Indian stock market opens the big opportunities in investment. There are two groups of investors: those who know about the prospects for investment in India and those who don’t. India may look like a small dot to someone in the U.S.
But, you will find the same stuff you would expect from any attractive market after closer inspection.
Here are the overview of the Indian stock market and how interested investors can gain exposure.
The BSE and NSE
Much of Indian stock market trading takes place on its two stock exchanges: the Bombay Stock Exchange ( BSE) and the National Stock Exchange (NSE).
The BSE had 5,518 listed companies as of February 2020, while the competitor NSE had around 1,799 listed companies as of 31 Dec 2019. Of all the companies listed on the BSE, only about 500 firms make up more than 90 per cent of their market capitalization; the rest of the crowd is extremely illiquid.
Nearly all of India’s big companies are listed on both the exchanges. BSE is the older stock market but in terms of value the NSE is the larger stock market. The NSE, instead, is a more liquid market.
Both exchanges compete for the flow of orders which leads to lower costs, market efficiency and innovation. The presence of arbitrageurs holds the rates within a very narrow range on the two stock exchanges.
Who Can Invest in India?
There are two types of foreign investment, namely foreign direct investment ( FDI) and foreign investment portfolio (FPI). All investments in which an investor participates in the company’s day-to-day management and operations are FDI.
Meanwhile, investments in shares without oversight of management and operations are FPIs.
One should be registered either as a foreign institutional investor (FII) or as one of the sub-accounts of one of the registered FIIs. It aims for making portfolio investments in India.
The market regulator, SEBI, concedes both registrations.
Foreign institutional investors consist mainly of mutual funds, pension funds, endowments, sovereign wealth funds, insurance companies, banks and money management companies. India currently does not allow foreigners to invest directly in its stock market. But, high-net worth individuals like those with a net value of at least $50 million, may be registered as a FII sub-accounts.