Indian Economics - 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 BODIES

Securities 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 INDIA

Bombay 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

Posted in: IAS Study Material