There are two major Stock Exchanges in India, the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). The BSE has been in existence since 1875 whereas the NSE was founded in 1992 and started trading in 1994. The NSE is the largest stock market in terms of volume.
The two prominent indexes for equities are SENSEX and NIFTY. SENSEX includes shares of 30 firms listed on the BSE whereas NIFTY includes shares of 50 firms listed on the NSE.
The responsibility for the development, regulation, and supervision of the stock market rests with the Securities and Exchange Board of India (SEBI) which was formed in 1992 as an independent authority. SEBI has the power to lay down market rules in line with best market practices and to impose penalties on market participants, in case of a breach.
Categorization of Companies
Large-cap: Companies having a market capitalization of Rs.20,000 crore or more are categorized as Large-caps. Large-cap companies generally have an excellent track record. That is why conservative investors having long-term investment horizons tend to invest in Large-cap stocks. Large-cap stocks are less risky compared to Mid-cap and Small-cap stocks.
Mid-cap: Companies whose market capitalization is between Rs.5,000 to Rs.20,000 crore are categorized as Mid-caps. Mid-cap companies generally have a decent track record. Investors having a long-term outlook with a higher risk appetite invest in Mid-cap stocks.
Small-cap: Companies whose market capitalization is below Rs.5,000 crore are categorized as Small-caps. Small-cap companies may have a volatile track record. Investors in these stocks usually have a short-term outlook with very high risk.