Project

File
(FMM)

Yash DevJai Gupta

Class- xth A
Roll no.- 30
“Understanding
the NSE: India’s
Financial
Backbone”
 Acknowledgement
I express my gratitude to Ms. Ritu Rani Choudhary , my
Financial Marketing Management Teacher and Guide, who
guided me through the project and also gave valuable
suggestions and guidance for completing the project. She
helped me to understand the intricate issues involved in
making the project, besides effectively presenting it. These
intricacies would have been lost otherwise. My project has
been a success only because of her guidance.
Name of the Student: Yash Devjai Gupta
Roll No.: 30
 Certificate
This is to certify that Mr. Yash Devjai Gupta of Class X A of
GD Goenka Public School, New Delhi, has completed his
project file under my guidance. He has taken proper care
and shown utmost sincerity in completing this project.
I certify that this project is up to my expectations and as per
the guidelines issued by CBSE.
Mr./Ms.: Ritu Rani Choudhary
(P.G.T. Financial Marketing Management)

(Signature)
 Index
1. History of NSE
2. Market Segments
3. Derivatives
4. Mutual Funds
5. Depository
6. Clearing, Settlement
and Redressal
7. Conclusion
8. Bibliography
 1. History of NSE
The National Stock Exchange of India (NSE) was incorporated in 1992 to bring
transparency to India's equity markets. It was established based on
recommendations from the Pherwani Committee in 1991 and was designed to
allow qualified individuals to trade, rather than restricting memberships to a
select group of brokers.
NSE commenced operations on 30 June 1994, starting with the wholesale debt
market (WDM) segment, followed by the equities segment on 3 November
1994. It was India's first exchange to introduce electronic trading, which quickly
led to NSE surpassing the Bombay Stock Exchange (BSE) in daily turnover
within a year.
Over the years, NSE has expanded significantly:
 2000: Launched derivatives trading.
 2008: Introduced currency derivatives.
 2012: Launched NSE EMERGE, a platform for SMEs and startups.
 2013: Established India's first dedicated trading platform for debt-related
products.
 2023: Introduced the Social Stock Exchange, allowing social enterprises
and non-profits to raise funds.
Today, NSE is one of the largest stock exchanges in the world, with a market
capitalization exceeding $5 trillion as of May 2024. It remains a leader in
technology and innovation, continuously evolving to support India's financial
markets
 2. Market Segments
A. Primary Market
The primary market is where companies issue new securities to raise capital
for business expansion, debt repayment, or other corporate needs. This market
is crucial for businesses seeking funding directly from investors.
Key Features of the Primary Market
 New Securities Only: The primary market deals exclusively with newly
issued securities.
 Direct Capital Raising: Companies sell shares directly to investors,
ensuring funds go to the issuer.
 Regulated Process: IPOs and FPOs require approval from regulatory
bodies like SEBI (Securities and Exchange Board of India).
 Various Issue Types:
o Initial Public Offerings (IPOs) – Companies go public by offering
shares for the first time.
o Follow-on Public Offerings (FPOs) – Public companies issue
additional shares to raise more capital.
o Private Placements – Securities are sold directly to institutional
investors rather than the general public.
o Rights Issues – Existing shareholders get the opportunity to buy
additional shares at a discounted price.

B. Secondary Market
The secondary market is where investors trade previously issued securities
among themselves. This market provides liquidity and price discovery for stocks
and bonds.
Key Features of the Secondary Market
 Trading Among Investors: Securities are bought and sold without
involving the issuing company.
 Market-Driven Pricing: Prices fluctuate based on supply and demand.
 Liquidity & Transparency: Stock exchanges like NSE and BSE ensure
smooth transactions.
 Types of Secondary Market Trading:
o Stock Exchanges – Organized platforms like NSE facilitate trading
with strict regulations.
o Over-the-Counter (OTC) Market – Securities are traded directly
between parties without a formal exchange.
o Auction Market – Buyers and sellers submit bids, and transactions
occur at the best available price.
The primary market helps companies raise funds, while the secondary market
ensures liquidity and efficient price discovery. Both markets play a vital role in
the financial ecosystem.
 3. Derivatives
Derivatives are financial instruments whose value is derived from an
underlying asset, such as stocks, indices, commodities, or currencies. They are
widely used for hedging risks, speculation, and arbitrage in financial markets.
Types of Derivatives Traded on NSE
1. Futures – A contract to buy or sell an asset at a predetermined price on a
future date.
2. Options – A contract that gives the buyer the right, but not the
obligation, to buy or sell an asset at a specific price before or on a certain
date.
Key Milestones in NSE’s Derivatives Market
 June 2000 – NSE launched index futures on NIFTY 50, marking the
beginning of derivatives trading in India.
 2001 – Introduction of index options and stock options.
 2002 – Launch of stock futures, expanding the range of tradable
derivatives.
 2008 – Introduction of currency derivatives, allowing trading in forex-
related contracts.
 2013 – NSE launched interest rate futures, enabling investors to hedge
against interest rate fluctuations.
Functions of Derivatives
 Hedging – Investors use derivatives to protect against price fluctuations
in underlying assets.
 Speculation – Traders use derivatives to bet on future price movements
for potential profits.
 Arbitrage – Investors exploit price differences between markets to earn
risk-free profits.
Popular Derivative Contracts on NSE
 NIFTY 50 Futures & Options – Based on India's benchmark stock index.
 Bank NIFTY Futures & Options – Tracks banking sector performance.
 Commodity Derivatives – Includes contracts on gold, silver, crude oil,
and agricultural products.
 Currency Derivatives – Enables trading in USD/INR, EUR/INR, GBP/INR,
and JPY/INR pairs.
Derivatives play a crucial role in financial markets by enhancing liquidity,
improving price discovery, and providing risk management tools for investors
 4. Mutual Funds
Mutual funds are investment vehicles that pool money from multiple investors
and allocate it across a diversified portfolio of assets, such as stocks, bonds,
commodities, and money market instruments. They are managed by
professional fund managers, making them an attractive option for investors
seeking long-term growth or steady returns with managed risk.
NSE and Mutual Funds
The National Stock Exchange of India (NSE) facilitates mutual fund transactions
through its NMF (NSE Mutual Fund) platform. This platform enables investors
to buy, sell, and manage mutual fund units electronically, ensuring
convenience and transparency.
Types of Mutual Funds Available on NSE
1. Equity Mutual Funds – Invest primarily in stocks, offering high growth
potential but with higher risk.
2. Debt Mutual Funds – Focus on fixed-income securities like bonds and
government securities, providing stable returns.
3. Hybrid Mutual Funds – Combine equity and debt investments to balance
risk and reward.
4. Index Funds & ETFs – Track benchmark indices like NIFTY 50, offering
passive investment options.
5. Sectoral & Thematic Funds – Invest in specific industries such as
technology, banking, or healthcare.
6. Tax-Saving Funds (ELSS) – Provide tax benefits under Section 80C of the
Income Tax Act.
Benefits of Investing in Mutual Funds
 Diversification – Reduces risk by spreading investments across multiple
assets.
 Professional Management – Fund managers make strategic investment
decisions.
 Liquidity – Investors can buy or sell units easily through NSE’s platform.
 Systematic Investment Plans (SIP) – Allows disciplined investing with
small, regular contributions.
Mutual funds are ideal for investors looking for passive wealth creation
without actively managing their portfolios.
 5. Depository
National Securities Depository Limited (NSDL) is India's first and largest
depository, established in 1996 to facilitate the electronic holding and transfer
of securities. It was promoted by the National Stock Exchange (NSE) and plays
a crucial role in modernizing India's financial markets.
Functions of NSDL
 Dematerialization – Converts physical securities into electronic form,
eliminating risks associated with paper-based certificates.
 Dematerialization – Allows investors to convert electronic holdings back
into physical certificates if needed.
 Electronic Transfer of Securities – Enables seamless transfer of shares,
bonds, and mutual funds between accounts.
 Pledging & Hypothecation – Investors can pledge securities as collateral
for loans.
 Corporate Actions Processing – Handles dividends, bonus issues, rights
issues, and mergers electronically.
Key Benefits of NSDL
 Easy Transfer of Securities – Investors can buy, sell, and transfer
securities without physical documentation.
 Reduced Paperwork – Eliminates the need for physical certificates,
making transactions faster and more efficient.
 Increased Safety – Protects securities from theft, forgery, and loss.
 Faster Settlement – Reduces settlement time, improving liquidity in
financial markets.
 Access to Multiple Investment Options – Investors can hold stocks,
bonds, mutual funds, and government securities in a single demat
account.
Depository Participants (DPs)
NSDL operates through Depository Participants (DPs), which act as
intermediaries between investors and the depository. Investors open demat
accounts with DPs to access NSDL’s services.
NSDL vs. CDSL
India has two major depositories:
 NSDL – Primarily associated with NSE.
 CDSL (Central Depository Services Limited) – Linked with BSE.
Both provide similar services, but NSDL is the largest depository in India,
holding securities worth approximately US$5 trillion as of April 2025
 6. Clearing,
Settlement and
Redressal
Clearing, Settlement, and Investor Redressal are crucial components of the
National Stock Exchange of India (NSE), ensuring smooth transactions and
investor protection.
A. Clearing and Settlement
Clearing and settlement at NSE are managed by National Securities Clearing
Corporation Ltd. (NSCCL), a wholly owned subsidiary of NSE. It plays a vital role
in ensuring trade matching, fund transfers, and securities settlement.
Key Functions of NSCCL
1. Trade Matching & Confirmation – Ensures that buy and sell orders are
correctly matched.
2. Risk Management – Implements margin requirements and risk controls
to safeguard market integrity.
3. Fund & Securities Transfer – Facilitates seamless movement of funds and
securities between buyers and sellers.
4. Settlement Process:
o T+1 Settlement Cycle – Equity trades are settled one business day
after the transaction (T+1 basis).
o Multilateral Netting – Reduces settlement obligations by offsetting
buy and sell positions.
o Auction Settlement – Handles cases where securities are
unavailable for delivery.
o Auto Delivery Out Facility – Allows direct credit of securities to
investors' accounts.
For more details, you can explore NSE’s official clearing and settlement page
here.
B. Investor Redressal Mechanism
NSE has a robust Investor Grievance Redressal Mechanism to address
complaints related to trading and settlement.
Common Investor Complaints
 Delayed Payments – Issues related to non-receipt of funds after selling
securities.
 Non-Receipt of Securities – Problems with shares not being credited to
the investor’s demat account.
 Unauthorized Trading – Complaints about trades executed without
investor consent.
Resolution Process
1. Investor Service Centres – NSE has multiple centres across India to assist
investors.
2. Online Complaint Filing – Investors can lodge complaints through NSE’s
Investor Grievance Redressal System (IGRS).
3. Arbitration & Conciliation – Disputes are resolved through structured
arbitration and conciliation processes.
4. SEBI SCORES Platform – Investors can escalate unresolved complaints to
SEBI’s SCORES portal for regulatory intervention.
 7. Conclusion
The National Stock Exchange of India (NSE) has played a transformative role in
shaping India's financial markets, making them more transparent, efficient,
and accessible. Since its inception in 1992, NSE has continuously evolved,
introducing electronic trading, derivatives, mutual funds, and debt
instruments, among other innovations.
Key Contributions of NSE
1. Market Transparency & Efficiency – NSE introduced electronic trading,
eliminating manual errors and ensuring fair price discovery.
2. Liquidity & Capital Mobilization – By providing a robust trading
platform, NSE enables companies to raise capital and investors to access
diverse financial instruments.
3. Investor Protection & Regulation – Through NSCCL (National Securities
Clearing Corporation Ltd.), NSE ensures secure clearing and settlement,
reducing counterparty risks.
4. Financial Inclusion – Platforms like NSE EMERGE support SMEs and
startups, fostering entrepreneurship and economic growth.
5. Global Recognition – NSE ranks among the top stock exchanges
worldwide, with a market capitalization exceeding $5 trillion as of May
2024.
Future Outlook
NSE continues to innovate, integrating AI-driven analytics, blockchain
technology, and sustainable finance initiatives to enhance market operations.
With India's economy expanding, NSE remains a pillar of financial stability,
driving investment and economic progress.
 Bibliography
1. National Stock Exchange of India. (n.d.). Retrieved from
[Link]

2. Securities and Exchange Board of India (SEBI). (n.d.).

Retrieved from [Link]

3. NSDL – National Securities Depository Limited. (n.d.).

Retrieved from [Link]

4. Investopedia. (n.d.). “What Is a Stock Exchange?”

Retrieved from [Link]

5. Khan, M.Y., & Jain, P.K. (2018). Financial Management.

McGraw Hill Education.

6. Chandra, Prasanna. (2021). Investment Analysis and

Portfolio Management. Tata McGraw Hill.
THAN
K
YOU