National Stock Exchange

The National Stock Exchange of India Limited is the country’s leading financial exchange, with headquarters in Mumbai. It was incorporated in 1992 and, since then, has evolved into an advanced, automated, electronic system offering trading facilities to investors across the country.

In 2021, this exchange system ranked fourth in the world according to the metric of its trading volume.

What is NSE?

NSE established in 1994, began its operations at the behest of the Indian government to bring transparency to the country’s capital market. Set up by an assembly of leading financial institutions and at the recommendations formulated by Pherwani Committee, this stock exchange comprised diverse shareholding assets from both global and domestic investors.

It was also the first stock exchange in the country to introduce electronic trading facilities, thus facilitating the integration of investors throughout the country into a single base.

As of April 11, 2023, the total market capitalisation of NSE is approximately USD 3.26 trillion, putting it in 9th place on the list of the largest stock exchanges in the world.

However, unlike the USA, where trading from the corporate sector accounts for about 70% of the country’s GDP, this sector in India accounts for only 12-14% of its total GDP. Out of this entire corporate sector, around 7800 companies are listed, with about 4000 among those trading at Indian stock exchanges. Thus, stock exchange trading accounts for a meagre of 4% of the country’s GDP.

Functions of NSE

The NSE was established with the specific objective of performing the following functions:

• Creating a nationwide trading establishment for equities, debt, and hybrid instruments.
• Providing equitable access to investors across the country via a good communication network.
• Using electronic trading systems provides investors with a fair, efficient, and transparent securities market.
• Enabling faster settlement cycles, book entry settlements systems, and fulfilling the latest international norms of securities markets.

Features of NSE

Like every other major stock exchange today, the NSE operates an order-driven rather than a quote-driven market. Additionally, it serves an entirely automated screen-based trading system called the National Exchange for Automated Trading (NEAT).

Each order received by NEAT is assigned a unique number. If a match isn't found instantly, it is included in an order book, where the sequence of orders to be matched is established based on price-time priority.

If two orders are submitted into the system, the order with the best value is more important, and the older order precedes orders of the same price.

Order matching is accomplished by comparing the most suitable buy order, which has the most incredible price, with the best sell order, which has the lowest price. A seller prefers to sell to the buyer who offers the best price and vice versa. While orders can be partly matched until the entire order is granted, the matches always happen depending on the order's passive value, not the active price at which the match occurs.

Market Segments of National Stock Exchange

NSE trades securities in Whole Sale Debt and Capital Market Segments.

1) Whole Sale Debt Market Division

The first NSE section is the Whole Sale Debt Market section, which offers traders a trading system for diverse fixed-income instruments. Certificates of Deposit, Bonds, Commercial Paper, Treasury Bills, Central Government Securities, and other securities fall within this category.

2) The Capital Market Division

The Capital Market Segment of the NSE offers traders a means of trading for securities, including debentures, equity shares, exchange-traded funds, preference shares, and retail government securities.

How Does NSE Stock Exchange Work?

Trading through this stock exchange in India is carried out through an electronic limit order book, where order matching takes place through a trading computer. This entire process does not have the interference of specialists or market makers and is driven entirely by orders.

When investors place a market order, it is automatically matched with a limit order. Thus, sellers and buyers can remain anonymous in this market.

Additionally, an order-driven market offers investors more transparency by displaying every buy and sell order in the trading system. These orders in NSE are placed via stockbrokers, who often provide customers with an online trading facility.

Few institutional investors can use this “direct market access” facility to place their orders directly into the trading system.

NSE market trading in the equities segment is carried on throughout the week, except on Saturdays, Sundays and other holidays declared by the stock exchange. The timing is as follows –

• Pre-opening Session – 

1. Order entry opens at 9.00 hours
2. Order entry closes at 9.08 hours

• Regular Session – 

1. The market opens at 9.15 hours
2. The market closes at 15.30 hours

National Stock Exchange’s flagship index is the Nifty50 which represents about 63% of the total quantum of market capitalisation listed under it. This index covers approximately 12 sectors of the economy under 50 variable stocks.

Currently, the stock exchange is spearheaded by Vikram Limaye as the CEO and Managing Director and Ashok Chawla as the Chairman of the Board of Directors.

Benefits of Listing with the National Stock Exchange of India 

NSE offers several benefits of listing with it. Some of them are as follows –

• Comprehensive Visibility 

This trading system is efficient in providing various trade and post-trade information. Investors can quickly look up the trading system's top buy and sell orders and the total number of securities available for a transaction.

It helps investors to gauge the market’s depth quickly.

• Makes for a Premier Marketplace

The volume of trading activity in this stock exchange helps to lower the impact cost on it, which decreases the expenses of trading for investors.

Additionally, the exchange’s automated trading system helps to maintain transparency and consistency with an investor.

• Biggest Exchange in the Country

Regarding trading volume, the NSE is the country’s largest exchange, with a market capitalisation exceeding $2.25 Trillion.

• Fast Transactions

The pace at which orders are processed in this Exchange helps investors to avail the best prices. For instance, on May 19th 2009, the stock exchange recorded 11,260,392 trades, its highest number daily.

• Trade Statistics

Listed companies can receive trade statistics each month to help track the performance of companies listed on the exchange.

Thus, with the above benefits, NSE makes for a favourable facility to conduct market transactions.

Investment Segments

NSE offers investment and trading in the segments mentioned below –

• Equity

This comprises a volatile class of assets which helps investors to maximise the returns from investments.

Equity investment consists of several types of assets: Mutual Funds, equities, indices, Exchange Traded Funds, Security Lending and Borrowing schemes, Initial Public Offerings, etc.

• Equity Derivatives

Derivatives traded under this stock exchange include Global indices like Dow Jones, CNX 500, commodity derivatives, currency derivatives, interest rate futures, etc. The NSE market started derivative trading in 2002 with the launch of index futures. In 2011, it launched derivative contracts on the world’s most-followed index – Dow Jones Industrial Average and S%P 500.

Thus, this exchange has made remarkable headway in the trade market regarding equity derivatives.

• Debt 

This type of investment pool consists of various Mutual Funds, Exchange Traded Funds, etc. The core asset holdings comprise long- and short-term bonds, corporate bonds, securitised products, etc.

NSE launched the country’s first debt platform on 13th May 2013 to provide investors with a transparent and liquid trading platform for all debt-associated products.

Major Indices in this Exchange System

A stock market index is created by choosing a collection of stocks representing the whole market or a specific segment.

Following are some of the most critical broad market indices, consisting of the liquid stocks that are listed on this stock exchange –

• Nifty 50 index
• Nifty 100 index
• Nifty Next 50 index
• Nifty Midcap 50 index
• Nifty Smallcap 250 index
• India Vix index

NSE also includes other indices like thematic, strategy, hybrid and fixed-income indices.

Top 10 Companies Listed Under this Stock Exchange According to Market Capitalisation 

With these listed companies and more, the National Stock Exchange is a premier marketplace that enables efficient trading, boosting visibility and providing high liquidity of assets with accurate prices.