Stock markets in India

There are in total 22 stock exchanges in India including the Over-the-Counter Exchange of India. The Bombay stock exchange is the oldest one, in fact oldest in Asia. This exchange contributes very largely to India and that is why Bombay is also called as the financial capital of India.

Presently, there are stock exchanges at Ahmedabad, Bombay, Bangalore, Bhubaneshwar, Calcutta, Cochin, Mangalore, Delhi, Patna, Vadodara, Jaipur, Kanpur, Pune, Saurashtra, Meerut, Ludhiana, Madras, Guwahati, Hyderabad, Indore, in addition to the OTCEI. Some of the exchanges are organized as public limited companies while others are set up as voluntary non-profit associations.

Stock market in India actually witnessed a major boom on the eve of the First World War as Europe could not produce any manufacturing articles other than war equipments. The import of manufactured products into India stopped completely which leveraged Indian enterprises and their business increased and they made good profits. After that when the Second World War broke out, India emerged as one of the major supply hub for various products, leading to huge increase in industrial production, which was reflected in the growth of the stock markets after the war.

The stock exchanges in India are categorized by differences in trading hours, settlement procedures and delivery systems, the ultimate result of which is that the investors’ interest are affected. Hence, the government took a decision to form National Stock Exchange (NSE) at Bombay with Industrial Development Bank of India (IDBI) as the lead sponsor. The NSE has a uniform settlement period which is T+2, like anywhere in the world. NSE is efficient and modern stock exchange where trading is fully computerized, with speed and transparency in deals.

The Over-the-Counter Exchange of India

OTCEI is a new concept in India and it has potential to serve as an effective exit route for venture capital investors. This exchange was set up in 1989 to deal in securities of those companies which are smaller and could not be listed on the main stock exchange. The OTCEI has been promoted by several leading financial institutions such as the ICICI and UTI, banks and insurance companies.

Exclusive features of OTCEI

1. Registration of investors: - Every investor has to obtain registration on the OTCEI before he can to trading on the stock exchange. Each investor is issued an INVESTOTC card with an exclusive registration number.

2. Ring less trading: - Trading on the OTCEI is through computers linked to the central OTC computer, which allows nation wide trading. Hence there is no formal ring (floor) for trading in securities.

3. Transparency: - Since all the trading is done through computers, the investors can always check the price of any securities at any time and also the price at which the transactions took place. So there is transparency in the deals that take place in OTCEI.

4. Scrip less trading: - The investors don’t exchange certificates of securities but they trade with an instrument called Counter Receipt (CR).

5. Assured liquidity: - The requirement of listing on OTCEI include compulsory sponsor and an additional market maker who are required to give both ‘buy’ and ‘sell’ quotations.

6. Single-window concept: - all functions such as the transfer of shares, splitting of shares, registration of power of attorney, etc. can be carried out at the counters of the OTCEI. This is one of the biggest advantages of the OTCEI.

REGULATION OF STOCK MARKETS

The first major legislation governing stock exchanges was the Bombay Securities Contracts (control) Act, 1925, which was later replaced by Securities Contracts (Regulation) Act, 1956. The Securities and Exchange Board of India (SEBI) was created in early 1988 as a non-statutory body and given statutory powers in early 1992.