Over the Counter Market (OTC)
5paisa Research Team
Last Updated: 02 Jul, 2025 09:35 AM IST

Content
- What is the Over-the-counter-market?
- How Does the OTC Market Work?
- Risks of Over-the-Counter Markets
- Differences Between the OTC Market and Stock Exchanges
- What are the 3 OTC Markets?
- Is the OTC Market Safe?
- How to Buy OTC Stocks in India
- Risks of OTC Stocks
- Regulations of OTC in India
- Advantages & Disadvantages of OTC in India
- Things to Consider Before Buying OTC Stocks in India
- The Importance of OTC in Finance
- Conclusion
Think of the Over The Counter (OTC) market in India as a more flexible, informal alternative to the big stock exchanges like NSE or BSE. Instead of trading through centralised platforms, buyers and sellers deal directly—often through phone calls, emails, or digital platforms.
This market mainly caters to small and medium-sized businesses (SMEs) that aren’t listed on major exchanges yet. It’s a way for them to raise capital and for investors to explore new opportunities. But here’s the catch: with fewer rules and less oversight, OTC investing comes with more risk and less transparency.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.
Frequently Asked Questions
OTC stocks usually have low trading volume, less liquidity, larger spreads, and little publicly available information in comparison to their exchange-traded peers. Thus, it turns them into volatile investments that are quite speculative in nature.
More than 12,000 securities are traded on the OTC market. They include exchange-traded funds (ETF), stocks, commodities, bonds, and other derivatives. Unlike traditional exchanges like the Nasdaq or the New York Stock Exchange (NYSE), no physical location is associated with the OTC market.
Short selling is allowed on securities traded over the counter. However, it comes with potential problems as these stocks generally trade in low volumes. Therefore, an investor trying to cover an unprofitable short position will likely get stuck.
Over-the-counter stocks can be bought through authorised brokers from the OTC Exchange of India. As they often come at a significantly lower price, they carry the potential of attractive returns if the company performs well. However, there are equally high risks as well.
The OTC market in India is under the ownership of the Ministry of Finance, Government of India.