Stock exchanges across the world offer a ready platform for the purchase and sale of securities, anchoring the modern economic system. One such stock exchange that we wish to discuss is the National Stock Exchange – the largest stock exchange in India.
What is a Stock Exchange?
Stock exchanges are organised markets where shares, debentures, government securities and hybrid instruments are bought and sold. These stock exchanges play an active role in developing an active primary market and ensuring that smooth trading of stocks happens in the secondary market.
What is the National Stock Exchange of India Ltd?
Founded in the year 1992, the National Stock Exchange or the NSE, is the leading stock exchange of India and the second largest in the world. It is also known to be the first dematerialised stock exchange in India with a fully automated, screen-based electronic trading system.
What is the background to the National Stock Exchange?
The NSE was incorporated in 1992, several years after the BSE had established itself. On the request of the Government of India, it was set up by a group of renowned financial institutions to bring about transparency in the capital markets. The recommendations of the Pherwani Committee were followed in order to establish a shareholding system that comprises both global and domestic investors.
The NSE began in the Wholesale Debt Market segment and the capital market segment in the year 1994. The operations surrounding the derivatives segment started in the year 2000.
NSE was instrumental in the creation of the National Securities Depository Limited (NSDL) which lets its investors transfer or hold their shares and bonds through an electronic medium. The security offered by the NSDL coupled with transparency, lower transaction prices, and efficiency of the NSE have made the process of trading in the capital and debt market much easier for investors.
What is the objective of NSE?
The NSE is “committed to improving the financial well-being of the people”. It works on the core principles of customer-centricity, trust, and care for the individual, teamwork, passion for excellence and integrity.
Organisation and Management of the NSE
The NSE is managed by a board of directors elected from a body of executive members comprising trading members, public and the management. The management of the day to day affairs of the exchange is under the supervision of the managing director.
Current Operations of NSE
The NSE fulfils its functions of exchange listings, settlement services, trading services, indices, technology solutions, market data feeds and financial education offerings efficiently and effectively. Its unrelenting work has increased the reliability and performance of the financial system.
The NSE has trading in not just the debt and equity market, but also has trading in derivatives. In the year 2011, NSE launched derivative contracts on the S&P 500 and the Dow Jones Industrial Average indices.
NSE has also contributed significantly to the financial literacy in the country by conducting several campaigns and programmes through government and university tie-ups.
One of the latest initiatives of NSE is the NSE EMERGE. It ensures that small and medium scale enterprises as well as start-ups get listed on the NSE without an IPO. It is a good platform to connect the investors with these emerging enterprises.
Major Indices in National Stock Exchange
Launched in 1996, NIFTY 50 is a flagship index that is used by investors in India and abroad as a barometer of the capital market.
What is the difference between National Stock Exchange and Bombay Stock Exchange?
The stocks traded on the BSE and NSE account for nearly 4000 out of the 7800 companies listed on stock exchanges. These stocks account for 4% of the Indian economy. While the collective contribution of these two exchanges is significant, there are several differences between the two.
While the NSE promotes trading debt, currency equity, and equity derivatives segments, the BSE promotes trading in debt instruments, derivatives, currencies, equity, and mutual funds. The NSE has a greater trading volume than BSE. NSE also has more liquidity in the process of trading than the stocks on BSE.
The flagship index of NSE is NIFTY FIFTY while that of BSE is SENSEX. The number of listed stocks on the NSE is lesser than that in BSE. The derivative segment has been monopolized by the NSE.
Advantages of Listing with NSE
Companies can enjoy these benefits by listing with NSE are:
- Greater visibility: Listing with NSE provides companies with greater visibility and exposure to a larger investor base, including retail and institutional investors.
- Liquidity: NSE is one of the most liquid exchanges in the world, providing companies with access to a deep and liquid market for their securities.
- Improved credibility: Listing with NSE can enhance a company’s credibility and reputation, as it is subject to strict regulatory and disclosure requirements.
- Access to capital: Listing with NSE can provide companies with access to a wider pool of capital, including domestic and international investors, which can be important for growth and expansion.
Frequently Asked Questions
It is regulated by the Securities Exchange Board of India.
NEAT is a state-of-the-art client server-based application that the NSE uses to operate trading functions in the exchange. There is an internet trading facility available for the investors on the NOW (NSE on web) platform.
NSE has a three-fold function namely, to establish a trading facility accessible to investors of all classes in the debt, equity, and other asset classes market; to provide all investors an equal opportunity to participate in the trading system; and to meet the lofty global standards set for financial exchange markets.
In case one is a beginner, or wishes to invest in newer stocks, or is a conservative investor, then it is advisable to invest in the Bombay Stock Exchange. If one is an experienced investor, or wishes to trade in derivatives, futures, and options, NSE is a better option.