A stock Exchange is where all the financial instruments like stocks, bonds, derivatives, commodities, and ETFs are listed. In simple terms, it is a place where securities are bought and sold by various market participants such as Investors, Traders, Institutions, etc.

The two major stock exchanges in India are:

1. BSE (Bombay Stock Exchange)

   The BSE is one of Asia’s oldest stock exchanges. It was established in the 1875 and is located in Mumbai. It is home to the 'Sensex,' one of India's most widely followed stock market indices. It lists various financial products, including equities, fixed-income securities, derivatives, and ETF units.




2. NSE (National Stock Exchange)

   The NSE was established in 1992 and is also located in Mumbai. The NSE is well-known for its electronic trading platform and is India's largest stock exchange in terms of daily trading volume. It lists a wide range of financial instruments, including equities, derivatives, exchange-traded funds (ETFs), and more.

   NSE has more trading volume and liquidity than BSE.

As of March 2024, the total listed companies on NSE stands at 2,137 and 4,304 in the case of BSE. These figures include only active companies. However, the numbers mentioned can change daily because of new listings, delisting, mergers, etc.

Currently, NSE is offering trading in futures & options on four major indices:

1. NIFTY 50




2. NIFTY Bank




3. Nifty Financial Services




4. NIFTY Midcap

The derivatives, i.e., futures and options contracts are available on 185 individual securities on NSE.

The future is a contract to buy or sell an asset at a pre-determined future price and date. On the other hand, options give buyers the right but not the obligation to buy or sell a security.

IPO, Initial Public Offering, is the process through which a private company becomes a public company by offering its shares to public investors for the first time.

The process of IPO includes hiring an investment bank to act as an underwriter so that the IPO procedure can be managed in an organised manner. The underwriter helps in the preparation of Draft Red Herring Prospectus (DRHP) and maintains compliance with the Securities and Exchange Board of India (SEBI). It reviews the DRHP to ensure compliance. The company and its underwriters then conduct a roadshow to market the IPO.

The underwriters, in consultation with the company, determine the IPO price at which the shares will be offered to the public. The investment bank then takes orders from investors for shares and this is known as book-building; the investment bank then allocates the shares to investors based on the orders, the last and the final process is listing on the stock exchange,i.e., National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India.

To apply in an IPO, a PAN Card and Demat account are required.

IPOs can be either risky or rewarding investments. Companies with strong fundamentals and reasonable valuation are likely to have strong debuts in the market.

First, let us understand what market capitalisation is. It is defined as total outstanding value of a company’s outstanding shares.

Suppose, X company has 100 shares trading at a price of INR 50, out of which 20 shares are held by promoters and 80 shares are held by retail and institutional investors, which implies only 80 shares are tradeable in the market.

Now, the market capitalisation would be = Total Outstanding shares in the market * Current Market price of the share, i.e., 80*50 = 4,000 is the market capitalisation of company X.

The companies can be categorised into three categories:

1. Large Cap

   The top 100 listed companies based on full market capitalisation are known as large-cap companies. Generally, these companies have a market cap of at least INR 20,000 crs.These are well-established companies and also known as “Blue-chip” companies as they are the largest and most liquid companies.




2. Mid Cap

   Mid-cap companies are often in their growth phase and carry the potential to be converted into large-cap companies. In terms of total market capitalisation, mid-cap companies ranged from 101st to 250th. Generally, these companies have a market cap of INR 5,000 – 20,000 crs.




3. Small Cap

   Small-cap companies are those having full market capitalisation starting from the 251st position. Generally, these companies have a market cap of less than INR 5,000 crs. Stocks of these companies are more volatile and riskier than large and mid-cap companies.