The Indian stock market has become the fifth-biggest in terms of market capitalization – hitting a new record high of INR 280.5 trillion in August 2022. Now it contributes to the world market valuation with an all-time high contribution of 3.5%, owing to key market drivers, including strong Foreign Institutional Investors (FII).
Meaning of the Indian Stock Market
The Indian stock market is a combination of entities where numerous financial assets, such as equity shares, bonds, derivatives, government securities, etc., are traded by market participants (individuals or institutions) on various platforms (public exchanges). Market participants, like traders, can seek gains over the short period or investors seek returns over the long run.
Stock markets can be categorized as Primary and Secondary Markets.
Primary Share Market: Companies are registered in the primary market to issue their shares and raise money from the public. The process is called listing on the stock exchange through Initial Public Offering (IPO). Companies issue their shares to the public for the first time for formal trading in India. After issuing an IPO, the company becomes a public entity.
Secondary Market: Once the securities are issued in the primary or IPO market, the company’s shares are available to buy and sell in the secondary market through stock exchanges. Investors can trade the securities at a price based on market drivers, like demand and supply, company profitability, economic conditions, and various micro and macroeconomic factors.
Primary Stock Exchanges in India – BSE, and NSE
Most trades in India are placed on the BSE (Bombay Stock Exchange) and the NSE (National Stock Exchange). There are 23 stock exchanges in India. BSE, founded in 1875, is the oldest stock exchange in Asia and among the topmost exchanges globally, with the maximum number of listed members. More than 5,000 companies are listed on the BSE. Stock exchanges do not interact with market participants directly. You need to approach a stock broker to open a Demat account online.
An index is a compilation of stocks listed on a formal stock exchange. It helps to track a particular market or sector. You can check the sector and sub-sector weightage of the stocks in the various BSE and NSE indexes. Investors can get information about the price movements of financial assets. Overall, stock market indexes capture the overall behavior of the markets. The most prominent and broad market indexes in India are the Sensex and the Nifty. Sensex provides data on the BSE and Nifty on the NSE.
Indian Stock Market Regulation
The Securities and Exchange Board of India (SEBI) regulates trading activities in the Indian stock markets. The SEBI ensures a fair market by implementing various rules and regulations and keeps them reforming in the interest of investors’ safety. It has administrative control over stock exchanges in India.
Trading Hours and Trade Settlement
The normal trading session in the Indian stock market starts at 9:15 am and closes at 3:30 pm. A trader order placed during this duration follows a bilateral order-matching system based on demand and supply forces.
The settlement cycle follows the T+2 format, in general. In simple terms, a trade takes just two days to complete the trade cycle, from placing an order to executing and matching the order to the final settlement.
How to Invest in the Stock Market
You can connect to the stock brokers to make buy/sell trades on the stock exchanges. Once you open your demat and trading account online with the broker, you can access their trading platforms linked to the stock exchanges to start stock trading.
The Indian stock market gives participants trading opportunities to make quick profits with small price changes. Investors with a long-term horizon can gain significantly from capital appreciation. Experts suggest investors have a 3-5 year investment commitment in equities to gain maximum from the stock market. Thus, open your Demat account with a SEBI-registered discount broker and invest online.
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