The Stock Market refers to a collection of markets and exchanges where shares of publicly traded companies are bought and sold.
Also, in the stock market, existing owners of shares can sell their shares of a company to potential buyers. When you buy shares on the stock market, you are not buying shares from the company itself, but from another holder of the shares
Although the terms “stock market” and “stock exchange” are used interchangeably, there is a difference. The stock market is a collection of stock exchanges.
History Of The Stock Market
Let’s go back to the beginning of the stock market. The earliest “stock markets” were in Europe during the 16-17th century. They were not the conventional definition of stock markets, as they mainly traded in bonds and there were little to no companies issuing shares, but the idea was the same.
Likewise, the oldest ‘modern’ stock market is considered to be the Amsterdam Stock Exchange. It was established in 1602 by the Dutch East India Company.
The Indian Stock Markets
Similar to the past, today stock markets are self-regulatory organizations (SRO’s) and establish their own rules and regulations. In India, the 2 major stock exchanges in India are the NSE and BSE. The NSE is the National Stock Exchange and The BSE is the Bombay Stock Exchange
The BSE is the oldest stock exchange in Asia, founded in 1875. Today, there are more than 5,500 firms as of 2020 listed on the BSE. However, only 500 firms account for more than 90% of the BSE’s market capitalization. The rest of the stocks are illiquid shares. This means that they are hard to sell after being bought, as not many people buy them.
Similar to the BSE, the NSE is a leading stock exchange in India. The NSE has about 1,800 registered firms as of 2020. On the contrary, many of the smaller stocks are not available on the NSE and are only traded on the BSE. Even though the BSE is older, the NSE is currently the leading stock exchange in India and was established in 1992. Surprisingly, it was the first dematerialized electronic stock exchange in India.
Another important thing to keep in mind is the stock market timings. The Indian stock market opens at 9:15 AM and closes at 3:30 PM. Just like many markets in the world, our stock markets are open on all days of the week and closed on weekends.
Apart from these working days, the stock market may be open or closed on specific holidays. To know more about these special holidays, visit the NSE’s website.
The Workings Behind The Indian Stock Market
Just like many other stock exchanges around the world, the Indian Stock market works on an open electronic limit order book. This means that market and limit orders are matched up with each other automatically by a computer.
That’s why the Indian stock market is called order-driven. Based on the orders, the computer matches the best limit orders with market orders. Order driven markets bring more transparency, as the numbers of buyers and sellers in the market are publicly available.
However, In the Indian stock market, there are no market makers. Since there are no market makers, this means that there is no guarantee that orders get executed.
In this system, buyers and sellers remain anonymous.In the Indian market, all orders are settled on a T+2 day basis. That means, if you buy a stock on Monday, it will be delivered to your Demat account on Wednesday. The same goes for selling stocks. Some brokerage firms offer quicker selling options for certain stocks, where the money will be put into your account in as fast as 30 minutes.
Corresponding with the BSE and NSE, the two biggest market indexes are the SENSEX and the Nifty. The SENSEX consists of 30 companies listed on the BSE, which represents 48% per cent of the index’s free-float market capitalization.
Just like the SENSEX, The Nifty consists of 50 companies listed on the NSE, which represents around 62% of the index’s free-float market capitalization.
