An order to buy or sell a security immediately at the best available current price, guaranteeing execution but not price.
A market order is an instruction to buy or sell a security immediately at the best available price in the Order Book. Unlike a Limit Order, a market order prioritises execution speed over price - execution is effectively guaranteed (assuming sufficient Liquidity), but the exact price may differ from what was on the screen.
On the NSE and BSE, a market buy order is matched against the lowest ask (sell) price in the order book, and a market sell order is matched against the highest bid (buy) price. If the quantity at the best price is insufficient to fill the entire order, the remaining quantity fills at the next best price, and so on. This is why large market orders on illiquid stocks can experience slippage.
For highly liquid stocks like Reliance, TCS, or HDFC Bank, market orders typically execute within ₹0.05-₹0.20 of the displayed price - negligible for most investors. On a small-cap stock with a bid-ask spread of ₹5, a market order can fill significantly away from the displayed price, in which case a limit order produces tighter execution.
Indian brokers also offer the SL-M (Stop-Loss Market) order, which triggers a market order when a specified price is breached. For a holding of Infosys at ₹1,500 with an SL-M at ₹1,450, when the price drops to or below ₹1,450, a market sell order is automatically placed. The actual execution price could be ₹1,448 or ₹1,445 depending on order book depth at that moment.
Market orders fit specific conditions: highly liquid stocks where the bid-ask spread is narrow, urgent exits (e.g., a stop-loss trigger), and small order quantities where slippage is negligible. For larger orders or illiquid stocks, limit orders provide tighter execution control.