National Stock Exchange
National Stock Exchange of India Limited (NSE) is one of the leading stock exchanges in India, based in Mumbai. NSE is under the ownership of various financial institutions such as banks and insurance companies. It is the world's largest derivatives exchange by number of contracts traded for the fifth consecutive year and the third largest in cash equities by number of trades for the calendar year 2023. It is the 7th largest stock exchange in the world by total market capitalization, exceeding $5 trillion on May 23, 2024. NSE's flagship index, the NIFTY 50, is a 50 stock index that is used extensively by investors in India and around the world as a barometer of the Indian capital market. The NIFTY 50 index was launched in 1996 by NSE. NSE has over 10 Crore unique registered investors having over 20 Crore accounts.
National Stock Exchange was incorporated in the year 1992 to bring about transparency in the Indian equity markets. Instead of trading memberships being confined to a group of brokers, NSE ensured that anyone who was qualified, experienced and met the minimum financial requirements, was allowed to trade. In this context, NSE was ahead of its time when it separated ownership and management of the exchange under SEBI's supervision. Stock price information which could earlier be accessed only by a handful of people could now be seen by a client in a remote location with the same ease. The paper-based settlement was replaced by electronic depository-based accounts and settlement of trades was always done on time. One of the most critical changes involved a robust risk management system that was set in place, to ensure that settlement guarantees would protect investors against broker defaults.
NSE was set up by a group of leading Indian financial institutions at the behest of the Government of India to bring transparency to the Indian capital market. Based on the recommendations laid out by the Pherwani committee, NSE was established with a diversified shareholding comprising domestic and global investors. The key domestic investors include Life Insurance Corporation, State Bank of India, IFCI Limited, IDFC Limited and Stock Holding Corporation of India Limited. Key global investors include Gagil FDI Limited, GS Strategic Investments Limited, SAIF II SE Investments Mauritius Limited, Aranda Investments (Mauritius) Pte Limited and PI Opportunities Fund I.
The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock exchange in 1993 under the Securities Contracts (Regulation) Act, 1956, when P. V. Narasimha Rao was the Prime Minister of India and Manmohan Singh was the Finance Minister. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The capital market (equities) segment of the NSE commenced operations in November 1994, while operations in the derivatives segment commenced in June 2000. NSE offers trading, clearing and settlement services in equity, equity derivative, debt, commodity derivatives, and currency derivatives segments. It was the first exchange in India to introduce an electronic trading facility thus connecting the investor base of the entire country. NSE has 2500 VSATs and 3000 leased lines spread over more than 2000 cities across India.
NSE was also instrumental in creating the National Securities Depository Limited (NSDL) which allows investors to securely hold and transfer their shares and bonds electronically. It also allows investors to hold and trade in as few as one share or bond. This not only made holding financial instruments convenient but more importantly, eliminated the need for paper certificates and greatly reduced incidents involving forged or fake certificates and fraudulent transactions that had plagued the Indian stock market. The NSDL's security, combined with the transparency, lower transaction prices and efficiency that NSE offered, greatly increased the attractiveness of the Indian stock market to domestic and international investors.