The Indian stock market is one of most well-regulated financial ecosystems in world. It ensure fast, transparent, and secure trading for millions of retail and institutional investors.
Here is a comprehensive breakdown of how the stock market works in India.
1. BSE and NSE
The market primarily operates through two major stock exchanges. Think of these as marketplaces where buyers and sellers meet.
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Bombay Stock Exchange (BSE): Established in 1875, it is Asia’s oldest stock exchange. Its benchmark index is SENSEX, which tracks performance of 30 of largest and most financially sound companies.
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National Stock Exchange (NSE): Launched in 1994, it is largest exchange in India by trading volume. Its benchmark index isNIFTY 50, which tracks 50 of biggest companies across various sectors.
2. SEBI
The Securities and Exchange Board of India (SEBI) is regulatory body that governs market. Its primary mission is to protect interests of investors and prevent fraudulent activities. SEBI sets rules for:
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Stock exchanges and brokers.
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Listed companies (ensuring they disclose financial truths).
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Prevention of “Insider Trading” (trading using secret, non-public information).
3. How Companies Enter into the Market
Before you can buy a company’s shares on an exchange, company must go public.
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Primary Market (IPOs): A private company issues new shares to public for first time through an Initial Public Offering (IPO). This is how companies raise capital for expansion.
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Secondary Market: Once the IPO is over and shares are allotted, they are listed on BSE or NSE. This is where regular daily trading happens between investors; company is no longer directly involved in transaction.
4. How trading works?
In India, you cannot trade directly on the exchange. You need three essential components:
| Component | Purpose |
| Trading Account | Used to place “Buy” or “Sell” orders with a stockbroker (e.g., Zerodha, Groww, ICICI Direct). |
| Demat Account | Short for Dematerialized. It acts like a digital locker where your shares are stored in electronic form. |
| Bank Account | Linked to your trading account to transfer funds for transactions. |
5. Settlement Cycle (T+1 and T+0)
India is a global leader in settlement speed. Most trades currently follow a T+1 cycle, meaning if you buy a stock on Monday, it is officially settled and appears in your Demat account by Tuesday.
Note: As of 2025-2026, India has also successfully piloted T+0 settlement for certain stocks, allowing for same-day settlement where money and shares are exchanged almost instantly.
6. How Prices are Determined
Stock prices are governed by law of Demand and Supply.
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High Demand: If more people want to buy a stock than sell it, the price goes up.
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High Supply: If more people want to sell than buy, the price goes down.
Prices fluctuate in real-time based on company earnings, government policies, global events, and investor sentiment.
Key participants are,
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Investors: People like you who buy shares for the long term.
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Traders: People who buy and sell within a single day (Intraday) or short periods to profit from price swings.
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Depositories (NSDL & CDSL): Central bank for shares that manage via Demat accounts.
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Stockbrokers: The intermediaries that provide platform for you to trade.