Sharekhan Blog

What is National Stock Exchange (NSE)?

  • Jan 4, 2024

There's a lot to grasp, from the intricacies of market trends to the nuances of different securities. In the section below, we'll discuss India's national stock exchange.

About National Stock Exchange (NSE)

Established in 1992, the NSE has become the beating heart of India's stock market. Unlike the traditional chaos of open-outcry systems, the NSE employs state-of-the-art electronic trading platforms, revolutionizing the way financial transactions unfold. This modern approach has streamlined transactions and brought about greater transparency and efficiency, making trading accessible and reliable for everyone involved. Today, the NSE is a testament to India's financial market evolution and innovation.

How Does NSE Work?

1. Listing and Trading

Companies seeking to go public navigate a meticulous process to get listed on the NSE. Once listed, their stocks become commodities for investors, who buy and sell through brokerage firms, making transactions as effortless as a few clicks.

2. Trading Hours

The NSE adheres to a structured schedule, demarcating pre-market, normal-market, and post-market sessions. Understanding these timings is fundamental for investors planning their strategic moves.

3. Market Dynamics

When placing an order, you're faced with choices – market orders for immediate execution at prevailing prices or limit orders, allowing you to set specific buying or selling prices. Understanding these dynamics empowers investors to navigate the market with finesse.

Significance of NSE

The NSE has transformed Indian capital markets and made the stock investment experience for citizens far more inclusive through the following ways:

Democratized Investing

  1. The NSE provided retail investors from even small towns and villages access to a nationwide, transparent stock trading platform for the first time. Earlier, trading was confined to a few urban pockets.
  2. It introduced free online access to market data, prices, news and Research Report This keeps non-institutional investors on par with pros in making informed decisions.
  3. The NSE brought in innovative products like ETFs and derivatives to suit different risk appetites and investment needs beyond just cash equities.
  4. By supporting the surge in financial literacy programs in recent years, the NSE has nurtured a growing population of retail investors across Tier 1,2 and 3 locations.

Efficiency and Transparency

  1. As India's first demutualized exchange with advanced systems, the NSE enabled efficient price discovery and lowering of transaction costs. This benefitted institutional and retail traders alike.
  2. Its fully automated screen-based trading eliminated intermediaries and arbitrary pricing by brokers. This brought greater transparency into the price and order-matching processes.
  3. The NSE systems provide equal, unrestricted access to the trading platform for brokerages big or small. This creates an equal opportunity for them based on the competitiveness of services.
  4. It uses state-of-the-art IT infrastructure and risk management framework, providing unmatched trading experience across segments regarding speed and system stability.

Benefits of listing on the National Stock Exchange (NSE)

1. Wider Investor Reach

  1. Companies can gain access to a larger set of investors - institutional and retail, based in major cities and small towns.
  2. This builds more demand for the company's shares and boosts trading activity and market capitalization over the long run.
  3. Wide retail participation allows companies' management to diversify ownership of shares and not just depend on big investors. This brings stability to the stock.

2. Enhanced Visibility & Prestige

  1. Listing on NSE and BSE, the leading exchange, immediately improves relatively unknown companies' visibility and public profile.
  2. Investors see an NSE listing as a signal of compliance with high regulatory standards expected of companies on India's premier exchange. This builds positive market perception.
  3. The company finds a place among 'branded' peers and eligibility for inclusion in major stock indexes like Nifty 50 or Bank Nifty that investors and funds keenly track.
  4. Overall, NSE listing signifies enhanced market reputation, corporate brand building and positioning amongst key stakeholders like customers, employees, and vendors.

3. Improved Liquidity

  1. Higher NSE trading volumes and more excellent analyst coverage that stems from NSE listing ensure good liquidity for the company's stock on an ongoing basis.
  2. Investors are assured of finding buyers and sellers quickly for entry or exit due to daily active turnover enabled by NSE's infrastructure reach and participation.

The Bottom Line

The National Stock Exchange has made finance inclusive. Today, small-town retail investors can seamlessly access markets, just like big institutional players. For listed companies, it unlocks holistic growth leveraging wider reach. And for India, the NSE remains the pulsating nerve centre that connects innovation, governance, and capital - driving economic progress.


Team Sharekhan
by Team Sharekhan

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