The National Stock Exchange (NSE), headquartered in Mumbai, is India’s largest stock exchange and ranks second globally by the number of trades in equity shares. Established in 1992, it became the first demutualized electronic exchange in the country, revolutionizing the Indian capital markets.
As of December 2023, the NSE’s market capitalization stood at $4.3 trillion, with equity shares traded worth $247.55 billion that month.
What is NSE?
The National Stock Exchange of India (NSE) is a leading financial marketplace offering seamless trading facilities to investors. Founded as a joint effort by prominent financial institutions, the NSE was created to ensure safe, transparent, and automated stock trading across the nation. Its operations began in 1994 with the Wholesale Debt Market segment, later expanding to include equity and derivatives trading.
NSE is renowned for its NIFTY 50 Index, a benchmark index widely used by domestic and international investors to track the Indian market’s performance. Along with NIFTY 50, another key index representing the banking sector is Bank nifty.
The National Stock Exchange of India (NSE) was the world's largest derivatives exchange in 2023, marking the fifth consecutive year it achieved this title.
Functions of NSE
The NSE performs vital functions to ensure seamless trading and investment opportunities, such as:
● Establishing a national trading facility for securities.
● Providing fair and equitable access to Indian investors.
● Maintaining a transparent and efficient market for share trading.
● Ensuring faster settlement cycles through book-entry systems.
● Aligning trading standards with global financial benchmarks.
The National Stock Exchange (NSE) provides trading and clearing services through an electronic, fully automated screen-based trading system based on an order-driven market model. It also offers a settlement guarantee through its clearing corporation, ensuring reliable trade execution. Key features of the NSE include:
1. Automated Trading System - NSE operates the National Exchange for Automated Trading (NEAT), which processes transactions electronically. Each order is assigned a unique number and queued for matching based on price-time priority if an immediate match is unavailable.
2. Order-Driven Market Model - NSE follows an order-driven system where orders are matched based on the best available prices. Buyers and sellers are automatically matched without the need for intermediaries, making the process straightforward.
3. Transparency in Transactions - The system displays all buy and sell orders, allowing investors to view market depth. This transparency helps investors make informed decisions.
4. Settlement Guarantee - The clearing corporation guarantees the settlement of trades, ensuring there are no defaults from either party involved in the transaction.
5. Fair Order Matching - Orders are matched based on price and time. The best-priced order is prioritized, and if two orders have the same price, the older one is executed first.
6. Wide Market Access - NSE’s electronic trading system ensures nationwide access, enabling investors from across India to participate in trading.
7. Anonymity in Trading - Transactions maintain anonymity for buyers and sellers, letting market dynamics decide prices based on supply and demand.
The NSE’s operations are divided into key segments:
Wholesale Debt Market Division - This segment allows trading in various fixed-income instruments, like Bonds, Treasury Bills, Certificates of Deposit and Government Securities.
Capital Market Division - This segment focuses on equity trading, including, Debentures, Equity shares, Exchange-traded funds (ETFs) and Retail government securities.
The National Stock Exchange (NSE) facilitates trading through an advanced electronic system. Brokers place buy or sell orders on behalf of clients, which are matched based on price-time priority. Matched orders are settled through a clearing corporation, ensuring secure transactions.
NSE offers trading, clearing, and settlement services across equity, derivatives, debt, and currency segments. Trading operates through an electronic limit order book, where orders are matched by a system without intermediaries. This order-driven market model enhances transparency by displaying all buy and sell orders, while also maintaining anonymity.
Investors typically trade via stockbrokers with online platforms, while institutional investors can use a direct market access facility. This efficient system ensures fair pricing and smooth transactions driven purely by supply and demand.
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
Order entry opens at 9.00 hours
Order entry closes at 9.08 hours
Regular Session
The market opens at 9.15 hours
The market closes at 15.30 hours
Currently, the stock exchange is spearheaded by Shri Ashishkumar Chauhan as the CEO and Managing Director.
The National Stock Exchange (NSE) provides a diverse range of investment and trading opportunities, catering to various financial needs and preferences. Below is a comprehensive overview of the key segments available for trading and investment:
1. Equity Segment - This segment includes assets that are generally more volatile like stocks, mutual funds, benchmark indices, ETFs, IPOs, etc.
2. Equity Derivatives - The NSE is a pioneer in equity derivatives trading, offering contracts based on various underlying assets, such as:
● Global Indices: Includes indices like Dow Jones, S&P 500, and CNX 500.
● Commodity Derivatives: Contracts based on commodity prices.
● Currency Derivatives: Instruments to hedge currency risk.
● Interest Rate Futures: Contracts based on expected changes in interest rates.
NSE introduced derivatives trading in 2002 with index futures and has since added contracts on major global indices, such as the Dow Jones Industrial Average and S&P 500.
3. Debt Segment - The debt segment is generally ideal for investors seeking stable returns with lower risk. It encompasses:
● Debt Instruments: Includes treasury bills (T-bills), corporate bonds, securitized products, and State Development Loans (SDLs).
● Debt Mutual Funds: Funds investing in fixed-income securities.
● Debt ETFs: Exchange-traded funds that focus on fixed-income instruments.
In 2013, NSE launched India’s first debt platform to provide a transparent and liquid marketplace for trading debt-related products, enhancing accessibility and market efficiency.
Listing on the National Stock Exchange (NSE) offers numerous benefits for companies and investors, including:
Access to a Wide Investor Base - Companies listed on the NSE gain access to a broad network of domestic and international investors, making it an ideal platform for raising capital and expanding shareholder diversity.
Improved Liquidity and Marketability - Being listed on the NSE enhances the liquidity of a company’s shares, ensuring that investors can buy and sell shares easily. This improves the marketability of the company’s securities, attracting more participants.
Transparent and Efficient Trading Processes - The NSE’s automated trading system ensures fair, transparent, and efficient trading. Investors benefit from detailed trade information, while companies enjoy an organized and reliable platform for trading their securities.
Enhanced Brand Visibility and Credibility - A company listed on the NSE gains greater visibility in the financial market and among investors. This not only builds credibility but also positions the company as a trustworthy and reliable entity in the industry.
Attracting Top Talent - Publicly listed companies are often more attractive to skilled professionals. Employees view such companies as stable, transparent, and growth-oriented, which can help attract and retain top talent.
Additional Benefits:
● Market Depth and Data Access: The NSE provides comprehensive trade data, allowing investors to analyze market trends effectively.
● Faster Transactions: High-speed trade processing ensures investors get the best prices.
● Monthly Trading Insights: Companies receive detailed trading performance reports, enabling data-driven strategies.
By offering access to a broad investor base, high liquidity, and a trusted trading environment, the National Stock Exchange helps companies grow while fostering confidence among investors.
The NSE offers a range of indices to track market performance, with the NIFTY 50 being the most prominent. It represents approximately 63% of the NSE’s total market capitalization and is used for various purposes such as benchmarking fund portfolios, index-based derivatives and index funds. Other key indices include:
● Nifty Next 50
● Nifty Midcap 50
● Nifty 100
● CNX Nifty
Top Companies on NSE by Market Cap
Here are the top 30 companies in NSE by market capitalisation:
The National Stock Exchange is India’s largest stock exchange, offering trading across multiple asset classes.
Securities & Exchange Board of India (SEBI) is the principal regulator for stock exchanges in India.
The National Stock Exchange (NSE) is the largest stock exchange in India in terms of volume.
No, NSE is not a government organization. It is a private entity established by multiple financial institutions but is regulated by SEBI.
Stock exchanges in India follow a three-tier time slot system.
Pre-opening slot: From 9.00 AM to 9.15 AM
Regular slot: 9.15 AM to 3.30 PM. It is the primary trading time slot for the Indian stock market.
Post-closing slot: The Indian stock market closes at 3.30 PM. You cannot make transactions post this period.
The main functions of the NSE are:
To set up a robust trading solution for equity, debt, and other securities for investors in India
To work as a link network between investors and the global capital market
To satisfy the regulatory standards set by financial regulators worldwide
NSE utilizes National Exchange for Automated Trading (NEAT), an automated screen-based trading platform, and satellite communication for efficient operations.
The main difference between National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) is their size, age, trading systems, and benchmark indices. The NSE is newer and leads in trading volumes and liquidity. The BSE is older and has more listed companies.