Mark Twain once divided the world into two kinds of people: those who have seen the famous Indian monument, the Taj Mahal, and those who haven't. The same could be said about investors.
There are two kinds of investors: those who know about the investment opportunities in India and those who don't. Although India's exchanges equate to less than 3% of the total global market capitalization as of 2020, upon closer inspection, you will find the same things you would expect from any promising market.
The BSE and NSE:
Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been in existence since 1875.The NSE, on the other hand, was founded in 1992 and started trading in 1994.However, both exchanges follow the same trading mechanism, trading hours, and settlement process.
As of November 2021, the BSE had 5,565 listed firms,5 whereas the rival NSE had 1,920 as of Mar. 31, 2021.
Almost all the significant firms of India are listed on both the exchanges. The BSE is the older stock market but the NSE is the largest stock market, in terms of volume. Both exchanges compete for the order flow that leads to reduced costs, market efficiency, and innovation. The presence of arbitrageurs keeps the prices on the two stock exchanges within a very tight range.
Trading Mechanism
Trading at both the exchanges takes place through an open electronic limit order book in which order matching is done by the trading computer.There are no market makers and the entire process is order-driven, which means that market orders placed by investors are automatically matched with the best limit orders. As a result, buyers and sellers remain anonymous.
Settlement and Trading Hours
Equity spot markets follow a T+2 rolling settlement. This means that any trade taking place on Monday gets settled by Wednesday. All trading on stock exchanges takes place between 9:55 a.m. and 3:30 p.m., Indian Standard Time (+ 5.5 hours GMT), Monday through Friday. Delivery of shares must be made in dematerialized form, and each exchange has its own clearing house, which assumes all settlement risk by serving as a central counterparty.
