The majority of trading in India is done on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). BSE was founded in 1875 and NSE was established in 1992; however, both these stock exchanges follow the same trading hours, mechanisms, and settlement processes.
Trading in both these stock exchanges is conducted through an online electronic limit order book. This means that buy and sell orders are matched through trading computers. The Indian stock market is order-driven where buyers and sellers remain anonymous, providing greater transparency to all investors. Orders are placed through brokers, most of which now provide online share trading services to retail investors.
The stock market adopts the T+2 settlement cycle. This means that if the trades are executed on Day 1, the buyers will receive their shares and sellers the sales proceeds after two working days from Day 1. The stock exchanges are operational between 9.55 AM and 15.30 PM from Monday to Friday. All deliveries must be made in an electronic form through demat account. Each exchange has a clearing house to settle all trades and mitigate settlement risks.
The two most prominent Indian stock market indices include the BSE Sensex and Nifty. The Sensex is the oldest index comprising shares of 30 companies and represents roughly 45% of the free-float market capitalization. The Nifty includes 50 companies and accounts for approximately 62% of its free-float market cap.
The responsibility of developing the stock market, regulating the exchanges, and forming rules is assumed by the Stock Exchange Board of India (SEBI). It was established in 1992 as an independent authority body. SEBI constantly lays down rules and regulations for best market practices. The regulator is also given the right to penalize market participants in case of any breach or fraudulent activities.
The Indian stock market includes primary and secondary markets. Companies offer an initial public offering (IPO) on the primary market, which is then listed on the stock exchange. Investors can then buy and sell these shares through the secondary market.
Investing is complex and investors should rely on professional analysis to avoid being surprised. Sticking to the stock market basics, doing the research and due diligence, and regularly monitoring the portfolio will help investors make profits through their share market investments.
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