What is stock market and how it works in India?

Below are the structures of stock markets in India as of the year 2024. Let's understand them one by one.

Ministry of Finance, Govt. of India

This is a government of India department that regulates all financial institutions in India either directly or indirectly. It takes care of taxation, financial legislations, capital markets, stock markets, financial institutions,  budgets etc.

Securities and Exchange Board of India (SEBI)

This was constitured as non-statutory body in April 1988 through a resolution by government. However, it was established in 1992 and came into force on Jan 30, 1992.

SEBI is a regulatory body that controls the securities (stock markets) and commodity markets in India. It's main objective is to protect investors's interests, promote the development of securities market and regulate the market.

Stock Exchanges

India has mainly 2 stock exchanges

1. Bombay Stock Exchange - it was established in 1875 and was one of the top 10 stock exchange in the world.
2. National Stock Exchange - it was established in 1992 

These stock exchanges are regulated by SEBI.

Brokers (Stock Brokers)

These are intemediaries organizations/companies that hold the broking licenses granted by SEBI. As the name suggest, they work between Stock Exchange and Investors as a link/brokers so that investors can buy/sell securities (shares of companies).

Along with broking (buy/sell) services, they also provide following services broadly

1. Managing investment portfolios
2. Analysing companies and preparing financial reports
3. Investment advisory services

In India, there are two types of brokers

1. Full-time brokers - provides wide range of services like trading, investment advice, money management etc. They have all financial products for money management. They are costly in terms of brokerage fees if you compare with Discount brokers as they provide more peronalized services and they have dedicated account or investment manager for their clients.
2. Discount brokers - provides basic services like trading in stock markets and mutual funds. They are cheap in terms of brokering charges as most of their services are online and they hardly have dedicated account manager or investment advisors.

The names of brokers given in above picture are for reference purposes only.