Stock markets are comprised of Stock exchanges which provide an organised platform for the trading and listing of securities. Indian stock markets are regulated by the Securities and Exchange Board of India (SEBI) which was founded in 1992. It is an Independent authority that lays down rules for market trading establishing best practises and penalising breaches.
Indian Stock market primarily functions through two principal large Stock exchanges- The Bombay Stock Exchange(BSE) and the National Stock Exchange (NSE). There are other Official Stock exchanges in India like the Magadh Stock exchange, Calcutta Stock exchange which are smaller in scale.
Bombay Stock Exchange (BSE), located on Dalal Street in Mumbai, was established in the year 1875. It is India’s first and Asia’s oldest Stock exchange. BSE was an open outcry stock exchange till the year 1995, when it switched to electronic trading platform. National Stock Exchange (NSE), also located in Mumbai, started its operations in 1992 as an electronic marketplace with screen-based trading. It is the largest stock exchange in India. Both the stock exchanges have high market capitalization and are among world’s largest stock exchanges. Both these stock exchanges have high market capitalization. As of April 2018, NSE had the market capitalization of 2.27 trillion US dollar while BSE was at 2.1 trillion US dollar market capitalization.
The market indices for BSE and NSE are Sensex and Nifty respectively. A market index indicates the movement of the market and is based on top firms listed on the exchange. Some of the securities not listed on NSE can be found on BSE. While BSE was limited to few brokers, the Introduction of NSE opened the platform for the masses.
Both BSE and NSE follow a similar trading pattern, trading times and settlement processes. The trading hours are between 9:15am to 3:30pm, India Standard Time(IST). Within this time the normal buying and selling of securities takes places. There is also a pre-opening session, post-closing session, and closing price calculation session followed in both stock exchanges. Trading takes place through an electronic limit order book mechanism. This system ensures that the Investors can remain anonymous, the trading is transparent and time-efficient. Most of the trading takes place through brokers which provide the online trading facility to their clients.
The stock exchanges in India contribute to only 4% of the National GDP (Gross Domestic Product) as of October 2017, while in matured markets, like US, this percentage can be as high as 70%. This is because many corporates and large Industries in India are still not listed on Indian stock exchanges. NSE dominates the spot trading with almost 70% market share and almost 90% share in the Derivatives trading. Both the stock exchanges, have high potential for future growth as more and more regular earning Indians continue to invest in markets through Direct trading or mutual funds.