How Indian stock markets work: exchanges, brokers, depositories and settlement
Who does what in the Indian stock market, how a trade travels from order to settlement, trading hours, circuit limits and how indices work, in plain language.
The stock market is where shares of listed companies are bought and sold. Several separate institutions make that work, each with a specific job. This guide explains who they are and how a trade moves from an order to a completed transaction. It describes how the system works, not what any share will do.
At a glance
| Who | Job |
|---|---|
| Stock exchanges (NSE, BSE) | Run the markets where buyers and sellers are matched |
| Brokers | Members of the exchange who place orders for their clients |
| Depositories (NSDL, CDSL) | Hold shares in electronic form, in demat accounts |
| Clearing corporations | Guarantee and settle trades between buyers and sellers |
| SEBI | The regulator of the securities market |
| RBI | The central bank; regulates banks and money, not the stock market itself |
Two accounts you need
- A trading account with a broker, to place orders.
- A demat account with a depository participant, to hold shares electronically. Most people open both at the same broker.
- A bank account is linked to both, and KYC (know your customer) checks are done once.
How a trade works
- You place an order through your broker: which share, how many, and at what price.
- The broker sends it to the exchange, where it is matched with an opposite order.
- The trade is cleared by the clearing corporation, which works out who owes what.
- Settlement follows: money moves from the buyer to the seller, and shares move from the seller’s demat account to the buyer’s. Equity trades in India settle on the next working day, called T+1. See what T+1 settlement means.
Order types
- Market order: buy or sell immediately at the best available price.
- Limit order: buy or sell only at a price you set or better; it may not be filled.
- Orders can be for the same day or, for some types, remain open. Your broker’s platform lists what it offers.
Trading hours
The main equity session runs on weekdays. It opens at 9:15 a.m. India time, after a short pre-open session that sets opening prices, and closes in the mid-afternoon. Closing arrangements differ by stock and are set by the exchanges, so check the exchange’s own schedule. The exchanges also publish the calendar of market holidays each year.
Circuit limits
To limit sudden moves, the exchanges apply circuit limits: a share cannot trade beyond a set percentage above or below the previous close in a day, and trading pauses at that band. There are also market-wide pauses triggered by large index moves. The exact bands are set by the exchanges and vary by share.
What an index is
An index is a calculated number that tracks a group of shares, for example a set of large companies. It is a summary of those shares’ prices, weighted in a defined way. It is not an investment in itself; separate products may be built to track one. Index methods are published by the index provider.
Where prices come from
Prices come from the orders of many buyers and sellers. Nobody sets the price; it moves as orders arrive. This guide does not explain why any price moves, and no page on this site predicts prices.
Common questions
Who protects investors? SEBI regulates the market and sets rules for brokers, exchanges and companies. It runs an investor education website and a complaints system.
Do I own the share or does the broker? You do. The shares sit in your demat account with the depository, not with the broker.
Can I trade outside these hours? Some other sessions and products exist. Your broker and the exchange sites list them.
Where company numbers come from is covered in the guide to company filings; how results are published is in the quarterly results guide.