The capital market is where companies and governments raise long-term money (more than one year) by selling shares and bonds. Financial awareness sections ask about SEBI, Sensex and Nifty, IPO terms and settlement cycles. This guide covers the basics.
Primary vs secondary market
Primary market
Secondary market
New securities are sold for the first time
Already-issued securities are traded between investors
Money goes to the company
Money moves between investors
IPO, FPO, rights issue, private placement
Stock exchanges (BSE, NSE)
Also called the “new issue market”
Also called the “stock market”
SEBI
Fact
Detail
Set up
12 April 1988 (non-statutory)
Statutory powers
SEBI Act, 1992 (from 30 January 1992)
Headquarters
Mumbai (BKC)
Chairperson
Tuhin Kanta Pandey (11th chairperson, since March 2025)
Regional offices
Ahmedabad, Chennai, Kolkata, New Delhi
Took over commodity markets
2015, when the Forward Markets Commission (FMC) merged with SEBI
SEBI’s main roles: protect investors, regulate the securities market and promote its development.
Stock exchanges
Exchange
Key facts
BSE (Bombay Stock Exchange)
Asia’s oldest stock exchange, set up in 1875 as the Native Share and Stock Brokers’ Association; index Sensex
NSE (National Stock Exchange)
Set up in 1992; started trading in 1994; India’s first fully electronic (screen-based) exchange; index Nifty 50
MCX
Multi Commodity Exchange; commodity derivatives
NCDEX
Agricultural commodity exchange
India INX and NSE IX
International exchanges at GIFT City, Gandhinagar
Sensex and Nifty
Index
Exchange
Stocks
Base year
Base value
Sensex
BSE
30
1978-79
100
Nifty 50
NSE
50
3 November 1995
1,000
Both are calculated using the free-float market capitalisation method.
Ways to raise money in the primary market
Term
Meaning
IPO (Initial Public Offer)
A company sells shares to the public for the first time and gets listed
FPO (Follow-on Public Offer)
A listed company issues more shares to the public
Rights issue
New shares offered to existing shareholders in proportion to their holding
Bonus issue
Free shares to existing shareholders from reserves (no money raised)
QIP (Qualified Institutional Placement)
Listed company sells shares only to QIBs (banks, mutual funds, FPIs)
OFS (Offer for Sale)
Existing promoters/owners sell their shares; the money goes to them, not the company. Government uses OFS for disinvestment
Private placement
Shares sold to a small group of chosen investors
ASBA
Application Supported by Blocked Amount: money stays in your account (blocked) until shares are allotted
Retail investor in an IPO: applies for up to ₹2 lakh.
Anchor investors are QIBs who get shares one day before the IPO opens.
SME IPOs list on BSE SME and NSE Emerge.
Trading and settlement
Term
Detail
Settlement cycle
T+1 (trade day + 1 working day) for all stocks since January 2023; India was among the first major markets to move to T+1
Optional T+0
Same-day settlement in a limited set of stocks (beta from March 2024)
Clearing corporations
NSE Clearing (NCL), Indian Clearing Corporation (ICCL, BSE), MCXCCL
Bull / bear market
Rising market / falling market
Circuit breaker
Trading halts when an index moves 10%, 15% or 20% in a day
Depositories
Point
Detail
Law
Depositories Act, 1996
NSDL
National Securities Depository Ltd, 1996 (India’s first depository), Mumbai
CDSL
Central Depository Services (India) Ltd, 1999, Mumbai; promoted by BSE
Demat account
Holds shares in electronic form through a Depository Participant (DP)
Other investment products
Product
Key fact
Mutual funds
Regulated by SEBI; industry body AMFI; India’s first mutual fund: UTI (1963)
ETF
Exchange Traded Fund; tracks an index or gold and trades like a share
REIT
Real Estate Investment Trust; invests in rent-earning property
InvIT
Infrastructure Investment Trust; invests in roads, power lines and similar assets
Debentures / bonds
Debt instruments; pay fixed interest
G-secs
Government securities; regulated by RBI; retail investors can buy through RBI Retail Direct (2021)
Exam-ready one-liners
SEBI was set up in 1988 and got statutory powers in 1992; HQ Mumbai.
BSE (1875) is Asia’s oldest stock exchange.
Sensex: 30 stocks, base 1978-79 = 100; Nifty: 50 stocks, base 1995 = 1,000.
IPO = first sale of shares; FPO = further sale by a listed company.
OFS money goes to the selling shareholder, not the company.
India moved fully to T+1 settlement in January 2023.
NSDL (1996) and CDSL (1999) are India’s two depositories.
