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In India, with the concept of «stock market» The country's two main stock exchanges are linked: Bombay - BSE, Bombay Stock Exchange, and National – NSE, National Stock Exchange of India.
Both exchanges have played an important role in the development of the Indian stock market. Securities and Exchange Board of India, SEBI, monitors the functioning of trading platforms and protects the interests of investors. It is the main regulatory body in the country, similar to the Securities and Exchange Commission in the United States. Except for the two largest exchanges, in India, there are also 22 Small Regional Stock Exchanges.
History
In 1850, after the passage of the Companies Act, investors, except for goods, began to show interest in corporate securities as well.. Almost immediately, an organization called the National Association of Stockholders and Stock Brokers was formed. It was she who became the predecessor of the BSE.
In 1957, the National Association of Stockholders and Stock Brokers became the first stock exchange, recognized by the Government of India under the Securities Regulation Act. In 1986, the SENSEX index was launched, and in 1989, the national BSE index.
To oversee and regulate the securities and exchange industry, the Securities and Exchange Board of India (SEBI) was established in 1988, Securities and Exchange Board of India. Four years later, it became an autonomous body with fully independent powers.
In February 1992, NSE, the country's first electronic exchange with mutual capital, was established, designed to ensure the transparency of markets. And three years later, BSE, in pursuit of a competitor, also switched to an electronic bidding system. In 1994, NSE began operations in the bond segment – WDM, Wholesale Debt Market, then in the equity segment, And in 2000, it used a platform for trading derivatives.
In 2015, SEBI was merged with the Commission on Derivatives Markets, FMC, to strengthen the regulation of the commodity market and facilitate the participation of domestic and foreign institutions.
GDP of India
Developing markets, such as India and China, In the eyes of investors, quickly became the engines of future growth. Taking into account the growth of the gross domestic product by 7-8% per year over the past few years, Not counting the pandemic period, and the second most populous country in the world after China, Interest in this market can grow in the future.
In 2012-2013, Indian stock markets, as well as the country's GDP, showed slower growth. But the liquidity of the Indian market, provided by the inflow of foreign capital, caused a strong growth in economic indicators. India is now the sixth largest country in the world in terms of GDP.
Indian market now
Today, BSE is ranked as the eleventh largest stock exchange in the world, And the market capitalization is about $1.7 trillion. The NSE is estimated to have a market capitalization of more than $1.65 trillion. India has overtaken France to become the world's sixth-largest stock market.
More than 5000 companies are listed on the BSE, and on the NSE, 1900. Stock trading volumes on both exchanges are roughly the same. Currently, Indian investors, As in many other countries, it is possible to conduct online trading.
In 2021, India performed best among 15 Major Markets. The main NSE index is NIFTY 50, which is used by investors around the world as a barometer of Indian financial markets. The index doubled in 2021.
While many markets have been plagued by the spread of the Delta variant of the coronavirus and concerns about the curtailment of the program FED USD on Asset Purchases, Indian shares rose due to inflow of retail capital. Now the average P is / E of the Indian stock market is 24.
Stock Market Trading Parameters
Trading mechanism. Trading on the BSE and NSE exchanges takes place through an open electronic limit order book, in which the approval is carried out by the trading computer. There are no market makers there, And the whole process is managed by orders.
It means, that market orders, placed by investors, are automatically matched with the best limit orders. As a result, buyers and sellers remain anonymous.
The advantage of such a market, managed by orders, is that, that it provides greater transparency, displaying all buy and sell orders in the trading system. But in the absence of market makers, there is no guarantee, that they will be executed.
All orders in the trading system must be placed through brokers, many of which provide retail customers with the opportunity to trade online. For institutional investors, there is also the option of direct access to the market, in which they use trading terminals, provided by brokers, to place orders directly in the stock market trading system.
Settlement and trading hours. Spot Equity Markets Follow a Trailing T Calculation + 2,89. It means, that any transaction, Done on Monday, will be settled by Wednesday. All trades on stock exchanges take place from 09:55 to 15:30 Indian Standard Time Monday to Friday.
Who Can Invest in India. India began to allow foreign investment only in the 1990s. Foreign investment is divided into two categories: Foreign Direct Investment (DFI) and Foreign Portfolio Investment (FPI). All investments, in which the investor takes part in the day-to-day management and operations of the company, are considered as DFI, whereas investing in stocks without any control over management and operations is treated as an FPI.
Investments for foreign organizations. Foreign entities and individuals can access Indian stocks through institutional investors. Many Indian mutual funds are becoming popular among retail investors.
Investments can also be made through some offshore instruments., such as participation bonds – PNS; depositary receipts, For example, American Depositary Receipts — ADR and Global Depositary Receipts (GDRs); Exchange-Traded Funds (ETFs) and Exchange-Traded Notes (ETNs).
Opportunity Market
Loose monetary policy. India has one of the world's highest stock market returns. This is facilitated by policies to stimulate economic growth.. The MSCI India Index for 2021 has increased by more than 30%.
India's booming stock market continues to attract both local newcomers, and global investors to financial equities, industrial and technology companies, that dominate its listings.
Both indices reached their maximum values due to growing demographics and the government's soft monetary policy. Now the key rate in India is 4%, This is the lowest value in the last decade.
High percentage of working-age population, who is interested in modern technologies. As of March 2022, this percentage was almost 65%. Their interest in investments in November 2021 was especially highlighted by the example of the initial public offering of shares of the digital payments platform One 97 Communications Ltd (NSE: PAYTM).
The company achieved its goal of raising $2.5 billion, The IPO was the largest in the country's history and valued the company at more than $20 billion. These numbers showed the growing interest of active investors in digital startups. except them, Abu Dhabi Sovereign Wealth Fund invested more than a billion dollars in Paytm.
Ongoing private investor boom. In 2021, the number of their accounts doubled compared to 2020. The government seeks to attract money to the economy, therefore, in the spring of 2021, the Central Bank of India launched a bond purchase program.. This is the same program by analogy with examples in the rest of the world, which has flooded the stock market with liquidity over the past two years.
Chinese investment flows into the Indian market. The Chinese government's crackdown on China's largest internet companies has reduced the market value of shares by 1,5 trillion dollars. As a result, India, Asia's second-largest economy after China, has become the main beneficiary of the attention of investors fleeing Chinese stocks. Thanks to new listings, IPO, added almost $65 billion to the capitalization of the Indian stock market in 2021.
What are the risks
Risks are no different from global ones. Strong inflation expectations and an increase in key rates may lead to a correction in any stock indices. Therefore, it is necessary to keep an eye on the inflation rate in India.
Inflation Rate in India
| September 2021 | 4,35% |
| October 2021 | 4,48% |
| November 2021 | 4,91% |
| December 2021 | 5,66% |
| January 2022 | 6,01% |
4,35%
Which Indian Companies to Invest In
Dr. Reddy’s Laboratories Ltd (DRL). It is an integrated global pharmaceutical company, which produces drugs, including generics. Since 2014, it has been on the list of the most reliable Indian companies.
Dr. Reddy's operates in markets all over the world. The main markets are the United States, India, Russia, CIS countries and Europe. The company was founded in 1984 in Hyderabad. Her well-known medications are Ketorol and Cetrin.
ICICI Bank Ltd (IBN). India's largest private bank by consolidated assets. The company was incorporated in 1994 as part of the ICICI group under the name ICICI Banking Corporation Ltd. As of 30 As of June 2021, the Bank's branch network consisted of 5268 outlets and 14 141 ATM.
Tata Motors Ltd (TTM). India's leading passenger car manufacturer, Buses, trucks and military equipment. India's largest car company and part of the Tata Group. Works in the UK, South Korea, Thailand, South Africa and Indonesia through a strong global network of 76 Subsidiaries and associates, including Jaguar Land Rover in the UK and Tata Daewoo in South Korea.
Besides, For unqualified investors, funds are available to the markets of developing countries, including India:
- VTB Emerging Markets Equity Fund (VTBE);
- ATON – Markets of Opportunities (AMEN).
Output
Developing markets, such as India, quickly become engines of future growth. With the launch of online trading in the Indian stock market – first on the NSE, and then on the BSE, the number of investors increased several times.
There are 1 people living in India/6 of the world's population, And this means huge opportunities for growth in the consumption of goods. But it is worth taking into account the risks of the external geopolitical situation and inflation expectations, just like in the rest of the world, and within India.
