If you invest in stocks, youтАЩve likely heard of BSE and NSE, but did you know India once had over 20 regional stock exchanges? While these smaller exchanges were once vital for local businesses and investors, most have shut down due to low trading volumes and regulatory changes.
However, their existence played a key role in shaping IndiaтАЩs stock market as we see it today. Keep reading as we break down the major stock exchanges in India, explain the differences between primary and secondary markets, and look at the status of regional exchanges.
Introduction to Stock Exchanges in India
In India, only listed companies can trade in exchange. At the same time, unlisted securities are dealt with in over-the-counter (OTC) markets (where securities are traded directly between parties without a central exchange).
Role of Stock Exchanges in India
Stock exchanges do more than just facilitate tradingтАФthey help companies raise funds, provide investors with opportunities to grow their wealth and maintain market stability. HereтАЩs how they contribute:
- Capital Formation: Companies raise funds by issuing shares, allowing them to expand operations and invest in new projects.
- Investor Protection: Strict regulations ensure that trading remains transparent and fair.
- Market Liquidity: Investors can easily buy and sell securities, making stock markets a reliable investment avenue.
- Fair Price Discovery:тАФSecurities prices are determined by supply and demand, ensuring that they reflect actual market conditions.
Importance of Stock Exchanges for the Indian Economy
The impact of stock exchanges extends beyond the financial marketsтАФthey are crucial for IndiaтАЩs economic development. A well-regulated stock market attracts domestic and international investors, giving businesses the funds to grow. This, in turn, leads to:
- Economic Stability: A strong stock market supports financial stability by directing investments into productive sectors.
- Employment Generation: Companies that raise funds through stock exchanges can expand their operations, creating new job opportunities.
- Infrastructure Development: Capital raised from the stock market often funds large-scale manufacturing, IT, and real estate projects.
- Global Integration: A growing stock market strengthens IndiaтАЩs position in global financial markets, encouraging foreign investments.
History of Stock Exchanges in India
The Indian stock market has a long history, evolving from informal trading among merchants to a structured financial system regulated by authorities. LetтАЩs look at this evolution in detail.
Early Trading and the First Stock Exchange (18th to 19th Century)
Stock trading in India dates back to the late 18th century when the East India Company issued bonds and shares to raise funds for its operations. Merchants and traders in Mumbai (then Bombay) informally exchanged securities, laying the foundation for organised trading.
By 1850, the Companies Act was introduced, making corporate securities more accessible to investors. The concept of limited liability (where shareholders are only responsible for the company’s debts up to their investment amount) also emerged, encouraging more participation.
In 1875, a group of brokers formed the Native Share and Stock Brokers Association, which later became the Bombay Stock Exchange (BSE)тАФIndiaтАЩs first official stock exchange. This marked the beginning of a formalised market structure.
Growth of Regional Stock Exchanges (20th Century)
As industries expanded, stock trading spread beyond Mumbai. In 1894, the Ahmedabad Stock Exchange was set up to trade shares of textile mills, followed by exchanges in Kolkata, Chennai, and Delhi.
After independence in 1947, India focused on economic development, and stock exchanges played a key role. In 1956, the Securities Contracts (Regulation) Act was passed, bringing a legal structure to stock trading and recognising major stock exchanges in India.
Introduction of Modern Regulations (1980s- 1990s)
The Indian stock market grew significantly in the 1980s, attracting more retail investors. However, weak regulations led to market manipulations like the Harshad Mehta scam (1992), where stock prices were artificially inflated using bank funds. This highlighted the need for stricter oversight.
The National Stock Exchange (NSE) was established in 1992 to improve transparency. It introduced electronic trading, a major shift from the earlier open outcry system (where traders would shout their bids and offers on the trading floor). The NSEтАЩs launch made stock trading faster and more efficient.
Stock Market Reforms and Globalisation (2000s: Present)
The Ketan Parekh scam (2001) exposed further loopholes, prompting stronger regulations. In 2015, the Forward Markets Commission (FMC), which regulated commodity markets, merged with SEBI (Securities and Exchange Board of India) to streamline oversight.
With the rise of online trading, stock exchanges became more accessible. The BSE Sensex and Nifty 50, which track top-performing companies, became key indicators of market trends. Currently, India has six permanent stock exchanges, with the BSE and NSE handling the majority of trades.
How Many Stock Exchanges Are There in India?
As of now, there are six recognised stock exchanges in India:
- Bombay Stock Exchange (BSE): Established in 1875, BSE is the oldest stock exchange in Asia.
- National Stock Exchange (NSE): Founded in 1992, NSE is IndiaтАЩs largest stock exchange by trading volume.
- Multi Commodity Exchange (MCX): A leading commodity exchange operational since 2003.
- National Commodity & Derivatives Exchange (NCDEX): Specialises in agricultural commodities.
- India International Exchange (India INX): Located in GujaratтАЩs GIFT City, this is India’s first international exchange.
- NSE International Exchange (NSE IFSC): Another international exchange offering global securities trading.
Active vs. Defunct Stock Exchanges in India
Apart from the six recognised exchanges, some regional exchanges, like the Metropolitan Stock Exchange (MSE) and Indian Commodity Exchange (ICEX), also actively operate but with limited influence compared to the BSE and NSE.
In contrast, several regional exchanges have shut down over the years due to low trading volumes, non-compliance with SEBI norms or voluntary exits. These include:
| Stock Exchange | Closure Year |
| Mangalore Stock Exchange | 2004 |
| Bhubaneshwar Stock Exchange | 2005 |
| Cochin Stock Exchange | 2005 (trading stopped), 2014 (closed) |
| Hyderabad Stock Exchange | 2007 |
| Magadh Stock Exchange | 2007 |
| Coimbatore Stock Exchange | 2009 (requested exit) |
| Kolkata Stock Exchange | 2013 |
| Bangalore Stock Exchange | 2014 |
| Inter-connected Stock Exchange of India | 2014 |
| Ludhiana Stock Exchange | 2014 |
| Madras Stock Exchange | 2015 |
| OTC Exchange of India | 2015 |
| Pune Stock Exchange | 2015 |
| UP Stock Exchange | 2015 |
| Vadodara Stock Exchange | 2015 |
| Gauhati Stock Exchange | 2015 |
| Jaipur Stock Exchange | 2015 |
| Delhi Stock Exchange | 2017 |
| Ahmedabad Stock Exchange | 2018 |
| Madhya Pradesh Stock Exchange | 2018 |
| Raipur Stock Exchange | 2018 |
Regulatory Framework Governing Stock Exchanges
Stock exchanges in India operate under strict SEBI regulations. SEBI was established in 1992 to regulate the securities market, protect investor interests, and prevent fraudulent activities.
Key SEBI regulations include:
- Securities Contracts (Regulation) Act, 1956 (SCRA): This act defines how stock exchanges function and ensures transparency.
- Listing Obligations & Disclosure Requirements (LODR), 2015: Mandates listed companies to follow strict disclosure norms.
- SEBI Act, 1992: Grants SEBI the authority to regulate stock exchanges and impose penalties for violations.
Apart from SEBI, other institutions like the Reserve Bank of India (RBI) and the Ministry of Finance regulate specific segments, such as currency trading and commodities.
Major Stock Exchanges in India
India has two primary stock exchanges that dominate the market and several regional exchanges that have either ceased operations or play a limited role. HereтАЩs a brief overview of them.
Bombay Stock Exchange (BSE): The Oldest Stock Exchange in India
Founded in 1875, the BSE is the oldest stock exchange in Asia and one of the world’s largest in terms of listed companies. It played a crucial role in shaping India’s capital markets, offering a platform for companies to raise funds and investors to trade securities. Some key points about BSE:
- Benchmark Index: S&P BSE Sensex, which tracks the top 30 companies.
- Trading Platform: BOLT (BSE Online Trading) was introduced in 1995.
- Listings: Over 5,000 companies, making it one of the most diverse stock exchanges globally.
National Stock Exchange (NSE): Leading Electronic Stock Exchange
Established in 1992, the NSE revolutionised Indian stock trading by introducing a completely electronic and screen-based trading system. It is the largest stock exchange in India in terms of trading volume and market capitalisation.
- Benchmark Index: NIFTY 50, representing the top 50 companies across various sectors.
- Trading Platform: NEAT (National Exchange for Automated Trading).
- Key Offerings: Derivatives trading (Futures & Options), equity, commodities, and currency trading.
Regional Stock Exchanges and Their Current Status
While regional stock exchanges (RSEs) once played a role in local market development, most have shut down due to a lack of liquidity, regulatory changes, and the dominance of BSE and NSE.
- Defunct Exchanges: Many RSEs, including the Madras Stock Exchange, Delhi Stock Exchange, and Ahmedabad Stock Exchange, ceased operations between 2013 and 2018.
- Limited Activity: The Kolkata Stock Exchange is still operational but has restricted trading activity.
Types of Stock Exchanges in India
Stock exchanges in India can be categorised based on their functions and the types of assets traded. The key classifications include:
Primary Market vs. Secondary Market
- Primary Market: This is where companies issue new securities (stocks, bonds, etc.) to raise capital from investors. The Initial Public Offering (IPO) process takes place here. Once the securities are sold, they move to the secondary market for trading.
- Secondary Market: This is where investors buy and sell existing securities among themselves through exchanges like BSE and NSE. Prices fluctuate based on supply and demand.
Commodity Exchanges vs. Equity Exchanges
- Commodity Exchanges: These specialise in trading commodities such as gold, silver, crude oil, agricultural products, and metals. Major commodity exchanges in India include:
- Multi Commodity Exchange (MCX): Trades metals, energy, and agricultural commodities.
- National Commodity and Derivatives Exchange (NCDEX): Focuses on agricultural commodities.
- Indian Commodity Exchange (ICEX): Trades diamonds, rubber, and other commodities.
- Equity Exchanges facilitate trading in company shares and other financial instruments. The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) are India’s two major equity exchanges.
Over-the-counter (OTC) Exchanges
OTC Exchanges facilitate trading in securities not listed on formal stock exchanges. The OTC Exchange of India (OTCEI) was introduced in 1990 to help small and medium-sized companies raise capital, but it was shut down in 2015 due to low trading activity.
The Bottom Line
India’s stock exchanges play a key role in shaping the financial market. While BSE and NSE dominate equity trading, regional exchanges have largely shut down. The market is divided into primary and secondary exchanges, where companies raise capital and investors trade securities. Additionally, commodity exchanges facilitate trading in metals, energy, and agriculture, while OTC markets handle decentralised transactions.
For you as an investor, stock exchanges ensure transparency, liquidity, and access to diverse assets. Whether you’re investing in stocks or commodities, understanding market structures helps you make informed decisions. Appreciate can guide you with tailored investment strategiesтАФconnect with us to align your portfolio with your financial goals.
Frequently Asked Questions
How many stock exchanges are there in India?
Two major stock exchanges operate in India: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Several regional stock exchanges have closed over the years due to low trading volumes.
What are the major stock exchanges in India?
The two primary stock exchanges in India are:
- Bombay Stock Exchange (BSE): Established in 1875, it is the oldest stock exchange in Asia.
- National Stock Exchange (NSE): Launched in 1992, it introduced electronic trading and is now the largest exchange in India by trading volume.
What is the role of a stock exchange in India?
Stock exchanges provide a regulated platform for buying and selling securities such as stocks, bonds, and derivatives. They ensure transparency, liquidity, and fair price discovery, making it easier for companies to raise capital and for investors to trade securely.
What is the history of stock exchanges in India?
The BSE, established in 1875, was IndiaтАЩs first stock exchange. Over time, several regional exchanges emerged, but most shut down due to low activity. The NSE revolutionised the market in the 1990s with electronic trading. BSE and NSE dominate today, offering a modern, efficient trading environment.
What are the different types of stock exchanges in India?
Stock exchanges in India fall into three main categories:
- Primary Market: Where companies issue new shares through Initial Public Offerings (IPOs).
- Secondary Market: Where investors trade existing securities.
- Commodity Exchanges: Platforms for trading metals, energy, and agricultural products.
- Over-the-Counter (OTC) Markets: Decentralised trading platforms for less liquid securities.
Disclaimer: Investments in securities markets are subject to market risks. Read all the related documents carefully before investing. The securities quoted are exemplary and are not recommended.
