FINANCIAL MARKETS IN INDIA

FINANCIAL MARKETS IN INDIA

Overview

• India’s financial market is one of the oldest in the world

• It is considered the fastest growing and strongest among emerging economies

• Financial markets in India are under the purview of the Capital Markets Division of the Department of Economic Affairs of the Ministry of Finance

• The markets in India are regulated by the Securities and Exchange Board of India (SEBI)

• The PAN is the sole identification number for all transactions in securities markets

• Although there are more than 25 stock exchanges in the country, the Bombay Stock Exchange and the National Stock Exchange account for a large majority of securities exchanges

GOVERNMENTAL REGULATORY BODIESSecurities and Exchange Board of India (SEBI)

• Established 1992, headquarters Mumbai

• Functions under the Department of Economic Affairs, Ministry of Finance

• SEBI is the regulator for financial markets in India

• SEBI has regional offices in New Delhi, Kolkata, Chennai and Ahmadabad

• The main responsibilities of SEBI include protection of interests of investor, and the development and regulation of securities markets

SEBI has three main functions

• Legislative functions: it drafts regulations and policies for financial markets

• Executive functions: conducts investigations and enforces action

• Judicial functions: passes rulings and orders and arbitrates disputes

Forward Markets Commission (FMC)

• Established 1953, headquarters Mumbai

• Functions under the Ministry of Consumer Affairs, Food and Public Distribution

• The FMC is the chief regulator of forwards and futures markets in India

The main functions of the FMC include

• Advice the Union Government on matters relating to forward markets

• To monitor and regulate forward markets

• Collect and publish information relating to forward markets

• The FMC currently allows futures trading in specific spices, edible oils, pulses, energy products and metals

• These forwards and futures exchanges in commodities are performed at specialised commodity exchanges in the country

IMPORTANT STOCK EXCHANGES IN INDIABombay Stock Exchange (BSE)

• Established 1875, location Mumbai

• The BSE is the oldest stock exchange in Asia

• The BSE is the largest stock exchange in India (in terms of market capitalization)

• In terms of the number of listed companies, the BSE is the largest stock exchange in the world (with over 4500 listed companies)

• The key index of the BSE is the SENSEX (BSE Sensitive Index). It is a composite measure of the performance of 30 key listed companies

National Stock Exchange (NSE)

• Established 1992, location Mumbai

• The NSE is the second largest stock exchange in India (after BSE)

• In terms of number of trades in equity, it is the largest stock exchange in India and the third largest in the world

• The NSE is also the second fastest growing stock exchange in the world

• The NSE is owned by a set of financial institutions, banks and insurance companies. There are at least two foreign investors in NSE: NYSE Euronext and Goldman Sachs

• The NSE’s key index is the Nifty