Do you have an introduction to the Indian stock market? You may have, but many people do not know about the Indian stock market.
A stock market is where trading (selling and buying) of stocks occurs between sellers and buyers. Stocks, also known as equities, represent small ownership of an investor in a company.
There are opportunities to invest in the Indian stock market, and well-educated people about the Indian stock market know this.
In November 2022 Indian stock market capitalization was 3,543 billion dollars; this is higher than the previous months, which was 3,383 billion dollars. From January 1993 to November 2022, the Indian stock market is updated monthly.
What is a Stock Exchange?
Stock exchange provides a platform for traders (sellers and buyers) to trade financial instruments. The stock exchange in India is a marketplace where traders sell stocks, bonds, and commodities.
In this platform, trading of stocks, bonds, and commodities occurs between seller and buyers every working day per the guidelines defined by the Securities and Exchange Board of India (SEBI).
Companies not listed on the stock exchange cannot trade on it, but those listed on a stock exchange can trade on this trading platform.
An Introduction to Indian Stock Market
If we look into the history of the Indian stock market, it dates back to 1875. Native Share and Stock Broker’s Association started with 318 members and was India’s first share trading association.
This association later become one of the leading stock trading exchanges of India, which we at present know by the name Bombay Stock Exchange (BSE).
According to sebi.gov.in, there are seven stock exchanges in India, with the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) two leading exchanges.
Over 1600 companies are listed on National Stock Exchange (NSE), and more than 5000 are listed on the National Stock Exchange of India.
Bombay Stock Exchange (BSE)
Bombay-based Bombay stock exchange (BSE) is the first stock exchange in Asia. The exchange was established in 1875 under Native Share and Stockbrokers Association. BSE is India’s primary and one of the largest stock exchanges in the world.
In India’s capital market development, the Bombay stock exchange plays a significant role. Besides a country-wide presence, the exchange has a global reach with customers worldwide.
The Bombay Stock Exchange provides several services to the investors of the capital market. The stock exchange offers a trading market for equity trading, currencies, mutual funds, debt instruments, derivatives, and mutual funds.
Other essential services the BSE provides are settlements, risk management, and investor education.
Processes and systems of BSE are designed to protect market integrity, support the growth of India’s capital markets and promote innovation and competition in all market sectors.
It has one of the country’s most prestigious capital market training institutes known as BSE Institute Ltd. Depository services are also offered by the BSE through its Central Depository Services (CDSL).
BSE is the first recognized stock exchange by the Indian Government under the Securities Contracts Regulation Act. The exchange developed the BSE SENSEX in 1986, which made it easier to measure the overall performance of the BSE.
National Stock Exchange of India (NSE)
National Stock Exchange (NSE) is based in Mumbai, established in 1992, and started its operations in 1994. In April 1993 Securities and Exchange Board of India (SEBI) recognized NSE as a stock exchange.
NSE offers automated trading facilities all over the country. With a total market capitalization of 3400 billion dollars in August 2022, the exchange is the 9th largest stock exchange in the world.
Starting trading in 1994, NSE became the first Indian stock exchange that introduced electronic or screen trading. Based on SEBI data, the business, in terms of total and average daily share turnover, is the largest in India.
The National Stock Exchange currently deals in wholesale debt, equity, and derivative markets. NIFTY 50 index of the exchange, which tracks the most extensive holdings in the Indian stock market, is one of the most popular offerings.
NSE provides a platform for companies to raise money. Investors can access stocks, mutual funds, debt, and shares on the platform. Foreign companies can raise capital using the NSE platform through initial public offerings (IPOs), bonds, and Indian Depository Receipts (IDRs).
The National Stock Exchange also offers settlement and clearing services.
Multi Commodity Exchange (MCE)
Multi commodity exchange of India is based in Mumbai and trades in agri and non-agri commodities such as rubber, cotton, crude palm oil, cardamom, zinc, lead, copper, gold, silver, crude oil, and natural gas.
Established in 2003, the MCE is governed by the Minister of Finance, Government of India. The Securities and Exchange Board of India currently regulating this exchange since 2015.
Early FMC (Forward Markets Commission) regulated the MCE, which merged with the Security and Exchange Board of India in September 2015.
The MD &CEO of MCD is P. S. Reddy; SEBI approved the appointment of P. S. Reddy as MD & CEO for five years from the 10th of May 2019.
National Commodity & Derivatives Exchange (NCDEX)
National Commodity & Derivatives Exchange was introduced in April 2003 and started business on December 15, 2003. The Ministry of Finance, Government of India governs NCDEX.
NCDEX has an independent board of directors and provides a platform for traders to trade in commodities.
The exchange offers the trade of agri products, including soybean, coffee, cumin (jeera), kapas (cotton), mustard seed, crude palm oil, and spices such as turmeric, coriander, etc.
The India International Exchange Limited (INX)
The Ministry of Finance governs the India International Exchange, Government of India. Shri Narendra Modi, Prime Minister of India, on January 9th, 2017, inaugurated the exchange.
The exchange is located in Gujarat International Finance Tec-City (GIFT City). The INX is India’s first international stock exchange; it is a BSE subsidiary.
INX offers derivative product trading, including equity, commodities, currency, foreign currency, and debt instruments.
INX claims to be the most advance and fastest in the world; with a 4 microseconds time cycle, it operates six days a week, 22 hours per day. This timing makes it easy for international investors and overseas Indians to trade anywhere in the world at any time.
NSE IFSC (NSE International Exchange)
NSE IFSC is a full subsidiary of the National Stock Exchange of India (NSE). The Registrar of companies, government Gujrat, incorporated NSE FISC in November 2016.
The exchange is approved by the Securities and Exchange Board of India and is located in Gujarat International Finance Tech City (GIFT).
The exchange started trading in June 2017 and offers to trade in commodity derivatives, stock derivatives, currency derivatives, index derivatives, and debt securities.
Two daily trading sessions of 16 hours occur on the exchange, the first session occurs between 08 am – 05 pm, and the second session occurs between 5:30 pm – 11:30 pm.
Metropolitan Stock Exchange (MSE)
The ministry of finance, the government of India, governs the Metropolitan Stock Exchange (MSE). It is a nationwide exchange and has a license to trade in debt, equity derivatives, and currency derivatives.
Shareholders of MSE consist of Banks/ Foreign institutional investors (Fiis), which include banks like SBI, HDFC Bank, PNB, Bank of Baroda, Axis Bank, etc., corporate institutions include IL&FS Financial Services, Edelweiss Commodities Services, etc.
Individual investors of MSE include Mr. Nemish Shah, Mr. Radhakishan Dmani, Mr. Rakesh Jhunjhunwala, and many others.
How Do the Stock Markets Work?
When a company is listed on an exchange such as BSE, NSE, or both via IPO (Initial Public Offerings), the company’s shares become available for selling and buying. The company can distribute its shares in the secondary market for buying.
The company’s aim in selling shares is to raise money from investors for the growth and development of the company. Shareholders (investors) have voting rights and residual claims on corporate earnings in capital form.
A stock market investor, when buying shares, does not buy them from the selling company. Instead, it is buying the stock from an existing shareholder.
And if a stock stockholder sells their stock, it does not sell them back to the company. Instead, the seller sells them to another buyer on the stock exchange.
Brokerage firms and brokers registered with the exchange help a stock investor buy stocks.
A broker passes an investor buying order to the exchange. The exchange searches the sell order for the share you want to buy; this process takes T+2 days for execution, and you will get your order in your Demat account in two working days.
Indian Stock Market Opening and Closing Time
The Indian stock market starts trading at 9:00 am and closes at 5:15 pm. The trading time is the same for BSE and NSE.
The stock market trade timing in India is divided into sessions:
- The pre-opening-from 9:00 am to 9:15 am
- Norma session-from 9:15 am to 3:30 pm
- The post-closing session started at 3:30 pm
Holidays are also observed in Indian stock exchanges, which are Republic Day, Holi, Ram Navami, Mahavir Jayanti, Good Friday, Dr. Baba Saheb Ambedkar Jayanti, Maharashtra Day, Bakri Id, Independence Day, Ganesh Chaturthi, Mahatma Gandhi Jayanti, Dussehra, Diwali-Balipratipada, Gurunanak Jayanti and Christmas.
However, the exchange management can close the market other than the holidays or may open the market during the holidays. Trading hours on the exchanges can also be extended or reduced.
Who Can Invest in the Share Market of India?
Any person can invest in the Indian stock market. The investor should be 18 years and have a Demat account. A Demat account is a trading account where shares are placed after purchasing.
A minor less than 18 can also invest in the stock market by opening a Demat account; the minor can open a Demat account by producing his guardian’s documents.
NRIs (Non-Indian Residents) can also invest in the Indian stock market if they have an NRO account in India.
If you decide to invest in the stock market, you must approach a stockbroker who is registered with SEBI and must first register yourself before investing in the stocks.
Who Regulates the Indian Stock Market?
The regulatory authority of Indian stock exchanges is the Securities and Exchange Board of India (SEBI). Protecting the interests of investors and regulating and promoting the Indian stock market is the primary function of the SEBI.
India has several stock exchanges, with BSE and NSE being the largest. These exchanges play a vital role in the country’s economy.
Introduction to Indian stock market can be profitable for those who want to invest in this market. The Indian stock market provides a platform for investors to earn profit through the fluctuating prices of stocks.
A stock market is an excellent place for investors to invest in different companies to earn a profit on their investments. Investing in the stock market is profitable but can also be risky as the stock prices fluctuate.
Anyone who wants to invest in the stock market should consult a market expert before investing.