When a company is listed on a Stock Exchange, it means that the company name appears on the list of companies whose shares can be bought and sold through that Stock Exchange. The Bombay Stock Exchange (BSE) is India’s oldest stock exchange. The National Stock Exchange (NSE) was incorporated recently i.e. in 1992.
BSE and NSE are the 2 premier stock exchanges of India and are both headquartered in Mumbai, India’s financial capital. NSE though comparatively new has gone much ahead of the BSE in terms of volume of trade and facilities offered.
Listing a company on the NSE is advantageous to both the company as well as its shareholders.
Advantages To The Company:
- A company may be new or may not be very well known. Listing a company on the NSE gives it a sense of legitimacy.
- A company may want to raise money through an Initial Public Offering (IPO). The fact that this company will be listed on the NSE will make investors feel confident about the company and a large number of investors will subscribe to the Offering. Similarly in the case of Follow-on Public Offering (FPO), a company listed on the NSE can raise funds easily.
- Not only can a company listed on the NSE raise funds easily, it can get individual and institutional investors from different parts of India as well as abroad. So the investor base is widespread.
- There will be adequate liquidity in the shares which are listed on the NSE and this would ensure that a company’s shares would trade at the right price.
- It is not just large companies which will benefit from an NSE listing. The shares of small and medium sized companies too can trade on the National Stock Exchange.
Advantages To The Shareholders:
- To ensure the safety of shareholders of companies, the National Stock Exchange has formulated many rules and regulations. If the listed companies do not follow them then they are warned, fined and sometimes even delisted. So the shareholders feel safe about investing in the shares of NSE listed companies.
- For the shares of every company that is traded, the NSE provides real time information about the top 5 bids and top 5 asks. It also supplies information about the total buying and selling quantity. All these indicate the depth of the market to the trader or investor.
- The NSE has in place a very advanced clearing and settlement infrastructure. Due to this, the clearing of shares and settlement of payment takes place very smoothly without any kind of confusion or interruption.
- If shareholders want to borrow money, shares of companies listed in the NSE are generally accepted as collateral since they are considered safe.
- It is mandatory for NSE listed companies to provide information regarding important events, meetings and decisions to the Exchange. The NSE immediately circulates this information among shareholders by publishing it on the NSE website. Thus the promoters and management of these companies cannot play mischief by withholding vital information to the detriment of the shareholders.
- People can not only buy and sell stock of listed companies on the NSE, they can also participate in the futures and options market either for trading or for hedging their positions. Trading in currency derivatives and equity ETFs and gold ETFs are also allowed. Thus the NSE offers traders and investors a variety of choices to select from.
- In the event that an investor wants to immediately sell shares of a company, he can do so with ease if that company is listed on the NSE. This is because NSE listed shares have ample liquidity making the trade possible at the right price.
The National Stock Exchange has succeeded in changing the scene of stock trading in India for the better.