Capital Market In India....

India is home to Asia's oldest stock exchange—the Bombay Stock Exchange (BSE) —which traces its origin to 1875, when a group of 22 stockbrokers began trading under a banyan tree. Since then, 23 stock exchanges have been set up in the country.

The largest stock exchange—the National Stock Exchange—was set up in by financial institutions at the behest of the government of India as an online trading exchange to give investors across the country an equal opportunity to trade in a larger number of stocks. Since it began operations in 1994, the National Stock Exchange (NSE) has become the largest stock exchange in the country in terms of transactions, volumes and value. Even globally, both NSE and BSE have emerged as significantly large exchanges. The NSE is the third largest exchange in terms of number of trades after NASDAQ and NYSE, and BSE ranks fifth. The 30-scrip BSE Sensex, however, is still the bellwether index, though investors also look at the 50-scrip “Nifty” index of the NSE.

Even in terms of listed companies, Indian capital markets are in the top globally. Over 7,000 companies are listed on Indian bourses, of which about 2,000-2,500 are traded everyday. India, with a market capitalisation of $600 billion, is the largest in Asia, barring Japan.

Over the nineties, and despite several scandals, the regulator, the Securities and Exchange Board of India (SEBI) has worked hard to introduce global best practices so that the Indian stock exchanges are on par with those in developed countries. It introduced capital adequacy norms for brokers, transparency of transactions, dematerialization of shares and so on.

The rules were made simpler for companies to raise capital, while transparency and disclosures were increased to safeguard investors. The NSE ushered in the era of electronic trading in 1994, and the BSE followed suit the next year. Almost all of India’s trading is paperless today. In 2000, trading of derivatives was introduced, and today, the volumes in the derivatives market are about 3 times those in the cash segment.

Today, the Indian stock markets are driven substantially by foreign portfolio investments – and India has been the focus of foreign funds over the past year or so.