Welcome to the Indian stock market. There are two types of investors, one who has full knowledge about the Indian share market and other who are fresher in this field. India seems like a small stock market compares to the United State but on closer examination, you will get the exact same things that you expect from any emerging stock market. Here, we are providing the overview of the Indian stock market that will help investors to get in-depth knowledge about the Indian share market.
Bombay Stock Exchange (BSE) and National Stock Exchange (NSE)
Most of the share trading in the stock market is done in two stock exchanges. One is the Bombay Stock Exchange (BSE) and another is National Stock Exchange (NSE). The BSE has existed since 1875. On the other hand, the NSE was established in 1992 and started trading in 1994. Both exchanges BSE and NSE have the same trading pattern. Almost all the important companies and organization of India are listed on both the exchanges.
1. Trading System
Trading in BSE and NSE is done by an open electronic limit order book, in which the order is matched by the computer. There are no experts or market makers and the whole process is order-driven, which means that the orders are placed by the investors, which automatically match the best limit orders. As a result, the buyers and sellers always remain anonymous. The main advantage of the order driven market is that it brings extra transparency by showing all the purchasing and selling orders in the trading system. However, there is no confirmation or guarantee of execution of the orders in the absence of the market makers and specialists.
2. Settlement Cycle and Trading Hours
The T+2 rolling settlement is followed in equity spot markets. It means that any business or trade that takes place on Monday will be fixed by Wednesday. The trading on the stock exchanges takes place Monday to Friday, between 9:15 am to 3:30 pm, Indian Standard Time (+ 5.5 hours GMT). The delivery of shares should be in dematerialized form and both exchanges have its own clearing house, which serves as the central counterparty and considers all settlement risks.
3. Market Indexes
There are two very famous Indian market indexes named Sensex and Nifty. The Sensex is the largest market index of shares. Another index is the S & P CNX Nifty. This includes shares of 50 firms listed on the NSE, which represent 62% free-float market capitalization of the index. It was built in 1996.
4. Securities Market Regulation
The entire responsibility of the stock market development, supervision and regulation are the Securities and Exchange Board of India (SEBI). The SEBI was formed in 1992 as an independent authority. Since then, Securities and Exchange Board of India (SEBI) has constantly tried to make market rules in line with best market practices. SEBI is well known for imposing the penalty on participants of the market if rules are breached by them.