What is NASDAQ? Meaning, Full Form & How It Works

NASDAQ, short for National Association of Securities Dealers Automated Quotations, is an American stock exchange based in New York City. It is the world’s second-largest stock exchange by market capitalisation and the first fully electronic exchange ever launched. NASDAQ is home to some of the biggest technology companies in the world, including Apple, Microsoft, NVIDIA, Amazon, and Alphabet. 

For Indian investors, NASDAQ offers a way to gain exposure to global technology leaders and diversify beyond domestic equities. This guide explains what NASDAQ is, how it works, its market structure, the difference between the NASDAQ Composite and NASDAQ 100 indices, the tax implications for Indian investors (LTCG at 12.5%), and three practical ways to invest in it from India in FY 2025-26: direct equity via LRS, rupee-denominated ETFs, and the GIFT City route. 

What is NASDAQ? 

NASDAQ is an American stock exchange where shares of publicly listed companies are bought and sold electronically. It is best known for hosting some of the world’s largest technology companies, including Apple, Microsoft, NVIDIA, and Amazon. Unlike traditional exchanges, NASDAQ operates entirely through a computerised network, with no physical trading floor. Trades are matched digitally between buyers and sellers through market makers and an automated order system, which makes execution faster and more transparent. 

Before it became the digital home of Silicon Valley, the stock market was a physical place where traders shouted orders on a floor. That changed in 1971. 

The Origins (1971):
NASDAQ stands for the National Association of Securities Dealers Automated Quotations. It was founded by the National Association of Securities Dealers (NASD), now known as FINRA. On February 8, 1971, it launched as the world’s first electronic stock market. Unlike the New York Stock Exchange (NYSE), which relied on a noisy trading floor, NASDAQ used a computer bulletin board system to display prices.

Evolution to an Exchange:
Initially, it was merely a quotation system and didn’t execute trades. By the 1990s, during the dot-com boom, it became the preferred venue for technology companies. In 2006, it officially separated from the NASD to become a licensed national securities exchange. Today, it is the second-largest exchange in the world by market capitalization, trailing only the NYSE, but often surpassing it in trading volume.

How does NASDAQ work?

NASDAQ operates as a fully electronic dealer market, which means all trades happen through a computerised network rather than a physical trading floor. When you place an order to buy or sell a NASDAQ-listed stock, the trade is routed through a market maker rather than being matched directly with another investor. 

For every stock listed on NASDAQ, multiple market makers compete for your order. Each one posts two prices: a bid price (the price at which they buy the stock from you) and an ask price (the price at which they sell it to you). The difference between the two is called the spread, which is the dealer’s profit. This competition keeps spreads tight, ensures continuous liquidity, and allows you to enter or exit positions quickly, even in volatile market conditions. 

Orders are matched, executed, and settled digitally within seconds. This electronic structure makes NASDAQ faster, more transparent, and able to handle higher trading volumes than traditional floor-based exchanges. 

NASDAQ Market Structure

Not all companies on the exchange are treated equally. To maintain quality and investor trust, the exchange is divided into three distinct market tiers based on financial strength and liquidity.

1. The Nasdaq Global Select Market

This is the most exclusive tier with the highest listing standards. It includes the massive tech giants and large-cap international companies. Think of this as the “Ivy League” of the exchange. Indian ADRs like Infosys and HDFC Bank (listed on NYSE) would meet these stringent criteria if they chose this venue.

2. The Nasdaq Global Market

This tier consists of mid-cap companies. These are established firms with global operations but may not yet meet the massive financial requirements of the Select Market. It offers a balance of visibility and strict regulation.

3. The Nasdaq Capital Market

Previously known as the “SmallCap Market,” this tier is for early-stage companies with lower market capitalization. It serves as an incubator for growth companies. Listing requirements here are less stringent, allowing smaller firms to raise capital and grow before graduating to higher tiers.

NASDAQ vs NYSE: Key Differences 

How Companies Get Listed on NASDAQ?

For a company to list its “scrips” (shares) on the exchange, it must meet rigorous financial, liquidity, and corporate governance standards. These include minimum pre-tax earnings, cash flow, and a minimum bid price (usually $4).

 Can Indian Companies List on NASDAQ?

As of November 2025, Indian companies cannot directly list their equity shares on foreign exchanges like NASDAQ or NYSE. Instead, they use American Depositary Receipts (ADRs).

How ADRs Work:

1. Deposit: The Indian company deposits its shares with a domestic custodian bank.
2. Issue: A US depository bank (like JP Morgan or Citibank) issues receipts (ADRs) against these shares.
3. Trade: These ADRs trade on NASDAQ just like regular US stocks.

Notable Indian ADRs:
While many Indian giants like HDFC Bank and ICICI Bank are listed on the NYSE, companies like MakeMyTrip (technically Mauritius-incorporated but India-centric) and Sify Technologies trade on NASDAQ.

The GIFT City Exception:
Recent regulations allow Indian companies to list on the International Financial Services Centre (IFSC) in GIFT City, Gujarat. While this is not a direct NASDAQ listing, it is a step towards global capital access.

NASDAQ Index: Composite vs NASDAQ 100 

New investors often confuse the exchange with the index. Here is the difference: 

How to Invest in NASDAQ from India? 

In FY 2025-26, Indian investors have three primary routes to own a piece of the US market. Each has different tax and regulatory implications.

Method 1: Direct Investment via LRS

You can open a US brokerage account through platforms (like Vested, INDmoney, or your bank’s overseas tie-up) and buy stocks directly.

• Regulation: Under the Liberalised Remittance Scheme (LRS), you can remit up to $250,000 (approx. ₹2.1 crore) per financial year.
• TCS Rules (Budget 2025):
  • Remittance up to ₹10 lakh: Nil TCS.
  • Remittance above ₹10 lakh: 20% TCS (Tax Collected at Source). This is not an extra cost but an advance tax you can claim back in your ITR.
• Pros: You own the actual stock/ETF. No expense ratio from Indian fund house.
• Cons: High wire transfer fees; currency conversion costs.

Method 2: Indian Mutual Funds & ETFs

You can buy rupee-denominated Mutual Funds or ETFs listed on NSE/BSE that invest in US stocks.

• Examples: Motilal Oswal Nasdaq 100 ETF or Kotak Nasdaq 100 Fund of Fund.
• Status Check (Nov 2025): SEBI has an industry-wide limit on overseas investments ($7 billion). While existing ETFs trade on the exchange, fresh lumpsum inflows into Fund of Funds (FoFs) are occasionally paused when the limit is breached. Always check the current subscription status with the AMC.
• Pros: Easy to buy via your standard demat account; no LRS paperwork.
• Cons: Expense ratios can be higher; tracking error due to currency/market timing.

Method 3: NSE IFSC (GIFT City)

This is the newest route. You can trade in “unsponsored depository receipts” of top US companies through the NSE International Exchange (NSE IFSC).

• Mechanism: You open a demat account with a broker registered in GIFT City.
• Pros: Lower costs than direct LRS; regulated by IFSCA.
• Cons: Liquidity is still developing compared to direct US markets.

Conclusion

Investing in NASDAQ offers Indian investors a front-row seat to global innovation. Whether you choose the direct LRS route or the convenience of domestic ETFs, the key is consistency. Remember, while US markets offer dollar diversification, they also come with currency risk and different tax rules. By understanding what is NASDAQ and how it functions, you can build a robust, geographically diversified portfolio that isn’t solely dependent on the Indian economy.

Ready to diversify globally? Open your PL Capital account and explore international ETFs today.

FAQ’s on NASDAQ

1. What are NASDAQ Trading Hours?

As of November 2025 (Standard Time), the trading hours are 9:30 AM to 4:00 PM Eastern Time. For Indian investors, this converts to 8:00 PM to 2:30 AM IST. Pre-market and after-hours trading sessions exist but carry higher volatility risks.

2. What is the difference between NSE and NASDAQ?

NSE is an order-driven auction market where buyers/sellers match directly. NASDAQ is a quote-driven dealer market where market makers provide liquidity. Additionally, NSE lists Indian companies, while NASDAQ is a US exchange hosting global tech giants.

3. What is NASDAQ 100 Index?

The Nasdaq 100 is an index comprising the 100 largest non-financial companies listed on the exchange. It is a modified market-capitalization-weighted index and is the primary benchmark for investors seeking exposure to the technology, biotech, and consumer sectors.

4. What type of companies do you find in NASDAQ?

You primarily find growth-oriented companies in technology (Apple, Microsoft), consumer services (Amazon, Starbucks), and biotechnology (Moderna, Gilead). Unlike the NYSE, it has very few financial institutions or heavy industrial firms.

5. How are US stocks taxed for Indian investors?

For AY 2026-27, Long-Term Capital Gains (LTCG) (held > 24 months) are taxed at 12.5%. Short-Term Capital Gains (STCG) are taxed at your applicable income tax slab. Dividends are taxed at your slab rate, plus a 25% tax withheld in the US (claimable as credit).

7. How can Indians invest in NASDAQ?

Yes, Indian residents can invest directly in NASDAQ and other US stock markets. You can invest up to USD 250,000 per financial year via the Liberalised Remittance Scheme (LRS). PL Capital lets you invest in US stocks directly through its app and website, giving you access to NASDAQ-listed companies like Apple, Microsoft, NVIDIA, and Amazon.