Capital Markets

Stock Exchange in India

A stock exchange is a place where securities, shares, bonds and other financial instruments are listed and bought and sold by traders or brokers. To be able to trade on a stock exchange, securities must be listed on it. Stock exchanges help companies to raise funds. Therefore the company needs to list themselves in the stock exchange. Shares listed on the stock exchange are known as equity and these shareholders are known as Equity Shareholders. Here we shall discuss the Stock Exchange in India.

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Stock Exchange in India

Indian stock exchange is one of the oldest markets in Asia and is a yardstick to measure the health and progress of the economy of the country. Over the course of the period, the market has transitioned into the electronic market and securities are dealt in dematerialization form.

There are two major stock exchanges in India- National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE). National Stock Exchange was established in Mumbai in 1992 and started trading in 1994. Bombay Stock Exchange was established in 1875 in Mumbai.

Other stock exchanges are as follows-

  1. Calcutta Stock Exchange in Kolkata
  2. India International Exchange
  3. Metropolitan Stock Exchange

Market Indices

There are two major indices in the stock exchange of India – Sensex and Nifty. Sensex comprises of the weighted average of the market capitalization of stock of 30 well established and financially sound companies across different key sectors in India. Nifty comprises of top 50 companies in 12 sectors of the Indian economy in one portfolio. It reflects the health of the Indian economy from a broader perspective.

SENSEX is an indicator of Bombay Stock Exchange and NIFTY is an indicator of National Stock Exchange of India.

Trading Hours and Settlement on Stock Exchange of India

Trading in the stock market in India takes place in between 9:55 AM to 3:30 PM Indian Standard Time, Monday to Friday.

Settlement of securities takes places in T+2 period. It means if the transaction has happened on Tuesday, it will be settled on Thursday.

Stock Exchange in India

Source: freepik.com

Functions of Stock Exchange in India

Stock exchange in India ensures –

  1. Stability of prices of securities.
  2. Convenient and transparent place to trade in securities.
  3. Help companies to raise their funds.
  4. Promote the habit of saving and investment
  5. Provide forecasting service.

How to Deal in Stock Exchanges in India

In order to deal in stock exchange in India, one must have a Demat A/c. It is just like a bank account. Various banks in India provide this facility. Through Demat A/c, an investor can buy or sell securities in trading hours.

Regulation of Stock Exchange in India

Entire stock exchange of India is regulated by the Securities and Exchange Board of India (SEBI) which was established in 1992 as an independent authority. SEBI has the power to impose fines and penalties in case of violation of rules and regulations. It plays a pivotal role and protects the interest of investors in the stock exchange of India. SEBI promotes education and training of intermediaries of the stock market.

Bull Market and Bear Market

A bull market is a market where buyers are aggressively buying the shares in an expectation that shares price will rise and will sell at later date. A bear market is a market where prices are falling.

Strong economic conditions, high employment levels, the favorable government are few factors which lead to a bull market whereas poor economic conditions, natural adversity, unemployment or sudden unfavorable political changes lead to bear market.

Future of Stock Exchange in India

In a growing economy like India, the future of stock exchange is bright and the volume of transactions will grow substantially in the coming years.

Out of 1.2 billion people, there are only 20 million demat accounts as of now. Government’s initiative to bring retail customers in mutual funds and foreign investments in India will help the stock exchange of India.

Practice Question for Stock Exchange in India

Which of the following body regulates the Stock exchanges in India?

  1. Reserve Bank of India (RBI)
  2. Securities and Exchange Board of India (SEBI)
  3. Government of India
  4. Association of Mutual Funds (AMET)

Ans. Securities and Exchange Board of India (SEBI)

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