Indian Stock Market

History

The history of the Indian stock market dates back to the late 19th century when the first stock exchange, the Bombay Stock Exchange (BSE), was established in 1875. The BSE was initially set up as a non-profit organization and was run by brokers who traded shares of Indian companies.

In the early 20th century, the Indian economy began to develop and more companies started to emerge. The stock market also grew and expanded, with several regional stock exchanges being established across the country.

In the 1990s, the Indian government implemented several reforms aimed at liberalizing the economy, including the stock market. This led to the establishment of the National Stock Exchange of India Limited (NSE) in 1994, which quickly became the leading stock exchange in the country.

Since then, the Indian stock market has continued to grow and expand, with the establishment of several other stock exchanges and the development of new financial products and services. Today, the Indian stock market is one of the largest in the world, with a market capitalization of over INR 145 trillion.

However, the Indian stock market has also experienced its fair share of ups and downs, with several market crashes and financial scandals taking place over the years. Nevertheless, the Indian stock market has proven to be a resilient and profitable investment option for those who are willing to take calculated risks and diversify their investments

BSE (Bombay Stock Exchange)

About BSE

BSE Limited, previously known as Bombay Stock Exchange, is a corporatized and demutualized entity that was established in 1875. It is the world's fastest stock exchange, with a speed of 6 microseconds and has a strategic partnership with Deutsche Bourse.

As India's largest bourse, BSE has over 5000 companies listed and its popular equity index, S&P BSE SENSEX, is the most widely tracked stock market benchmark index in the country. It is traded on leading exchanges around the world, including EUREX, BRCS (Brazil, Russia, China, and South Africa). BSE has dedicated platforms for trading in equities of small and medium enterprises (SMEs) and mutual funds.

BSE Services

BSE offers various services to capital market participants, including trading in equity debt instruments, equity derivatives, currency derivatives, interest rate derivatives, mutual funds, stock lending and borrowing. BSE also provides risk management, clearing, settlement, market data services, and education. BSE's subsidiary, Indian Clearing Corporation Limited, acts as the central counterparty to all trades on the BSE trading platform. BSE Institute Ltd, another subsidiary, runs a respected capital market educational institute.

BSE's Legacy

BSE is the oldest stock exchange in Asia, starting as an informal group of 22 stockbrokers who traded under a banyan tree in the 1850s. The group organized itself as the Native Share and Stockbrokers Association, which in 1875 became the Bombay Stock Exchange. BSE has a rich heritage and was fully computerized in 1995, replacing the out-cry system with the BSE Online trading (BOLT) system. BSEWEBX.com, the world's first centralized exchange-based internet trading system, was introduced in 2001. In 2006, BSE launched the Directors Database and Indian Corporate Electronic Reporting System (ICERS) to increase information flow and transparency in the Indian capital market.

BSE Partnerships and Developments

BSE has entered into index co-operation agreements with Deutsche Borse, making SENSEX and other BSE indices available to investors globally. BSE has formed alliances with Singapore Exchange Limited and USE to develop currency and interest rate derivatives markets. In recent years, BSE has introduced trade details facility for investors, new transaction fee structures, FASTRADE, BSE STAR MF (mutual fund trading platform), clearing and settlement of corporate bonds, mobile-based trading, and Smart Order Routing (SOR).

National Stock Exchange (NSE)

About NSE

The National Stock Exchange of India Limited is the premier financial exchange in India. It has its headquarters in Mumbai and was incorporated in 1992. NSE is an advanced, automated and electronic system that offers trading facilities to investors all over the country. In 2015, NSE ranked fourth in the world based on its trading volume.

Origins of NSE

The Indian government established NSE in 1994 to bring transparency to the capital market. It was set up by a group of leading financial institutions and was based on the recommendations of the Pherwani Committee. NSE has diverse shareholding assets from both global and domestic investors.

Electronic Trading

NSE was the first stock exchange in India to introduce electronic trading facilities, which helped to integrate investors from all over the country into a single base.

Market Capitalization

As of 2018, NSE had a total market capitalization of over US $2.25 Trillion, putting it in 11th place among the largest stock exchanges in the world. However, the corporate sector in India accounts for only 12-14% of the country's GDP, compared to 70% in the USA. Out of this corporate sector, around 7800 companies are listed with Indian stock exchanges, with 4000 of them trading. This means that stock exchange trading accounts for only 4% of India's total GDP.

How Does NSE Work?

Trading in NSE is done through an electronic limit order book, where order matching takes place through a trading computer. This process is driven entirely by orders, without the interference of specialists or market makers. Investors can place a market order, which is automatically matched with a limit order, and buyers and sellers have the advantage of anonymity.

Order-Driven Market

The NSE stock exchange operates as an order-driven market, which offers greater transparency to investors. All buy and sell orders are displayed in the trading system, and orders are placed through brokers who often provide online trading facilities for their customers. Institutional investors can also access the "direct market access" facility, allowing them to place orders directly into the trading system.

SEBI (Securities and Exchange Board of India )

SEBI stands for the Securities and Exchange Board of India. It is an independent regulatory body established by the Indian government in 1992, with the objective of protecting the interests of investors in securities and promoting the development of the securities market in India. SEBI's headquarter is located in Mumbai.

SEBI's Role in Indian Securities Market

SEBI is responsible for overseeing and regulating all securities market activities, including the issuance of securities, trading of stocks, mutual funds and bonds, and ensuring the safety of investors' funds. It acts as a watchdog for the Indian securities market and ensures that all market participants comply with the laws and regulations governing the securities market.

SEBI has the power to take enforcement actions against individuals or companies that violate securities laws, including imposing fines and penalties, banning market participants from trading, and even prosecuting offenders. SEBI also has the authority to investigate any illegal activities or market manipulation that may occur in the securities market.

SEBI's primary functions :

• Regulating and supervising the securities market and ensuring its smooth functioning.
• Protecting the interests of investors and promoting the development of the securities market.
• Promoting and regulating self-regulatory organizations (SROs) such as stock exchanges, depository participants, mutual funds, and merchant bankers.
• Regulating and supervising the securities market intermediaries, including brokers, sub-brokers, share transfer agents, registrars, and bankers to an issue.

SEBI also plays a significant role in promoting the growth of the Indian capital market by improving market infrastructure and increasing investor awareness. It also provides a framework for dispute resolution between market participants and ensures that all market participants have a level playing field.

In conclusion, SEBI plays a crucial role in maintaining the integrity and stability of the Indian securities market and protecting the interests of investors. Its regulations and oversight help promote fair and transparent trading, thereby increasing the confidence of investors in the securities market.

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