3: Understanding the markets Part 3 : Products in the Indian Stock markets

In the last part of the “Understanding the markets” , We cover the important parts of a stock exchange. Ideally , It is a common wrong understanding that only stocks are traded in the stock exchanges , when there is a wide scope of products and services

The Indian stock market offers a variety of products and asset classes for investors to trade and invest in. Here is an overview of the products available in the Indian stock markets, the listing of companies across various exchanges, and segments for institutional investors:

1. Equity Stocks:

Equity stocks represent ownership in a company. They are traded on two major stock exchanges in India:

National Stock Exchange (NSE): The NSE is one of the largest stock exchanges in India, and it lists a wide range of companies from various sectors.

Bombay Stock Exchange (BSE): BSE is another major stock exchange in India that lists a diverse set of companies.

2. Securities lending and borrowing is a financial arrangement where one party lends securities to another for a specified period, typically in exchange for collateral. This practice allows investors to earn additional income by lending out their securities, while borrowers can use these borrowed securities for short-selling or other trading strategies. The borrower pays a fee or interest to the lender for the duration of the loan, and the borrower must return the securities at the end of the agreed-upon period. It is a common practice in financial markets to facilitate short-selling and enhance market liquidity.

3. Equity Derivatives:

Equity derivatives include futures and options contracts based on individual stocks. These are traded on both NSE and BSE.

4. Indices:

Stock market indices like the Nifty 50 and Sensex are available for tracking the overall market performance.

5. Fixed Income Securities:

These include bonds and debentures issued by government entities, corporations, and financial institutions.

6. Mutual Funds:

Mutual funds pool money from investors and invest in a diversified portfolio of stocks, bonds, or other securities.

7. Exchange-Traded Funds (ETFs):

ETFs are investment funds that are traded on stock exchanges, representing an underlying asset like an index, commodity, or basket of assets.

8. Commodity Derivatives:

Commodity derivatives include futures and options contracts based on various commodities like gold, silver, crude oil, etc.

9. Currency Derivatives:

Currency futures and options contracts are available for trading on various currency pairs.

10. Real Estate Investment Trusts (REITs):

REITs allow investors to invest in income-generating real estate properties.

11. Infrastructure Investment Trusts (InvITs): - InvITs enable investment in infrastructure projects such as roads, power plants, and ports.

Segments for Institutional Investors:

Institutional investors, including mutual funds, insurance companies, and foreign institutional investors (FIIs), participate in the Indian stock market through various segments and routes, including:

• Cash Segment: Institutional investors buy and sell stocks in the cash segment just like retail investors.

• Futures and Options Segment: Institutional investors use derivatives for hedging and speculation.

• Bulk Deals and Block Deals: Large transactions involving institutional investors are often executed in these segments.

• Qualified Institutional Placement (QIP): Companies can raise capital by issuing shares or convertible securities to institutional investors through QIPs.

• Foreign Institutional Investment (FII): FIIs are registered with SEBI (Securities and Exchange Board of India) and invest in Indian equities and debt instruments.

• AIFs (Alternative Investment Funds): AIFs are a popular choice for institutional investors looking to invest in alternative assets like private equity and real estate.

It's important to note that the Indian stock market is regulated by SEBI, and various exchanges have their own rules and regulations governing the listing and trading of different products and asset classes. Investors, whether retail or institutional, should carefully evaluate their investment goals and risk tolerance before participating in the Indian stock markets.

-Authored By

Seshadri Krishnaswamy Iyengar

Mentor - StockEazy Financials