.project Of Nse And Bse.docx

PROJECT REPORT “A study on performance of Indian Stock Market after LPG” SUBMITTED TO University Of Mumbai for partial completion of the degree of Bachelor in commerce (Accounting and Finance) Under the faculty commerce

BY Vipul.A.Suthar

TYBAF (SEM. 6) ( ROLL NO.60) Under the Guidance of Prof. Arpita DR. BABASAHEB AMBEDKAR & ADV.GURUNATH KULKARNI COLLEGE Near Diwanman Talav, Vasai (W) - 401202 ACADEMIC YEAR 2018-2019

DECLARATION

I Vipul .A. Suthar student of B.A.F (Bachelor of account & finance) semester V (2018-2019) hereby declare that I have completed the project on the study of performance of Indian stock market after LPG. Wherever the data or information have been taken from any book or sources, the same have been mentioned in the bibliography. The information submitted is true and original to the best of my knowledge.

Signature of student

CERTIFICATE This is to certify that Mr. Vipul .A. Suthar, Roll No.-60 of B.A.F (Bachelor of Account & Finance) semester V (20182019) has successfully completed the project on performance of Indian stock market after LPG under the guidance of prof. Arpita Naik.

Project Guide

Co-Ordinator

Principal

External Examiner

ACKNOWLEDGEMENT

I sincerely thank the University for introducing a degree course in B.A.F (Bachelor of accounts &finance). This has given us an opening to gain knowledge on the insights of the finance studies. A special thank to our project coordinator For being in the right sense of the word and motivating me during the project. I would also like to thank the librarian of Dr. Babasaheb Ambedkar & Adv. Gurunath Kulkarni College who helped me out in finding various books on the topic. This project was highly educational and a great experience.

EXECUTIVE SUMMARY The project is about performance of Indian Stock Market after LPG. Indian stock market is one of the oldest stock market in Asia. It dates back to the 18th century when the east India company used to transact loan securities. In India there are various stock exchange are included but top stock exchange of the India is BSE(Bombay Stock Exchange) and NSE (Nationl Stock Exchange).BSE was established in 1875 and NSE was founded in the year 1992. BSE was established before LPG(librarisation, Privatisation, Globalisation) and NSE was founded after LPG. LPG was introduced in 1990 by Indian government. The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG or Liberalisation, Privatisation and Globalisation model. The primary objective of this model was to make the economy of India the fastest developing economy in the globe with capabilities that help it match

up

with

the

biggest

economies

of

the

world.

The chain of reforms that took place with regards to business, manufacturing, and financial services industries targeted at lifting the economy of the country to a more proficient level. These economic reforms had influenced the overall economic growth of the country in a significant manner. Liberalisation refers to the slackening of government regulations. The economic liberalisation in India denotes the continuing financial reforms which began since July 24, 1991. Privatisation refers to the participation of private entities in businesses and services and transfer of ownership from the public sector (or

government) to the private sector as well. Globalisation stands for the consolidation of the various economies of the world.

INDEX

Chapter. Contents

Page

No.

No.

1.1

INTRODUCTION TO STOCK MARKET & STOCK 1 EXCHANGES

1.2

VARIOUS STOCK EXCHANGE IN INDIA

2

1.3

EVOLUTION OF STOCK EXCHANGES

5

1.4

TERMS RELATING TO STOCK EXCHANGES

6

2.1

INTRODUCTION OF LPG IN INDIAN STOCK 8 MARKET

2.2

OBJECTIVE OF THE STUDY

11

2.3

DATA & RESEARCH METHODOLOGY

12

2.4

BSE & NSE

14

2.5

INTRODUCTION TO BSE

16

2.6

SOME OF THE INITIATIVES UNDERTAKEN BY BSE 19

2.7

ACHIEVEMENTS AWARD & RECOGNITIONS

21

2.8

MANAGEMENT TEAM OF BSE

23

3.1

NATIONAL STOCK EXCHANGE OF INDIA

29

3.2

MILESTONES/ACHIEVEMENTS

32

3.3

S&P NIFTY

34

3.4

IMPACT OF GLOBALISATION ON INDIAN STOCK 37 MARKET

3.5

LITRATURE REVIEW

38

4.1

BENEFIT OF INVESTMENT IN STOCK MARKET

39

4.2

BENEFIT OF LISTING

39

4.3

ANALYSIS OF DATA

42

4.4

TRADING AND SETTLEMENT

43

4.5

PROCEDURE

47

4.6

DEPOSITORY

47

4.7

HOW TO ENTER STOCK MARKET

50

4.8

SECURITIES EXCHANGE BOARD OF INDIA

54

5.1

CONCLUSION

59

5.2

REFERENCES

60

CHAPTER 1

1.1 INTRODUCTION TO STOCK MARKET AND STOCK EXCHANGES:

a) Stock Markets: Stock Market is a market where the trading of company stock, both listed securities and unlisted takes place. It is different from stock exchange because it includes all the national stock exchanges of the country. For example, we use the term, "the stock market was up today" or "the stock market bubble."

b) Stock Exchanges:

Stock Exchanges are an organized marketplace, either

corporation or mutual organization, where members of the organization gather to trade company stocks or other securities. The members may act either as agents for their customers, or as principals for their own accounts.

Stock exchanges also

facilitates for the issue and redemption of securities and other financial instruments including the payment of income and dividends. The record keeping is central but trade is linked to such physical place because modern markets are computerized. The trade on an exchange is only by members and stock broker do have a seat on the exchange.

1.2 VARIOUS STOCK EXCHANGE IN INDIA

OTC EXCHANGE OF INDIA

OTC Exchange of India (OTCEI) also known as Over-the-Counter Exchange of India based in Mumbai, Maharashtra. It is the first exchange for small companies. It is the first screen based nationwide stock Exchange in India. It was set up to access high technology enterprising promoters in raising finance for new product development in a cost effective manner and to provide transparent and efficient trading system to investors. OTCEI is promoted by the Unit Trust India, the Industrial Credit and Investment corporation of India, the industrial development bank of India, the industrial finance corporation of India and other and is a recognized stock exchange under the SCAR act.

Type

Stock Exchange

Location

Mumbai, India

Founded

1990

Owner

OTC Exchange of India

Key people

Mr. Praveen Mohnot, MD

Currency

Indian rupee

MADRAS STOCK EXCHANGE: The Madras Stock Exchange is a stock exchange in Madras, (Chennai), and India. The Madras Stock Exchange (MSE) is the fourth Stock Exchange to be established in the country, and the first in South India. It had a turnover (2001) of Rs 109 crores (25 million USD), but is a fraction (below 0.1percent) of the turnover generated by the Bombay Stock Exchange and National Stock Exchange of India. In 1996, the MSE was fully computerized and online trading became operational, as the MSE was connected to 120 broking offices in and around Chennai through Wide Area Networking. The MSE has about 120 live members and 1,785 companies listed. The exchange follows the Rolling Settlement system, as per the January 2000 SEBI (Securities Exchange Board of India) Guidelines and a proactive Grievance Cell is operational. By this system, investors can log in their complaints, for which a number will be given for further reference, through which investors can keep track of the action taken by the exchange as regards their complaint.A subsidiary company - MSE Financial Services Ltd, has been established. A member of the Bombay Stock Exchange, MSE Financial Services will help create greater broker and investor flexibility through multi-market access. Hereafter the members will be able to trade in both BSE and MSE. This will be followed up with National Stock Exchange (NSE) membership. Live trading at the MSE takes place from 10.00 am to 3.30 pm.

AHMEDABAD EXCHANGE STOCK: Ahmedabad Stock Exchange or ASE is the second oldest exchange of India located in the city of Ahmedabad in the western part of the country. It is recognized by Securities Contract (Regulations) Act, 1956 as permanent stock exchange. It has adopted a Swastika in its logo which is one of the most auspicious symbols of Hinduism depicting wealth and prosperity. Ahmedabad Stock Exchange Limited is a premier national equities exchange that plays a key role in the Indian securities markets. Serving individual and institutional investors from around the world, its primary business is the trading of approximately 2000 nationally listed equities. The Exchange also trades over 200 high growth companies that are solely listed on the ASE or dually listed with another exchange.

BANGALORE STOCK EXCHANGE: Bangalore Stock Exchange is currently the largest stock exchange in South India. The BgSE is managed by the Council of Management consisting of members nominated by Securities and Exchange Board of India (SEBI), public representatives, elected members and Executive Director. The Exchange has been continuously growing since its inception in 1963. There are 595 companies listed on the exchange out of which over 300 companies are nonregional companies. As of now, more than 5000 companies belonging to listed and permitted category can be traded at the Exchange. The Exchange has about 239 members. The corporate members constitute more than 25% of the total membership of the Exchange.

Bangalore Stock Exchange was the first stock exchange in South India to start electronic trading of securities in 1996.

1.3 Evolution of Stock Exchanges in India

Stock exchange

Year incorporation

Bombay stock exchange

1894

Calcutta stock exchange

1908

of

Madras stock exchange Bengal

share

and

1920 stock 1937

exchange Ltd. Indian stock exchange Ltd.

1938

Uttar Pradesh stock exchange

1940

Nagpur stock exchange

1940

Hyderabad

stock

exchange 1944

Ltd. Bangalore stock exchange

1963

National stock exchange

1992

LPG IN INDIAN STOCK MARKET: The economy of India had undergone significant policy shifts in the beginning of the 1990s. This new model of economic reforms is commonly known as the LPG or Liberalisation, Privatisation and Globalisation model. The primary objective of this model was to make the economy of India the fastest developing economy in the globe with capabilities that help it match up with the biggest economies of the world.The

chain of reforms that took place with regards to business, manufacturing, and financial services industries targeted at lifting the economy of the country to a more proficient level. These economic reforms had influenced the overall economic growth of the country in a significant manner.

Liberalization:

Liberalisation refers to the slackening of government regulations. The economic liberalisation in India denotes the continuing financial reforms which began since July 24, 1991. The basic aim of liberalization was to put an end to those restrictions which became hindrances in the development and growth of the nation. The loosening of government control in a country and when private sector companies’ start working without or with fewer restrictions and government allow private players to expand for the growth of the country depicts liberalization in a country.

Objectives of Liberalization Policy 

To increase competition amongst domestic industries.



To encourage foreign trade with other countries with regulated imports and exports.



Enhancement of foreign capital and technology.



To expand global market frontiers of the country.



To diminish the debt burden of the country.

Privatization: This is the second of the three policies of LPG. It is the increment of the dominating role of private sector companies and the reduced role of public sector companies. In other words, it is the reduction of ownership of the management of a government-owned enterprise. Government companies can be converted into private companies in two ways: 

By disinvestment



By withdrawal of governmental ownership and management of public sector companies.

Objectives of Privatization:





Improve the financial situation of the government.



Reduce the workload of public sector companies.



Raise funds from disinvestment.

Increase the efficiency of government organizations. 

Provide better and improved goods and services to the consumer.



Create healthy competition in the society.

Globalization: It means to integrate the economy of one country with the global economy. During Globalization the main focus is on foreign trade & private and institutional foreign investment. It is the last policy of LPG to be implemented.

Globalization as a term has a very complex phenomenon. The main aim is to transform the world towards independence and integration of the world as a whole by setting various strategic policies. Globalization is attempting to create a borderless world, wherein the need of one country can be driven from across the globe and turning into one large economy.

Outsourcing as an Outcome of Globalization: The most important outcome of the globalization process is Outsourcing. During the outsourcing model, a company of a country hires a professional from some other country to get their work done, which was earlier conducted by their internal resource of their own country.

The best part of outsourcing is that the work can be done at a lower rate and from the superior source available anywhere in the world. Services like legal advice, marketing, technical support, etc. As Information Technology has grown in the past few years, the outsourcing of contractual work from one country to another has grown tremendously. As a mode of communication has widened their reach, all economic activities have expanded globally.

INDIAN STOCK MARKET BEFORE LPG

Before liberalization, Privatization and Globalization Indian economy was tightly controlled and protected by number of measures like licensing system, high tariffs and rates, limited investment in core sectors only. During 1980’s, growth of economy was

highly unsustainable because of its dependence on borrowings to correct the current account deficit. To reduce the imbalances, the government of India introduced economic policy in 1991 to implement structural reforms. The financial sector at that time was much unstructured and its scope was limited only to bonds, equity, insurance, commodity markets, mutual and pension funds. In order to structure the security market, a regulatory authority named as SEBI (Security Exchange Board of India) was introduced and first electronic exchange National Stock Exchange also set up. The purpose behind this was to regularize investments, mobilization of resources and to give credit. The Indian stock market mainly functions on two major stock exchanges, the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). In terms of market capitalization, BSE and NSE have a place in top five stock exchanges of developing economies of the world. Out of total fourteen stock exchanges of emerging economies, BSE stood at fourth position 2 with market capitalization of $1,101.87b as on June, 2012 and NSE at fifth position with market capitalization of $1079.39b as on June, 2012.

NEED AND IMPACT OF NEW ECONOMIC POLICY, 1991 IN INDIA: Introduction Due to continuous increase in government expenditure, high growth of imports, insufficiency of foreign exchange reserves and high level of inflations, India decides to take a historical step of changing trade in 1991. It embarked on a comprehensive reform of the economy Out of Liberalization, Privatization and Globalization the first two are policy strategies and the third one is the outcome of these strategies. These three expressions are the supporting pillars, on which the structure of New Economic

Policy of the government has been erected and implemented since 1991. Therefore, we have to understand the positive and negative impacts of these and find out the ways and challenges of adopting new economic policy and how to overcome from its demerits.

Background and reasons for economic reforms of 1991 The economic condition of India in the year 1991 was miserable. It was due to the cumulative effects of number of reasons. Therefore economic reforms were introduced in India as 1991 was the year of crises for the Indian economy. The main reasons were as follows:i) National income was growing just at a rate of 0.8%, ii) Inflation reaches the height from 6.7% to 16.8%, iii) Balance of payment crises was to the extent of 10,000 crores. Balance of payments deficit was estimates at Rs 2,214 crore in 1980-81, which rose to high level of Rs 17,367 crore in 1990-91, iv) India was highly indebted country. It was paying 30,000 crores interest charging per year, v) Foreign exchange reserves were only 1.8 billion dollars which were sufficient for three weeks. Forex reserves that were Rs 8,151 crore in 1986-87, decline sharply to Rs 6,252 crore in 1989-90, vi) India sold large amount of gold to Bank of England, vii) India applied for the loan from World Bank and IMF (International Monetary Fund) to avail this loan, Indian government also agree to the conditions of World Bank and IMF (International Monetary Fund) and announced the New Economic Policy,

viii) Fiscal deficit was more than 7.5%, ix) Deficit financing was around 3%, x) Trade relations with soviet block had broken down, xi) India used to receive huge amount of remittance from gulf countries in foreign exchange. But, remittance from non-residence Indians stopped due to war in gulf countries, xii) Prices of petroleum products was very high on account of Iraq war in 1990-91, xiii) The PSU’s (Public Sector Undertakings) in India were facing the problem of low productivity and poor rates of return. In 1951, there were just 5 enterprises in public sector in India which rose to 232 in 1991. Several thousand crores of rupees were invested in their growth and development. In the initial 15 years their performance was quite satisfactory but thereafter most of these started recording losses. Because of their poor performances, public sector undertaking degenerates into a liability. On account of these factors it became imperative for the government to adopt New Economic Policy or initiate reforms policies. The government was left with no option but to approach World Bank and IMF (International Monetary Fund) for economic asylum. To manage the crises, India was granted a loan for 7 billion dollars. But, before granting loan to India, World Bank and IMF (International Monetary Fund) expected India to liberalize and open up the economy by removing restrictions on the private sector, reducing the role of the government in many areas and removing trade restrictions, Liberalization, Privatization and Globalization were three basic elements of the New Economic Policy (NEP, 1991) or New Economic Reforms. Out of Liberalization, Privatization and Globalization the first two are policy strategies and the third one is the outcome of these strategies. These three expressions are the supporting pillars, on which the structure of New Economic Policy of the government has been erected and implemented since 1991. This is popularly known as LPG model of growth.

Characteristics of Stock Market :

There are some most important characteristics of Stock market which are as below: i) Stock Market is a market, where securities of corporate bodies, government and semi-government bodies are bought and sold. ii) This market deals with shares, debentures bonds and such securityes already issued by the companies. It also deals with existing or second hand securities and hence it is called secondary market. iii) Stock Exchange does not buy or sell any securities on its own account. It merely provided the necessary infranstructure and facilities for trade in securities to its members and brokers who trade in securities. It also regulates the trade activities so as to ensure free and fair trade. iv) NSE maintain an official list of securities that could be purchased and sold on its floor. Securities which do not figure in the official list of stock market or exchange are called unlisted securities. Such unlisted securities cannot be traded in the stock exchange. v) All the transactions in securities at the stock exchange are affected only through its authorised brokers and members. Outsiders or direct investors are not allowed to enter in the leading circles of the stock exchange. Investors have to buy or sell the securities at the stock exchange through the authorised brokers only. vi) A stock exchange is an association of persons or body of individuals which may be registered or unregistered. vii) Stock Market is an organised market and requires recognition from the Central Government. viii) Buying and selling transactions in securities at the stock market are governed by the rules and regulations of stock market as well as SEBI Guidelines. No deviation from the rules and guidelines is allowed in any case. ix) This market is a particular market place where authorised brokers come together daily on the floor of market called trading circles and conduct trading activities. The

prices of different securities traded are shown on electronic boards. After the working hours market is closed. All the working of stock exchanges is conducted and controlled through computers and electronic system. x) NSEs are the financial barometer and development indicators of national economy of the country. Industrial growth and stability is reflected in the Index of Stock Exchange (ISE).

CHAPTER 2 RESEARCH METHODOLOGY: 2.3 Data and Research Methodology:

The data used for the analysis of stock market development after liberalisation period has been collected from hand book of statistics on Indian Economy by SEBI. Economy wide data has been collected from the annual reports and other publications of RBI. Besides this other information regarding stock market development has been obtained from NIC, economic surveys and other published reports of Government organisations. BSE 100 index2 has been used as a proxy for market for calculating vola-tility of the Indian stock market. To avoid factors such as temporal stability and business cycle influencing our study, a longer time frame of study of 17 years period i.e., 1990-91 to 2006-07 has been used. This period is chosen to correspond with the period when changes in trade policy were taking place and Indian economy went through a phase of increasing competition, deregulation, and restructuring. Further three sub periods are chosen within this period, 1990-91, 1997-98 and 2002-03 to study the impact of reforms announced by government in phases. While 1990-91 signified the beginning of the reforms after liberalisation, 1997-98 was chosen so that it would capture the changes initiated in the reforms I and the beginning of reforms II. The end-year 2002-03 comes five years after the process of second phase of reforms was initiated in 1997-98, and is chosen so as to capture any changes that may have taken place as a consequence. Ratio analysis technique of financial management has been used to analyse the movements over the period. The average of each ratio is computed and tabulated to study the indicators of stock market development in post liberalisation scenario and over sub-periods. The data has been analysed by using Statistical Package for Social Sciences (SPSS).

2.2 Objectives of the Study: This study aims to assess impact of globalisation on stock market development in India. Theory does not provide a unique concept of stock market development to guide empirical research. Existing models suggest that stock market development is a multi faceted concept, involving issues of market size, market liquidity, and integration with world capital markets. Using measure of market integration, as well as measures of stock market i.e. market size, liquidity, volatility, concentration, and institutional development for forty four developed and emerging markets from 1986 to 1993, Demirguc-Kunt and Levine (1996) find that large markets tend to be less volatile, more liquid, and less concentrated in a few stocks than smaller markets. The three stock market indicators, viz, size, liquidity, and volatility were considered and two time series trend break techniques of Perron were applied on monthly data of Bombay Stock Exchange, by Biswal and Kamaiah (2001) and they found that the Indian stock market grew and became more liquid after liberalisation. However, in respect of volatility the market had not exhibited any significant changes. The period covered by them was up to 1998. Subsequently there were significant changes in the development of Indian stock market. For the purpose of this study, we have used same indicators assuggested by Biswal and Kamaiah (2001) i.e., Size, Liquidity, and Volatility and then tested to see ifthese indicators will exhibit any trend over time in response to various stock market regulations. The objective of the paper is to assess market development through measures involving market size, liquidity, and volatility. 1. Size of the Indian stock market has increased during the period 1990-91 to 200607. 2. Liquidity of the Indian stock market has increased during the period 1990-91 to 2006-07. 3. Volatility in the Indian stock Indian stock market has increased during the period 1990-91 to 2006-07.

1

Market Size: In 1980, the stock market capitalisation ratio was only 5% of GDP. As a result of liberalisation measures initiated in the 1980s, the ratio had risen to 13% by 1990. Market Capitalisation ratio of Indian corporate sector after 1991…… MARKET CAPITALISATION RATIO OF INDIAN CORPORATE SECTOR:

YEAR

MARKET

GDP

CAPITALISATIO (RS.MILLIO

RATIO(% MARKET GDP)

N(RS.MILLIONS) NS)

CAPITALIS ATION(%C HANGE)

1990-91

7000

51503

13.59

_

1991-92

12314

58409

21.08

75.92

1992-93

18676

66987

27.88

51.66

1993-94

36807

78007

47.18

97.08

1994-95

43548

91216

47.74

18.31

1995-96

52648

106981

49.21

20.90

1996-97

46392

124763

37.18

-11.88

1997-98

56033

138873

40.35

20.78

1998-99

54536

160111

34.06

-2.67

1999-00

91284

177109

51.54

67.38

2000-01

57155

190228

30.05

-37.39

2001-02

61222

207766

29.47

7.12

2002-03

57220

224473

25.49

-6.54

2003-04

120121

251992

47.67

109.93

2004-05

169843

285533

59.48

41.39

2005-06

302219

324955

93.00

77.94

2006-07

345504

376029

94.28

17.80

2

Whenever a study is conducted, it is done on the basis of certain objectives in mind. A successful completion of a project is based on the objectives of the study that could be stated as under:1. To study the expectations and apprehensions of Investors and Traders and also

their way of working in Indian stock markets. 2. To study the time period for which investments are generally made by investors in the stock markets. 3. To study how comfortable people investing in stock markets are. 4. To determine the awareness level of people about India infoline ltd and its products and services and the factors affecting the choice of a brokerage house. 5. To study the importance of various factors which according to investors and traders affect the share prices.

2.5 INTRODUCTION TO BSE

Established in 1875, BSE (formerly known as Bombay Stock Exchange Ltd.), is Asia's first & the Fastest Stock Exchange in world with the speed of 6 micro seconds and one of India's leading exchange groups. Popularly known as BSE, the bourse was established as "The Native Share & Stock Brokers' Association" in 1875. BSE is a corporatized and demutualised entity, with a broad shareholder-base which includes two leading global exchanges, Deutsche Bourse and Singapore Exchange as strategic partners. BSE provides an efficient and transparent market for trading in equity, debt instruments, derivatives, mutual funds. It also has a platform for trading in equities of small-and-medium enterprises (SME). The BSE Ltd, the oldest stock exchange in Asia had a very humble beginning under a Banyan Tree in Mumbai’s town hall. The stock exchange was started by four Gujaratis and one Parsi and gradually the group grew. As the number of brokers was continuing increasing the venue of their meeting changed many times. In 1874, the group finally moved to Dalal Street and in 1875 the 3

group became an official organization known as The Native Share and Stockbrokers Association.

By 1956, the BSE became the first stock exchange to be recognized by the government of India under the Securities Contracts Regulation Act. By 1986, the BSE had developed the BSE SENSEX which made it easy for the BSE to measure the overall performance of the exchange. In 2000, the BSE used this index to open its derivatives markets, trading SENSEX futures contracts. The development of SENSEX options along with equity derivatives in 2001 and 2002 expanded the BSE’s trading options. Since its inception in 1857, the BSE was an open-floor trading exchange, the BSE switched to an electronic trading system in 1995. BSE is the first exchange in India and second in the world to obtain an ISO 9001:2000 certifications.

Vision and Mission of BSE:



Vision Our vision is to be the most sought after learning provider in the world in areas of financial and leadership learning, by pioneering the generation and dissemination of knowledge for the enhancement of skills and capabilities of professionals and aspiring professionals.



Mission As a centre of learning, our mission is to promote an open learning environment that brings together people, cultures and ideas from around the world, changing lives and helping transform organizations through innovative 4

learning programs. Through our learning programs, we develop responsible, thoughtful leaders and entrepreneurs who create value for their organizations and their communities. It is the first exchange across India and second across world to get an ISO 9000:2000 certification.

5

6

2.6 SOME OF THE INITIATIVES UNDERTAKEN BY BSE 

BSE acquired a stake in United Stock Exchange (USE) to drive the development and growth of the currency derivatives segment. USE commenced operations in September 2010 and created a world record for the largest number of contracts (9.88 million) traded by any exchange on the first day of trading.



A reporting platform for corporate bonds was launched which was christened as ICDM or Indian Corporate Debt Market.



BSE STAR MF – a Mutual fund trading platform was launched in December 2009. BSE is doing exceptionally well in terms of market share (80%) and order flows coming in through this platform.



To bring down the cost of transactions, a new transaction fee structure for cash equity segment has been introduced.



To fill the huge go-to-market knowledge gap which exists in several PSUs, BSE launched www.bsepsu.com, a website which provides a single, updated platform to Public Sector Units (PSUs) of India with all information relating to disinvestments and public offerings



Additionally, BSE significantly enhanced its website, which attracts 1 million unique visitors everyday and also launched its website in regional languages in Hindi, Marathi and Gujarati versions to reach out to a larger audience in India.



BSE is the first Indian Exchange to launch mobile-based trading in India in Sept 2010.



After receiving the green signal from Securities & Exchange Board of India (SEBI), BSE introduced Smart Order Routing (SOR) for its members in Oct 2010.



BSE reduced membership deposit by 90% for new members with an aim to build an expanded pan national membership base to promote financial inclusion.



BSE is the first Securities Market Infrastructure member of SWIFT in India and shall provide Corporate Actions to Custodians in ISO 15022 format. 7



BSE launched SENSEX Realized Volatility Index in Nov 2010 - the first of its kind in India

8

2.7 ACHIEVEMENTS AWARDS & RECOGNITIONS:

At par with international standards, BSE Ltd. has been a pioneer in several areas over the decades and has many firsts and key achievements to its credit. BSE is the first exchange in India to



Launch a special platform for trading in SME securities



Launch a Free Float Index - S&P BSE SENSEX



Launch Exchange Enabled Internet Trading Platform



Obtain ISO certification for a stock exchange



Exclusive facility for financial training – BSE Institute Ltd.



Launch its website in Hindi and regional languages



Host the popular opening-bell ceremony in Indian capital markets



Launch mobile-based trading in India in Sept 2010



Become securities market infrastructure member of SWIFT in India and provide corporate actions to custodians in ISO 15022 format



Launched S&P BSE SENSEX Realized S&P BSE Volatility (REALVOL) Index in Nov 2010



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.



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

9



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

10

2.8 MANAGEMENT TEAM OF BSE:

Sr.

NAME

DESIGNATION

No.

PJ. POWER TOOLS

1

Mr. Ashishkumar

Managing Director

Chauhan

&Chief Executive

25th

officer 2

Mr. Nehal Vora

Chief Regulatory

24th

Officer 3

Mr. Nayan Mehta

Chief Financial Officer 25th

4

Mr. Kersi Tavadia

Chief Information

22th

Officer 5

Mr. Neeraj Kulshrestha

Chief Business Officer

27th

6

Mr. Sayee

Head- Product

28th

11

Graph of S&P BSE SENSEX monthly data from 1 August 1995 to August 2017:

It comprised 100 stocks listed at five major stock exchanges in India – Mumbai, Calcutta, Delhi, Ahmadabad and Madras. The BSE National Index was renamed BSE100 Index from 14 October 1996 and, since then, its calculations take into consideration only the prices of stocks listed at BSE.

BSE launched the dollar-linked version of BSE-100 index on 22 May 2006, the "BSE-200" and the "DOLLEX-200" on 27 May 1994, the BSE-500 Index and 5 sectoral indices in 1999, and the BSE-PSU Index, DOLLEX-300, and the BSE 0TECk Index (the country's first free-float based index) in 2001. Over the years, BSE shifted all its indices to the free-float methodology (except BSE-PSU index). The BSE disseminates information on the Price-Earnings Ratio, the Price to Book Value Ratio, and the Dividend Yield Percentage of all its major indices on day-to-day basis. The values of all BSE indices are updated on a real-time basis during market hours and displayed through the BOLT system, the BSE website, and news wire agencies. All BSE Indices are reviewed periodically by the BSE Index Committee.

12

This Committee, which comprises eminent independent finance professionals, frames the broad policy guidelines for the development and maintenance of all BSE indices.

13

WHAT IS SENSEX ? Sensex, otherwise known as the S&P BSE Sensex index, is the benchmark index of the Bombay Stock Exchange (BSE) in India. Sensex is composed of 30 of the largest and most actively-traded stocks on the BSE, providing an accurate gauge of India's economy. Initially compiled in 1986, the Sensex is the oldest stock index in India. Analysts and investors use the Sensex to observe the overall growth, development of particular industries, and booms and busts of the Indian economy.

14

How SENSEX is calculated ? The formula for calculating the SENSEX = (Sum of free flow market cap of 30 benchmark

stocks)*Index

Factor

where, Index

Factor

=

100/Market

Cap

Value

in

1978-79.

100 is the Index value during 1978-79. Example: Assume SENSEX has only 2 stocks namely SBI and RELIANCE. Total shares in SBI are 500 out of which 200 are held by Government and only 300 are available for public trading. RELIANCE has 1000 shares out of which 500 are held by promoters and 500 are available for trading. Assume price of SBI Stock is Rs.100 and Reliance is Rs.200. Then "free-Floating Market Cap" of these 2 companies =(300*100+500*200) Assume Then

Market

= Cap

SENSEX

30000+100000 during

the

=

year

= 1978-79

130000*100/25000

Rs.

130000

was

Rs.25000

=

520.

The methodology in the example is exactly followed to calculate the SENSEX, only difference being the inclusion of 30 stocks.

Stock Market Volatility: To invest money in stock market is assumed to be risky because stock markets are volatile. There is volatility in stock market because macro economic variables influence it and affect stock prices. These factors can affect a single firm’s price and can be specific to a firm. On the contrary, some factors commonly affect all the firms. For example, when stock market crashed on September 2008, the price of almost listed companies came down. Volatility is the variation in asset prices change over a particular time period. It is very difficult to estimate the volatility accurately. Volatility is responsible to make the stock market risky but it is this only which provides the opportunity to make money to those who can understand it. It gives the investor opportunity to take advantage of fluctuation in prices, buy 15

stock when prices fall and sell when prices are increasing. So, to take advantage of volatility it is need to be understood well. If the performance of Indian stock market is seen during last few years, it is found that its all about only four years 2003-2007. Some people believe that investment in stock market for longer period is always give fair returns but that’s not true. According to one study, returns in September 2001 were just 49% higher as compared to returns in September 1991, a compound return that is even lesser as compared to the return on a saving bank account deposit. In the last five years, from 2007 till 2012, the total market returns are only 5.9% per year.

The whole growth in stock market is attained during 2003 and 2007, besides this time period, the stock market has given only substandard returns. The scrip prices have high returns but overall stock market doesn’t raise much.

NEED FOR BOMBAY STOCK EXCHANGE:

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 Indian economy have 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 16

market it not only affects the company listed but also affects many families. In the few extreme cases, it is observed that the bread winners of the family tends to suicide due to losses occurred. In most of major industrial cities all over the world, where the business 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 in stock exchanges . Not to forget that the taxes and other statutory charges paid by BSE are substantial and make a sizeable contribution to the government. BSE is an asset to our country and its existence plays a vital role in many people’s life that depends on it. Indeed, BSE has made a major contribution to the industrial and economic development of India.

17

CHAPTER 3

3.1 NATIONAL STOCK EXCHANGE OF INDIA :

The National Stock Exchange (NSE) is a stock exchange located at Mumbai, Maharashtra, India. It is the 9th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading. NSE has a market capitalization of around US$1.59 trillion and over 1,552 listings as of December 2010. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalization.NSE is mutually-owned by a set of leading financial institutions, banks,insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6percent.

Type

National Stock Exchange

Location

Mumbai, India

Coordinates

19°3'37N 72°51'35E

Founded

1992

Owner

National Stock Exchange of India Limited

Key people

Ravi Narain (MD)

Currency

Indian rupee ()

No. of listings 1,552 Market Cap

US$1.59 trillion (Dec 2010)

Indexes

S&P CNX Nifty CNX Nifty Junior 18

S&P CNX 500 Website

www.nse-india.com

19

Mission NSE's mission is setting the agenda for change in the securities markets in India. The NSE was set-up with the main objectives of: 

establishing a nation-wide trading facility for equities, debt instruments and hybrids,



ensuring equal access to investors all over the country through an appropriate communication network.



providing a fair, efficient and transparent securities market to investors using electronic trading systems,



enabling shorter settlement cycles and book entry settlements systems, and



meeting the current international standards of securities markets.

a. The standards set by NSE in terms of market practices and technology have become industry benchmarks and are being emulated by other market participants. NSE is more than a mere market facilitator. It's that force which is guiding the industry towards new horizons and greater opportunities.

NSE was set up with the objectives of: • Establishing a nationwide trading facility for all types of securities

• Ensuring equal access to investors all over the country through an appropriate communication network;

• Providing a fair, efficient and transparent securities market using electronic trading system; 20

• Enabling shorter settlement cycles and book entry settlements; and

• Meeting international benchmarks and standards.

21

3.2 NSE:ACHIEVEMENTS / MILESTONES YEAR

ACHIEVEMENTS

1993



Recognised as a stock exchange

1994



Launched the equity and wholesale debt market segments.



Commenced electronic or screen-based trading

1995



Established an Investor Protection Fund Trust.

1996



Created and administered a settlement fund.



Launched NIFTY 50 Index, which remains our flagship index today.



Commenced trading and settlement in dematerialised securities on our exchange.

1998

commenced NSE certification for "Financial Markets certification program" (NCFM) in India.

2000

Launch of index futures based on the NIFTY 50 index (then known as S&P CNX NIFTY) for trading; Listed index futures on NIFTY 50 on the Singapore Exchange; Commenced internet trading

2001



Launched index options based on the NIFTY 50 index (then known as S&P CNX NIFTY) for trading



Launched single stock futures and options on listed securities.

2002



2005

Launched ETFs listings. Launched NIFTY Bank index derivatives

2008

First in India to offer trading in Currency Futures. Establishment of Securities Lending and Borrowing Scheme (SLBS). Launched NOW platform for web-based trading.

2009 2010

Launched Mutual Fund Service System (MFSS) 

Launched NOW platform for mobile devices.



Launched trading in Currency Options

22

2011



Commenced trading in index futures and options on global indices, namely the S&P 500 and Dow Jones Industrial Average.

2012



Commenced trading in index futures and options contracts on the FTSE 100 index



Launched SME-specific EMERGE platform for the listing and trading of securities of SMEs.

2013



Launched the New Debt Segment(NDS).

2014



Launched NMF-II platform for mutual funds



Launched NBF II segment for interest rate futures



Launched trading on India VIX index futures



Commenced trading on NIFTY 50 (then known as CNX NIFTY) on the Osaka Exchange

2015



Entered into a memorandum of understanding to enhance the level of cooperation with the London Stock Exchange Group.

2016



Renamed CNX NIFTY to NIFTY 50.



Launched NIFTY 50 index futures trading on TAIFEX



Launched platform for sovereign gold bond issuances



Launched electronic book-building platform for private placement of debt securities

National Securities Clearing Corporation Ltd. (NSCCL) The National Securities Clearing Corporation Ltd. (NSCCL), a wholly owned 23

subsidiary of NSE, was incorporated in August 1995. It was set up to bring and sustain confidence in clearing and settlement of securities; to promote and maintain, short and consistent settlement cycles; to provide counter-party risk guarantee, and to operate a tight risk containment system. NSCCL commenced clearing operations in April 1996. NSCCL carries out the clearing and settlement of the trades executed in the Equities and Derivatives segments and operates Subsidiary General Ledger (SGL) for settlement of trades in government securities. It assumes the counterparty risk of each member and guarantees financial settlement. It also undertakes settlement of transactions on other stock exchanges like, the Over the Counter Exchange of India. NSCCL has successfully brought about an up-gradation of the clearing and settlement procedures and has brought Indian financial markets in line with international markets.

NSE Technology Across the globe, developments in information, communication and network technologies have created paradigm shifts in the securities market operations. Technology has enabled organisations to build new sources of competitive advantage, bring about innovations in products and services, and to provide for new business opportunities. Stock exchanges all over the world have realised the potential of IT and have moved over to electronic trading systems, which are cheaper, have wider reach and provide a better mechanism for trade and post trade execution. NSE believes that technology will continue to provide the necessary impetus for the organisation to retain its competitive edge and ensure timeliness and satisfaction in customer service. In recognition of the fact that technology will continue to redefine the shape of the securities industry, NSE stresses on innovation and sustained investment in technology to remain ahead of competition. NSE's IT set-up is the largest by any company in India. It uses satellite communication technology to energise participation from around 400 cities spread all over the country. In the recent past, capacity enhancement measures were taken up in regard to the trading systems so as to effectively meet the requirements of increased users and associated trading loads. With upgradation of trading hardware, NSE can handle up to 1 million trades per day. NSE has also put in place NIBIS (NSE's Internet Based Information System) for on-

24

line real-time dissemination of trading information over the internet. In order to capitalise on in-house expertise in technology, NSE set up a separate company, NSE.IT, in October 1999. This is expected to provide a platform for taking up new IT assignments both within and outside India and attaining global exposure. NEAT is a state-of-the-art client server based application. At the server end, all trading information is stored in an in-memory database to achieve minimum response time and maximum system availability for users. The trading server software runs on a fault tolerant STRATUS main frame computer while the client software runs under Windows on PCs. The telecommunications network uses X.25 protocol and is the backbone of the automated trading system. Each trading member trades on the NSE with other members through a PC located in the trading member's office, anywhere in India. The trading members on the Wholesale Debt Market segment are linked to the central computer at the NSE through dedicated 64Kbps leased lines and VSAT terminals. These leased lines are multiplexed using dedicated 2 Mbps, opticalfibre links. The WDM participants connect to the trading system through dial-up links. The Exchange uses powerful RISC -based UNIX servers, procured from Digital and HP for the back office processing. The latest software platforms like ORACLE 7 RDBMS, GUPTA - SQL/ORACLE FORMS 4.5 Front - Ends, etc. have been used for the Exchange applications.

3.3 S&P NIFTY: The Standard & Poor's CNX Nifty stock index is endorsed by Standard & Poor's and composed of 50 of the largest and most liquid stocks found on the National Stock Exchange (NSE) of India. It is commonly used to represent the market for benchmarking Indian investments. Similar to other major stock indexes like the S&P 500, companies must meet certain requirements in terms of market capitalization and liquidity before they can be considered for inclusion in the index.

25

26

HOW NIFTY50 IS CALCULATED ? Nifty is simply a trade mark or market index used by National Stock Exchange of India. Nifty covers fifty stocks from various segments of the market. This is the reason why nifty is highly versatile and diversified. Nifty is calculated using the – “FREE FLOAT MARKET CAPITALIZATION“ methodology. In this methodology or technique, nifty level at any point of time reflects the free-float market. The base period of NIFTY is 1995 and the base value is 1000 index points. The mathematical formula for calculating nifty is-: NIFTY50 = (sum of free flow market capital of 50 most liquid stocks)*index factor Where, Index factor = 1000/market capital value in 1995 For instance, Suppose nifty has only two stocks namely ABC and XYZ. Total stocks in ABC are 600 out of which 200 are held by promoters and 400 are available for public trading. Similarly, let the total stocks of XYZ are 400 out of which 100 are held by the promoters and 300 are available for public trading. Assume price of ABC stock is Rs. 100 and that of XYZ stock be Rs. 200. Then, the free floating market capital of these two companies will be-: (400*100+300*200) = 40,000 + 60,000 = Rs. 1,00,000 Let the market capital in year 1995 be Rs. 90,000.

Then, NIFTY= 1,00,000*1000/90,000 = 1111. This is exactly the same how NIFTY is calculated except the fact that it has an inclusion of fifty stocks.

27

MANAGEMENT TEAM OF NSE: Sr. No. NAME & COMPANY

DESIGNATION

1 Mr. Vikram Limaye

Managing Director & CEO

2

Mr. Abhay Havaldar Former Advisory Director - General

Shareholder Director

Atlantic LLC 3

Mr. Dinesh Kanabar Former Dy. CEO of KPMG in India &

Public Interest Director

CEO of Dhruva Advisors LLP 4

Ms. Dharmishta Raval Advocate & Former Executive Director

Public Interest Director

SEBI 5

Mr. Naved Masood Former Secretary, Ministry of Corporate Affairs

Public Interest Director

Government of India 6

Mr. T. V. Mohandas Pai Chairman of Manipal Global Education Services Private Limited

Public Interest Director

& Former CFO - Infosys Technologies

28

3.4 IMPACT OF GLOBALISATION ON INDIAN STOCK MARKET:

During 1980s, the developing countries started liberalising their economies. Equity flows to developing countries have increased sharply in recent years as a result (Bhaduri, 2000). There has been a greater emphasis on the development of equity markets as a part of financial reforms. India has also followed this path. With the globalisation, financial markets are becoming more and more important every day. A developed stock market is considered crucial to national economic growth as it provides an additional channel along with banks and other financial institutions, for encouraging and thus mobilising domestic savings. It also ensures improvements in the productivity of investment through market allocation of capital and increases managerial discipline through the market for corporate control. A study by ëWorld Institute for Development Economic Researchí (WIDER, 1990) has argued that the developing countries should liberalise their financial markets in order to attract foreign portfolio equity flow. The huge amount of financial capital available in the developed countries through pension and investment funds could be attracted to the developing countries provided the latter liberalised their markets externally and developed their stock market internally. Capital markets have taken a prominent place in the developing countriesí financial system during the last decade. The most important measure taken in this regard by developing countries was the opening of their respective stock markets to international investors. This step, taken in the late 1980s or early 1990s, resulted in historically high level of portfolio investment in the emerging markets1 by global and regional funds. Stock market liberalisation in many developing countries took place during the period 1985 to 1995 when market capitalisation of allemerging markets increased by 1,007 percent compared to an increase of 253 percent in the case of developed markets. As a result, the share of emerging markets in the world market capitalisation increased from 4 percent in 1985 to 11 percent in 1995.

29

3.5 LITRATURE REVIEW: There has been a wide range of studies concerning the Indian capital market. Several studies such as Sahni(1985), Kothari(1986), Mookerjee(1988), Lal(1990), Ramesh

Gupta(1991,1992), Raghunathan(1991), Gupta(1992), and Sinha(1993)

comment upon the Indian capital market in general and trading systems in the stock exchanges in particular. Raju and Ghosh (2004) empirically observe that emerging capital markets exhibit higher intra-day volatility compared to developed markets. It is a sign of an emerging market owing to economic and socio-political variations; the volatility in the emerging markets is generally on the high side. Chakrabarti and Mohanty (2005) discuss how capital market in India is evolved in the reform period. Bajpai (2006) concludes that the capital market in India has gone through various stages of liberalisation, bringing about fundamental and structural changes in

the

market design and operation, resulting in broader

investment choices, drastic reduction in

transaction

costs,

and

efficiency,

transparency and safety as also increased integration with the global markets. The opening up of the economy for investment and trade, the dismantling of administered interest and

exchange rates

regimes

and setting

up

of sound

regulatory institutions have enabled time. This literature review brings into forefront the fact that the capital market literature lacks the

empirical

study

of

the

performance of the Indian capital market, especially in the aftermath of global financial crisis. Therefore, in this paper an attempt has been made to study empirically the performance of Indian capital market and enrich the literature.

30

CHAPTER 4 4.1 BENEFIT OF INVESTMENTS IN STOCK MARKET

It is very important to have savings along with various means to park it for growth. Here, the rate of returns plays the major role. It is notice that the rate of return from investment, in stock is comparatively higher but it also exposes us to the higher risks. So, the knowledge of market and which scrip to buy is necessary that is what we will learn from this book.

Years of experience has taught that one should not invest total capital into any one scheme or all the money in particular scrip (not to put all the eggs in one basket). In share market, capital should be invested in few scripts and not only one or two scrips.

Share market is one of the good avenues of investing and appreciating the capital. Here, Common sense, discipline and flexibility are the factors which are taken care of that can fetch handsome returns.

Many times, we hear that Mr. so and so has multiplied his capital 10 to 20 times in five to six years time. Along with, there are plenty of cases where people are ruined & have to sell off their house too.

4.2 BENEFITS OF LISTING

The important advantages of listing are listed below 

Fund Raising and exit route to investors: Listing provides an opportunity to the corporate / entrepreneurs to raise capital to fund new projects/undertake expansions/diversifications and for 31

acquisitions. Listing also provides an exit route to private equity investors as well as liquidity to the ESOP-holding employees.



Ready Marketability of Security: Listing brings in liquidity and ready marketability of securities on a continuous basis adding prestige and importance to listed companies.



Ability to raise further capital:

An initial listing increases a company's ability to raise further capital through various routes like preferential issue, rights issue, Qualified Institutional Placements and ADRs/GDRs/FCCBs, and in the process attract a wide and varied body of institutional and professional investors. 

Supervision and Control of Trading in Securities:

The transactions in listed securities are required to be carried uniformly as per the rules and bye-laws of the exchange. All transactions in securities are monitored by the regulatory mechanisms of the stock exchange, preventing unfair trade practices. It improves the confidence of small investors and protects them. 

Fair Price for the Securities:

The prices are publicly arrived at on the basis of demand and supply; the stock exchange quotations are generally reflective of the real value of the security. Thus listing helps generate an independent valuation of the company by the market. 

Timely Disclosure of Corporate Information: 32

The listing agreement signed with the exchange provides for timely disclosure of information relating to dividend, bonus and right issues, book closure, facilities for transfer, company related information etc by the company. Thus providing more transparency and building investor confidence. 

Collateral Value of Securities:

Listed securities are acceptable to lenders as collateral for credit facilities. A listed company can also borrow from financial institutions easily as it is rated favorably by lenders of capital; the company can also raise additional funds from the public through the new issue market with a greater degree of assurance.



Better Corporate Practice:

Since the violation of the listing agreement entails the de-listing/suspension of securities from the rings of the exchange, the listed companies are expected to follow fair practices to the advantage of investors and public. 

Benefits to the Public:

The data daily culled out by the stock exchange in the form of price quotations and others; provide valuable information to the public which can be used for project and research studies. The stock exchange prices can be an index of the state of the economy. Financial institutions, NRl, individual investor’s etc. can take wise decisions before making investments. 

Subdivision and Consolidation of Holdings:

Stock exchange bye-laws provide for explicit rules for sub division and consolidation of securities as desired by the investors. There is special trading sessions in the exchange for conversion of odd lots into market lots arranged by financial and institutional investors. Thus listing helps to provide flexibility 33

to investors in the subdivision and consolidation of their holdings with speed and earnestness.

4.3 ANALYSIS OF DATA: CAPITAL REQUIREMENT IN BSE AND NSE: SR. NO.

Criteria

BSE

NSE

1

Capital required

Minimum 10 Crores

Minimum 10 Crores

2

Market Capitalisation

Minimum 2 Times Of Minimum 25 Crores Paid up Capital

3

Profit Making Record

At-least last 3 years

N.A

4

Net Worth

Minimum 20 cr

The net worth of the company has not been wiped out by the accumulated losses resulting in a negative net worth

Comparison when company/ies is/are already listed on other stock exchange/s 5

Capital Required (Paid-

Minimum 3 Crores

Minimum 10 Crores

Minimum 2 Times

Minimum 25 Crores

Up) 6

Market Capitalization

Paid up of Capital 7

Profit Making Record

At-least last 3 years

At-least two out of the last three financial years

8

Net Worth Required

Minimum 20 cr

Minimum 50 cr.

9

Dividend paying track

Minimum 3 years

Minimum 2 out of the

record

last 3 immediately preceding financial years 34

10

Listing Record

At-least two years

At-least three years

listing record with

listing record with any

any Regional Stock

Regional Stock

Exchange.

Exchange.

4.4 TRADING AND SETTLEMENT: Demat account is a compulsory account for traders who want to trade in stock market. This account is mainly used for buying and selling of shares.

Trading Each Stock Exchange has listed and permitted securities that are traded on it. There are two ways of organizing the trading activities.

1. Open Outcry System Under the open outcry system traders shout and resort to signals on the trading floor of the exchange which consists of several notional' trading posts for different securities. A member (or his representative) Wishing to buy or sell a certain security, reaches the trading post where the Security is traded. Here, he comes in contact with others interested in transacting in that security, Buyers make their bid and sellers make their offers and bargains are closed at mutually agreed upon prices. In stock where jobbing is done, the jobber plays an important role. He stands ready to buy or sell on his account. He quotes his bid (buying) and asks (selling) prices. He provides some stability and continuity to the market.

35

2. Screen Based System In the screen-based system the trading ring is replaced by the computer Screen and distant participants can trade with each other through the computer network. A large screen based trading system (a) enhances the Informational efficiency of the market as more participants trade at a faster speed, (b) permits the market participants to get a full view of the market, which increases their confidence in the market, and (c) establishes transparent audit trails.

Settlement: The settlement of transactions is done on a settlement period basis. Earlier, the settlement period on the Indian Stock Exchanges was 7 days, but now it is T+l settlement. T+1 include the day of trade and an additional day. During a settlement period, buying and selling transactions in a particular security can be squared up. Square off is a same day settlement cycle. At the end of settlement period, transactions are settled on net basis, since the settlement period used to be 7 days and the settlement is for the net position, most of the transactions are squared within the settlement period. Clearly these transactions are motivated by a desire to profit from price variations within the settlement period.

Traditionally, trades have been settled by physical delivery. This means that the securities have to physically move from the seller to the seller's broker, from the seller's broker to the buyer's broker (through the clearing house of the exchange or directly), and from the buyer's broker to the buyer. Further the buyer has to lodge the 36

securities with the transfer agents of the company and the process of the transfer may take one to three months. This leads to high paperwork cost and creates had papet risks. To mitigate the cost and the risks associated

with the physical delivery. Settlement in the developed securities market is mainly through electronic delivery facilitated by depositories. A “depository" is an institution which immobilizes physical certificates (of securities) and effect transfers of ownership by electronic book entry. A beginning in the direction of electronic delivery has been made in India with the establishment of the National Securities Depository Limited (NSDL), India's first depository, in 1996. As NSDL expands its operations and as new depositories come into being, settlement will progressively be done more by electronic delivery and less by physical delivery.

37

Following is the diagrammatic presentation of how a transaction takes place?

STOCK EXCHANGE Opening Demat Account

Selection of a broker

Getting Unique Client No.

Entering ISIN of Scrip

Placing of the order

Contact Note

Settlement

38

4.5 PROCEDURE:

There are two ways to deal with investments in securities. 

An investor can invest directly in response to an issuing company's appeal i.e. IPO Public issue i.e. (Primary Market)



Investment from stock exchange i.e. secondary market 

While an investor purchases his shares from primary market, he needs to open Demat Account where shares are parked on electronic mode. Shares can be resold- or additional purchasing could be done here as represented in the diagram



Demat Account is opened.



Selection of a broker i.e. an authorized broker: approved by stock exchange



Getting unique client No. (Client ID)



Entering ISIN No. of scrip i.e. No of shares to be purchased or sold.



Placing of the order.



Completing a contract note and



Settlement of the transaction



Collect news clippings about IPO issue of shares and discuss it in the class.

4.6 DEPOSITORY Forms of Shares: 1. Physical Shares 2. Demat

39

Physical Share is represented by a stock certificate, whereas Demat shares are dematerialized shares inform of electronic data stored in computers of electronic depository.

Depository: A Depository is a securities "bank," where dematerialised physical securities are held in custody, and from where they can be traded. This facilitates faster, risk-free and low cost settlement. A Depository is similar to a bank and performs activities similar in nature.

An analogy between a bank and a depository may be drawn as follows: BANK

DEPOSITORY

Holds funds in an account.

Hold Securities in an account.

Transfers funds between accounts on the Transfers securities between accounts on instruction of the account holder.

the instruction of the account holder.

Facilitates transfers without having to handle Facilitates transfer of ownership. money. Facilitates safekeeping of money.

Facilitates safekeeping of shares.

Depository Participant: The Depository provides its services to investors through its agents called depository participants (DPs). These agents are appointed by the depository with the approval of SEBI. According to SEBI regulations, amongst others, three categories of entities, i.e. Banks, Financial Institutions and SEBI registered trading members can become DPs.

Depositories in India: There are two Depositories in India, CDSL and NSDL. CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with leading banks such as State

40

Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Stand, ird . Chartered Bank, Union Bank of India and Centurion Bank 1999, NSDL National Securities Depository Limited (NSDL) and Central Depository Services (CDS). NSDL was the first Indian Depository. It was inaugurated in November 1996. NSDL was set up with an initial capital of Rs 124 crore, promoted by Industrial Development Bank of India (IDBI), Unit Trust of India (UTI), National Stock Exchange of India Ltd. (NSEIL) and the State Bank of India (SBI).

Demat: Demat is a commonly used abbreviation for the word Dematerialization, which is a process whereby securities like shares , debentures are converted from the Material (paper document) form into electronic data and stored in the computers of an electronic depository

Procedure for the Dematerialization of Securities: In order to dematerialize physical shares, one has to fill in a Demat Request Form (DRF) which is available with the DP and submit the same along with physical certificates one wishes to dematerialize. Separate DRF has to be filled foreach ISIN number. If at a later date you wish to have these "Demat" securities converted back into paper certificates, the Depository can help to revive the paper shares.

Benefits of Dematerialized Shares:



Immediate transfer of securities



No stamp duty on transfer of securities 41



Elimination of risks associated with physical certificates such as bad delivery, fake securities, etc.



Reduction in paperwork involved in transfer process of securities



Reduction in transaction cost



Ease of nomination facility



Change in address recorded with DP gets registered electronically with all companies in which investor holds securities climinating the need to correspond with each of them separately



Transmission of securities is done directly by the DP



eliminating correspondence with companies



Convenient method of consolidation of folios/accounts .

4.7 How to Enter Stock Market

Why should one Invest in Equities?

Equities have the potential to appreciate in value over time. It also provides your portfolio with the growth necessary to reach your long term investment goals. Research & studies have proved that the equities have outperformed most other forms of investments in the long term.

Equities are considered the most challenging and the rewarding, when compared to other investment options. Research studies have proved that investments in some shares with a longer tenure of investment have yielded far superior returns than any other investment. However, this does not mean all equity investments would guarantee a similar high returns. Equities are high risk investments. One needs to study them carefully before investing. 42

Since 1990 till date, Indian stock market has returned about 17% to investors on an average in terms of increase in share prices or capital appreciation annually. Besides that, on an average stocks have paid 1.5% dividend annually.

Opening of Demat Account: Demat refers to a dematerialized account. Just as you have to open an account with a bank if you want to save your money, make cheque payments etc, in the same fashion you need to open a demat account if you want to buy or sell stocks, You have to approach the DPs (remember, they are like bank branches), to open your demat account. Just like a bank passbook or statement, the DP will provide you with periodic statements of holdings and transactions. Once you approach your DP, you will be guided through the formalities of opening an account. You must fill up an account opening form and sign an agreement with your DP. The DP will ask for some documents as proof of your identity and address. Here is a broad list (though you won't need all of them): 

PAN card (It is mandatory)



Bank a/c proof with Bank attestation



Electricity/ Landline phone bill



Ration card



Any one of the following (Photo Proof)

- Passport - Driver's license - Voters ID

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While they only ask for photocopies of documents; they will need originals for verification. You will have to submit a passport size photograph on which you have signed across.

Opening Trading Account with Broker: A stockbroker or Brokerage house is a entity affiliated to a stock market who bridges the gap between an investor and a stock market to buy or sell stocks and shares. Approach any SEBI registered broker and register yourself to open an account with him. For registration, you will have to provide certain documentary proofs to establish your credentials. The broker will guide you properly in this direction.

Points to be considered for Selection of Broker: 

Broker should located as near as possible



Broker should be a SEBI Registered Broker



Services offered (NSE, BSE, FNO, Commodities, etc)



Brokerage Rates



Convenience of placing orders for BUY / SELL with him. (By phone/online trading)

The Broker will ask for some documents as proof of your identity and address. Here is a broad list (you won't need all of them though): 

PAN card (It is mandatory)



Proof of D.P a/c



Proof of Bank a/c



Electricity/ Landline Phone Bill



Bank Attestation



Ration card



Any one of the following (Photo Proof) 44

- Passport - Driver's license -Voters ID While they only ask for photocopies of the documents; they will need the originals for verification. You will have to submit a passport size photograph on which you have signed across.

Process of Buying and Selling Shares: When you open an account, the DP will allot a unique BO ID (Beneficial Owner Identification) Number, which you need to quote for all future transactions.

If you want to sell your shares, you need to place an order with your broker and give a "Delivery Instruction' to your DP. The DP will debit your account with the number of shares sold. You will receive the payment from your broker.

If you want to buy shares, inform your broker about your Depository Account Number, so that the shares bought are credited into your account.

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4.8 SECURITIES EXCHANGE BOARD OF INDIA (SEBI)

The capital market in India has witnessed tremendous growth since the beginning of 1990s when the process of liberalization initially was started. Under the impact of liberalization the industrial and financial policies were restructured. Resource mobilization in the stock markets was started increasing significantly. The liberalized investment policy of the Government, streamlining of industrial licensing policies and fiscal incentive to industry have led to the growth of the capital market significantly, With ever expanding response of investors and growing stock exchange operations, several malpractices started taking place on the part of Companies, brokers, investment consultants. Some of the undesirable practices like insider trading, delay in allotment of shares, inadequate information to investors started disturbing the smooth functioning of the market. This has started discouraging the common investor from investing into securities. Hence, there felt the need to set up an exclusive monitoring institution which would regulate the working of stock exchange. The Government of India established the market watchdog SEBI i.e. Securities and Exchange Board of India (SEBI) in April 1988. SEBI as security exchange board of India became a statutory body under SEBI Act 1992, and its head office is located at Mumbai. At present SEBI have offices in Mumbai, Calcutta, New Delhi and Chennai.

Objectives of SEBI The main objectives of SEBI are as under 

To promote fair dealing by the issuers of securities and to ensure a

market

place where companies or institutions can raise funds at a relatively low cost. 

To provide protection to the investors and protect their rights and interests so that there is a steady flow of savings into the market.

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

Το regulate and develop a code of conduct and fair practice by intermediaries like brokers etc. with a view to make them competitive and professional.

Functions of SEBI 

Regulating the business in stock exchanges and any other securities market.



Registering and regulating the working of stock brokers, share transfer agents, Sub brokers, bankers to an "issue, etc.



Promoting and regulating self regulatory organizations.



Prohibiting fraudulent and unfair trade practices relating to securities market.



Registering and regulating the working of venture capital funds and collective investment schemes including mutual funds.



Promoting investors education and training of intermediaries of securities market.



Prohibiting insider trading in securities.



Conducting research and carrying out publications,



Calling for information from undertaking inspection, Conducting inquiries and audits of stock exchanges and market intermediaries.

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Powers of SEBI SEBI has been given wide powers; some of them are as follows.  SEBI can ask stock exchanges to maintain the prescribed documents and records.

 SEBI may ask a stock exchange or any member to furnish information and explanation concerning its affairs.

 SEBI can approve and amend bye-laws of stock exchanges. It can call periodical returns from stock exchanges,

 SEBI can license dealers in securities in some areas.

 It can ask a public limited Company to list its shares and play supportive role when share market-is bearish. When an individual investor and even Speculators try to play shy in stock market (it means to hesitate to transact) it is the institutional investor who often accounts for bulk of trade. This helps sustaining for stock exchanges.

FRAUDS IN INDIAN STOCK MARKET: Harshad Mehta Scam

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Harshad Mehta, was the mastermind of one of the biggest scams that was witnessed by the people in India. The scam came to be known as the security scam and estimated to be around ₹3500 crores. Most investors lost every penny they had invested in the markets. In 1991-92, he used to get funds from banks and then used them to artificially inflate the BSE Sensex. The Sensex rose to as high as the levels of 4,500 points. Seeing the index rise to exorbitant levels each day, investors started pouring in more money into the markets. An example of stock was ACC Cement, which to everyone’s surprise rose from INR 200 to INR 9000. In between the period April 1991 to May 1992, he is believed to have diverted thousands of crores from banks to stockbrokers

After an investigation by a few reporters, it was eventually busted by Sucheta Dalal, a journalist on 23rd April, 2003. The stock markets crashed due to this. Mehta was sentenced for 9 years and eventually died in a civil hospital in Mumbai in 2001. He had burnt the hopes of many households through unleashing such a deadly scam. Post the crisis, it came to light that shares had been sold in the stock markets on behalf of Harshad Mehta by getting these transferred in benami names. This created serious apprehensions that interest of bonafide investors may be affected. SEBI, therefore came up with a consultative paper among all exchanges proposing that the members of exchanges ‘know’ their clients through a proper introductory procedure and exercise due precaution while dealing with them.

Ketan Parekh Scam Post the Harshad Mehta scam, Ketan Parekh, a Chartered Accountant had similar plans. Therefore, he is also known to be the heir of Mehta’s scam technique. He not only took banks by surprise but also two stock exchanges namely Allahabad Stock Exchange and the Calcutta Stock Exchange. He used to get funds from banks and institutions and as Mehta got the stock prices to increase. His favourite stocks were the K-10 stocks and he used the concept of circular trading to inflate the stock

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prices. He was even paid by some companies to increase its prices. Later on, the stocks (K-10 stocks) had to see the southwards movement. Post the Union budget of in March 1, 2001, the BSE Sensex shed 176 points. Government and agencies started questioning the fall and led an investigation into the same. Later, the Central Bank found Ketan Parekh guilty. He eventually sold off all his stocks leading to the market crash.

Satyam Scam One of India’s biggest corporate scandals unfolded in 2009. The company involved in the scam was Satyam Computer Services Limited (SCSL). During this time, the Chairman of SCSL, Mr. Ramalinga Raju confessed to SEBI that he had manipulated accounts to show increased sales and profits for the company. This was carried on from 2003 till 2008. The estimated size of the fraud was about ₹7,000 crores. As a consequence, CBI immediately filed charge sheets and Citi Bank froze the accounts of SCSL. The markets too were in a state of panic and Satyam’s stock bottomed. In April 2009, B. Ramalinga Raju along with several others was sentenced to jail. The company SCSL was taken over by Mahindra Group and renamed as Mahindra Satyam.

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CHAPTER 5 5.1 CONCLUSION: Results of the study show that capital market reforms that started in 1990s contributed to the development in the stock markets in India. This study has found significant improvement in the economy after liberalization, globalization and privatization. All indicators, show improvement in stock market activities in the post liberalization period. Market capitalisation ratio, value traded ratio, and turn over ratio have increased. These indicators together with decline in volatility are an evidence of stock market development in India.Infrastructure improvements in the stock market like the introduction of screen based on-line trading system, setting up of National Securities Clearing Corporation (NSCC) in 1996, the setting up of depositories in India and the introduction of trading in financial derivatives in 1999 may have contributed to the improvement in the stock markets. Analysis reveals that liberalization of the stock market or the FII entry in particular does not have any direct implications for the stock return volatility. However, it had affected the size and liquidity of the stock market. The primary Indian capital market has grown significantly since the beginning of capital market reforms. The secondary capital market is also found to have grown in terms of its size and liquidity. Volatility in stock prices is found to have declined annually.

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5.2 REFERENCES: Webliograghy 

www.bseIndia.com



www.nseindia.com



www.Investopidia.com

Bibliography 1. Guide To Stock Market (jitendra gala) 2. Stock Market in India (Saloni Gupta)

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