What Is A Stock Market?
A stock market is a place where buyers and sellers of stocks (Shares), which represent the ownership claims on businesses that may be publicly listed or privately owned. Generally stocks are traded in stock exchanges.
Stock market of India is quite large and regulated by SEBI and there are more then 4500 listed shares in India. Stock market of India is quite stable and investor friendly as volatility is significantly lower.
Main Stock Exchanges NSE And BSE
Stock exchange is a place where investors and traders buys and sells stocks or securities of different companies. Most of the trades in India took place in the two main stock exchanges in India NSE and BSE. The BSE (Bombay stock Exchange) was founded in 1875 (earliest in Asia) and NSE (National stock Exchange) was founded in 1992.
BSE has more then 4500 share listed and NSE has nearly 1700 shares listed in it’s platform. Transaction wise NSE has more turn over then BSE but market capitalisation of all the stock combined in BSE is higher then that of NSE. Among all the listed companies 90% of market capitalisation is covered by only 500 stocks.
In Derivative segment NSE has the complete Monopoly with about 98% of market share and BSE has only 2%. The presence of active traders and arbitrager the price gap of stock between the two exchanges are very tight and close to each other.
The benchmark Index of NSE is Nifty 50 and BSE is SENSEX, which indicates the movement in stock market of India. Nifty 50 consists of 50 Top performing shares where as SENSEX consists of 30 top performing shares from different sectors.
Trading Mechanism of Indian Stock Market
Both the stock exchanges use electronic trading platforms and other software used for trading. In order to bring more transparency in the trading system, NSE and BSE introduced nationwide fully automated online “Screen Based Trading System”. The trading platform used by BSE is called BOLT and NSE is NOW.
All trading orders in the system need to be placed through stock brokers, who mostly provide online trading platform to retail customers. Institutional investors can invest with direct market access option in which they can place orders directly into the stock market trading system.
Trading Hours And Settlement
Trading starts from 9.15 AM and ends in 3.30 PM, pre-open sessions continue from 9.00 AM to 9.07 AM. The equity market follows the T+2 day Rolling settlement option where stocks settles in 2 trading days, means stock sold on Monday settles on Wednesday.
Each exchanges have their own clearing house, and delivery of shares must be mede in dematerialise form.
The Securities and Exchange Board of India (SEBI) is the Regulator for the stock market of India and is owned by Indian Government. SEBI was founded in 1988 and receives the statutory powers on 12 Apr 1992 by the SEBI Act, 1992.
The basic functions of the Securities and Exchange Board of India (SBI) is to protect the interests of investors in securities and to promote the development and regulation of the stock market of India.
Powers of SEBI
- To approve the by−laws of Stock exchanges.
- Inspect the books of accounts and call for periodical returns from recognised Stock exchanges.
- Inspect the books of accounts of financial intermediaries.
- Compel certain companies to list their shares in one or more stock exchanges.
- Registration of Brokers and sub-brokers.
How To Invest In Stock Market of India
Find a Broker
Broker works as the intermediate between the stock exchange and the investor. You can execute a trade in stock market through a broker. Broker provides all the tools needed for trading system like Demat account, trading account and trading platform.
Choosing a stock broker is very important in stock market as all the trades are executed by them. There are two types of brokers ie; Regular Brokers and Discount Brokers. Regular Brokers provides all the basic tool like call and trade dealers, branches, trading calls and investment ideas, where as the Discount Brokers provides significantly lower charges and online trading services.
After Choosing a stock broker you can open a trading and Demat account and by providing proper documents like PAN, ADHAR and bank details you can start trading in Indian stock Market.
Who Can Invest In Indian Stock Market?
All the Indian citizen having valid identity card, PAN card and Bank account can invest in stock market easily, you just have to open a trading and demat account. For Foreign Investors, India started permitting foreign investments after 1991.
All the foreign investments are classified as two types ie; foreign direct investment (FDI) and foreign portfolio investment (FPI).Investor, who takes part in the day-to-day management and operations activity of the company are treated as FDI, whereas investments in shares without any control over management are known as FPI. To invest in stock market of India you have to be registered as foreign portfolio investor and granted by SEBI.
India is an emerging developing market with good GDP growth and low inflation, which is very good for the economy and Indian stock market. Investor can get healthy sum of return from Indian market then any other because of strong projections and stable environment.