National Stock Exchange of India (NSE)

by · June 11, 2012

The National Stock Exchange of India (NSE), located in Mumbai, the financial capital of India was incorporated in 1992. The exchange, the second national exchange in the country after the Bombay Stock Exchange (BSE), is the outcome of capital reforms that started with the establishment of the industry watchdog, Securities and Exchange Board on the lines of Securities and Exchange Board of USA. NSE became the largest stock exchange in the country within a few years of its operations.

The NSE is ranked as the world’s 16th largest stock exchange in terms of market capitalization (US$ 985 billion) and as of December 2011 had 1,646 companies listed for trading. By 2006, NSE had 2,799 VSAT terminals covering 1,500 cities across India. In terms of number trades, NSE ranks as the third largest stock exchange in the world and the second fastest growing stock exchange with a growth rate of 16.6%. Along with BSE, the oldest stock exchange in India, NSE is responsible for an overwhelming majority of transactions forcing many smaller exchanges in other parts of the country to extinction.

Its benchmark index is S&P CNX Nifty, commonly known as NSE Nifty, comprising of fifty major stocks across different industries weighted by market capitalization. Although owned by some of India’s top banks, insurance companies and other financial institutions and intermediaries, the National Stock Exchange operates as a separate entity independent of its owners. Two prominent names that figure in the list of foreign investors are NYSE Euronet and Goldman Sachs.

Early History

The NSE came into being on the recommendation of the Pherwani Committee set up by the government of India for studying feasibility and the need of establishing a new stock exchange. As a result of its recommendations, the NSE was incorporated in November 1992 and recognized in April 1993 as a stock exchange under the Securities Contracts (Regulation) Act, 1956. The three segments of operations of the NSE trading platform became operational one after the other. The Wholesale Debt Market segment commenced operations in June 1994, the Capital Market segment in November 1994 and the Futures and Options in June 2000.

Market Segments

Presently, NSE offers for trading nearly all major segments of capital market that one would expect from a premier stock exchange. These include trading in equity, equity derivatives (Futures and Options), retail as well as whole debt market, mutual funds, currency futures and stock lending and borrowing.

Trading in currency derivatives came to India for the first time with the launch of currency futures in USD/INR pair in August 2008. Later, more currency pairs were added in the list and presently, NSE allows trading in euro, the British Pound and the Japanese Yen.

A year later, NSE became the first stock exchange in India to offer interest rate futures. On recommendation from a SEBI-RBI sponsored committee, it launched the 7% 10-Year notional coupon-bearing Government of India Security Futures with quarterly maturities on 31st August 2009.

The NSE platform opens for trading at 9.15 IST (GMT + 5.30) in the morning and closes at 3.30 IST in the afternoon.

Significant Events, Initiatives and Awards

  • Significant Events

Ever since its incorporation in November 1992 and recognition as a stock exchange in April 1993, the National Stock Exchange has been growing in popularity on the strength of services and products offered for trading.

Immediately after trading in wholesale debt and capital (equities) market going live in June and November 1994 respectively, it established an Investor grievances cell in March 1995. By October that year the NSE became India’s largest stock exchange and world’s third largest in terms of number of equity related trades.

In June 1996, NSE set up a settlement guarantee fund to facilitate faster payouts.

The NSE website, www.nse.co.in was launched in May 1998 and in July same year it introduced its certification program in financial markets. Automated lending and borrowing mechanism was introduced in February 1999. The year 2000 saw the commencement of Internet trading, derivatives trading and WAP trading.

Derivatives’ trading in indices and individual securities was introduced in 2001 and exchange traded funds in 2002. NSE VaR (Value-at-Risk) in Government Securities was also launched in the same year. NSE’s product mix increased further in 2003 with the launch of retail debt market, interest rate futures and futures and options for IT index by the name of CNXIT.

Electronic interface for listed companies was launched in October 2004 and in March the same year in collaboration with CRISIL the launch of IndiaBondWatch.com was announced.

A media centre in collaboration with CNBC TV 18 and securities lending and borrowing scheme were launched in January 2008. The same year saw the introduction of currency derivatives and interest rate futures.  A mutual fund service system and settlement of corporate bonds were introduced in 2009.

In October 2010, a pre-open session lasting 15 minutes was launched to allow traders to place trades before the opening of the market.

  • Initiatives

 

    • In 11995, establishment of NSCCL, the first clearing corporation in India and an investor protection fund and introduction of insurance cover for all registered members.
    • 1996 saw even bigger changes in Indian capital markets and brought laurels to NSE. In April, the S&P CNX Nifty was launched and NSCCL commenced clearing and settlement functions.
    • In November 1996, NSE, together with some of other financial institutions of national stature co-promoted National Securities Depository Limited, an initiative that made paperless trading a reality in India.
    • In October 1999, a knowledge-based and technology driven initiative, NSE.IT, a 100% subsidiary, was launched. NSE.IT is basically an offshoot of NSE’s IT initiatives. It runs a development center in Mumbai, has developed an E Auction system for the Tea Board and also conducts online exams.
    • NSE research initiative launched in January 2000.
    • Zero Coupon Yield Curve launched I September 2000

 

  • Awards

 

    • 1996: Best IT usage from the Computer Society of India and top IT user from Dataquest
    • 1997: Best IT usage from the Computer Society of India
    • 1998: Cyber Corporate of the Year award.
    • 1999: CHIP Web Award
    • 2002 The Wharton-Infosys Business Transformation Award in category of Organization-wide Transformation

Indices

NSE has set up an index services firm by the name of India Index Services & Products Limited (IISL). Besides its benchmark index S&P CNX Nifty, there are also other sector-wise indices available for trade on NSE.

  • S&P CNX Nifty: launched in April 1996 and trading in index futures commenced in June 2000 and options trading in June 2001.
  • CNX Nifty Junior
  • CNX 100 – S&P CNX Nifty plus CNX Nifty Junior
  • CNXIT: Information technology stocks.
  • S&P CNX 500 – a combination of CNX 100 and 400 major stocks across 72 sectors.
  • CNX Midcap – comprises of mid-sized companies across sectors

List of Exchange Trading Funds Offered For Trade on NSE

There is a long list of ETFs available for trade on NSE. A majority of these are index or gold ETFS. Some of the popular equity based and gold ETFs of some prominent financial institutions in India are as under:

  • Goldman Sachs
    • Equity – Nifty Exchange Traded Scheme (NIFTYBEES)
    • Equity -Nifty Junior Exchange Traded Scheme (JUNIORBEES)
    • Equity -Banking Index Exchange Traded Scheme (BANKBEES)
    • Equity -PSU Bank Exchange Traded Scheme (PSUBNKBEES)
    • Equity -S&P CNX Nifty Shariah Index Exchange Traded Scheme (SHARIABEES)
    • Equity -Infrastructure Exchange Traded Scheme (INFRABEES)
    • Gold – GOLDMAN SACHS GOLD EXCHANGE TRADED SCHEME (GOLDBEES)

 

  • Units Trust of India (UTI)
    • Equity – S&P CNX Nifty UTI Notional Depository Receipts Scheme (UTISUNDER)
    • Gold – UTI GOLD ETF (GOLDSHARE)
  • Kotak
    • Equity – PSU Bank ETF (KOTAKPSUBK)
    • Equity – KOTAK NIFTY (KOTAK NIFTY)
    • Gold – KOTAK GOLD ETF (KOTAKGOLD)
  • Reliance
    • Equity – Reliance Banking ETF (RELBANK)
    • Gold -RELIANCE GOLD ETF (RELGOLD)
    • Gold – RELIGARE GOLD ETF (RELIGAREGO)
  • Quantum
    • Equity -Index ETF (QNIFTY)
    • Gold – QUANTUM GOLD FUND (QGOLDHALF)
  • Motilal Oswal
    • Equity – MOSt Shares M50 ETF (M50)
    • Equity – MOSt Shares M100 ETF (M100)
  • HDFC
    • Gold- GOLD ETF (HDFCMFGETF)
  • ICCI Prudential
    • Gold – ICICI PRUDENTIAL GOLD ETF (IPGETF)
  • State Bank of India – MF
    • Gold – SBI MF-SBI GOLD ETS-GO (SBIGETS)
  • IDBI
    • Gold – GOLD ETF (IDBIGOLD) (Newly added)

Besides domestic indices and equity and gold based ETFs, the NSE also has a couple of world indices as well – GS Hang Seng BeES (HNGSNGBEES) and MOSt Shares NASDAQ 100 (N100).

GS Liquid BeES (LIQUIDBEES) is presently, the only debt ETF available for trade on NSE.

Online Exams and Certifications

NSE’s Certification of Financial Markets conducts online examinations. Successful candidates are awarded certifications in nearly 32 educational courses for beginners as well as those seeking advanced training. Available modules cover almost all the sectors of capital and other financial markets. Training is imparted through NSE branches spread across the country. Also on offer is NSE Certified Capital Market Professional (NCCMP), a short term course imparted in collaboration with well known colleges and training institutes in India.

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