National Stock Exchange(NSE)

What is NSE?

 

Stock exchanges are organised marketplaces for purchasing and selling shares, debentures, government securities, and hybrid products. These stock exchanges actively contribute to developing an active primary market and seamlessly trading equities in the secondary market.

 

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Incorporated in 1992, The National Stock Exchange is the largest stock exchange in India and the second largest in the world. It is also recognised as being the first dematerialised stock exchange in India with a completely automated, screen-based electronic trading system.

 

Several years after the BSE had established itself, NSE was established by a group of recognised financial institutions at the request of the Government of India in order to increase capital market transparency. The establishment of an ownership structure that includes both domestic and foreign investors was accomplished by adhering to the Pherwani Committee’s recommendations.

 

In the years 1994 and 1995, the NSE launched in the capital market and wholesale debt markets. 

 

The National Securities Depository Limited (NSDL), which enables investors to transfer or keep their shares and bonds through an electronic medium, was founded in part thanks to the National Stock Exchange (NSE). Investors now find trading in the capital and debt markets to be a considerably simpler procedure thanks to the security provided by the NSDL as well as the NSE’s efficiency, cheaper transaction fees, and transparency.

 

With a total market capitalisation of more than US $2.25 trillion as of 2018, the NSE ranked 11th among the world’s major stock exchanges. Contrarily, this sector only amounts to 12–14% of India’s overall GDP, compared to nearly 70% of the USA’s GDP, which comes from corporate commerce. Out of the total handful of companies, 7800 are listed, with around 4000 of them trading on Indian stock markets. As a result, just 4% of the nation’s overall GDP is attributable to stock market activity.

 

Benchmark Index of NSE

 

In 1996, S&P CNX Nifty (also known as the Nifty 50) was launched as the NSE’s benchmark index. The weighted average of the top 50 firms across 17 industries is represented by the CNX Nifty.

 

NIFTY50 has a base value of 1000 and a base capital of Rs. 2.06 lakh crore with a base period of November 1995. (USD 27.28 billion). The NIFTY50 equities account for more than half of all stocks traded on the exchange in the previous six months, constituting a sizeable chunk of the NSE market capitalisation.

 

How Does NSE Stock Exchange Work?

 

The national stock exchange executes transactions using an electronic limit order book where order matching is performed by a trading computer. This entire process is solely driven by orders, which means that when investors place market orders, they are instantly matched with limit orders. Thus, dealers and buyers enjoy the benefit of anonymity in this market.

 

In addition, an order-driven market provides investors with greater transparency by showing every buy and sell order in the trading system. Customers submit these orders on the NSE through brokers that frequently facilitate internet trading. Few institutional investors can utilise this “direct market access” capability, which allows them to make orders directly into the trading system.

 

The NSE market’s equities section trades seven days a week, excluding Saturdays, Sundays, and any holidays announced by the stock exchange. The timing of the market is as follows:

 

  • Pre-opening session-

 

    • Order entry begins at 9:00 a.m.
    • Order entry closes at 9:08 a.m

 

  • Regular session

 

    • The market opens at 9:15 a.m. 
    • The market closes at 15:30 hours

 

The National Stock Exchange’s main index is the Nifty50, which accounts for around 63% of the total market capitalisation of the stocks listed under it. This index represents about 12 economic sectors with 50 changeable equities.

 

Currently, Mr Ashish Kumar Chauhan is the CEO and Managing Director of the stock exchange and Mr Girish Chandra Chaturvedi as the Chairman & Public Interest Director.

 

Benefits of Listing with National Stock Exchange of India

 

  • Simple to evaluate the market’s depth

 

The platform provides a wealth of trade and post-transaction information. Additionally, you may easily locate the best buyers and sellers. For each transaction, the total number of available securities and the top buy and sell orders are displayed. Thus, NSE gives broad market depth visibility.

 

  • Transparency

 

There is a high volume of trade, which reduces the impact cost. Consequently, the cost of trading is reduced for investors. In addition, the trading system is automated, which increases trade visibility and transparency.

 

  • Trade stats

 

Each month, trading information is supplied to listed companies. They are quite useful for monitoring the company’s performance and the market mood.

 

  • Quick transactions

 

Investors can access the cheapest pricing thanks to the exchange’s quick order processing. 

 

  • Country’s largest exchange

 

The NSE National Stock Exchange, with a market capitalisation of more than $2.25 trillion, is the largest exchange in the nation in terms of the trading volume.

 

Investment Segments

 

  • Equity:

 

Investors may generate enormous gains through equity investments in a market that is constantly changing. Although earnings are made more quickly, there is also a significant risk involved. When an investor decides to purchase shares of stock, they must speak with a broker or financial advisor who aids in efficient trading. The act of trading involves purchasing and reselling shares on the stock money market.

 

Investors can purchase and sell stock securities on the stock market. Investors have a guarantee that their interest in equities will pay off when necessary since these marketplaces exist.

 

When to purchase or sell your shares depends on the growing and declining share prices. One should buy shares at low prices and then sell them when the value increases. When an investor makes a contribution, they become a partial owner of the business. The investment enables the company’s growth and the development of a more lucrative enterprise.

 

One may comprehend a company’s performance and make an informed decision without jeopardising their money on underperforming businesses by keeping in mind the background of the firms they wish to invest in.

 

Equity investments include ups and downs. Thus using a financial advisor can help one stay secure. Consequently, it is crucial to examine the relevant company’s stock performance during the last several years. Investor is also better protected against risk if they own shares in many companies.

 

Some of the most popular forms of equity investment are listed here-

 

    • Shares

 

The term “shareholder” refers to the person who owns shares, which are a kind of partial ownership of corporate entities. According to their ownership of shares, each shareholder receives a piece of the company’s profits.

 

    • Equity Mutual Funds Investment

 

A mutual fund is a pooled investment vehicle that invests its capital in securities such as stocks and bonds. A majority of an equity mutual fund’s assets are invested in listed market securities. Equity mutual funds are perfectly suited for individuals with a limited understanding of which equities to invest in owing to a lack of information or time.

 

A mutual fund investment in equities has limited exposure to a particular company’s stock and allocates its assets among a variety of companies operating in several industries. Due to the fact that mutual fund companies establish a diverse portfolio, individual price fluctuations have a limited effect on the investment as a whole. However, these market-linked investments are not entirely risk-free, and the rate of return is not guaranteed.

 

In addition to diversification, equity mutual funds offer expert fund management, transparency, and the possibility to contribute modest sums periodically through SIP, making them a great investment choice for investors with a basic understanding of financial markets.

 

  • Equity Derivatives:

 

On June 12, 2000, the National Stock Exchange of India Limited began trading in derivatives with the introduction of index futures. The futures contracts are based on the widely followed Nifty 50 Index.

 

On June 4, 2001, the Exchange began trading in Index Options (also based on the Nifty 50). In addition, on July 2, 2001, the NSE became the first exchange to begin trading options on individual shares. Individual security futures were established on November 9, 2001. Futures and options on individual stocks are offered on securities that fulfil the SEBI’s eligibility requirements.

 

The Exchange has also begun trading in Indices-based Futures and Options contracts. Derivatives on the NIFTY 50, NIFTY Bank, NIFTY Financial Service, and NIFTY Midcap Select are currently accessible for trading.

 

Future and Options (F&O) contracts essentially allow the investor to purchase or sell the underlying stock at the present price while deferring delivery to a future date. While both parties (buyer and seller of the futures contract) are legally obligated to execute the agreement at a specified date in the case of a futures contract, an options contract gives the investor the right but not the obligation to execute the agreement as per the agreed price at any time during the contract.

 

Because this equity investment is a derivative, its success is explicitly dependent on the performance of the underlying equities, i.e. the stock or index from which it is generated. An F&O investor buys futures contracts by predicting whether the price/value of the underlying share/index will rise or fall in the future. Thus, F&O is essentially a wager made by the investor on the movements of the underlying asset/index.

 

F&O contracts can be utilised by investors to generate money by speculating on the underlying stock’s price fluctuations or to hedge current investments. F&O enables an investor to purchase or sell a company’s stocks in big amounts by investing a small amount of margin money. 

 

The National Stock Exchange of India Limited (NSE) has advanced with a diverse product offering in equity derivatives since the inception of the Index Derivatives on the well-known benchmark Nifty 50 Index in 2000. The Exchange now offers trading in futures and options contracts on more than 100 equities and four main indexes.

 

  • Debt:

 

Debt investments invest in money market instruments such as corporate bonds, certificates of deposit, Treasury bills, and government securities. These securities pay the face value (principal) upon maturity as well as interest (coupon) at predetermined intervals. Many of these securities often provide better returns than bank FD interest rates for identical maturity periods. The yields on corporate bonds with a AAA rating might be 150–200 basis points higher than FD interest rates. Since these securities are traded on the market, you can gain from price growth in addition to greater dividends.

 

On May 13, 2013, the NSE introduced India’s first debt platform. The goal was to give investors access to a digitised, transparent, and liquid marketplace for trading all types of debt instruments.

 

Major Indices in this Exchange System:

 

An index of a stock market is constructed by selecting a group of stocks thought to be representative of the market as a whole or of a particular subset of it. The following are prominent market indices on the national stock exchange (Updated as of September 26, 2022, 15:33:23 IST):

 

  • Broad Market Indices:

 

Index Current 52w High 52w Low
NIFTY 50 17,016.30 18,604.45 15,183.40
NIFTY NEXT 50 42,236.05 45,509.70 35,018.20
NIFTY 100 17,374.80 18,870.70 15,336.05
NIFTY 200 9,095.70 9,895.10 7,978.20
NIFTY 500 14,725.70 16,004.45 12,855.55

 

  • Sectoral Indices:

 

Index Current 52w High 52w Low
NIFTY BANK 38,616.25 41,840.15 32,155.35
NIFTY AUTO 12,594.35 13,421.60 9,226.95
NIFTY FIN SERVICE 17,565.30 19,778.95 14,857.30
NIFTY FMCG 43,937.40 45,237.95 33,407.55
NIFTY IT 26,743.65 39,446.70 26,186.70

 

  • Strategy Indices:

 

Index Current 52w High 52w Low
NIFTY DIV OPPS 50 3,541.15 3,971.00 3,197.75
NIFTY GROWSECT 15 8,678.05 8,997.20 6,822.30
NIFTY100 QUALTY30 3,821.75 4,180.25 3,340.70
NIFTY50 VALUE 20 8,490.60 9,602.50 7,700.65
NIFTY50 TR 2X LEV 11,156.95 13,910.90 8,986.95

 

  • Thematic Indices:

 

Index Current 52w High 52w Low
NIFTY COMMODITIES 5,524.30 6,458.45 4,774.15
NIFTY CONSUMPTION 7,825.55 8,146.95 6,177.70
NIFTY CPSE 2,530.85 2,827.75 2,166.35
NIFTY ENERGY 25,684.20 29,304.05 21,841.95
NIFTY INFRA 4,888.40 5,362.80 4,405.55

 

  • Fixed Income Indices :

 

Index Current 52w High 52w Low
NIFTY GS 8 13YR 2,278.10 2,320.94 2,200.08
NIFTY GS 10YR 2,023.35 2,068.45 1,956.52
NIFTY GS 10YR CLN 862.55 939.61 850.23
NIFTY GS 4 8YR 2,484.70 2,518.95 2,425.08
NIFTY GS 11 15YR 2,483.18 2,530.62 2,374.21

 

Top 10 Companies listed in the NSE Based on Market Capitalisation

 

Symbol Company Name

Market capitalization as on March 31, 2022

(Rs in Lakhs)

RELIANCE Reliance Industries Limited 178237576
TCS Tata Consultancy Services Limited 138342672
HDFCBANK HDFC Bank Limited 81525796
INFY Infosys Limited 80216196
ICICIBANK ICICI Bank Limited 50744643
HINDUNILVR Hindustan Unilever Limited 48134901
SBIN State Bank of India 44047420
BAJFINANCE Bajaj Finance Limited 43953860
HDFC Housing Development Finance Corporation Limited 43247739
BHARTIARTL Bharti Airtel Limited 41462060

 

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