Like millions of investors, you are careful that the money you invest continues to work for you. One avenue that not only has the potential of growing your money but also building wealth is the stock exchange. What was once a pastime of the wealthy is now widely acknowledged, by the novice and experienced investor alike, as a means to grow and maximise wealth.
New investors are generally gung-ho about the stock market. But to make wise decisions, it is essential to know how to trade in the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
NSE trading and BSE trading requires some knowledge about the stock market. An important point to keep in mind is to know that markets are volatile and fickle. But if you understand what causes prices to fall or rise, you can be better equipped to deal with losses, if any, and reap benefits during the highs.
Here is a primer that can help you know how to trade in BSE and NSE and invest in stocks.
About the BSE and NSE
Most trading that takes place in the Indian stock market is on its two stock exchanges: the BSE and NSE. The BSE first came into existence in 1875. The NSE, on the other hand, was launched in 1992 and began its first trade in 1994. Both the stock exchanges follow similar trading mechanisms, trading hours, settlement processes and the like. In its latest update, the BSE listed approximately 4700 listed companies, while the NSE currently has around 1200 companies.
Trading at the BSE and the NSE
Every significant company in India is listed on both the exchanges. Trading on both the exchanges is similar and follows identical patterns. All trading takes place through brokers, such as Kotak Securities, and other depository participants that offer online trading facilities to retail and individual investors.
Trading hours at both the NSE and BSE, starts from 9:55 AM (Indian Standard Time) and ends by 3:30 PM, from Monday through Friday. All shares traded on the BSE and NSE is delivered in its dematerialised form, and each of these exchanges has its own clearinghouse that assumes settlement risks. To accomplish BSE trading or NSE trading, it is crucial for investors to have a Demat account with a brokerage firm.
The market index for the BSE is the Sensex, which is the oldest market index for equities that was created in 1986. It includes the shares of 30 firms listed on the BSE. The market index for NSE is the Nifty that contains 50 shares listed on the NSE; it was created in 1996.
Regulating the stock exchanges
The Securities & Exchange Board of India (SEBI), formed in 1992, as an independent authority, regulates, supervises and is responsible for the BSE and the NSE. The SEBI consistently lays down market rules for both the NSE and BSE in accordance with the best market practices. The SEBI is a stringent body that has the power of enforcing heavy penalties on market participants in the event of breaches or frauds.
In order to trade with the BSE or the NSE you need to open a Demat account with a brokerage firm, bank or depository participant. All reputed brokers, such as Kotak Securities, must be registered with the SEBI and either stock exchange, to buy and sell shares on your behalf.