Final Black Book.docx

RESEARCH METHODOLOGY

1. BACKGROUND OF THE TOPIC The topic, I selected is the “The Overview of Bombay Stock Exchange”. This topic is challenging and related to the various functions, activities & services which BSE offers. 2. OBJECTIVE OF THE STUDY The following are the objectives undertaken for the study of Bombay Stock Exchange: 1) To obtain information regarding stock market. 2) To study the procedure & workings of Stock Exchange. 3) To obtain in depth knowledge about BSE. 4) To understand the behaviour of stock market investors.

3. SCOPE & IMPORTANCE OF THE STUDY 1. This project helped me to know more about Bombay Stock Exchange. It gave me practical as well as theoretical knowledge. 2. The study of the project has improved my knowledge from economics point of view. 3. It has cleared many of my doubts regarding functioning of stock exchanges.

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4. METHODS OF DATA COLLECTION I collected data via both Primary as well as secondary Data.

Primary DataI asked few questions to the Stock market investors. Secondary Data Books  Websites

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Chapter

Contents

1 Introduction

Page.No 10-22

1.1 Executive summary 1.2 Introduction 1.3 Bombay Stock Exchange(BSE) 1.4 BSE History 1.5 Vision 1.6 Need fo BSE 1.7 Functions of BSE 1.8 Technological Impact on BSE 1.9 Minimum requirement for listing in BSE 2 Shares

23-35

2.1 Shares 2.2 Classifications of shares 2.3 Top 30 companies listed in BSE 2.4 Procedure to buy shares online 3 Indices used in BSE

36-52

3.1 Indices used in BSE 3.2 calculation of sensex 3.3 Milestones 4 Players in Stock exchange

53-61

4.1 Investors 4.2 Market Makers 4.3 Mutual funds 4.4 Underwriters 4.5 Foreign institutional investors (FII) 5 SEBI

62-66

5.1 Introduction 5.2 Functions of SEBI 5.3 Powers of SEBI 5.4 Limitations of SEBI

3

6 Awards achieved by BSE

67-70

6.1 Awards achieved by BSE 6.2 Heritage 6.3 Several Firsts Data analysis& interpretation

71-75 76

Conclusion Annexure

77

Bibliography &Webliogarphy

78

4

Chapter 1-

Introduction

Contents: 1.1 Executive Summary 1.2 Stock exchange 1.3 Bombay Stock Exchange (BSE) 1.4 BSE History 1.5 Vision & logo 1.6 Need of BSE 1.7 Functions of BSE 1.8 Technological Advancement in BSE 1.9 Minimum requirement for listing in BSE

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1.1 Executive Summary BSE is the oldest stock exchange in India. It was established in year 1875. It is ranked 1st in India, 6th in Asia and 14th in world in terms of market capitalization. It also has the title of largest number of company listed in the world. Over 5112 listed companies are listed in BSE. The equity market capitalization of the total companies listed is more than US $1 trillion as of Dec 2011. BSE is 1st in India and 2nd in world to obtain ISO 9001:2000 certification. BSE has been the backbone of country’s capital market located in PhirozeJeejobhoy tower, Dalal Street in Mumbai which is financial capital of India. Bse carries in-depth knowledge of capital market acquired since its inception in 1875. The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark index. It has also launched many sectorial indices to monitor the growth of a particular sector like FMCG, automobile industry, banking industry to name a few. To facilitate smooth transactions, BSE had replaced its open outcry system with the BSE On-line Trading (BOLT) facility in 1995. This totally automated, screen-based trading in securities was put into practice nation-wide. BSE has classified Equity scripts into categories A, B1, B2, S, T, TS, & Z to provide guidance to the investors. The classification is on the basis of several factors like market capitalization, trading volumes and numbers, track records, profits, dividends, shareholding patterns, and some qualitative aspects.

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1.2Stock exchange Stock exchange is a marketplace in which securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange - such as a stock exchange - is to ensure fair and orderly trading, as well as efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments and other groups a platform to sell securities to the investing public. An exchange may be a physical location where traders meet to conduct business or an electronic platform. May also be referred to as "share exchange" or "bourse" depending on geographical location.A stock exchange is a form of exchange which provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of increased speed and reduced cost of transactions. Trade on an exchange is by members only. There are 24 stock exchanges in India. Among them two are national level stock exchanges, namely the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE). The other 22 are Regional Stock Exchanges (RSE).

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1.3 Bombay Stock Exchange(BSE) The Phiroze Jeejeebhoy Towers, popularly known by its original name of BSE Towers, is a 29 storey building in downtown Mumbai on Dalal Streetand is the oldest stock exchange in Asia. The equity market capitalization of the companies

listed

on

the

BSE

was US$1 trillion as of December 2011, making it the 6th largest stock exchange in Asia and the 14th largest in the world. The BSE has the largest number of listed companies in the world. As of December 2011, there are over 5,112 listed Indian companies, the Bombay Stock Exchange has a significant trading volume. TheBSE SENSEX, also called "BSE 30", is a widely used market index in India

and Asia.

Though

many

other

exchanges exist, BSE and the National Stock Exchange of India account for the majority of the equity trading in India. While both have similar total market capitalization (about USD 1.6 trillion), share volume in NSE is typically two times that of BSE. BSE Limited is the oldest stock exchange in Asia what is now popularly known as the BSE was established as "The Native Share & Stock Brokers’ Association" in 1875. Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform. Today, BSE is the world's number 1 exchange in the world in terms of the number of listed companies. It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31, 2009). The companies listed on BSE command a total market capitalization of USD Trillion 1.28 as of Feb, 2010.BSE is the first 8

exchange in India and the second in the world to obtain an ISO 9001:2000 certification. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE On-Line trading System (BOLT). Presently, BSE is ISO 27001:2005 certified, which is a ISO version of BS 7799 for Information Security. The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on BSE and in Hong Kong. Futures and options on the index are also traded at BSE.

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1.4BSE History The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history to the 1850s, when four Gujarati and one Parsi stockbroker would gather under banyan trees in front of Mumbai's Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as 'The Native Share & Stock Brokers Association'. In 1956, the BSE became the first stock exchange to be recognized by theIndian Government under the Securities Contracts Regulation Act. The Bombay Stock Exchange developed the BSE SENSEX in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading SENSEX futures contracts. The development of SENSEX options along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform. Historically an open outcry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition. This automated, screen-based trading platform called BSE On-line trading (BOLT) currently has a capacity of 8 million orders per day. The BSE has also introduced the

world's

first

centralized

exchange-based

internet

trading

system,

BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE platform. The BSE is currently housed in PhirozeJeejeebhoy Towers at Dalal Street, Fort area.

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1.5Vision, Logo & Management team Vision "Emerge as the premier Indian stock exchange by establishing global Benchmarks”

Logo The Stock Exchange, Mumbai is now BSE Limited a new name, and an entirely new perspective a perspective born out of corporatization and demutualization. As a corporate entity, our new logo reflects our new mission smoother, seamless, and efficient, whichever way you look at it. BSE is Asia's oldest stock exchange carrying the depth of knowledge of capital markets acquired since its inception in 1875. Located in Mumbai, the financial capital of India, BSE has been the backbone of the country's capital markets.

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Management Team No.

Name

Designation

1

Mr. Madhu kannan

Managing Director & CEO

2

Mr. ashishkumarchauhan

CEO

3

Mr. balasubramaniam

Chief Business Officer

4

Mr. nehalvora

Chief regulatory officer

5

Mr. kersiTavadia

Chief Information Officer

6

Mr. V.K Agarwal

Chief Financial Officer

7

Dr. Sayee Srinivasan

Head- Product Strategy Head-

market

8

Mr. Rahul paulekar

Development

9

Mr. Lakshman Gogulothu

CEO- SME Exchange

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1.6Need for BSE BSE is one of the factors Indian Economy depends upon. BSE has played a major role in the development of the country. Through BSE, Foreign Investors have invested in India. Due to inward flow of foreign currency the, the Indian economy has started showing the upward trend towards the development of the country. BSE provides employment for many people. Trading in BSE is also a business for a few, their family income depends on it that is the reason why when scandals occur in the stock market it not only affects the companies listed but also affects many families. In the few extreme cases, it is observed that the bread winner of a family tends to suicide due to the losses occurred. In most of major industrial cities all over the world, where the businesses were evolving and required investment capital to grow and thrive, stock exchanges acted as the interface between Suppliers and Consumers of capital. One of the key advantages of the stock exchanges is that they are efficient medium for raising resources and channeling savings from the general public by the way of issue of Equity / Debt Capital by joint stock companies which are listed on stock exchanges. The taxes and other statutory charges paid by BSE are substantial and make a sizeable contribution to the Government exchequer (Financial resources; funds). For example, transactions on the stock exchanges are subject to stamp duties, which are paid to the State Government. The annual revenue from this source ranges from Rs 75 – 100 crores. With the opening up of the financial markets to Foreign Investors a number of foreign institutional investors and brokers have established a sizeable presence in Mumbai. With no doubt we can clearly state without BSE, the Indian Economy would have been a complete different story. Various companies wouldn’t have been a strong and successful as they are today and the brokers and traders would have been elsewhere. 13

BSE is an asset to our country and its existence plays a vital role in many people’s life who depends on it. Indeed, BSE has made a major contribution to the industrial and economic development of India.

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1.7Functions of BSE The Bombay Stock Exchange is a pivotal institution in the financial system of India. A well-ordered stock market performs several economic functions: •It ensures the measure of safety and fair dealing •It performs an ‘act of magic’ by translating short-term investments into long-term funds for companies. •It directs the flow of capital in the most profitable channels. •It induces companies to raise their standard of performance. •It offers guidance to management about the cost of capital.

1. Measure of Safety and Fair Dealing: BSE operates under a regulatory framework which seeks to protect the interest of investors. The rules, regulations, and bye-laws of a stock exchange, which are approved by the central government, are meant to ensure that a reasonable measure of safety is provided to investors and transactions take place in competitive conditions which are fair to all concerned. 2. Act of Magic: Most of the investors are interested in short-term investments. The requirements of companies are, however, long-term in nature—they require equity capital on a more or less permanent basis and debenture capital for 3 to 15 years. Thanks to the negotiability and transferability of securities, through the stock market, it is possible for companies to obtain their long-term requirements from investors with short-term horizons. While one investor is substituted by another when a security is transacted, the company is assured of availability of funds. 3. Flow of Capital in the Most Profitable Channels: Companies which have more profitable investment opportunities are normally able to raise substantial funds through the stock market, whereas companies which do not have such opportunities are normally not able to do so. 15

As a result, the stock market facilitates the direction of the flow of capital in the most profitable channels. 4. Inducement to Companies to Raise their Standard of Performance: When the equity, capital of a company is listed on a stock exchange, the performance of the company is reflected in the market price of the equity stock, which is readily available for public consumption. Put differently, the company’s performance is more ‘visible’ in the eyes of public. Such a public exposure normally induces companies to raise their standard of performance. 5. Guidance of Cost of Capital: The market values of the securities of company are required for computing its cost of capital. Such values can be obtained from stock market quotations. Hence the stock market offers guidance on cost of capital.

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1.8Technological Advancement in BSE BSE places a great deal of emphasis on Information Technology for its operations and performance. The 'Operations & Trading Department' at BSE continuously upgrades the hardware, software and networking systems, thus enabling BSE to enhance the quality and standards of service provided to its members, investors and other market intermediaries. BSE strictly adheres to IS policies and IS Security policies and procedures for its day-to-day operations on 24x7 basis which has enabled it to achieve the BS7799 certification and the subsequent ISO 27001 certification. In addition, BSE has also been successful in maintaining systems and processes uptime of 99.99%. 1. Dematerialization With the age of computers and the Depository Trust Company, securities no longer need to be in certificate form. They can be registered and transferred electronically. This enables speedy transactions and also saves cost. 2. BOLT To facilitate smooth transactions, BSE had replaced its open outcry system with the BSE On-line Trading (BOLT) facility in 1995. This totally automated, screen-based trading in securities was put into practice nation-wide within a record time of just 50 days. BOLT has been certified by DNV for conforming to ISO 27001:2005 security standards. The capacity of the BOLT platform stands presently enhanced to 80 lakh orders per day. BOLT is the trading platform used by all the dealers / terminal operators to punch the buy/sell orders. The orders are updated on this computer and broadcast to all the terminals instantly. The trades and orders information is updated continuously 3. BSEWebx.co.in BSE has also introduced the worlds first centralized exchange based Internet trading system, BSEWEBx.co.in. The initiative enables investors anywhere in the world to trade on the BSE platform. 17

4. bseindia.com BSE's website www.bseindia.com provides comprehensive information on the stock market. It is one of the most popular financial websites in India and is regularly visited by financial organizations and other stakeholders for updates. 5. Large Private Network BSE operates a large private network in India. The network uses following segments to cater to market intermediaries:

BSE's Campus LAN Connects market participant offices across 28 floors of BSE campus to BSE systems. BSE Campus comprises of 3 BSE buildings: P.J. Towers, Rotunda and Cama building.



BSE WAN TDM / MPLS lines from different service providers cater to connectivity requirements of market participants across the country. Wired / Wireless media is used.

VSATs: Satellite based communication system serves the connectivity requirements of market participants in remote areas.

Services are provided

through BSE's Satellite Communication Hub in Mumbai. BSE Online Surveillance System - integrated (BOSS-i). an Real-time system to closely monitor the trading and settlement activities of the member-brokers. This system enables BSE to detect market abuses at a nascent stage, improve the risk management system and strengthen the self-regulatory mechanisms.

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1.9Minimum Listing Requirements for listing in BSE The following eligibility criteria have been prescribed for listing of companies on BSE, through Initial Public Offerings (IPOs) & Follow-on Public Offerings (FPOs): 

The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as "the Company") shall be Rs. 10 crore for IPOs & Rs.3 crore for FPOs; and



The minimum issue size shall be Rs. 10 crore; and



The minimum market capitalization of the Company shall be Rs. 25 crores.

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Chapter 2 Shares & Other Securities

Contents: 2.1 Securities dealt in BSE 2.2 classifications of Shares 2.3 Top 30 companies listed in BSE 2.4 Procedure to buy shares online

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2.1 Securities Dealt in Stock Exchange (A) Shares Aunitof ownership interest in a corporation or financial asset. While owning shares in a business does not mean that the shareholder has direct control over the business's day-to-day operations, being a shareholder does entitle the possessor to an equal distribution in any profits, if any are declared in the form of dividends.

Types of shares The capital of the company can be divided into different units with definite value called shares. Holders of these shares are called shareholders or members of the company. There are two types of shares which a company may issue (1) Preference Shares (2) Equity Shares.

(1) Preferences Shares Shares which enjoy the preferential rights as to dividend and repayment of capital in the event of winding up of the company over the equity shares are called preference shares. The holder of preference shares will get a fixed rate of dividend. Preference shares may be (a) Cumulative Preference Share: If the company does no earn adequate profit in any year, dividends on preference shares may not be paid for that year. But if the preference shares are cumulative such unpaid dividends on these shares go on accumulating and become payable out of the profits of the company, in subsequent years. Only after such arrears have been paid off, any dividend can be paid to the holder of quality shares. Thus a cumulative preference shareholder is sure to receive dividend on his shares for all the years our of the earnings of the company.

(b) Non-cumulative Preference Shares

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The holders of non-cumulative preference shares no doubt will get a preferential right in getting a fixed dividend it is distributed to quality shareholders. The fixed dividend is to be paid only out of the divisible profits but if in a particular year there is no profit as to distribute it among the shareholders, the non-cumulative preference shareholders, will not get any dividend for that year and they cannot claim it in the next year during which period there might be profits. If it is not paid, it cannot be carried forward. These shares will be treated on the same footing as other preference shareholders as regards payment of capital in concerned.

(c) Redeemable Preference Shares Capital raised by issuing shares, is not to be repaid to the shareholders (except buy back of shares in certain conditions) but capital raised through the issue of redeemable preference shares is to be paid back by the raised thought the issue of redeemable preference shares is to be paid back to the company to such shareholders after the expiry of a stipulated period, whether the company is wound up or not.

(2) Equity Shares Equity shares will get dividend and repayment of capital after meeting the claims of preference shareholders. There will be no fixed rate of dividend to be paid to the equity shareholders and this rate may vary from year to year. This rate of dividend is determined by directors and in case of larger profits, it may even be more than the rate attached to preference shares. Such shareholders may go without any dividend if no profit is made.

(3) Deferred shares: These shares are those shares which are held by the founders or pioneer or beginners of the company. They are also called as Founder shares or Management shares. In deferred shares, the right to share profits of the company is deferred, i.e. postponed till all the other shareholders receive their normal dividends. Being the last claimants of the profits, they have a considerable 22

element of speculation or uncertainty and they have to bear the greatest risk of loss. The market price of such shares shows a very wide fluctuation on account of wide dividend fluctuations. Deferred shares have disproportionate voting rights. These shares have a small denomination or face value.

(4) Bonus shares: The word bonus means a gift given free of charge. Bonus shares are those shares which are issued by the company free of charge as bonus to the shareholders. They are issued to the existing shareholders in proportion to their existing share holdings. It is a kind of gift to the shareholders from the company. It is bonus in the form of shares instead of cash. It is given out of accumulated profits and reserves. These shares have all types of preferences which are available to the existing shares. For example. Two bonus shares for five equity shares. The issue of bonus shares is also termed as capitalization of undistributed profits. Bonus shares is a type of windfall gain to the equity shareholders. They are advantageous to the equity shareholders as they get additional shares free of cost and also they earn dividend on them in future.

(B) Bonds A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities. Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents. It is a fixed income (debt) instrument issued for a period of more than one year with the purpose of raising capital. The central or state government, corporations and similar institutions sell bonds. A bond is generally a promise to repay the principal along with a fixed rate of interest on a specified date, called the Maturity Date. (C) Debentures

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A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer.Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts.

Today BSE provides an efficient and transparent market for trading in equity, currencies, debt instruments, derivatives, mutual funds. It also has a platform for trading in equities of small-and-medium enterprises (SME). India INX, India's 1st international exchange, located at GIFT CITY IFSC in Ahmedabad is a fully owned subsidiary of BSE. BSE is also the 1st listed stock exchange of India.

BSE provides a host of other services to capital market participants including risk management, clearing, settlement, market data services and education. It has a global reach with customers around the world and a nation-wide presence. BSE systems and processes are designed to safeguard market integrity, drive the growth of the Indian capital market and stimulate innovation and competition across all market segments. BSE is the first exchange in India and second in the world to obtain an ISO 9001:2000 certification. It is also the first Exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its On-Line trading System (BOLT). It operates one of the most respected capital market educational institutes in the country (the BSE Institute Ltd.). BSE also provides depository services through its Central Depository Services Ltd. (CDSL) arm.

BSE's popular equity index - the S&P BSE SENSEX - is India's most widely tracked stock market benchmark index. It is traded internationally on the EUREX as well as leading exchanges of the BRCS nations (Brazil, Russia, China and South Africa).

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Bombay Stock Exchange, under new CEO Madhu Kannan, wants to re-invent itself. Is it too late? Before the year is over, Sensex, which comprises the 30 most-traded shares on Bombay Stock Exchange (BSE), will begin to trade on Deutsche Borse, Europe’s largest stock exchange. The stated intention of the move is to draw the attention of large investors abroad to the happening Indian stock markets. The unstated intention is to regain market share and mind space from arch rival National Stock Exchange (NSE). Nifty, the NSE index of top 50 shares, is already traded in the United States and Singapore. BSE, which traces its history to 1875, has been hammered black and blue by NSE which was born as a “child of competition” in 1992. BSE’s share of stock trading, cash as well as derivatives, has fallen from 45 per cent in 2000 to 12 per cent in 2005 and just 6 per cent now. NSE has a virtual monopoly over derivatives (futures and options) trading in the country. This is a vicious cycle. In stock markets, liquidity breeds liquidity. Because of higher liquidity, the bid-ask spreads (the difference between the best buy and best sell prices of any scrip) on NSE are lower, which brings down the transaction costs for brokers. So, NSE’s position as the preferred stock exchange gets strengthened day after day, week after week. MR Mayya, a former executive director of BSE, says that the securities scam of 2001, wherein some BSE officials were accused of leaking market-sensitive information, was the final straw. “That was the point when BSE began to lose out and people moved on to NSE,” says he. More than that, BSE was unable to read the trend correctly when derivatives trading started in the country in June 2000. NSE, with its nationwide reach, was able to capitalise on it better. The daily volumes in the derivatives segment are now close to Rs 90,000 crore — way above the Rs 20,000 crore in the cash segment — and almost the entire trade is carried out on NSE. Moreover, NSE has put in place strong system and compliance processes that have ensured that the exchange never suffered on account of any payment issue. Even when the market went through tough times in 2008, thanks to the liquidity crunch, there was never any stoppage. Equity trading is big business. Transactions have grown at a compounded annual rate of 46 per cent in the last 14 years. The future too looks good. Analysts at IDFC SSKI estimate that with improving penetration, volumes could grow at 12 per cent per annum till 2014 and will reach the size of $5.3 trillion (Rs 2,46,10,000 crore) per annum. Operating profit margins of a stock exchange can be as high as 60 per cent. The stakes are too big for BSE to throw in the towel. It has a gameplan ready to recover lost ground. BSE, for a long time, was seen as a club of a select few and a largely westernIndia-oriented exchange. “Repositioning ourselves as a national exchange with professionals and persons of eminence guiding us has been the first step,” says BSE Managing Director & CEO Madhu Kannan. Before he took up this assignment in June last year, Kannan was the managing director of Bank of

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America Merrill Lynch. He has also worked as a senior executive with NYSE Euronext.

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2.2 Classifications of shares An investor can choose from more than 5,112 listed companies, which for easy reference, are classified into A, B, S, T and Z groups. What is Group A, B1, B2, S, T, TS, & Z classification of BSE? The Bombay Stock Exchange (BSE), India’s leading stock exchange, has classified Equity scripts into categories A, B1, B2, S, T, TS, & Z to provide guidance to the investors. The classification is on the basis of several factors like market capitalization, trading volumes and numbers, track records, profits, dividends, shareholding patterns, and some qualitative aspects. As on February 2008 following criterion are used for classifying stocks into various categories by the Bombay Stock Exchange (BSE). Group A: It is the most tracked class of scripts consisting of about 200 scripts. Market capitalization is one key factor in deciding which scrip should be classified in Group A. At present there are 216 companies in the A group. Group S: “The Exchange has introduced a new segment named “BSE Indonext” w.e.f. January 7, 2005. The “S” Group represents scripts forming part of the “BSEIndonext” segment. “S” group consists of scripts from “B1” & “B2” group on BSE and companies exclusively listed on regional stock exchanges having capital of 3 crores to 30 crores. All trades in this segment are done through BOLT system under S group.” Group Z: “The ‘Z’ group was introduced by the Exchange in July 1999 and includes the companies which have failed to comply with the listing requirements of the Exchange and/or have failed to resolve investor complaints or have not made the required arrangements with both the Depositories, viz., Central Depository 27

Services (I) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) for dematerialization of their securities.” Group B1 & B2: All companies not included in group ‘A’, ‘S’ or ‘Z’ are clubbed under this category. B1 is ranked higher than B2. B1 and B2 groups will be merged as a single Group B effective from March 2008. Group T: “It consists of scripts which are traded on trade to trade basis.” Group TS: “The “TS” Group consists of scripts in the “BSE-Indonext” segments which are settled on a trade to trade basis as a surveillance measure.”

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2.3 Top 30 companies listed in BSE The BSE Sensex currently consists of the following 30 major Indian companies as of 17 February 2012.

#

Company

Industry

1

Housing Development Finance Corporation Consumer finance

2

Cipla

Pharmaceuticals

3

Bharat Heavy Electricals

Electrical equipments

4

State Bank Of India

Banking

5

HDFC Bank

Banking

6

Hero Motocorp

Automotive

7

Infosys

Information Technology

8

Oil and Natural Gas Corporation

Oil and gas

9

Reliance Industries

Oil and gas

10 Tata Power

Power

11 Hindalco Industries

Metals and Mining

29

#

Company

Industry

12 Tata Steel

Steel

13 Larsen & Toubro

Conglomerate

14 Mahindra & Mahindra

Automotive

15 Tata Motors

Automotive

16 Hindustan Unilever

Consumer goods

17 ITC

Conglomerate

18 Sterlite Industries

Metals and Mining

19 Wipro

Information Technology

20 Sun Pharmaceutical

Pharmaceuticals

21 GAIL

Oil and gas

22 ICICI Bank

Banking

23 Jindal Steel & Power

Steel and power

30

#

Company

Industry

24 Bharti Airtel

Telecommunication

25 Maruti Suzuki

Automotive

26 Tata Consultancy Services

Information Technology

27 NTPC

Power

28 DLF

Real estate

29 Bajaj Auto

Automotive

30 Coal India

Metals and Mining

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2.4 Procedure to buy shares online Online buying of shares is very easy. There are some simple steps to follow for people who want to buy shares first time. 1. Choose best stock broker: A stock broker is like a consultant who is expert into stock market and is authorized by SEBI. Stock broker has deep knowledge of the market as they keep on doing the research work and can guide to buy shares for the best benefits.Only the members of the stock exchange can. These members are called brokers and they buy and sell shares on behalf of investors. So, if someone wants to start investing in shares, they can do it only through a broker. 2. Open demat and trading account: Gone are the days when shares were held as physical certificates. Today, they are held in an electronic form in demat accounts. Demat refers to a dematerialized account. To buy shares you need to have your own demat and trading account. Demat account hold securities which you buy. It can be open through financial brokers. Trading account is required to buy or sell shares. A bank account is also required to carry out financial transactions with the trading account in which the money is credited and debited on purchase and sell of shares. Let's say portfolio of shares looks like this: 40 shares of Infosys, 25 of Wipro, 45 of HLL and 100 of ACC. They will show in the demat account. One doesn’t have to possess any physical certificates showing you own these shares. They are all held electronically in theaccount. Periodically, accountholder will get a demat statement telling what shares one has in his demat account.

3. Buying and selling shares: When an investor wants to buy or sell a share, he has to login the Trading account software with account details and password and selects which share is to buy or sell, define the number of shares, company name and the price at 32

which he wants to buy or sell. At the desired price is reached, this trade gets executed. The amount will be debited or credited from the Bank account and the shares are debited or credited into the Demat account. Following are the list of leading stock brokers in India 1. Share khan 2. India Infoline 3. ICICI Direct 4. Motilal Oswal 5. Angel Broking 6. Indiabulls 7. Religare 8. Geojit financial services 9. Anand rathi securities ltd 10. Reliance money

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Chapter 3Indices used in BSE

Contents: 3.1 Indices used in BSE 3.2 Calculation of Sensex 3.3 Milestones achieved by Sensex

34

3.1 Indices used in BSE 1). Broad market Indices a. BSE SENSEX The BSE SENSEX, also called the BSE 30 or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 wellestablished and financially sound companies listed on Bombay Stock Exchange. The 30 component companies which are some of the largest and most actively traded stocks are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX is taken as 100 on April 1, 1979, and its base year as 1978-79. On 25 July, 2001 BSE launched DOLLEX-30, a dollar-linked version of SENSEX. As of 21 April 2011, the market capitalisation of SENSEX was about

29,733 billion (US$593

billion)(42.34% of market capitalization of BSE), while its free-float market capitalization was

15,690 billion (US$313 billion).

b. BSE100 BSE-100 Index is a broad based Index. This Index has 1983-84 as the base year and was launched in 1989. In line with the shift of the BSE Indices to the globally accepted Free-Float methodology, BSE-100 was shifted to FreeFloat methodology effective from April 5, 2004. The method of computation of Free-Float index and determination of free-float factors is similar to the methodology for SENSEX. Over the years, the number of companies listed on BSE continued to register a phenomenal increase; from 992 in to over 3,200 companies by March 1994, with combined market capitalization rising from Rs.5,421 crore to Rs. 3,98,432 crore as on 31st March, 1994.

c. BSE200

35

Though SENSEX (1978-79=100) was serving the purpose of quantifying the price movements as also reflecting the sensitivity of the market in an effective manner, the rapid growth of the market necessitated compilation of a new broadbased index series reflecting the market trends in a more effective manner and providing a better representation of the increased equity stocks, market capitalization as also to the new industry groups. As such, BSE launched on 27th May 1994, two new index series-BSE-200 and Dollex-200.The equity shares of 200 selected companies from the specified and non-specified lists of BSE were considered for inclusion in the sample for `BSE-200'. The selection of companies was primarily been done on the basis of current market capitalization of the listed scrips. Moreover, the market activity of the companies as reflected by the volumes of turnover and certain fundamental factors were considered for the final selection of the 200 companies.

d. BSE500 Bombay Stock Exchange Limited constructed a new index, christened BSE-500, consisting of 500 scrips w.e.f. August 9, 1999. The changing pattern of the economy and that of the market were kept in mind while constructing this index.BSE-500 index represents nearly 93% of the total market capitalization on BSE. BSE-500 covers all 20 major industries of the economy. In line with other BSE indices, effective August 16, 2005 calculation methodology was shifted to the free-float methodology.

e. BSE Midcap and Smallcap BSE introduced the new index series called 'BSE MID-Cap' index and 'BSE Small-Cap' index to track the performance of companies with relatively smaller market capitalization. It was launched in year 2005 with the base year 2002-03 with the base index 1000.

2) Sectoral indices

36

BSE also constructs various sectoral indices as detailed below. All these indices are calculated and disseminated on BOLT, BSE's trading terminal on a real time basis. a. Bse Auto Considering the growth in automobile sector Bse launched BSE auto index in year 2004 with the base year 1999 and base index 1000 under free float capitalization method. b. Bankex In view of the emergence of banking stocks as a major segment in the equity markets, BSE considered it desirable to design an index exclusively for bank stocks. BANKEX tracks the performance of the leading banking sector stocks listed on the BSE. BANKEX is based on the free-float methodology of index construction. The base date for BANKEX is 1st January 2002. The base value for BANKEX is 1000 points.

c. Capital Goods Launched on full market capitalization method and effective August 23, 2004, calculation method shifted to free-float market capitalization with the base index 1000 and base year 1999-00.

d. BSE Fmcg Launched on full market capitalization method and effective August 23, 2004, calculation method shifted to free-float market capitalization with the base year 1999-00 and base index 1000. Though the BSE FMCG Index is made up of 11 scrips, it is ITC that dominates with a 53 per cent weight. Hindustan Unilever with a 20 per cent weight and Nestle with a 7.9 per cent weight take the next two positions, while Colgate Palmolive, Dabur India and United Spirits each have 3 per cent weights. Godrej Consumer, Tata Global, Marico, United Breweries and Jubilant FoodWorks are the other companies in the index. The BSE FMCG index registered its life-time high at 4,274 on November 14, 2011 and life time low at 705 on April 24, 2003. 37

e. BSE Realty One of the latest index launched by BSE is BSE realty which shows growth in construction company or real estate sector. It was launhed in year 2007 with base year 2005 and base index 2007.

f. BSE Healthcare Launched on full market capitalization method and effective August 23, 2004, calculation method shifted to free-float market capitalization. Wockhardt, fortis, cipla, glenmark are some companies that falls under BSE healthcare. g. BSE IT This indices was launched on 23rd august 2004 with base year 1999 and shows the growth in IT sectors. TCS, HCl, Tech Mahindra, Oracle and Mphasis are some companies that comes under this Indice.

h. BSE Metal This indice views growth rate in Metal sector. It was launched at 23rd August 2004 with base year 1999 under free float capitalization method. Tisco, Jindal steel, SAIL, NMDC are some companies that comes under BSE metal.

I. BSE Oil & Gas This indice views growth rate in Oil & gas industry. Launched on 23rd august it has a base year of 1999 under freefloat capitalization method. BPCL, GAIL, ONGC, Petronet LNG, Oil India are some companies that falls under this sector.

J. BSE Power This indices is the newest indices launched by BSE till now. It was launched in year 2007 with base year of 2005. BHEL, Reliance infra, Torrent power, TATA power are some of the renowned companies in BSE power.

38

3) Dollar linked version a. Dollex 30 DOLLEX-30 is the dollar version of BSE Sensex, the benchmark index of equity markets in India. Similar to Sensex, the base year for the DOLLEX-30 is fixed as 1978-79 and base value at 100 points. BSE has computed historical index values of DOLLEX-30 since 1979. The scope for DOLLEX-30 emerged from the background of Indian equity markets increasingly getting integrated with global capital markets and the need to assess the market movements in terms of international benchmarks. While Sensex reflects growth in market value of constituent stocks over the base period in rupee terms, the DOLLEX-30 would reflect the changes in both the stock prices as well as currency values. DOLLEX30 could be found useful by foreign investors to enable them to measure the equity returns in real terms both in respect of domestic and international currencies. DOLLEX-30 is the second dollar denominated index designed by the BSE.

b. Dollex 100 Dollex 100 is a dollar version of BSE 100 launched on 27 may 1994, This indices is initially calculated at the end of the trading session by taking into consideration day's rupee/ US$ reference rate as announced by India 's Central Bank i.e. Reserve Bank of India.

c. Dollex 200 In 1994 BSE had launched DOLLEX-200, a dollar version of BSE-200 Index. Like Dollex 100 This indices is also initially calculated at the end of the trading session by taking into consideration day's rupee/ US$ announced by India’s Central Bank i.e. Reserve Bank of India.

39

3.2.1 Calculation of sensex The Bombay Stock Exchange (BSE) regularly reviews and modifies its composition to be sure it reflects current market conditions. The index is calculated based on a free float capitalization method—a variation of the market capitalization method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors. Initially,

the

index

was

calculated

based

on

the

‘full

market

capitalization’ method. However this was shifted to the ‘free float method’ with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice. As per free float capitalization methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also referred as adjustment factor. Free float factor represents the percentage of shares that are readily available for trading. The calculation of SENSEX involves dividing the free float market capitalization of 30 companies in the index by a number called index divisor. The divisor is the only link to original base period value of the SENSEX. It keeps the index comparable over time and is the adjustment point for all index adjustments arising out of corporate actions, replacement of scrips, etc. The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE SENSEX works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation. For the premier Bombay Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot 40

has changed since 1875 when 318 persons became members of what today is called The Stock Exchange, Mumbai by paying a princely amount of Re 1. Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market. Sensex is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, Sensex is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of Sensex is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology. (See below: Explanation with an example) Due to is wide acceptance amongst the Indian investors; Sensex is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the Sensex has over the years become one of the most prominent brands in the country. The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The Sensex captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through Sensex. S&PBSECARBONEX The S&P BSE CARBONEX aims to provide the investors with an index that is indicative of companies' commitment to mitigating the effects of climate change 41

and moving forward to tackle the environmental challenges of the coming years.

It uses comprehensive data acquired from independent providers of sustainibility data and companies' public disclosures and tracks the underlying benchmark index'S&PBSE100Index'closely.

AIPL (Asia Index Private Limited, JV of BSE and SPDJI) is the index calculating partner with BSE for S&P BSE CARBONEX. RobecoSAM shall be the knowledge partner and CDP India would continue to be data provider for the Index.

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3.2.2 Sensex Calculation Methodology Sensex is calculated using the "Free-float Market Capitalization" methodology. As per this methodology, the level of index at any point of time reflects the Free-float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the freefloat market capitalization. The base period of Sensex is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. The calculation of Sensex involves dividing the Free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the Sensex. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate Sensex every 15 seconds and disseminated in real time.

43

3.2.3 Understanding Free-float Methodology Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalization of a company for the purpose of index calculation and assigning weight to stocks in Index. Freefloat market capitalization is defined as that proportion of total shares issued by the

company

that

are

readily

available

for

trading

inthemarket.

It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a Free-float index is reduced to the extent of its readily available shares in the market.

In India, BSE pioneered the concept of Free-float by launching BSE TECk in July 2001 and Bankex in June 2003. While BSE TECk Index is a TMT benchmark, Bankex is positioned as a benchmark for the banking sector stocks. Sensex becomes the third index in India to be based on the globally accepted Free-float Methodology.

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3.2.4Example Suppose the Index consists of only 2 stocks: Stock A and Stock B. Suppose Company A has 1,000 shares in total, of which 200 are held by the promoters, so that only 800 shares are available for trading to the general public. These 800 shares are the so-called 'free-floating' shares. Similarly, company B has 2,000 shares in total, of which 1,000 are held by the promoters and the rest 1,000 are free-floating. Now suppose the current market price of stock A is Rs 120. Thus, the 'total' market capitalization of company A is Rs 120,000 (1,000 x 120), but its free-float market capitalization is Rs 96,000 (800 x 120). Similarly, suppose the current market price of stock B is Rs 200. The total market capitalization of company B will thus be Rs 400,000 (2,000 x 200), but its freefloat market cap is only Rs 200,000 (1,000 x 200).So as of today the market capitalization of the index (i.e. stocks A and B) is Rs 520,000 (Rs 120,000 + Rs 400,000); while the free-float market capitalization of the index is Rs 296,000. (Rs 96,000 + Rs 200,000). The year 1978-79 is considered the base year of the index with a value set to 100. What this means is that suppose at that time the market capitalization of the stocks that comprised the index then was, say, 60,000 (remember at that time there may have been some other stocks in the index, not A and B, but that does not matter), then we assume that an index market cap of 60,000 is equal to an index-value of 100. Thus the value of the index today is = 296,000 x 100/60,000 = 493.33 This is how the Sensex is calculated. The factor 100/60000 is called index divisor. 3.3 Milestones

45

The graph of SENSEX from July 1997 to March 2011 The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised 100 stocks

listed

at

five

major

stock

exchanges

in

India

-

Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index was renamed BSE-100 Index from October 14, 1996 and since then, it is being calculated taking into consideration only the prices of stocks listed at BSE. BSE launched the dollar-linked version of BSE-100 index on May 22, 2006. BSE launched two new index series on 27 May 1994: The 'BSE-200' and the 'DOLLEX-200'. BSE-500 Index and 5 sectoral indices were launched in 1999. In 2001, BSE launched BSE-PSU Index, DOLLEX-30 and the country's first freefloat based index - the BSE TECk Index. Over the years, BSE shifted all its indices

to

the

free-float

methodology

(except

BSE-PSU

index).

BSE

disseminates information on the Price-Earnings Ratio, the Price to Book Value Ratio and the Dividend Yield Percentage on day-to-day basis of all its major indices. The values of all BSE indices are updated on real time basis during market hours and displayed through the BOLT system, BSE website and news wire agencies. All BSE Indices are reviewed periodically by the BSE Index Committee. This Committee which comprises eminent independent finance professionals frames the broad policy guidelines for the development and maintenance of all BSE indices. The BSE Index Cell carries out the day-to-day

46

maintenance of all indices and conducts research on development of new indices. SENSEX is significantly correlated with the stock indices of other emerging markets

Here is a timeline on the rise of the SENSEX through Indian stock market history.  1000- July 25, 1990 - On July 25, 1990, the SENSEX touched the four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon and excellent corporate results.  2000- January 15- 1992 - On January 15, 1992, the SENSEX crossed the 2,000-mark and closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then finance minister and current Prime Minister Dr Manmohan Singh.  3000- February 29, 1992 - On February 29, 1992, the SENSEX surged past the 3000 mark in the wake of the market-friendly Budget announced by Manmohan Singh.  4000, March 30, 1992 - On March 30, 1992, the SENSEX crossed the 4,000mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad Mehta scam hit the markets and SENSEX witnessed unabated selling.  5000- October 11, 1999 - On October 8, 1999, the SENSEX crossed the 5,000-mark as the Bharatiya Janata Party-led coalition won the majority in the 13th Lok Sabha election.  6000- February 11, 2000 - On February 11, 2000, the information technology boom helped the SENSEX to cross the 6,000-mark and hit and all time high of 6,006.  7000- June 21, 2005 - On June 20, 2005, the news of the settlement between the Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance Energy, Reliance Capital and IPCL made huge gains. This helped the SENSEX crossed 7,000 points for the first time.

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 8000- September 8, 2005 - On September 8, 2005, the Bombay Stock Exchange's benchmark 30-share index – the SENSEX - crossed the 8000 level following brisk buying by foreign and domestic funds in early trading.  9000- December 9, 2005 - The SENSEX on November 28, 2005 crossed 9000 to touch 9000.32 points during mid-session at the Bombay Stock Exchange on the back of frantic buying spree by foreign institutional investors and well supported by local operators as well as retail investors.  10-000- February 7, 2006 - The SENSEX on February 6, 2006 touched 10,003 points during mid-session. The SENSEX finally closed above the 10,000-mark on February 7, 2006.  11-000, March 27, 2006 - The SENSEX on March 21, 2006 crossed 11,000 and touched a peak of 11,001 points during mid-session at the Bombay Stock Exchange for the first time. However, it was on March 27, 2006 that the SENSEX first closed at over 11,000 points.  12,000- April 20, 2006 - The SENSEX on April 20, 2006 crossed 12,000 and touched a peak of 12,004 points during mid-session at the Bombay Stock Exchange for the first time.  13,000- October 30, 2006 - The SENSEX on October 30, 2006 crossed 13,000 for the first time. It touched a peak of 13,039.36 and finally closed at 13,024.26.  14,000- December 5, 2006 - The SENSEX on December 5, 2006 crossed 14,000.  15,000- July 6, 2007 - The SENSEX on July 6, 2007 crossed 15,000 mark.  16,000- September 19, 2007- The SENSEX (Sensitivity Index) on September 19, 2007 crossed the 16,000 mark and reached a historic peak of 16322 while closing.  17,000- on September 26, 2007 crossed the 17,000 mark for the first time, creating a record for the second fastest 1000 point gain in just 5 trading sessions. It failed however to sustain the momentum and closed below 17000. The SENSEX closed above 17000 for the first time on the following day. Reliance group has been the main contributor in this bull run, contributing 256 points. This also helped Mukesh Ambani's net worth to grow

48

to over $50 billion or Rs.2 trillion. It was also during this record bull run that the SENSEX for the first time zoomed ahead of the Nikkei of Japan.  18,000- October 9, 2007- The SENSEX crossed the 18k mark for the first time on October 9, 2007. The journey from 17k to 18k took just 8 trading sessions which is the third fastest 1000 point rise in the history of the SENSEX. The SENSEX closed at 18,280 at the end of day. This 788 point gain on October 9 was the second biggest single day absolute gains.  19,000- October 15, 2007- The SENSEX crossed the 19k mark for the first time on October 15, 2007. It took just 4 days to reach from 18k to 19k. This is the fastest 1000 points rally ever and also the 640 point rally was the second highest single day rally in absolute terms. This made it a record 3000 point rally in 17 trading sessions overall.  20,000- October 29, 2007 - The SENSEX on October 29, 2007 crossed the 20,000 mark for the first time.  21,000- Jan 08, 2008 - The SENSEX on January 8, 2008 touched all-time peak of 21078 before closing at 20873. Some Major Date And Events 1. May 2006 On May 22, 2006, the SENSEX plunged by 1100 points during intra-day trading, leading to the suspension of trading for the first time since May 17, 2004. The volatility of the SENSEX had caused investors to lose Rs 6 lakh crore (US$131 billion) within seven trading sessions. The Finance Minister of India, P. Chidambaram, made an unscheduled press statement when trading was suspended to assure investors that nothing was wrong with the fundamentals of the economy, and advised retail investors to stay invested. When trading resumed after the reassurances of the Reserve Bank of India and the Securities and Exchange Board of India (SEBI), the SENSEX managed to move up 700 points, still 450 points in the red. The SENSEX eventually recovered from the volatility, and on October 16, 2006, the SENSEX closed at an all-time high of 12,928.18 with an intra-day high of

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12,953.76. This was a result of increased confidence in the economy and reports that India's manufacturing sector grew by 11.1% in August 2006. 2. May 2009 On May 18, 2009, the SENSEX surged 2110.79 points from the previous closing of 12174.42 this leading to the suspension of trade for the whole day. This event created history in Dalal Street, by being the first ever time that trade had been suspended for an increase in value. This rally is primarily due to the victory of the UPA in the 15th General elections. Trading was open for that day only for 55 seconds. Initially 25 seconds and 30 seconds market reached upper freeze limit twice in that day itself. Effects of the Subprime crisis in the U.S On Monday July 23, 2007, the SENSEX touched a new height of 15,733 points. On July 27, 2007 the SENSEX witnessed a huge correction because of selling by Foreign Institutional Investors (FIIs) and global cues to come back to 15,160 points by noon. Following global cues and heavy selling in the international markets, the BSE SENSEX fell by 615 points in a single day on Wednesday August 1, 2007. Therefore the US Subprime crisis has a great effect even on INDIA. gold cross the psychological barrier.

29 October 2007 The SENSEX crossed the 20,000 mark on the back of aggressive buying by funds ahead of the US Federal Reserve meeting. The index took only 10 trading days to gain 1,000 points after the index crossed the 19,000-mark on October 15. The major drivers of today's rally were index heavyweights Larsen and Toubro, Reliance Industries, ICICI Bank, HDFC Bank and SBI among others. The 30-share index spurted in the last five minutes of trade to fly-past the crucial level and scaled a new intra-day peak at 20,024.87 points before ending at its fresh closing high of 19,977.67, a gain of 734.50 points. The NSE Nifty rose to a record high 5,922.50 points before ending at 5,905.90, showing a hefty gain of 203.60 points.

50

November 5, 2010 - The SENSEX on November 5, 2010 closes at 20,893.6 with highest peak in two years. Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market. Sensex is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, Sensex is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of Sensex is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology. (See below: Explanation with an example) Due to is wide acceptance amongst the Indian investors; Sensex is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the Sensex has over the years become one of the most prominent brands in the country. The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The Sensex captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through Sensex. Sensex Calculation Methodology

51

Sensex is calculated using the "Free-float Market Capitalization" methodology. As per this methodology, the level of index at any point of time reflects the Freefloat market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This market capitalization is further multiplied by the free-float factor to determine the free-float market capitalization. The base period of Sensex is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. The calculation of Sensex involves dividing the Free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the Sensex. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by the trading system to calculate Sensex every 15 seconds and disseminated in real time. Dollex-30 BSE also calculates a dollar-linked version of Sensex and historical values of this index are available since its inception. Understanding Free-float Methodology Free-float Methodology refers to an index construction methodology that takes into consideration only the free-float market capitalisation of a company for the purpose of index calculation and assigning weight to stocks in Index. Free-float market capitalization is defined as that proportion of total shares issued by the company that are readily available for trading in the market. It generally excludes promoters' holding, government holding, strategic holding and other locked-in shares that will not come to the market for trading in the normal course. In other words, the market capitalization of each company in a Free-float index is reduced to the extent of its readily available shares in the market.

52

In India, BSE pioneered the concept of Free-float by launching BSE TECk in July 2001 and Bankex in June 2003. While BSE TECk Index is a TMT benchmark, Bankex is positioned as a benchmark for the banking sector stocks. Sensex becomes the third index in India to be based on the globally accepted Free-float Methodology. Example (provided by rediff.com reader Munish Oberoi): Suppose the Index consists of only 2 stocks: Stock A and Stock B. Suppose company A has 1,000 shares in total, of which 200 are held by the promoters, so that only 800 shares are available for trading to the general public. These 800 shares are the so-called 'free-floating' shares. Similarly, company B has 2,000 shares in total, of which 1,000 are held by the promoters and the rest 1,000 are free-floating. Now suppose the current market price of stock A is Rs 120. Thus, the 'total' market capitalisation of company A is Rs 120,000 (1,000 x 120), but its free-float market capitalisation is Rs 96,000 (800 x 120). Similarly, suppose the current market price of stock B is Rs 200. The total market capitalisation of company B will thus be Rs 400,000 (2,000 x 200), but its freefloat market cap is only Rs 200,000 (1,000 x 200). So as of today the market capitalisation of the index (i.e. stocks A and B) is Rs 520,000 (Rs 120,000 + Rs 400,000); while the free-float market capitalisation of the index is Rs 296,000. (Rs 96,000 + Rs 200,000). The year 1978-79 is considered the base year of the index with a value set to 100. What this means is that suppose at that time the market capitalisation of the stocks that comprised the index then was, say, 60,000 (remember at that time there may have been some other stocks in the index, not A and B, but that does not matter), then we assume that an index market cap of 60,000 is equal to an index-value of 100. Thus the value of the index today is = 296,000 x 100/60,000 = 493.33 This is how the Sensex is calculated. The factor 100/60000 is called index divisor. ACC, Ambuja Cements, Bajaj Auto, BHEL, Bharti Airtel, Cipla, DLF, Grasim Industries, HDFC, HDFC Bank, Hindalco Industries, Hindustan Lever, ICICI Bank, Infosys, ITC, Larsen & Toubro, Mahindra & Mahindra, Maruti Udyog, 53

NTPC, ONGC, Ranbaxy Laboratories, Reliance Communications, Reliance Energy, Reliance Industries, Satyam Computer Services, State Bank of India, Tata Consultancy Services, Tata Motors, Tata Steel, and Wipro.

54

Chapter 4 Players in Stock Exchange

Contents: 4.1 Investors 4.2 Market Makers 4.3 Mutual Funds 4.4 Underwriters 4.5 FII’s

55

Players in Stock Exchange 4.1 Investors An investor is someone who puts money into something with the expectation of a financial return. The types of investments include, --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc.

Types of investors Bull: An operator who expects the share price to rise and takes position in the market to sell at a later date. Bull Market: A rising market where buyers far outnumber the sellers A bull market is one where prices are rising, whereas a bear market is one where prices are falling. The two terms are also used to describe types of investors. What are Bear? Bear : An operator who expects the share price to fall Bear Market : A weak and falling market where buyers are absent. A stock market bull is someone who has a very optimistic view of the market; they may be stock-holders or maybe investors who aggressively buy and sell stocks quickly. A bear investor, on the other hand, is pessimistic about the market and may make more conservative stock choices. Sometimes, the terms are used to refer to specific funds or stocks. Bear market funds, for example, are those that are falling and faring poorly. Investors sometimes refer to bull stocks to describe securities that are aggressively rising and making their investors’ money. Knowing what is meant by the bear and bull market can help you understand whether the market is currently rising or falling. There is no need to get frightened

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by a bear market indicator; however, as experts agree that the market is cyclical. When prices start falling, they will eventually rise too. The Other Animals on the Farm - Chickens and Pigs Chickens are afraid to lose anything. Their fear overrides their need to make profits and so they turn only to money-market securities or get out of the markets entirely. While it's true that you should never invest in something over which you lose sleep, you are also guaranteed never to see any return if you avoid the market completely and never take any risk, Pigs are high-risk investors looking for the one big score in a short period of time. Pigs buy on hot tips and invest in companies without doing their due diligence. They get impatient, greedy, and emotional about their investments, and they are drawn to high-risk securities without putting in the proper time or money to learn about these investment vehicles. Professional traders love the pigs, as it's often from their losses that the bulls and bears reap their profits.

What Drives Bear and Bull Markets? The stock market is affected by many economic factors. High employment levels, strong economy, and stable social and economic conditions generally build investor confidence and encourage investors to put their money in the stock market. Often, this can bolster bull markets. Also, new technologies and companies that encourage investors to put their money in stocks can create bull markets. For example, in the 1990s, the dot com craze encouraged many investors to put their money in stocks that they felt would keep increasing. In some cases, a bullish market is simply self-perpetuating. Since the market is doing well, it only encourages investors to invest more money or to start investing.

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On the other hand, discouraging economic or social political changes in a society can push the market down. Sudden instability or unemployment -- or even fears of unemployment caused by wars and other problems -- can start to make investors more conservative and therefore lead to bear markets. Of course, again this becomes a self-perpetuating trend. As the economy slows down, companies begin downsizing. Increased unemployment makes people far less willing to gamble on the stock market. Sometimes, a panic caused by dire predictions about the market can also create bearish conditions.

How to Predict Bear and Bull Markets? The easiest way to predict both types of markets is to realize that what goes up must come down. That is, if the market is rising, then you know that at some point it will start to fall again. Similarly, if the market is currently falling, you can be certain that eventually it will pick up again. There are no precise ways to predict either bull or bear markets, although general social economic situations can help you to determine what will happen. A country which wages a war will experience bullish market conditions as government contracts create more jobs and boost investor confidence if their expectation is to win. Sudden international crises push the market downward and create bearish conditions. News is very often a good indicator of where investors are headed. The reports will inform about loss of investor confidence as well as sudden economic downturns that may affect the market. If you notice from stock market research that several indexes have changed by 15% to 20%, you can be sure that market direction is changing. When you notice such changes, it is time to sit up and take notice. You may be headed for a bullish or bearish market.

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4.2 Market Maker Investors probably take for granted that they can buy or sell a stock at a moment's notice. Place an order with the broker, and within seconds, it is executed. Many investors wonder how this is possible? Whenever an investment is bought or sold, there must be someone on the other end of the transaction. If one wants to buy 1,000 shares of HUL, then he must find a willing seller, and vice versa. It's very unlikely that they always manage to find someone who is interested in buying or selling the exact number of shares of the same company at the exact same time. This begs the question, how is it that you can buy or sell anytime? This is where a market maker comes in. A market maker is a bank or brokerage company that stands ready every second of the trading day with a firm ask and bid price. This is good for you, because when you place an order to sell your thousand shares of Disney, the market maker will actually purchase the stock from you, even if he doesn't have a seller lined up. In doing so, they are literally "making a market" for the stock. Edelweiss capital is the renowned example of market makers in India.

How do Market Makers make their Money? Market Makers must be compensated for the risk they take; what if he buys your shares in IBM then IBM's stock price begins to fall before a willing buyer has purchased the shares? To prevent this, the market maker maintains a spread on each stock he covers. Using our previous example, the market maker may purchase your shares of IBM from you for $100 each (the ask price) and then offer to sell them to a buyer at $100.05 (bid). The difference between the ask and 59

bid price is only $.05, but by trading millions of shares a day, he's managed to pocket a significant chunk of change to offset his risk.

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4.3Mutual funds A mutual fund is a type of professionally-managed collective investment scheme that pools money from many investors to purchase securities. While there is no legal definition of mutual fund, the term is most commonly applied only to those collective investment schemes that are regulated, available to the general public and open-ended in nature.

Mutual funds collect money from the investors and invest it in various securities on their behalf. The returns on these investments are passed on to the investors, either periodically or at the end of a specified time period. They charge fees for their services referred to as management fees.

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4.4 Underwriters A company or other entity that administers the public issuance and distribution of securities from a corporation or other issuing body. An underwriter works closely with the issuing body to determine the offering price of the securities, buys them from the issuer and sells them to investors via the underwriter's distribution network. Underwriters generally receive underwriting fees from their issuing clients, but they also usually earn profits when selling the underwritten shares to investors. However, underwriters assume the responsibility of distributing a securities issue to the public. If they can't sell all of the securities at the specified offering price, they may be forced to sell the securities for less than they paid for them, or retain the securities themselves.

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4.5FII’s (Foreign institutional investors) The term is used most commonly in India to refer to foreign companies investing in the financial markets of India. International institutional investors must register with the Securities and Exchange Board of India to participate in the market. One of the major market regulations pertaining to FIIs involves placing limits on FII ownership in Indian companies. Institutional investors will have a lot of influence in the management of corporations because they will be entitled to exercise the voting rights in a company. They can actively engage in corporate governance. Furthermore, because institutional investors have the freedom to buy and sell shares, they can play a large part in which companies stay solvent, and which go under. Influencing the conduct of listed companies, and providing them with capital are all part of the job of investment management. Foreign investment can be of two forms: Foreign direct investment (FDI) and Foreign portfolio investment (FPI).FDI involves direct production activity and has a medium to long term investment plans. In contrast the FPI has a short term investment horizon. They mostly investment in the financial markets which consist of Foreign Institutional Investors (FIIs). They invest in domestic financial markets like money market, stock market, foreign exchange market etc. FII has leaded a significant improvement in India relating to the flow of foreign capital during the period of post economic reforms. The inflow of FII investments has helped the stock market to raise at a greater height according to financial analysts.

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Chapter 5 SEBI

Contents: 5.1Introduction 5.2 Functions of SEBI 5.3 Powers of SEBI 5.4 Limitations of SEBI

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5.1 Securities and exchange board of India (SEBI) The establishment of SEBI was a land mark government measure to monitor and regulate capital market activities and to promote healthy development of the market. It was constituted in 1988 by a resolution of Government of India and was made a statutory body by Securities and Exchange Board of India Act 1992.SEBI was formed officially by the Government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. SEBI is headquartered in the business district of Bandra Kurla Complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad. Management of the Board (Sec 4) It consist of a) Chairman b) 2 members from among the officials of the ministries of central govt. dealing with Finance and Law. c) One member from amongst the officials of RBI d) Two other members to be appointed by the central government.

SEBI has to be responsive to the needs of three groups, which constitute the market: 

the issuers of securities



the investors



The market intermediaries.

5.2 Functions of SEBI 65

SEBI has three functions rolled into one body: quasi-legislative, quasijudicial and quasi-executive. It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in its executive function and it passes rulings and orders in its judicial capacity. Though this makes it very powerful, there is an appeals process to create accountability. There is a Securities Appellate Tribunal which is a three-member tribunal and is presently headed by a former Chief Justice of a High court - Mr. Justice NK Sodhi. A second appeal lies directly to the Supreme Court. SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively and successively (e.g. the quick movement towards making the markets electronic and paperless rolling settlement on T+2 basis). SEBI has been active in setting up the regulations as required under law. SEBI has also been instrumental in taking quick and effective steps in light of the global meltdown and the Satyam fiasco.It had increased the extent and quantity of disclosures to be made by Indian corporate promoters. More recently, in light of the global meltdown it liberalized the takeover code to facilitate investments by removing regulatory structures. In one such move, SEBI has increased the application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at present.

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5.3 Powers of SEBI For the discharge of its functions efficiently, SEBI has been invested with the necessary powers which are: 1. To regulate the business in stock exchange. 2. To regulate working of broker, merchant banker, portfolio managers and other associates with security market. 3. To promote investors education. 4. To approve by−laws of stock exchanges. 5. To require the stock exchange to amend their by−laws. 6. To provide trainings to intermediaries of the security market. 7. Inspect the books of accounts and call for periodical returns from recognized stock exchanges. 8. Inspect the books of accounts of financial intermediaries. 9. Compel certain companies to list their shares in one or more stock exchanges. 10. Levy fees and other charges on the intermediaries for performing its functions. 11. Grant license to any person for the purpose of dealing in certain areas. 12. To prohibit the fraudulent and unfair trade practices related to securities market. 13. Prosecute and judge directly the violation of certain provisions of the companies Act.

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5.4 Limitations of SEBI 1. The Central Government has authorized SEBI to frame its rules and regulation for actively monitoring capital markets. These rules and regulations will have to be approved by the government first. This will cause unnecessary delay and interference by the Finance Minister. 2. SEBI will have to seek prior approval for filling criminal complaints for violations for the regulations. This will again cause delay at government level. 3. SEBI has not been given autonomy. Its Board of Directors is dominated by government nominees. Out of 5 directors only 2 can be from outside and these are to represent the Ministries of Finance, Law and Reserve Bank of India 4. Its compositions are dominated by government nominees. 5. Its rules and regulations requires Approval of government which is a time consuming process. 6. It faces lot of interference from finance ministry. 7. The chairman of the board has no fixed tenure. 8. It has to make prior approval for filing criminal complaints for validations of rules and regulations.

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Chapter 6 Awards and Achievements

Contents: 6.1 Awards achieved by BSE 6.2 Heritage 6.3 Several firsts

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6.1 Awards Achieved by BSE  The World Council of Corporate Governance has awarded the Golden Peacock Global CSR Award for BSE's initiatives in Corporate Social Responsibility (CSR).  The Annual Reports and Accounts of BSE for the year ended March 31, 2006 and March 31, 2007 have been awarded the ICAI awards for excellence in financial reporting.  It has been cited as one of the world's best performing stock market by Reuters.  The Human Resource Management at BSE has won the Asia - Pacific HRM awards for its efforts in employer branding through talent management at work, health management at work and excellence in HR through technology. Bombay Stock Exchange - Finance Learners. As a pioneering financial institution in the Indian capital market, BSE has won several awards and recognitions that acknowledge the work done and progress made.



‘IT Genius Awards 2017’ in the category ‘Data Centre Excellence’ for setup of the India INX Data Centre by CORE (Centre of Recognition & Excellence)



Digital Innovation Award 2017 for the Social Media Analytics Project by Netmagic



Business World Digital Leadership and CIO Award



The IDC Digital Transformation Awards 2017



The Best Exchange of the year award for equity and currency derivatives in Tefla's Commodity Economic Outlook Award 2017



Best Brand award 2017 by Economic Times



CIO POWER LIST 2017



Best Corporate film encompassing Vision, History, Value and Spirit of Excellence award, Best Corporate film on Employer Branding award and Most Influential HR Leaders in India award at World HRD Congress 2017 70



'Best Exchange of the year' award at 4th India Bullion & Jewellery awards 2017



Red Hat Innovation Awards 2016 by Red Hat Solutions



Skoch Achiever Award 2016 for SME Enablement



Best IT Implementation Award 2016 in the “Most Complex Project Category” by PCQuest



InfoSec Maestros Awards 2016 .



Lions CSR Precious Awards 2016



Golden Peacock Award 2015



CIO Power List 2015



SKOCH Rennaissance Award 2014 for Contribution to Economy



SKOCH Rennaissance Award 2014 for Corporate Social Responsibility



Netmagic Innovative Champion Award – IT Consolidation growth & Scalability 2014



India Innovative Awards- Big Data Innovation 2014



ET Now – CISCO Technology Awards 2014



Unicom –India Top 50 companies with best software 2014



HR was awarded with Asia's Best Employer Brand Awards at Singapore in two categoriesinAugust2014 o

Asia's Best Employer Brand Award

o

CHRO of the Year Award



Lokmat HR Leadership Award at Mumbai in June-2014



50 most talented global HR leaders in Asia at the World HRD congress at Mumbai in February-2014



FIICI-Frames Best Animation Film-International Category for the Investor Education television commercial



India Innovation Award for Big Data Implementation



ICICI Lombard & ET Now Risk Manager Award in BFSI Category



SKOCH Order of Merit for E-Boss for qualifying among India’s Best 2013



Indian Merchant Chamber Award in the Large Enterprise Category for use of Information Technology



Best Managed Financial Derivatives Exchange in the Asia Pacific by the The Asian Banker



The Golden Peacock Global CSR Award for its initiatives in Corporate Social Responsibility

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

BSE has won NASSCOM - CNBC-TV18’s IT User Awards, 2010 in Financial Services category



BSE has won Skoch Virtual Corporation 2010 Award in the BSE StAR MF category



Responsibility Award (CSR), by the World Council of Corporate Governance



Annual Reports and Accounts of BSE have been awarded the ICAI awards for excellence in financial reporting for four consecutive years from 2006 onwards



Human Resource Management at BSE has won the Asia - Pacific HRM awards for its efforts in employer branding through talent management at work, health management at work and excellence in HR through technology

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6.2 Heritage The first ever stock exchange in Asia (established in 1875) and the first in the country to be granted permanent recognition under the Securities Contract Regulation Act, 1956, BSE Limited has had an interesting rise to prominence over the past 133 years. In 2002, the name "The Stock Exchange, Mumbai" was changed to Bombay Stock Exchange. Subsequently on August 19, 2005, the exchange turned into a corporate entity from an Association of Persons (AoP) and renamed as Bombay Stock Exchange Limited. BSE Limited, which had introduced securities trading in India, replaced its open outcry system of trading in 1995, with the totally automated trading through the BSE Online trading (BOLT) system. The BOLT network was expanded nationwide in 1997.

Prominent Position The journey of BSE Limited is as eventful and interesting as the history of India's securities market. In fact, as India's biggest bourse, in terms of listed companies and market capitalisation, BSE Limited has played a pioneering role in the development of the Indian securities market. It is surely BSE Limited pride that almost every leading corporate in India has sourced BSE Limited services in capital raising and is listed with BSE Limited.

Even in terms of an orderly growth, much before the actual legislations were enacted, BSE Limited had formulated a comprehensive set of Rules and Regulations for the securities market. It had also laid down best practices which were adopted subsequently by 23 stock exchanges which were set up after India gained its independence.

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BSE Limited, as a brand, has been and is synonymous with the capital market in India. Its SENSEX is the benchmark equity index that reflects the health of the Indian economy.

6.3 Several Firsts At par with the international standards, BSE Limited has in fact been a pioneer in several areas. It has several firsts to its credit even in an intensely competitive environment. 

First in India to introduce Equity Derivatives.



First in India to launch a Free Float Index.



First in India to launch US$ version of BSE Limited.



First in India to launch Exchange Enabled Internet Trading Platform.



First in India to obtain ISO certification for a stock exchange.



'BSE On-Line Trading System' (BOLT) has been awarded the globally recognised the Information Security Management System standard BS77992:2002



First to have an exclusive facility for financial training.



First in India in the financial services sector to launch its website in Hindi and Gujarati.



Shifted from Open Outcry to Electronic Trading within just 50 days.



First bell-ringing ceremony in the history of the Indian capital markets (listing ceremony of Bharti Televentures Ltd. on February 18, 2002)

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Data analysis and interpretation Data is collected by filling questionnaire by 100 stock market investors.

Are you investing in Equity market? a. Yes b. No

60%

50%

40%

yes

30%

no 20%

10%

0% how many people invest in equity market

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From how long you are investing in equity market? a. Less than 1 year b. 1 to 2 year/s c. 2 to 3 years

100%

90% 80% 70% 60%

2 to 3 years 50%

1 to 2 years

40%

less than 1 year

30% 20% 10% 0% Category 1

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Why do you invest in equity market? a. For quick short term gain b. For high long term gain

100% 90% 80% 70% 60% for high long term gain

50%

for quick short term gain

40% 30% 20% 10% 0% why do you invest in equity market

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What is the purpose of investment? a. To meet the cost of Inflation b. To earn return on idle resources c. To generate a specified sum of money for a specific goal in life d. To make a provision for an uncertain future

100% 90% 80% to prevent from uncertainity

70%

60%

to generate specified sum of money

50%

to earn return on idle resources

40% 30%

to meet the cost of inflation

20% 10% 0% what is the purpose for investment

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In which sector you invest most? a. IT b. Pharmacy c. Telecom d. Banking e. Petroleum f. Others

100% 90% 80%

70% petroleum

60%

banking

50%

telecom

40%

pharmacy

30%

IT

20% 10% 0% in which sector you invest the most

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The stock market reflects the health of countries economy. Stock market movements are largely influenced by money supply, inflation fiscal deficits, political instability, corporate performance, industrial growths etc. BSE is one of the factors Indian Economy depends upon. BSE has played a major role in the development of the country. Through BSE, Foreign Investors have invested in India. Due to inward flow of foreign currency the, the Indian economy has started showing the upward trend towards the development of the country. Since investors can’t invest directly they need intermediaries like brokers and mutual fund agent a lot of job opportunity is being created not only in Mumbai but throughout India The Bombay Stock Exchange is a pivotal institution in the financial system of India. A well-ordered stock market performs several economic functions

The Indian Economy would have been a complete different story. Various companies wouldn’t have been a strong and successful as they are today and the brokers and traders would have been elsewhere. The taxes and other statutory charges paid by BSE are substantial and make a sizeable contribution to the Government. 80

ANNEXURE Questionnaire

QUESTIONNAIRE 1. Name: 2. Age: 3. Occupation a. Service b. Business c. Student d.Other

4. Are you investing in Equity market? a. Yes b. No 5. What percentage of your investment is invested in equity market? a. Less than 25% b. 25-50% c. 51-75% d. More than 75%

6. From how long you are investing in equity market? a. Less than 1 year b. 1 to 2 year/s c. 2 to 3 years d. More than 3 years 7. Why do you invest in equity market? a. For quick short term gain b. For high long term gain 8. What attracts you towards equity market? 81

a. High return b. Speculation c. Dividend d. Liquidity of invested fund 9. What is the purpose of investment? a. To meet the cost of Inflation b. To earn return on idle resources c. To generate a specified sum of money for a specific goal in life d. To make a provision for an uncertain future 10. How much is your total investment annually? a. < 5000 b. 5000 – 10000 c. 10000 - 25000 d. 25000 – 50000

11. How much of investment for equity? a. < 25% b. 25% - 50% c. 50% - 75% d. 75% - 100% 12. Generally which is the holding period of equity?

a. Intraday b. Delivery

13. In which sector you invest most? a. IT b. Pharmacy c. Telecom d. Banking e. Petroleum f. Others

14. What will be the future of equity market in India as per you? a. Bullish b. Bearish c. Can’t say 82

Bibliography

1. BMS Sem 5 Special studies in finance 2. BFM Sem 3 Equity Markets I

Webliography 1. Bseindia.com 2. Wikipedia 3. Sebi.gov.in 4. Investopedia.com 5. Sharetips.info

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