indian economy envisage increased role for market forces in the allocation of investment resources among the most productive uses. The stock market can perform this allocation function effectively only when the securities traded on it are liquid, prices of securities are stable, costs of trading are minimal and the information is processed quickly and effectively. The attributes of liquidity, volatility, trading costs, and efficiency of a market and the securities traded on it characterise the trading activity of a security market. The presence or absence of each of these attributes has implications for the working of the economy in general, and the securities market in particular. Hence, the present study makes efforts to examine the trading activity in the Indian securities markets.