Indian city set around old marketplace (5)
I believe the answer is:
agora
'marketplace' is the definition.
(agora is a kind of marketplace)
'indian city set around old' is the wordplay.
'indian city' becomes 'agra' (city in India).
'set around' is an insertion indicator.
'old' becomes 'o' (abbreviation).
'agra' going around 'o' is 'AGORA'.
(Other definitions for agora that I've seen before include "Israeli monetary unit" , "Ancient Greek assembly place" , "money from Israel" , "meeting place" , "Ancient Greek marketplace or assembly area" .)