Indian Stock Market Facts

The economy of India is large and important, populated by firms that are already international giants, and poised for booming future growth. Interest in India and her economy is a regular fixture in business and economics reporting, and that naturally includes India's stock picture. That picture, however, is somewhat complicated. India's stock market is pluralistic, with a pair of big stock exchanges and a number of medium-sized exchanges. Therefore, depending on their investment interests, foreigners and Indians alike cannot simply pick open an account and start sinking their money into companies. They need to do their homework not just on Indian companies, but also on Indian stock markets.

The Securities and Exchange Board of India (SEBI)
SEBI is the national regulator and oversight body for all Indian securities markets, serving in a capacity similar to that of the American SEC. SEBI is an oddity in that it embraces executive, legislative and judicial functions into one organization. For example, it drafts securities regulations. This would be the same thing as if the SEC submitted suggested regulations to Congress which were then debated upon. In addition to the traditional regulatory roles of investigation and enforcement, SEBI also has the power to make binding rulings in some circumstances. Created in 1988, it did not become an official agency until 1992 when the Indian Parliament passed the confirming legislation. It is headquartered in India's financial and film-making capital of Mumbai, and has regional offices in Ahmedabad, Dehli, Kokata and Madras.

The Big Two
India's big stock markets are the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE). Both are headquartered in Mumbai.

BSE is the largest stock exchange in India, and the 10th largest in the world. Enjoying a market capitalization of almost $1.8 trillion, more than 6,000 companies are registered there. The BSE owns a small stake in the regional Calcutta Stock Exchange, while the Singapore Stock Exchange holds a 5% stake in the BSE. The leading 30 companies can be monitored through the BSE SENSEX, the exchange's own stock index.

Also in Mumbai is the NSE. While the BSE is bigger, the NSE has the distinction of being the busiest stock exchange in India. It does more trades on a daily basis by far than the BSE, and indeed ranks as the No. 3 stock exchange in the world on the basis of activity. In terms of size, the NSE is no slouch with a capitalization of roughly $1.5 trillion. This is the stock market in India that has attracted the most Western interest, with both Goldman Sachs and NYSE Euronext holding stakes in the exchange. Standard and Poor operates their main market index, the S&P CNX Nifty, which monitors their top 50 companies.

Other Players
India is also home to a number of regional stock markets, which potentially offer the best way of locating and investing in up-and-comers in the Indian economy. The aforementioned Calcutta Stock Exchange is a good example. Other important cities in India, such as Bangalore or Dehli, also have stock exchanges. Imagine, for example, if there was a San Francisco Stock Exchange made up mostly of Silicon Valley start-ups, and you have an idea of what Bangalore or Hyderabad's markets are like.

However, it is the Hyderabad Stock Exchange that represents the volatility and risk of investing in Indian stocks. SEBI directed the Hyderabad Stock Exchange that it had go public and sell 51% of its equity by August 27th, 2007. They did not comply, so SEBI promptly withdrew state recognition from the Hyderabad market. However, the only practical result of this action was that the stock exchange changed its name to Hyderabad Securities and Enterprises, Ltd. It operates much as it did before, and even continues to refer to itself as a stock market in its correspondence and literature.

Sources: bseindia.com/about/introbse.asp; sebi.gov.in; nseindia.com