How Does the Indian Stock Market Work?

Stock Markets in India

A stock market is a place where equity, commodities and other investments can be bought and sold. A stock market technically refers to an an individual stock exchange, although the term is often used as a general catchall for all stock exchanges within a country. For instance, the U.S. has the New York stock exchange and the NASDAQ, among many other smaller exchanges. Similarly, India's major exchanges are the Bombay stock exchange, or BSE, and the National Stock Exchange of India, which is abbreviated NSE. These markets account for the majority of stock market activity in India and operate similarly to any other modern stock market, where buyers place orders of stock through brokers, who carry out the transactions. Demand for stocks and commodities constantly shift, causing prices to fluctuate and the assets to gain or lose value.

The Major Exchanges in India

The Bombay Stock Exchange is one of the largest stock exchanges in the world, listing over 4,500 companies. The BSE SENEX is the major stock index of the Bombay exchange, comparable to the DOW industrials in the US. The National Stock Exchange of India is also based in Mumbai (Mumbai used to be called Bombay) and regularly trades in volumes exceeding that of the Bombay Stock Exchange. The main stock index of the National Stock Exchange of India is the S&P CNX Nifty, or just Nifty for short. Apart from equities, the NSE also deals with trades of futures, debt and foreign currencies.

Trends of Indian Stock Markets

India is a developing nation that boasts the second largest population in the world behind China. Similar to China, India has seen rapid growth and expansion over the past two decades, due to the ability to harness cheap labor, as well as a competitive advantage of English-speaking workers with technical educations. In India, English is an adopted national language and is used extensively in business and academic settings. As such, India is one of the prime places where first-world countries such as the U.S. and UK outsource work. Globalization and the increase of outsourcing has pushed the Indian stock markets to their highest levels in the mid 2000s. As a developing country, India's stock exchanges follow fairly closely to other emerging Asian nations and were hit especially hard by the global financial crisis in 2008, during which the SENEX shed over 50% of its value in less than a year.

Resources

• Bombay Stock Exchange (SENEX)
• National Stock Exchange of India