An important step to provide efficient and transparent stock market culminated into the establishment of National Stock Exchange of India (NSEI) in July 1994. The NSEI opened membership to 13 cities, including Bombay, the commercial capital of India. The NSEI operates in its two segments: (i) Wholesale Debt Market (WDM) and (ii) Capital Market (CM): In the Wholesale Debt Market. Government Securities, Treasury Bills, Public Sector Undertaking (PSU) bonds, Certificates of Deposits, Commercial Papers and Corporate Debentures are traded in.
The main participants in this market are banks, financial institutions and large corporate firms. The RBI has directed banks to use only the NSEI for all transactions in debt securities instead of using the services of brokers so as to ensure transparent and regulated deals.
In the capital market, segment of NSEI, equities are traded in. In the capital market segment of NSEI, the number of securities admitted to trading has expanded from 200 to start with to 525 by December 1994. Thus, the National Stock Exchange of India (NSEI), with its scrip-less trading system, can be regarded as a milestone in the development of stock market in India.
In short, stock exchanges, as secondary market in industrial securities, furnish an important mechanism of imparting liquidity in Indian capital market. Of late, SEBI has evolved certain guidelines of rules and regulations to make stock exchanges to function in accordance with the principle of safety of the market, transparency and investor protection. The liberalisation, privatization and globalisation (LPG) of Indian economy has led to the increase in volume of business in industrial securities in both the New Issue Market and Secondary Market (stock exchange) of Indian capital market.