The stock exchange market is the essential component of the stock market. The stock exchange work facilitates the transaction of financial instruments between traders and buyers. Rules and Regulations have been made by the Security Board Exchange of India (SEBI). Hence, the stock exchange lies among those rules and regulations. Stock exchange in India is a few types. Read this article and get every useful information about the stock exchange in India, this article is a complete Indian stock exchange guide.
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What Is Stock Exchange?
For the Indian stock market, the stock exchange market is an essential component where the instruments of financial assets are traded, including shares, bonds and commodities.
In simple words, we can say that the stock exchange is the common platform for every buyer and seller where they meet up and perform the act of buying and selling financial instruments by following the guidance of SEBI. However, only those companies list on the stock exchange can only be allow to trade in the stock market.
Although on the other hand, if some company stocks that are not listed under any stock exchange can also be traded based on “Over The Counter Market”, But such shares would not be held in high esteem in the stock exchange market.
How does the Stock Exchange In India Work?
Moreover, the stock exchange in India works independently. Hence there are no higher bodies and authorities involved in it. Order driven is the entire process of the stock exchange in India, and based on the limit order book, it is conduct.
However, in such kinds of steps, orders are book or match automatically with the help of a trading computer. It checks the investor market orders with the most eligible limit orders.
Although the primary benefit of such kind of order-driven is that they show transparency between all the transactions by showing all market orders publicly. For the stock market in India, brokers play a significant role in placing the demands of stocks in the market.
However, institutional investors and retail investors can benefit from direct market access to DMA. Investors can easily place the orders directly in the trading system through the terminals provided by the stock exchange in India.
Benefits of Listing With Stock Exchange
For company securities listing on the stock exchange in India increase the special privileges. And only those companies that are list on the stock exchange can be trade in the stock market.
However, being list on the stock exchange comes with various benefits for investors, companies, and the common public. Some of the benefits are list below:
Increased Value
Only those stocks or shares list under any respective stock exchange are consider the higher value stocks. By increasing the number of shareholders, companies can quickly cash on their market values and reputation in the stock exchange market. For increase, the shareholder base is the primary motive for issuing shares in the market.
Accessing Capital
To avail the cheap capital by issuing the company’s stocks to the shareholders in the stock market exchange is the best way. Although, money can be easily generate by the listed companies under the stock exchange market and use as capital for the growth and expansion of the company.
Collateral Value
Lenders always accept it listed securities as collateral to extend the facility of credit they give. And for credit requests, it is to get approval by the listed company because they deemed more credibility in the stock market in India or the stock exchange market.
Liquidity
Once the company is list in the secondary market, the security becomes tradeable and marketable i:e. The investor can enter and exit as per their trading and investment scenario. It helps early-stage investors who have taken a stake in the company in the initial stages to book profit at the market rate, which is impossible in an unlisted company due to lack of liquidity.
Fair Price
In a stock exchange in India, the price quoted for particular security represents its actual price. Based on demand and supply, the cost of all deposits is decide. Those prices are disclose publicly; hence, the common public can easily buy the securities at a determined price.
Also Read- Why Stock Price Change Frequently
Methods of Investment
In the stock exchange of India, investing in stocks will be done on the basis two types-
Primary Market
In the primary stock market, companies list their shares on the stock exchange for the first time in IPO (Initial Public Offering). In this investor needs to bid for the company’s shares between the bid given by the company.
Secondary Market
For investors, it acts as a trading platform. Here, every investor can trade in securities listed under the primary market. Further, this market is broken down into two parts auction market and the dealer market.
Major Stock Exchange In India
Majorly there are two types of stock exchanges in India. Let’s discuss both of them briefly.
1 Bombay Stock Exchange (BSE)
In 1875, in Mumbai at Dalal Street, this stock exchange was establish. Earlier, it was name The Native Share Broker Association. Also, in Asia, it is known as the most significant and oldest stock exchange, and in the entire world, it comes in 10th position in terms of trading volumes.
However, $4.9 trillion is the current market capitalization of the Bombay Stock Exchange. And under 6000 companies listed in BSE. Mainly Sensex is use to measure the BSE performance, and in June 2019, it reaches its high, with the touch of 40312.17.
2 National Stock Exchange (NSE)
In 1992, in Mumbai, NSE was establish, and it became the first best electronic stock exchange in India. Although, formation of National Stock Exchange (NSE) is done to eliminate the monopolistic impact of BSE and other regional exchanges,
Hence, it was India’s first fully automate demutualize exchange with the screen-based trading system. It follows strict price-time priority, and it increases transparency. Being automate and transparent increased market trading volume and efficiency.
Let’s look at the complete list of stock exchanges in India.
- The Bombay Stock Exchange Ltd (BSE)
- India International Exchange or India INX
- Metropolitan Stock Exchange of India Ltd, ( was valid till September 2019)
- National Stock Exchange In India (BSE)
- NSE IFSC Ltd.
The Bottom Line
The Indian stock market and the stock exchange in India play an essential role in the growth and expansion of the country and extend to the country’s financial sector. All stock exchanges are integrated. Hence if one stock exchange falls on another business, you can see the ripple effect. For better and more helpful information on the stock market, you can have to enroll in the Best Stock Market Course in Delhi
