How Do Stock Exchanges Actually Work?

The exchanges themselves

India's two major stock exchanges are the BSE (Bombay Stock Exchange, Asia's oldest, home to the Sensex) and the NSE (National Stock Exchange, home to the Nifty 50). Both are electronic marketplaces - there's no physical trading floor shouting orders anymore; it's all order-matching software.

What actually happens when you place an order

1. You place a buy or sell order through your broker's app, specifying a price (or "market price" for immediate execution).
2. The exchange's matching engine looks for a corresponding order on the other side at a compatible price.
3. Once matched, the trade executes instantly and is confirmed back to both parties.

Settlement: T+1

Indian equity markets settle on a T+1 cycle - shares (and funds) actually move into your demat account and the seller's bank account one working day after the trade date. You don't have to do anything for this to happen; it's handled automatically between your broker, the exchange, and the depositories.

Demat and trading accounts

You need two things to buy shares directly: a demat account (holds your shares electronically, like a bank account but for securities) and a trading account (through which you place buy/sell orders) - most brokers bundle both together when you open an account.

What actually moves prices

A share's price moves purely based on the balance of buy and sell orders at any moment - more buyers than sellers at a given price pushes it up, and vice versa. Company news, earnings, broader market sentiment, and macroeconomic events all influence this buy/sell balance, but ultimately it's supply and demand for that specific stock, expressed through orders, that sets the price in real time.

The takeaway

Buying a stock isn't buying it "from the company" - it's buying it from another investor willing to sell, matched electronically through the exchange, with the whole transaction settling into your account within a day.