Introduction
As you explore the Indian stock market, you will frequently encounter the term – NSE. Whether you are a new investor or want to become a seasoned trader, it is what NSE is and how it impacts your journey.
The full form of NSE is the National Stock Exchange. As a leading stock exchange in India, NSE plays a crucial role in shaping the country's financial landscape. Read ahead to learn more about the meaning of NSE and why it matters.
What is NSE?
Founded in 1992, NSE is a digitised platform for buying and selling financial instruments such as equities, derivatives, currencies, debt securities, and more. It came into existence due to the recommendations made by the Pherwani Committee.
NSE commenced operations in 1994 with the launch of the wholesale debt market. The cash market segment shortly followed. NSE replaced the "open outcry" format of stock trading. Unlike the traditional stock exchanges in India, the NSE facilitated trading through a modern, convenient, and transparent system.
Today, NSE is one of the biggest stock exchanges in the world. It ranked as the world's largest derivative exchange for the fifth consecutive year in 2023 while being the 3rd largest globally in the equity segment. With its steady growth, NSE has seen year-on-year growth over the last ten years – 2014 to 2023. It has achieved milestones like a record high turnover of Rs. 167,942.47 crores on a single day in the equity segment on 30th November 2023, and Rs. 381,623.12 crores on 2nd December.
How does NSE work?
NSE processes trading through an electronic limit order book. Under this system, the mechanism of the National Stock Exchange in India works as follows:
1. You place an order to buy or sell securities through your stockbroker on NSE.
2. Your market order is recorded in the NSE's electronic trading system and allotted a unique trading number.
3. The exchange system matches your market order with the limit order based on the price and time priority instantaneously.
4. You get updated about the trading activity in real time as the entire process is digitised.
5. Once your order is matched, the NSE's clearing corporation settles the transaction by transferring securities to or from your demat account based on the trading activity.
Besides investing through a stockbroker, you can also avail the "direct market access" facility to place orders directly in the trading system. Regardless of your approach, the NSE offers a seamless operation. The trading commences in two sessions:
- Pre-opening session: You can place some orders 15 minutes before the regular trading. It remains active from 9:00 am to 9:15 am every trading day.
- Regular session: The regular market timing for trading - 9:00 am to 3:30 pm
Major indices in the National Stock Exchange of India
The National Stock Exchange of India maintains diverse stock market indices. These indices denote a group of shares chosen on specific criteria. They include market capitalisation, trading frequency, company size, etc.
The NSE's benchmark index is Nifty 50. Introduced in 1996, Nifty 50 indicates the performance of 50 companies within 17 sectors. Other major broad market indices under this exchange system are:
Key benefits of NSE
The feature-rich platform of NSE offers the following advantages:
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Regulatory Compliance
The Securities and Exchange Board of India (SEBI) regulates the NSE activities. Thus, all your trading operations comply with strict rules and regulations.
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Diverse Investment Segments
To suit your unique investment needs, NSE comprises a range of investment segments. You can invest in diverse financial products across the wholesale debt and capital market.
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Equal Opportunity
Since you buy and sell securities through orders, the exchange system recognises you via orders. Hence, you can maintain anonymity and trade confidently regardless of the type of investor you are.
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Transparency & Ease
The NSE's trading system equips you with real-time trade and post-trade data. You also get detailed information on securities to make an informed decision and trade with ease.
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Liquidity
If your investment goals and needs change, NSE adapts to your requirements. It offers liquidity to buy and sell shares as per your requirements.
Conclusion
The National Stock Exchange is the first stock exchange in India to provide a fully automated exchange system. As an investor, you can leverage the NSE's multifaceted platform to learn and invest in different financial instruments. You can look into the investment segments and market indices on the platform for an optimal investment journey.
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