Stock Exchange in India

A stock exchange acts as a barometer of an economy. Companies get listed on the stock market to raise capital. Investors and traders buy and sell securities of already-listed companies under the regulation of SEBI. Let us learn more about ‘what is the stock exchange?’, primary vs secondary market, major stock exchanges in India, global stock exchanges, how does stock exchange works, how to buy and sell stocks on a stock exchange, benefits of listing on a stock exchange, and more in detail. Keep reading!

What is the stock exchange?

The stock exchange in India is a market where traders and investors trade financial instruments like stocks and commodities. Adhering to the guidelines set by SEBI, buyers and sellers trade financial securities during the specified hours. Investors can trade stocks of companies that are listed on the stock market. However, non-listed stocks can be traded in an Over the Counter Market (OTC) which is not held in high esteem in the stock market exchange. To trade stocks, you need to have a demat account. Using a demat account, you trade securities online from your laptop or mobile phone.

Primary vs Secondary Market

 Which companies can get listed?

To get listed on the stock market, a company must comply with SEBI (Securities and Exchange Board of India) regulations, which include meeting specific profitability, valuation, and net worth criteria. Failure to meet these requirements results in the rejection of its IPO application.

Additionally, stock exchanges like NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) have their own listing standards, such as minimum paid-up capital, public shareholder thresholds, and operational history. Companies must fulfill both SEBI and exchange-specific guidelines to successfully list their shares on the stock market.

Major stock exchanges in India

Below are the two stock exchanges in India:

BSE – Bombay Stock Exchange

Established in 1975, the Bombay Stock Exchange is one of the oldest stock exchanges in Asia and is the 10^th largest stock exchange in the world. Located at Dalal Street, Mumbai, BSE has more than 5500 companies listed with an estimated market capitalization of US$5.5 trillion. The Sensex is the benchmark index which includes 30 of the largest and most active companies on the BSE.

NSE – National Stock Exchange

Established in 1992, the National Stock Exchange is the 12^th largest stock exchange in the world. Located in Mumbai, NSE has more than 2500 companies listed with an estimated market capitalization of US$5.5 trillion. Investors use NIFTY50 (NSE’s index) to measure the performance of the Indian capital market. NIFTY 50 includes the 50 largest companies listed on the NSE.

MCX, NCDEX, IEX, etc. are the commodity exchanges in India that allow trading in commodities like metals, bullion, energy, etc.

Global Stock Exchanges

Similar to BSE and NSE, there are more stock exchanges in the world. Below is the list of global stock exchanges list as per market capitalization:

1. Hong Kong Stock Exchange
2. NASDAQ
3. New York Stock Exchange
4. Shanghai Stock Exchange
5. European New Exchange Technology (EURONEXT)
6. Tokyo Stock Exchange
7. Shenzhen Stock Exchange
8. London Stock Exchange
9. Bombay Stock Exchange
10. Toronto Stock Exchange

How does the stock exchange work?

The Securities Exchange Board of India is the regulatory body that is responsible for safeguarding the interests of investors. The rules and regulations set by SEBI are followed by the companies to ensure fair trade.

By following the guidelines and regulations set by SEBI, companies list themselves on the stock exchange. The listed shares are then purchased by investors to become owners of the company to extend their shareholdings.

These investors place buy and sell orders for shares. The share prices change on a real-time basis depending on the demand and supply. The last step includes clearing and settlement. The traded security is transferred from the seller to the buyer and money is sent from the buyer to the seller.

How To Buy And Sell Stocks On A Stock Exchange?

Follow the below steps to buy and sell stocks on a stock exchange:

• Open a Demat account with a stockbroker.
• Link your trading account with a bank account.
• Login to your demat account to place buy and sell orders.

Transfer funds from your bank account to your trading account to buy securities. Once you sell securities, the funds are transferred from your trading account to your bank account.

Benefits of Listing with a Stock Exchange

Below is the list of benefits that a company can gain by listing on a stock exchange:

• Access to capital: Easy access to capital, Companies can raise capital by listing themselves on the stock market. It allows them to get easy access to capital for their operations. Moreover, a listed company is accountable for showing its financial statement to the general public.
• Better Reputation: As compared to an unlisted company, a listed company has a better reputation. Generally, people have trust in the listed companies as the financials of these companies are available to the public.
• Stability: A stock exchange allows companies to raise capital through a diverse set of shareholders, which provides it stability. It is much better to raise capital from diverse shareholders than from a narrow set of shareholders.