Indian Stock Market
Most people do not know that India is home to the oldest stock exchange in Asia, the BSE or Bombay Stock Exchange. Established as early as 1875, under a few banyan trees infront of the town hall - BSE was the inspiration for the NSE or National Stock Exchange setup in 1992.
The Indian stock market is a promising, exciting and awe inspiring system of financial beauty. Many have made their millions in this market, and learning thoroughly the ups and downs of the Indian exchanges is the path that can lead us to those who have been blessed before us.
The Two Exchanges - BSE and NSE
India has two powerful stock exchanges, the ones we just mentioned above - the Bombay Stock Exchange and the National Stock Exchange (NSE). They both follow the same protocol with regard to trading mechanism, working hours etc.
All the major companies are listed on both exchanges. If you are keen on spot trading, NSE might be a good place to focus since it has a predominant share in stock trading. NSE has about seventy percent of the market share and total monopoly in derivatives trading.
Is Trading done the same way in both exchanges?
Yes. Trading is done in the same manner in both the exchanges. It functions through an open electronic limit order book and the order matching is calculated by the trading system. The whole process is order-driven, meaning market orders that are are matched with the best limit orders in an automated manner which enable buyers and sellers to stay anonymous. This system also provides more transparency.
Orders made in the trade are placed with the assistance of brokers, many of them have online services in place to allow the general public to trade.
What is Sensex and Nifty?
India has two major market indexes, Sensex and Nifty. Sensex is older, mostly equities and has shares of about 30 companies listed on BSE, meaning it has 45% of free-float market capitalization.
While Nifty has 50 shares listed, representing about 62% of its free-float market capitalization.
Are there specific trading hours?
Trading that happens on Monday gets settled by Wednesday. All trading happens between 9:55 am and 3:30 pm, Indian Standard Time, Monday to Friday.
How Safe is the Indian Stock Market?
The Indian Stock Market is regulated by the Securities and Exchange Board of India(SEBI), which is an independent entity. They can punish companies and individuals for breaking the established norms. Read more on how SEBI regulates the market here: http://www.sebi.gov.in/
Can Foriegners Invest?
Yes. There are two kinds of Foreign investments (FDI) and foreign portfolio investment (FPI). Those investments that pertains to routine management and operations of the company are considered as FDI, while investments in shares without operational involvement are understood as FPI.
Those interested must register as a foreign institutional investor (FII) or as a sub account of a registered FII. SEBI is involved in the approval of such agreements. FII includes mutual funds, pension funds, endowments, sovereign wealth funds, insurance companies, banks, and asset management companies.
But do note that foreign individuals are not allowed to invest directly in the Indian stock market. Although high income persons with at least US$50 million to show for can register directly as a sub-account of an FII.
The Bottom Line
What is amazing is the opportunity that has not been exploited by the Indian middle class by involving oneself in the Indian Stock Markets. A very low share of savings of middle class Indians are invested in the domestic stock market. This is a good reason for foreign investors to jump into the Indian market. Also a good reason for any Indian willing to work and learn about the stock markets.