Types of Stock Exchanges in India

India’s stock market infrastructure includes various exchanges catering to diverse financial instruments and sectors. These exchanges are integral to the country’s economic ecosystem, facilitating the trade of securities and providing platforms for raising capital. Broadly, India’s stock exchanges can be classified into two major categories:

1. National Stock Exchanges
   • Bombay Stock Exchange (BSE): Established in 1875, the BSE is Asia’s oldest stock exchange and among the top exchanges worldwide. It plays a crucial role in India’s equity trading, offering various securities including equities, debt instruments, mutual funds, and derivatives. The BSE is known for its SENSEX index, which tracks the performance of 30 financially robust companies and serves as a barometer for the Indian stock market.
   • National Stock Exchange (NSE): Launched in 1992, the NSE is India’s largest stock exchange by market capitalization and the first to introduce electronic trading. It provides platforms for trading various financial instruments, including equity, currency derivatives, and debt. The NSE’s primary index, NIFTY 50, comprises the top 50 companies, representing different sectors of the economy.
2. Regional Stock Exchanges (RSEs)
   • India once had multiple regional stock exchanges (RSEs) catering to local or regional participants. Some of the prominent ones included the Calcutta Stock Exchange, Madras Stock Exchange, and Delhi Stock Exchange. However, with the advent of electronic trading and the dominance of NSE and BSE, most RSEs have become inactive or shut down, unable to compete with the technological advancements and reach of national exchanges. As of now, a few RSEs still exist but have limited operations or regulatory approval.
3. Commodity Exchanges
   • Apart from equity markets, India has dedicated exchanges for commodities trading:
     • Multi Commodity Exchange (MCX): Specializes in trading commodities such as metals, energy, and agricultural products. It is one of the largest commodity derivatives exchanges in India.
     • National Commodity and Derivatives Exchange (NCDEX): Primarily focuses on agricultural commodities, providing a platform for farmers, traders, and companies to hedge against price fluctuations.
4. International Financial Services Centre (IFSC) Exchange
   • Located in the Gujarat International Finance Tec-City (GIFT City), this exchange is established under the International Financial Services Centre Authority to facilitate international financial services. The BSE and NSE have collaborated to set up an IFSC exchange, enabling global investors to participate in Indian markets with relaxed regulations. The IFSC exchange allows trading in derivatives, commodities, and other financial instruments and is part of India’s ambition to position itself as a global financial hub.
5. Over-the-Counter Exchange of India (OTCEI)
   • Established in 1990 to help small and medium-sized enterprises (SMEs) access capital markets, the OTCEI aimed to operate as an electronic exchange, offering an alternative to the traditional physical floor of trading. While OTCEI played an essential role in the early years, it struggled to maintain its relevance and eventually became dormant due to limited listings and competition from larger exchanges.
6. SME Exchanges
   • Both the NSE and BSE operate SME platforms (NSE Emerge and BSE SME, respectively) tailored for small and medium-sized enterprises. These platforms are designed to facilitate capital raising for SMEs, helping them grow by providing access to a larger pool of investors. SME exchanges have lower listing requirements than the main exchanges, making them accessible to smaller companies that need funds to scale operations.

Significance of Multiple Exchanges

Each of these exchanges serves a unique purpose, catering to specific segments of the economy and different types of investors. They play an essential role in ensuring liquidity, transparency, and access to capital. Through initiatives like the IFSC and SME platforms, India’s stock exchanges aim to attract global investment and support the growth of smaller businesses, making the financial markets inclusive and more resilient.

These types of exchanges collectively bolster India’s financial infrastructure, enabling effective capital formation and contributing to the country’s economic development.