National Stock Exchange: What is NSE? Market segment of NSE, Functions of NSE, Management, Trading Schedule, NSE NIFTY 50
Incorporated in 1992, The National Stock Exchange of India Limited (NSE) is India’s largest financial market offering capital raising abilities for corporations and a trading platform for equities, debt, derivatives including mutual fund units and currencies. It is India’s leading stock exchange with a total market capitalization of more than US$2.27 trillion as of April 2018, making it the world’s 11th-largest stock exchange.
NIFTY 50 Index is one of the popular offerings, which tracks the largest assets in the Indian equity market. NIFTY 50 is regarded as the flagship index which represents about 63% of total market capitalization listed on the exchange. US investors can access the index with ETF (Exchanged traded funds) like the iShares India 50 ETF, which is listed under the ticker symbol INDY.
The national stock exchange is the largest private wide-area network in the country which supports more than 3,000 VSAT terminals. In 2018, NSE introduced cross-currency derivatives contracts on GBP-USD, EUR-USD, and USD-JPY.
National Stock Exchange (NSE)
|Location||Mumbai, Maharashtra, India|
|Currency||Indian rupee (₹)|
|No. of listings||1,952|
|Market cap||US$2.27 trillion (April 2018)|
Operation/Market Segment of NSE:
Operations of NSE are divided into two market segments-
- Wholesale Debt Market (WDM) segment (commenced operations in June 1994)
- Capital Market segment (commenced operations in November 1994)
WDM segment provides trading facilities for a variety of debt instruments like Government Securities, Bonds of PSUs, Treasury bills, Certificates of Deposits, units of MF’s, Commercial paper, zero-coupon bonds, mutual funds, etc.
- Trading can be done only by members, recognized by the NSE. The membership is open only to, body corporates, financial institutions, and subsidiaries of banks.
- WDM product, which is now disseminated jointly with FIMMDA, the FIMMDA NSE MIBID/MIBOR is used as a benchmark rate for the majority of deals struck for Interest Rate Swaps, Floating Rate Debentures, Forwards Rate Agreements, and Term Deposits in the country.
- Even NSE-VaR for Fixed Income Securities as well as ‘Zero Coupon Yield Curve’ have become very popular for the valuation of sovereign securities across all maturities irrespective of its liquidity and facilitated the pricing of GOI Bond Index and corporate papers.
The capital market segment of NSE covers trading on equities and convertible debentures. The players in the market include individuals, corporates, registered firms, and institutions. This segment offers investors NEAT (National Exchange for Automated Trading), a fully automated screen-based trading system that enables members from across the country to trade with enormous ease and efficiency.
In addition to these two segments, there is also an
a) NSEs Futures & Options segment which provides trading of a wide range of derivatives like Index Options, Index Futures, Stock Options, and Stock Futures, which commenced on June 2000.
b) NSE Currency Derivatives segment which commenced on August 29, 2008, provides trading on currency futures contracts on the USD-INR.
The important subsidiaries of NSE include:
- National Securities Clearing Corporation Ltd. (NSCCL) Estd. 1995
- National Securities Depository Ltd. (NSDL) -Estd. October 1996- which is the repository of all securities in electronic form.
- India Index Services & Products Ltd. (IISL) Estd. 1998.
- NSE.IT Ltd. Estd. in 1999.
The NSE series of indices includes Nifty, Nifty Junior, CNX 100, CNX Midcap, etc.
Functions And Working Of NSE
NSE serves as a role of a catalytic agent in reforming the market in terms of microstructure and market practices.
- Because of NSE’s innovative endeavors, the market today uses state-of-art information technology to provide efficient and transparent trading, clearing and settlement mechanism with the elimination of settlement risks.
- NSE provides the screen-based automated trading system with a high degree of transparency in trading and operations and equal access to investors irrespective of geographical location.
- The investor is assured of the best price in the market with price and brokerage are separately shown on contract notes.
- NSE has given importance to information technology to increase liquidity in these 20 years and now can handle 1,60,000 orders/messages per second. This ensures NSE with infinite ability to scale up at short notice on demand, thus increasing investor’s confidence.
Management of National Stock Exchange
NSE has adopted the form of a demutualized exchange – the management, ownership, and trading are in the hands of three different sets of people.
NSE is owned by a set of leading financial institutions, insurance companies, banks, and other financial intermediaries. But the exchange is managed by professionals, who do not directly or indirectly trade on the Exchange which has completely eliminated any conflict of interest. This helped NSE in aggressively pursuing policies and practices maintaining a public interest framework.
The exchange comprises of senior executives in the fields of law, finance, economics, taxation, accountancy, etc, nominees of SEBI, public representatives, and one full-time executive.
The board deals with broad policy, procedure and compliance issues, and also focus on decisions relating to market operations. And then delegated by the Board to various committees includes representatives from trading members, the public, professionals, and the management. The day-to-day working management of the Exchange is managed by the Managing Director, supported by a team of professional staff.
NSE EMERGE is a National stock exchange’s new intuitive for growth and development of SME & Startup companies from India where companies can get listed without IPO (initial public offer) on NSE. This platform will help SME & Startup to connect with investors and help them with the funding.
Trading Schedule Of NSE
Trading on the NSE equities segment takes place on all days of the week except Saturdays, Sundays and holidays declared in advance. The market timings of the equities segment are:
(1) Regular trading session: In this session, you can do the trading
- Normal/Retail Debt/Limited Physical Market Open: 09.15 hrs
- Normal/Retail Debt/Limited Physical Market Close: 15:30 hrs.
(2) Pre-open session:
- Order entry & modification Open And Close: 09:00 hrs to 09:08 hrs
- Order matching starts from 9:08 hrs to 9:15 hrs and no cancellation of the order is allowed during this session.
(3) Closing Session is from 15:30 hrs to 15:40 hrs and it is basically for calculating the closing price of the stocks. The closing price is calculated based on the average value of all the stocks in the last half an hour from 15:00 hrs to 15:30 hrs.
(4) Post Closing Session is from 15:40 hrs to 15:00 hrs. In this session, you can place an order for trading and will be placed at the closing price, if the buyer or seller is available.
Nifty is an amalgamation of two words, that is, Nifty’s Fifty owned and managed by India Index Services and Products Ltd. (IISL). On NSE, more than 1600 companies are listed out of which only 50 selected companies represent Nifty. Nifty or Nifty 50 is nothing but the calculated weighted average of the performance of 50 companies from 12 sectors of the Indian economy like financial, auto, pharma etc which are listed on NSE.
|Calculation||on the basis of the free-float methodology|
|Market Capitalization Calculation||Multiply the market price of share with a number of outstanding shares.|
NIFTY is used for a variety of purposes such as benchmarking fund portfolios, index funds, and index-based derivatives.
Various indexes operating in NSE are:
- Bank nifty (comprising of Banking stocks)
- CNX IT (Information Technology Companies’ Like the Infosys, TCS etc)
- CNX Nifty Junior (comprises of second-most liquid stocks)
- CNX Midcap (Midcap companies)
- CNX Small Cap, etc (Small Cap Companies)
Indexes serve as lead indicators of the economy and allowing investors, financial institutions and money managers good hedging tools and instruments for their investments.