National Stock Exchange
Stock exchanges are the backbone of today's economy, providing a ready platform for selling and purchasing securities worldwide. The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are India's primary stock exchanges. This article discusses the National Stock Exchange in detail.
What is NSE?
India's largest financial exchange, the National Stock Exchange of India Limited or NSE, is headquartered in Mumbai. Established in 1992, it has evolved into a sophisticated, automated electronic system that offers trading facilities to investors across the country. The trading volume of this exchange system placed it in the fourth position in the world in 2015. On the world's list of largest stock exchanges, NSE ranked 9th in 2022 with a total market capitalisation exceeding US $3.06 trillion.
Indian government officials requested the opening of this stock exchange in 1994 to increase transparency in the country's capital markets. Founded by leading financial institutions and at the recommendation of the Pherwani Committee, the NSE comprises global and domestic investors with a diverse shareholding portfolio.
The NSE also introduced electronic trading facilities in India for the first time, thus making it easier for investors to integrate across the country.
The corporate sector in India accounts for only 12-14% of the country's entire GDP, in contrast to the USA, where it accounts for about 70%. There are around 7800 companies listed in this entire corporate sector, and about 4000 are listed on Indian stock exchanges. Thus, stock exchange trading accounts for a mere 4% of the country's gross domestic product.
Vikram Limaye is the CEO and Managing Director of the stock exchange, while Ashok Chawla is the Chairman of the Board of Directors.
NSE Milestones
The National Stock Exchange achieved the following essential milestones between 1993 and 2016.
| Year | Milestones |
|---|
| 2016 | - Trading of NIFTY 50 index futures on TAIFEX launched.
- Platform for issuance of sovereign gold bonds launched.
- Developed an electronic book-building platform for debt securities placements.
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| 2015 | - Enhanced cooperation with the London Stock Exchange Group through a memorandum of understanding.
- CNX NIFTY was renamed to NIFTY 50.
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| 2014 | - Mutual fund platform NMF-II launched.
- NBF II segment launched for interest rate futures.
- Futures trading was launched for the India VIX index.
- The Osaka Exchange began trading NIFTY 50 (then known as CNX NIFTY).
|
| 2013 | - Introduced the New Debt Segment (NDS).
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| 2012 | - Trading of FTSE 100 index futures and options contracts began.
- A platform specifically designed to list and trade SME securities was launched, known as EMERGE.
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| 2011 | - Initiated trading in global indices, including the S&P 500 and Dow Jones Industrial Average, through futures and options contracts.
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| 2010 | - The NOW mobile platform was launched.
- Launched trading in Currency Options.
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| 2009 | - The Mutual Fund Service System (MFSS) was launched.
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| 2008 | - Introducing Currency Futures trading in India for the first time.
- Securities Lending and Borrowing Scheme (SLBS) establishment.
- The NOW platform for web-based trading was launched.
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| 2005 | - The NIFTY Bank index derivatives were launched.
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| 2002 | - Listings of ETFs were launched.
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| 2001 | - The NIFTY 50 index (formerly S&P CNX NIFTY) was launched for trading as index options.
- The launch of single stock futures and options on listed securities was completed.
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| 2000 | - The launch of index futures based on NIFTY 50 (then called S&P CNX NIFTY).
- NIFTY 50 index futures listed on the Singapore Exchange.
- Trading on the internet began.
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| 1998 | - NSE certification program for Financial Markets (NCFM) in India began.
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| 1996 | - A settlement fund was created and administered.
- Founded the NIFTY 50 Index, which continues to serve as the flagship index.
- Trades and settlements in dematerialised securities began on the exchange.
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| 1995 | - A trust was established for the Investor Protection Fund.
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| 1994 | - Market segments for equity and wholesale debt were launched.
- Trading begins electronically or via a screen.
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| 1993 | - Became a recognised stock exchange.
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How Does NSE Stock Exchange Work?
In India, an investor can trade in the NSE using an electronic limit order book, with order matching performed by a trading computer. Once they place a market order, it is automatically matched with a limit order without the interference of specialists or market makers. This market, therefore, allows sellers and buyers to remain anonymous.
Order-driven markets also offer investors greater transparency by displaying all buys and sells in the trading system. NSE orders are typically placed through brokers who offer online trading to their customers. A few institutional investors can also use this "direct market access" facility by directly placing orders with the trading system.
The NSE trades equity stocks five days a week, excluding the weekends and other declared holidays. Here are the market timings:
- Pre-opening session
- The order entry window opens at 9:00 a.m.
- The order entry window closes at 9.08 a.m.
- Regular session
- 9:30 a.m. is the market opening time
- At 15.30 hours, the market closes
There are about 63% of the total market capitalisation listed under the Nifty50, which is the NSE's flagship index. About 12 sectors of the economy are covered by this index, which contains 50 variable stocks.
NSE Functions
- The establishment of a trading facility allows investors from anywhere in the country to trade debt, equity, and other asset classes.
- It provides equal access to trading opportunities to investors through a communication network.
- It facilitates the financial exchange market in India to meet global standards.
- The facility shortens the trade settlement period and enables book-entry settlements.
NSE Listing Benefits
- Gauge the depth of the market easily
The platform provides extensive information regarding trading and post-trading. Furthermore, you can easily find the top buyers and sellers. A list of the securities available and the top buys and sells are displayed for each transaction. As a result, NSE provides a comprehensive view of the depth of the market.
- Trade statistics
Each month, listed companies receive trading statistics. A company's performance and market sentiment can be tracked using these metrics.
Trading volume on this stock exchange lowers its impact costs, resulting in lower trading expenses for investors. Moreover, an automated trading system maintains transparency and consistency between investors and the exchange.
- Fast transactions
The NSE processes orders rapidly, enabling investors to take advantage of the best prices. For example, 19 May 2009, marked the highest number of trades the stock exchange had ever seen, with the number being 11,260,392.
Investment Segments
Below are the segments in which NSE offers investment and trading services.
- 1. Equity
Investors can maximise their returns on investments through equity, a volatile class of assets. The types of equity investments include Mutual Funds, equities, indices, Exchange Traded Funds, Security Lending and Borrowing Schemes, Initial Public Offerings, etc.
- 2. Equity Derivatives
Among the derivatives traded on this exchange are global indices like Dow Jones, CNX 500, and commodities, foreign currencies, and interest rate futures. With the launch of index futures in 2002, the NSE market began trading derivatives. As of 2011, it also began offering derivatives on Dow Jones Industrial Average and S&P 500, the world's two most popular indices.
Therefore, this exchange has achieved remarkable success in the equity derivatives market. NSE has completely monopolised the derivatives market.
- 3. Debt
Investment pools like this consist of different Exchange Traded Funds, Mutual Funds, etc., with core assets such as long and short-term bonds, corporate bonds, and securitised products.
On 13 May 2013, NSE Stock Exchange launched the country's first debt trading platform for investors to trade debt-related products transparently and easily.
How are the National Stock Exchange and the Bombay Stock Exchange different?
Among the 7800 companies listed on stock exchanges, nearly 4000 stocks trade on the BSE and NSE. 4% of the Indian economy consists of these stocks. Even though both exchanges make a significant contribution, they differ in several ways
The NSE favours trading currency equity, debt securities, and equity derivatives, whereas the BSE prefers debt instruments, derivatives, equity, currencies, and mutual funds. The NSE has a larger trading volume than the BSE. Likewise, NSE stocks trade with more liquidity than BSE stocks.
NIFTY 50 is the flagship index of the NSE, while SENSEX is the flagship index of the BSE. Stocks listed on the NSE are fewer than those on the BSE.
Major Indices in NSE Exchange System
Stock market indices represent a group of stocks in the whole market or a particular segment. This stock exchange lists the following broad market indices, which are composed of liquid stocks listed on the exchange.
- Nifty 50 index
- Nifty Midcap 50 index
- Nifty 100 index
- Nifty Next 50 index
- India Vix index
- Nifty Smallcap 250 index
The NSE also comprises thematic, hybrid, strategy, and fixed-income indices.
Top 10 Companies Listed Under NSE According to Market Capitalisation (Nov 2022)
| Company Name | Market Capitalisation (in Rs. Crore) |
|---|
| Reliance | 1,730,043.64 |
| TCS | 1,210,523.97 |
| HDFC Bank | 891,461.78 |
| Infosys | 666,202.32 |
| ICICI Bank | 646,707.71 |
| HUL | 589,124.77 |
| State Bank of India (SBI) | 542,304.03 |
| HDFC | 479,849.79 |
| Bharti Airtel | 477,389.42 |
| Adani Enterprise | 460,664.41 |
Conclusion
The National Stock Exchange is ideal for companies looking to get listed on a major exchange. It facilitates efficient trading, improves visibility and provides high liquidity of assets with accurate prices with its listing of these companies and more. Furthermore, trade matching and settlement processes are more transparent due to the sheer volume of trading activity and the use of automated systems.
As a result, investors can become more confident, and visibility in the market can increase. Additionally, by utilising cutting-edge technology, orders are also filled more efficiently, increasing liquidity and accuracy.
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