NATIONAL STOCK EXCHANGE - NSE

The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FI’s) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. When India’s National Stock Exchange (NSE) was started in 1994, few believed it would survive. How could a stock exchange run

by a team of untested professionals headed by a former development banker succeed against existing stock exchanges run by third generation, savvy stockbrokers?

Critics even went to the extent of warning that NSE’s sophisticated systems would be a misfit in an Indian capital market dominated by physical deliveries, arbitrary speculative trade, and lengthy trade settlements.

Today, with number of trades touching 2.5 million a day and turnover touching turnover touching Rs 100 billion in value terms, NSE towers over all the other stock exchanges in the country.

In a ten-year period (NSE completed a decade on June 30, 2004) the National Stock Exchange has tilted the market system in favour of investors and away from a significant bias in favour of intermediaries. For a mass of investors across the country, the NSE is now the focal point for trading in stocks, and futures and options.

The Stock Exchange, (NSE) came out with a stock index that subsequently became another barometer of the Indian stock market known as NIFTY.

Nifty been the focal point of investors, as it provides trading the shares as well as index in futures and options. Before Nifty came into existence trading of index concept was not present it was introduced by Nifty and is present in it only, till date.

Cash Market And Derivatives:-

National stock exchange gives the investors different option where an investor can deal the equities into different market situations like cash market and derivatives.

Cash market is simply the equity market where investors have to pay the security amount which is done in BSE also but in NSE investors has the choice of dealing in derivatives.

Derivatives are the future market where investors have the option of dealing in the price list of futures for which there a separate index is present known as NIFTY FUTURE.

In Derivatives there are two choices available for an investor FUTURES AND OPTIONS.

• FUTURE – In future market shares are deal in lots these lots could be of different numbers like 100, 200, 500 etc. Investors while taking over these lots and coming under the contract takes the position of the shares by paying the 1/3rd amount of the total holdings. (Could be understood by a formula).

Holdings of investors = (shares lot * price of the lot) / 3.

This formula explains that as investor is interested in taking 2 lots of reliance of 100 shares of Rs. 900 , the investor has to pay:- (2*100*900) / 3 = 60000/

Which shows the investor is taking the position of Rs. 180000/- in just Rs. 60000/- in future market which the area of attraction of this particular market.

These holdings are taken for 1 month, 2 months and three months according to the investor’s preference. The beauty of this contract is that the remaining 2/3rd money of the holdings is paid by the broking house the investors dealing with. Investor coming into this contract should know that by the time of contract he is in like of 1 or 2 months investor should clear its position before the last Thursday of the expiry month.