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The financial market is constantly growing, with more and more investors entering the area, especially in the stock market. The stock market has around 80 million unique investors.
Well, we believe now that stock market investments are famous. But what is the base for all these transactions? Of course, the stock is one. The other component equally essential for trading and investing is the stock exchange.
Stock exchanges are platforms that allow trading and investing in stocks. It is where all transactions begin and end. So, understanding what is NSE and BSE, along with their roles is crucial before one begins trading. Today’s article focuses entirely on the National Stock Exchange.
What is NSE?
Founded in 1992, the National Stock Exchange is one of India’s two most popular stock exchanges. It provides a platform for traders and investors to buy and sell shares. It is also the largest global derivatives exchange with respect to the number of contracts.
NSE has the credit of being the first Indian exchange to begin an electronic trading facility. In 2022, NSE saw 2.7 crore unique investors trading in the equity market.
The role of NSE
- The NSE acts as the backbone of capital markets in the country by facilitating companies to list themselves to raise money from the public.
- Provides investment options to investors across various asset classes like debts, bonds and equities, offering different risks and returns.
- Following the Securities and Exchange Board of India (SEBI) guidelines, the NSE ensures fair and efficient trading practices with transparency across all trades.
- The NSE plays a significant role in improving the country’s economy by adopting international standards and practices.
How to buy shares on NSE?
Investors cannot directly trade on the stock exchange as it requires special memberships and access. Hence, every trader interested in the stock market must open an account with a SEBI-registered broker. These brokers provide a trading platform to investors and charge a certain percentage of the transaction value as a commission.
- Choose a brokerage firm and register with them to open a demat account. A demat account helps you store your trades in an electronic format.
- Open a trading account if the broker has not opened it already with the demat account. Trading is essential in buying and selling shares.
- You must ensure your broker has registered with the NSE platform to trade shares listed on the NSE.
- You can initiate stock market trades once your demat and trading accounts are active. Look for the available options in the brokerage portal and order to buy or sell.
- If your order matches a counter order, your transaction gets executed.
Some basic parameters to analyse the performance of stocks listed on the NSE
- Advance and decline on NSE
The advance-decline ratio is a mathematical tool used by technical traders to analyse the direction of price movements in the stock market. The ratio considers the closing price of stocks today against the previous day’s closing price. If the current closing price exceeds the previous close, the stock is said to have advanced. Else, it is said to have declined.
The number of advances is divided by the number of stocks declining. If the number is more than 1, it suggests that the number of stocks increasing in price is high, indicating a bullish market. When the ratio is less than 1, it hints that the number of stocks declining is high, suggesting a bearish market.
Also read: < Insert Advance-Decline Ratio blog>
- NSE candle chart
Candlesticks chart patterns are among the most used methods in technical analysis. Each candlestick considers four price points – high, low, open and close. Each candle formed at every interval suggests how the prices are moving. Traders use these candles to study the price fluctuations of stocks in the market.
Coming to NSE particularly, the stock exchange uses various market indices like NIFTY 50 (to represent the performance of the top 50 stocks), Bank NIFTY (showing the performance of bank stocks), etc. Analysing the candlesticks of these indices helps traders examine the performance of different sectors and the whole market.
- NSE delivery percentage
The delivery percentage in the stock market refers to the percentage of securities traded on a delivery basis compared to the total quantity of shares traded. It excludes intraday trades as they square off on the same day.
Analysing this percentage helps in understanding investor sentiments. When the delivery percentage of a stock is high, it suggests that the number of investors for the stock is higher than the number of traders.
Objective of NSE
The National Stock Exchange (NSE) was established in 1992 to modernise India’s capital markets and provide a transparent, efficient, and technologically advanced trading platform. The key objectives of NSE include:
- Enhancing Market Transparency : Eliminating manual trading systems and ensuring a fair price discovery mechanism.
- Providing Efficient Trading Mechanisms : Facilitating seamless electronic trading for investors across India.
- Reducing Settlement Risk : Introducing a T+1 settlement cycle for faster trade execution and reduced counterparty risks.
- Boosting Liquidity : Encouraging participation from retail and institutional investors to improve market liquidity.
- Encouraging Financial Inclusion : Making stock market access easier for small and medium investors across India.
- Ensuring Regulatory Compliance : Adhering to SEBI’s framework to maintain market integrity and investor trust.
Features of NSE
NSE stands out as one of the largest stock exchanges in India and offers several key features:
- Fully Automated Trading System : A robust electronic trading platform ensures fast, transparent, and seamless execution.
- Index Benchmarking : The NIFTY 50 index represents market performance, helping investors gauge stock trends.
- Diverse Asset Classes : Investors can trade in equities, derivatives, currencies, debt instruments, and commodities on NSE.
- T+1 Settlement System : Faster trade settlement reduces market risk and improves liquidity.
- Regulated and Secure : NSE follows strict SEBI regulations to ensure compliance and investor protection.
- Wide Market Participation : Open to retail traders, institutional investors, mutual funds, and foreign investors, making it a global player.
Benefits of NSE
NSE offers multiple benefits that make it the preferred stock exchange in India:
- Easy Market Access : Investors from across India can trade in stocks without the need for physical stock certificates.
- Low Transaction Costs : NSE’s electronic trading system reduces brokerage and operational costs.
- High Market Liquidity : With over 1,800 listed companies, NSE ensures efficient order execution and better price discovery.
- Reliable and Transparent Pricing : Automated trading removes manipulation and ensures fair market pricing.
- Risk Management Systems : Margin trading, circuit breakers, and position limits protect investors from excessive volatility.
- Investment Opportunities : Wide range of investment options including IPOs, ETFs, bonds, and derivatives.
- Global Recognition : NSE ranks among the top exchanges globally, attracting both domestic and international investors.
Bottomline
The NSE is a popular exchange not just in India but globally. It is instrumental in helping companies raise capital through the public and provides investors with a profitable avenue to grow their wealth.
FAQs
NIFTY is a combination of two terms – National Stock Exchange and Fifty. It is a benchmark index representing the performance of the top 50 stocks listed on the NSE based on their market capitalisation.
NSE is the largest stock exchange in India and among the top 10 global exchanges. So, listing on the NSE gives companies national and international visibility, along with attracting investors worldwide. It also provides a settlement with guarantee and ensures fair trading practices for shares listed on NSE.
Companies can list themselves through an IPO or a new listing upon fulfilling the eligibility requirements. If the company is going public for the first time, it can adopt the IPO way. If it is already listed on another exchange, the listing can be transferred to NSE through the New Listing option.
NSE’s shares are currently not listed. The organisation is in talks with India’s Securities and Exchange Board to complete the listing procedure. Once listed, investors can not only buy the shares of other companies on the NSE but can directly buy NSE’s shares, too. Also, BSE is listed on NSE.
Yes, NSDL is part of the NSE. National Securities Depository Limited (NSDL) is the depository of NSE, which helps hold shares in a dematerialised form. NSDL plays a crucial role in the clearing and settling shares transacted through NSE.
