Stock markets are just like any other market with buyers and sellers in the market. The only difference between a stock market and a regular market is that the stocks are traded in this market. The medium for this trading to take place is the exchange. So, that’s where the National Stock Exchange comes into the picture.
“Two stocks hit 52-week highs on NSE,” “NSE’s nifty ended at 8967 levels”. You would have come across such news while reading the newspaper or browsing your e-newspaper, right? But have you ever thought about the history behind the National Stock Exchange, how did it originate, or what is its importance? If yes, then well and good. But, if not, we shall provide you a clear insight into this leading stock exchange of India.
Before 1992, trading took place solely within a group of brokers. There was no transparency in the markets at all. To avoid this, that is to bring in clarity among people, the National Stock Exchange was established in 1992. With the setting up of this, now anyone could trade if he/she has the experience and minimum knowledge in the field of finance. This way, NSE was set and, it was the first dematerialized electronic exchange in India. The electronic trading system wiped out the traditional trading methods entirely and became available for investors efficiently. It embarked on a new journey where the risk management methods were effectively handled way better than the previous methods.
Now NSE, based in Mumbai is one of the most comprehensive stock exchanges with a high average and total turnover of equity shares. It was ranked 4th in the world in 2015 by equity trading volume. As of 2015, a total market capitalization of 1.41 trillion was gathered. Since then it is the 11th largest stock exchange in the world.
NSE was founded by a chief group of financial institutions to bring more people to invest. Spread over 2000 cities across India, it has 2500 VSATs and 3000 leased lines. A new initiative by NSE is the NSE emerge where the SME and the Startup companies can get listed on the NSE without any Initial Public Offerings. Their main aim is to help startups for funding and connecting with investors.
Due to its numerous features, NSE is the third-largest stock exchange in the world. But what made it reach there? We’ll look into the traits that made it to the top.
Security – The members who are involved in trading are not kept away from the eyes of the public. The transactions are kept in the form of code without giving away the name of the person who transacted.
Online-Based – With NSE, trading is completely electronic. So, the physical presence of the trader is not essential every time. If he sits behind their computers, then quickly the transactions can take place.
Anytime, anywhere – Again, since it is electronic, it is available from across the country and at any time making trading more straightforward than ever before.
Easy borrowings- One can effortlessly repay the debts along with the interest rates with it. The repayment of debts is made a lot easier.
A wide array of accessibility – One can access it from anywhere and, there is transparency in every trade that he does.
Instant transactions – The transactions are settled instantly without any delay due to the online mode. It would take a long time with the traditional methods, but here the transactions are executed in no time.
Perfect matching – The trader can find the perfect match for buying and selling due to the trading software. This ease of process is what any trader would want. NSE has rightly understood it and provided everything that is needed by making it online.
NSE is also tied with some of the top universities and provides education to students in financial markets. It also provides students with a mock market software so that they get the right knowledge on investment and portfolio management.
NSE also provides certifications by conducting examinations under the NCFM program. By enrolling in this certification, one can gain insight into the financial markets and also have a wide array of career options in the same. It will help one gain knowledge on equity, derivatives, futures, and options and much more. If planning to pursue a career in finance and stock markets, then NSE Certifications are the go-to for that.
There is a wide array of benefits that NSE offers to all the investors out there. With the automated system, investors find it easier and flexible in the usage of the trading system and trading. Some of them are
Statistics – Every month, the companies that are listed will get to know their performance after every month. It helps them distinguish where they stand among the rest. This feature is highly beneficial for everyone.
Biggest exchange – Since we already know that NSE is the largest exchange in the country, with over a market capitalization of $2.27, there is no doubt about the trust they have instilled among the investors.
Reliability – They are one of the highly reliable stock exchanges in India and provide the best features to the investors so that they can trade easily without any hassle.
Ease of transaction – Transactions are made more accessible. One can buy and sell the stocks at some of the best prices available at just a tap of their finger. The online mode is immensely helping the investors.
Transparency -An investor can find out how the market is at the moment by the trading information provided before and after the trade. One can check accessible securities using the trading system. With the automated system, one can view what is happening and can make the right decisions based on it quickly.
Companies Listed on NSE
There are over 1600 companies listed on the NSE. To guard the interest of investors, provide liquidity for the securities, and to gather savings companies are listed on the NSE. Some of the companies are:
- Asian Paints
- Bharat Petroleum
- Andra Bank
- Blue Dart Express
- Britannia Industry
- Corporation Bank
- Hindustan Petroleum
- IDBI Bank
- Jet airways
- Indian Oil corporation
- Larsen & Toubro
- Titan Company
- Ujjivan Small Finance Bank
Debt, Equity, and equity derivatives are NSE products. Let’s take a look at them in detail.
Equity Derivatives – Trading in derivatives started in 2000 with the emergence of index futures. Trading is available in futures and options divisions like the Nifty 50 index, nifty IT index, Nifty bank index and nifty next 50. NSE was also the first Indian stock exchange to begin global indices.
It also launched derivative contracts on the S&P 500 and Dow Jones Industrial Average. In 2012, NSE launched derivative contracts on the UK equity stock market, FTSE 100 the universally tracked index.
Debt market – In 2013, NSE started its first debt platform to provide more transparency in the debt-based products. Here, mutual funds and traded funds are merged, where the asset will contain different bonds like the long term and short term.
Equities – To increase the number of returns in their investments, here the volatile assets are present like the following:
Equity, Indices, Mutual Funds, Exchange-Traded Funds, Initial Public Offerings, Security Lending, and Borrowing Scheme.
Nifty 50 or NSE fifty is the stock market index of the National Stock Exchange that comprises of 50 companies. That means 50 stocks are present in the index. These are the active and liquid stocks in the Indian Markets. The portfolio is self-managed. 50 companies from around 23 sectors have come together and, their total average is calculated and represented in the market. Nifty was founded in 1995. The Nifty 50 index is used as an economic indicator of India. Some of the other major indices are as follows:
- Nifty 50 index
- Nifty 100 index
- India Vix index
- Nifty Smallcap 250 index
- Nifty Next 50 index
Crashes in the Stock Market
The ongoing coronavirus pandemic has affected the stock markets mainly. As of Feb 1st, the Nifty fell by 3% during the initial days before the coronavirus became a pandemic. NSE fell for a complete week being the first weekly fall after the great recession of 2009. During this month, March it fell by 1000 points wiping out crores of wealth. Adding to the pandemic, the YES Banks crisis too, was the reason for the markets to fall to a large extent. It has unimaginably shaken the markets.
In 2016, the NSE is believed to have crashed due to the demonetization in India.It is said to be the reason for the crash because of the US Presidential elections and the rupee losing its value.
The NSE set out to become the firsts for numerous events and initiatives.
- The first dematerialized electronic trading system was NSE.
- It was the first to set the screen-based electronic trading system in 1994.
- In 2000, it was the first internet trading in India.
- It was the first exchange to trade ETFs in India.
- The National Securities Depository Limited was the first depository in India.
- In 2013, It was the first to launch a debt platform to provide trading of debt-related products.
- It is interest rate futures’ first SEBI-RBI approved stock exchange.
- It was the first stock exchange in India to begin local indices.
- NSE also launched derivatives contracts on FTSE 100, which was one of its kind in the UK Markets.
- The cross-currency derivative contract too was its first in 2018.
Thus as we have seen, NSE is the best stock exchange for financial markets. Being the firsts to many, throughout its journey, it has positively established to improve the trading system of India. With the advance in technology, NSE has increased the number of orders it can handle per second. From handling 2 orders per second, it can handle up to 1,60,000 orders per second.
Over the span of 25 years, NSE has made a tremendous impact on the Indian economy by using the latest technologies most efficiently. Now they have set themselves in various aspects and have been involving in IT, data and analytics, and much more. They have launched multiple platforms for different markets to function with ease using technology. Their involvement in the education sector and multiple fields truly sets them apart from the list of stock exchanges in India.
Now, investors can make use of technology and not worry about any vulnerabilities during trading. With great transparency in trade matching and instant settlement of transactions, no wonder NSE is among the top stock exchanges in the world. The ease of trade with the software trading system and the anonymity given for the investors makes trading a smooth process. Having a large influence on the Indian Economy, stock markets are, therefore, extremely important.