'Stock market' is a prominent word widely used in the finance and investment world. Ever wondered what it means or how many stock exchanges operate in India? Let's find out.
A stock market also referred to as a share market, equity market, or stock exchange, is a common place where buyers and sellers meet to transact shares and other kinds of financial instruments like bonds, debentures, etc. The transaction takes place at a price agreed upon by both the buyer and seller.
In other words, it is a place where shares of public listed companies are traded.
Though theoretically, the 2 major parties are termed as buyer and seller, in reality, the stock market has various participants; stockbrokers, portfolio managers, investment managers, custodian etc. The Exchange acts as an intermediary that facilitates the transaction to materialize. These stock exchanges are registered under SEBI (Securities and Exchange Board of India), which regulates and supervises their activities.
The stock market index is a statistical measure of changes in the securities market that helps investors choose potential stocks for investment. The most common ones are Sensex and Nifty50. A fluctuation in these index values determines a relative change in the share prices.
Various Stock Exchanges in India
The various stock exchanges registered under SEBI are:
1. National Stock Exchange (NSE)
Established in 1992, NSE is the largest stock exchange in India in terms of volume being traded. It is the first dematerialized electronic Exchange in the country, owned by the Government. The primary index of NSE is Nifty50, computed as the weighted average of the top 50 companies listed in NSE. Other indices are Nifty 100, Nifty 200, Nifty midcap 50, Nifty smallcap 100 etc. Around 1,600 companies are listed in the NSE.
2. Bombay Stock Exchange (BSE)
Owned by the Indian government and situated in Dalal street, Mumbai, BSE is Asia's oldest stock exchange, established in 1875. The market capitalization of BSE is more than US$2.8 trillion as of February 2021. Around 5,000 companies are listed on the Bombay Stock Exchange whose securities are actively traded-in.
The primary index of BSE is Sensex, the free-float market-weighted average of 30 well-established and financially sound companies listed on the Bombay Stock Exchange.
3. Calcutta stock exchange
Being the second-largest stock exchange in India and the second oldest stock exchange of Asia, this Exchange was established in 1908. From a get together under a "Neem Tree" way back in the 1830s, the Calcutta Stockbroking fraternity has come a long way.
The CSE implemented a fully computerized Online Trading System known as C-STAR (CSE ONLINE Screen-based Trading And Reporting System) in 1997, which proves beneficial to investors because it will offer complete transparency of all transactions and eliminate errors as matching will be done by the central computer.
Around 2,700 companies are listed on the Calcutta Stock Exchange with a market capitalization of US$ 20 billion (as of 2009). The index computed for this Exchange is CSE 40.
4. India International Exchange (India INX)
The India International Exchange Limited is India's first international stock exchange and is the subsidiary of the Bombay Stock Exchange. Founded in 2017, India INX is situated in Gift city, Gujarat.
It is the world's fastest exchange, with a turn-around time of 4 microseconds, offering an opportunity to trade 22 hours a day. Its daily turnover volume crosses ₹74,509 crores. The indices computed are S&P BSE SENSEX and S&P BSE SENSEX 50.
The Exchange provides a competitive advantage in terms of tax structure which include waiver of several taxes like security transaction tax, commodity transaction tax, dividend distribution tax, capital gains tax and GST.
With a wide range of innovative products and services, growing liquidity and efficient cost structure, India INX offers to be the offshore Exchange of choice for global investors and market participants. The CEO and MD of India INX is V. Balasubramaniam.
5. Metropolitan Stock Exchange of India Limited (MSE)
Founded in 2008, MSE is recognized by the Securities and Exchange Board of India (SEBI) under the Securities Contracts (Regulation) Act, 1956. The Exchange was notified as a "Recognized Stock Exchange" by the Ministry of Corporate Affairs, Govt. of India, in December 2012.
The Exchange's shareholders are some of India's top public sector banks, private sector banks, and domestic financial institutions.
MSE offers an electronic, transparent and hi-tech platform for trading in Capital Market, Futures & Options, Currency Derivatives and Debt Market segments. The indices computed are SX40 and SXBANK.
'Information, Innovation, Education and Research' are the four cornerstones of the unique market development philosophy adopted by MSE and supports its mission of Financial-literacy-for-Financial Inclusion, as is envisaged by the Government of India. Ms. Latika S. Kundu is the Managing Director & CEO.
6. Indian Commodity Exchange Limited
Indian Commodity Exchange Limited (ICEX) is a SEBI regulated online Commodity Derivative Exchange. Headquartered at Mumbai, the Exchange provides a nationwide trading platform through its appointed brokers.
The Exchange launched the world's first-ever Diamond derivative contracts. At present, it offers futures contracts in Diamond.
Some of the Prominent shareholders are MMTC Ltd, Central Warehousing Corporation, Indian Potash Ltd, KRIBHCO, Punjab National Bank, IDFC Bank Ltd, Gujarat Agro Industries Corporation, and Reliance Exchange next Ltd.
7. NSE IFSC Ltd.
NSE International exchange is a fully owned subsidiary company of the National Stock Exchange of India Limited (NSE). NSE IFSC Limited launched trading on June 5th, 2017.
NSE IFSC is situated in GIFT city, a special economic zone in Gujarat. Stock exchanges operating in the GIFT IFSC are permitted to offer trading in securities in any currency other than the Indian rupee.
Subject to SEBI approval, trading will be permitted in equity shares of companies incorporated outside of India, depository receipts, currency, index, interest rate and non-agriculture commodity derivatives.
NSE IFSC Limited usually conducts 16 hours of daily trading over two trading sessions. Currently, there are two trading sessions, the first between 8 am and 5 pm and the second between 5.30 pm and 11.30 pm.
These are the major stock exchanges operational in India. There are few other stock exchanges registered under SEBI, namely, Multi Commodity Exchange of India Ltd., National Commodity & Derivatives Exchange Ltd.
So how does one choose the stock exchange? It depends on the stocks of the company the investor is willing to trade in, the stock exchange in which the company is listed and the price at which it currently is traded. It is at the discretion of the investor to choose the most feasible stock exchange.
To conclude, stock exchanges are important institutions of a country. It acts like a one-stop-destination where an investor can find the shares of various companies that he can choose from to invest in, provided the company is listed on that stock exchange.
The regulated structure of the stock exchanges facilitates smooth transactions of financial instruments and also instills confidence in the investors, safeguarding them from any potential loss or fraud.
The number of stock market enthusiasts has gradually increased in the country. What do you think could be the potential reason for this increase? Tell us your views in the comments below.