Sandip Account Final

DHRUVA COLLEGE OF MANAGEMENT

MEDCHAL, HYDERABAD Study Of Stock Exchange

Submitted to: - Prof. Narsamhulu. Submitted by: - Sandip Bhowal Roll no - 08m99 Subject: - MC 204 Corporate Financial Management Term: - 2nd PGDBM Year: - 2008 – 2010

Stock Exchange Stock Exchanges are perhaps the most crucial agents and facilitators of entrepreneurial progress among modern service institutions. Since the industrial revolution, business enterprises have grown such that proprietors or even partnership firms can no longer raise the colossal amounts of money required for large entrepreneurial ventures. Such massive capital can only be raised through the participation of large number of investors and running into thousands, millions. SEBI established in 1988 and became a fully autonomous body by the year 1992 with defined responsibilities to cover both development & regulation of the market. The world’s stock exchange probably dates back to 1460 in Antwerp, Belgium. In fact, many consider the Amsterdam stock exchange, established in 1602, as the oldest in the world because of its uninterrupted continuity. Indian stock exchange was an association of individual members called, members brokers formed for the express purpose of self-regulating and facilitating the buying and selling of securities by the public and institutions at large. There are currently 23 recognized stock exchanges in India of which 4 are national and 19 are regional exchanges. The 4 national stock exchanges are 1. Bombay Stock Exchange (BSE) 2. National Stock Exchange (NSE) 3. Over The Counter Exchange of India (OTCEI) 4. Inter connected Stock Exchange of India (ISE) In the world following are the some of stock exchanges 1. DOWJONES 2. National Association of Securities and Dealers Automated Quotations (NASDAQ) popularly called as New York Stock Exchange (NYSE)

Difference between NSE and BSE NSE Stands for National Stock Exchange. It has more than 2000 stocks from different sectors listed with it. It is fully automated electronic order processing exchange. Nifty is major index of NSE and it comprise of 50 scripts from different sectors. BSE Stand for Bombay Stock Exchange. It is India's Oldest Stock Exchange with listing of over 4000 scripts with it. This not fully automated yet but progress towards full automation is underway. SENSEX is major index of BSE and it comprise of 30 scripts from different sectors.

Index The stock exchange index is a relative measure of the performance of all or a number of stocks that are traded on a stock exchange. It incorporates the return on stocks, their volumes traded and the shares outstanding. There can be a number of indices relating to a single stock exchange that incorporates the returns on a number of companies. They can also be differentiated on the basis of the return on different industries.

Construction of Index In computing the index, the following steps are taken: a. For each month, the arithmetic average price for each item in the market basket is derived first. This is done by summing all the prices taken divided by the number of sources. Hence, if a certain item has three price quotations, simply get the sum of the three prices and divide it by three. b. The price relative or index for each commodity is then taken by dividing the computed arithmetic average price by the corresponding average base price, as follows:

where: PRi is the price relative or index of the commodity; PRni is the current average price of the commodity; and PRoi is the base price of the commodity. c. The index of the subgroup of the commodities is computed using the following formula:

where: PRj is the index of the jth subgroup; PRij is the price relative of the ith commodity in the jth subgroup; and N is the number of commodities in the jth subgroup. d. The index for the next subgroup of commodities is computed by dividing the aggregate of weighted indices of component items in a subgroup by the total of their corresponding weights, as follows:

where: PRk is the index of the kth subgroup; PRjk is the index of the jkth subgroup; and Wjk is the weight of the jkth subgroup. The weighted average of these subgroup indexes, in turn, becomes the index of the major commodity group, until finally the weighted average of the major commodity group indexes becomes the overall index. e. The overall index is computed using the following formula:

where: I is the index for all items; PRn is the index of nth major commodity group; and Wn is the weight of the major commodity group.

National Stock Exchange

History of the National Stock Exchange of India

Capital market reforms in India and the launch of the Securities and Exchange Board of India (SEBI) accelerated the incorporation of the second Indian stock exchange called the National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stock exchange in India. Three segments of the NSE trading platform were established one after another. The Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options segment began operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world.

In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50 stocks from 25 different economy sectors. The Indices are owned and managed by India Index Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard & Poor's. In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by gaining many awards such as 'Best IT Usage Award' by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999). skip to main | skip to sidebar

About the National Stock Exchange of India In the fast growing Indian financial market, there are 23 stock exchanges trading securities. The National Stock Exchange of India (NSE) situated in Mumbai - is the largest and most advanced exchange with 1016 companies listed and 726 trading members. The NSE is owned by the group of leading financial institutions such as Indian Bank or Life Insurance Corporation of India. However, in the totally de-mutualised Exchange, the ownership as well as the management does not have a right to trade on the Exchange. Only qualified traders can be involved in the securities trading. The NSE is one of the few exchanges in the world trading all types of securities on a single platform, which is divided into three segments: Wholesale Debt Market (WDM), Capital Market (CM), and Futures & Options (F&O) Market. Each segment has experienced a significant growth throughout a few years of their launch. While the WDM segment has accumulated the annual growth of over 36% since its opening in 1994, the CM segment has increased by even 61% during the same period. The National Stock Exchange of India has stringent requirements and criteria for the companies listed on the Exchange. Minimum capital requirements, project appraisal, and company's track

record are just a few of the criteria. In addition, listed companies pay variable listing fees based on their corporate capital size. The National Stock Exchange of India Ltd. provides its clients with a single, fully electronic trading platform that is operated through a VSAT network. Unlike most world exchanges, the NSE uses the satellite communication system that connects traders from 345 Indian cities. The advanced technologies enable up to 6 million trades to be operated daily on the NSE trading platform.

Indices NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices, including : •

S&P CNX Nifty

•

CNX Nifty Junior

•

CNX 100 (= S&P CNX Nifty + CNX Nifty Junior)

•

S&P CNX 500 (= CNX 100 + 400 major players across 72 industries)

•

CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)

NSE Milestones November 1992

Incorporation

April 1993

Recognition as a stock exchange

May 1993

Formulation of business plan

June 1994

Wholesale Debt Market segment goes live

November 1994

Capital Market (Equities) segment goes live

March 1995

Establishment of Investor Grievance Cell

April 1995

Establishment of NSCCL, the first Clearing Corporation

June 1995

Introduction of centralised insurance cover for all trading members

July 1995

Establishment of Investor Protection Fund

October 1995

Became largest stock exchange in the country

April 1996

Commencement of clearing and settlement by NSCCL

April 1996

Launch of S&P CNX Nifty

June 1996

Establishment of Settlement Guarantee Fund

November 1996

Setting up of National Securities Depository Limited, first depository in India, co-promoted by NSE

November 1996

Best IT Usage award by Computer Society of India

December 1996

Commencement of trading/settlement in dematerialised securities

December 1996

Dataquest award for Top IT User

December 1996

Launch of CNX Nifty Junior

February 1997

Regional clearing facility goes live

November 1997

Best IT Usage award by Computer Society of India

May 1998

Promotion of joint venture, India Index Services & Products Limited (IISL)

May 1998

Launch of NSE's Web-site: www.nse.co.in

July 1998

Launch of NSE's Certification Programme in Financial Market

August 1998

CYBER CORPORATE OF THE YEAR 1998 award

February 1999

Launch of Automated Lending and Borrowing Mechanism

April 1999

CHIP Web Award by CHIP magazine

October 1999

Setting up of NSE.IT

January 2000

Launch of NSE Research Initiative

February 2000

Commencement of Internet Trading

June 2000

Commencement of Derivatives Trading (Index Futures)

September 2000

Launch of 'Zero Coupon Yield Curve'

November 2000

Launch of Broker Plaza by Dotex International, a joint venture between NSE.IT Ltd. and i-flex Solutions Ltd.

December 2000

Commencement of WAP trading

June 2001

Commencement of trading in Index Options

July 2001

Commencement of trading in Options on Individual Securities

November 2001

Commencement of trading in Futures on Individual Securities

December 2001

Launch of NSE VaR for Government Securities

January 2002

Launch of Exchange Traded Funds (ETFs)

May 2002

NSE wins the Wharton-Infosys Business Transformation Award in the Organization-wide Transformation category

October 2002

Launch of NSE Government Securities Index

January 2003

Commencement of trading in Retail Debt Market

June 2003

Launch of Interest Rate Futures

August 2003

Launch of Futures & options in CNXIT Index

June 2004

Launch of STP Interoperability

August 2004

Launch of NSE’s electronic interface for listed companies

March 2005

‘India Innovation Award’ by EMPI Business School, New Delhi

June 2005

Launch of Futures & options in BANK Nifty Index

December 2006

'Derivative Exchange of the Year', by Asia Risk magazine

January 2007

Launch of NSE – CNBC TV 18 media centre

March 2007

NSE, CRISIL announce launch of IndiaBondWatch.com

June 2007

NSE launches derivatives on Nifty Junior & CNX 100

October 2007

NSE launches derivatives on Nifty Midcap 50

January 2008

Introduction of Mini Nifty derivative contracts on 1st January 2008

March 2008

Introduction of long term option contracts on S&P CNX Nifty Index

April 2008

Launch of India VIX

April 2008

Launch of Securities Lending & Borrowing Scheme

August 2008

Launch of Currency Derivatives

Individual stock performance – S&P CNX Nifty The S&P CNX Nifty closed at 2755.1 points on November 28, 2008 representing a decrease of 130.50 pts points (4.52%), as compared to 2885.6 points on October 31, 2008. During the month of November 2008, S&P CNX Nifty touched a high of 3240.55 points on November 05, 2008 before closing at 2755.1 points on November 28, 2008. The market capitalization of S&P CNX Nifty decreased from Rs.1785998 corers on October 31, 2008, to Rs.1706209 corers on November 28, 2008 i.e. a decrease of Rs.79789crores (4.47%). During the month of November

2008, Bharat Petroleum Corporation Ltd. was the biggest gainer in S&P CNX Nifty constituent list delivering a positive return of 23.72%, Unitech Ltd. was the biggest loser, delivering negative returns of 52.17%, during the same month.

Name of NSE 50 companies RELIANCE INDUSTRIES LTD., OIL AND NATURAL GAS CORPORATION LTD., BHARTI AIRTEL LIMITED, NTPC LTD, RELIANCE COMMUNICATIONS LTD., ICICI BANK LTD., INFOSYS TECHNOLOGIES LTD., TATA CONSULTANCY SERVICES LTD, BHEL, STATE BANK OF INDIA, STEEL AUTHORITY OF INDIA, LARSEN & TOUBRO LTD., HERO HONDA MOTORS LTD, ZEE ENTERTAINMENT LTD, INDIAN PETROCHEMICALS CORPORATION LTD., CIPLA LTD, BHARAT PETROLEUM CORPORATION

LTD.,

VIDESH

SANCHAR

NIGAM

LTD,

DR.

REDDY'S

LABORATORIES, MAHANAGAR TELEPHONE NIGAM LTD, GLAXOSMITHKLINE PHARMA LTD., ABB LTD., POWER GRID CORPORATION OF INDIA, RELIANCE ENERGY LTD, SIEMENS LTD, ACC LIMITED, AMBUJA CEMENTS LTD, HCL TECHNOLOGIES LTD, HINDALCO INDUSTRIES LTD, NATIONAL ALUMINIUM CO LTD, SUN PHARMACEUTICALS IND., MAHINDRA & MAHINDRA LTD, TATA POWER CO LTD, PUNJAB NATIONAL BANK, RANBAXY LABS LTD, ITC LTD, RELIANCE PETROLEUM LTD., HDFC LTD, WIPRO LTD, STERLITE INDUSTRIES LTD., HDFC BANK LTD, TATA STEEL LIMITED, HINDUSTAN UNILEVER LTD., SUZLON ENERGY LIMITED, GAIL (INDIA) LTD, GRASIM INDUSTRIES LTD, SATYAM COMPUTER SERVICES, TATA MOTORS LIMITED, MARUTI UDYOG LIMITED.

Bombay Stock Exchange History of the Bombay Stock Exchange

The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers 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 the Indian 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-cry 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.

About the Bombay Stock Exchange As the first stock exchange in India, the Bombay Stock Exchange is considered to have played a very important role in the development of the country's capital markets. The Bombay Stock Exchange is the largest of 22 exchanges in India, with over 6,000 listed companies. It is also the fifth largest exchange in the world, with market capitalization of $466 billion. The Bombay Stock Exchange uses the BSE Sensex, an index of 30 large, developed BSE stocks. This index gives a measure of the overall performance of the Bombay Stock Exchange, and is closely followed around the world. Based on the Sensex, the BSE equity market has grown significantly since 1990. In addition to individual stocks, the BSE also has a market in derivatives, which was the first to be established in India. Listed derivatives on the exchange include stock futures and options, index futures and options, and weekly options. The Bombay Stock Exchange is also actively involved with the development of the retail debt market. The debt market in India is considered extremely important, as the country continues to develop and depends on this type of investment for growth. Until recently, the debt market in India was limited to a wholesale market, with banks and financial institutions as the only participants. The Bombay Stock Exchange believes that a retail market will bring great opportunities to individual investors through better diversification.

SENSEX Calculation Methodology SENSEX is calculated using the "Free-float Market Capitalization" methodology, wherein, 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 free-float market capitalization.

Definition of Free-float Shareholding of investors that would not, in the normal course come into the open market for trading are treated as 'Controlling/ Strategic Holdings' and hence not included in free-float. Specifically, the following categories of holding are generally excluded from the definition of Free-float: •

Shares held by founders/directors/ acquirers which has control element

•

Shares held by persons/ bodies with "Controlling Interest"

•

Shares held by Government as promoter/acquirer

•

Holdings through the FDI Route

•

Strategic stakes by private corporate bodies/ individuals

•

Equity held by associate/group companies (cross-holdings)

•

Equity held by Employee Welfare Trusts

•

Locked-in shares and shares which would not be sold in the open market in normal course.

Step1: Find out the “free-float market cap” of all the 30 companies that make up the Sensex. Step2: Add all the “free-float market cap’s” of all the 30 companies. Step3: Make all this relative to the Sensex base. The value you get is the Sensex value! Suppose, for a “free-float market cap” of Rs.100,000 Cr... the Sensex value is 4000… Then, for a “free-float market cap” of Rs.150,000 Cr... the Sensex value will be..

So, the Sensex value will be 6000 if the “free-float market cap” comes to Rs.150,000 Cr!

Major advantages of Free-float Methodology

•

A Free-float index reflects the market trends more rationally as it takes into consideration only those shares that are available for trading in the market.

•

Free-float Methodology makes the index more broad-based by reducing the concentration of top few companies in Index.

•

A Free-float index aids both active and passive investing styles. It aids active managers by enabling them to benchmark their fund returns vis-Ã -vis an investible index. This enables an apple-to-apple comparison thereby facilitating better evaluation of performance of active managers. Being a perfectly replicable portfolio of stocks, a Freefloat adjusted index is best suited for the passive managers as it enables them to track the index with the least tracking error.

•

Free-float Methodology improves index flexibility in terms of including any stock from the universe of listed stocks. This improves market coverage and sector coverage of the index. For example, under a Full-market capitalization methodology, companies with large market capitalization and low free-float cannot generally be included in the Index because they tend to distort the index by having an undue influence on the index movement. However, under the Free-float Methodology, since only the free-float market capitalization of each company is considered for index calculation, it becomes possible to include such closely-held companies in the index while at the same time preventing their undue influence on the index movement. Globally, the Free-float Methodology of index construction is considered to be an

industry best practice and all major index providers like MSCI, FTSE, S&P and STOXX have adopted the same. MSCI, a leading global index provider, shifted all its indices to the Free-float Methodology in 2002. The MSCI India Standard Index, which is followed by Foreign Institutional Investors (FIIs) to track Indian equities, is also based on the Free-float Methodology. NASDAQ-100, the underlying index to the famous Exchange Traded Fund (ETF) - QQQ is based on the Free-float Methodology.

Dollex-30 BSE also calculates a dollar-linked version of SENSEX and historical values of this index are available since its inception. (For more details click 'Dollex series of BSE indices').

BSE-100 Index A broad-based index, the BSE-100 was formerly known as the BSE National 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.

BSE-200 Index 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 broad-based 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.

Dollex-200 BSE also calculates a dollar-linked version of BSE-200 index and historical values of this index are available since its inception.

BSE-500 Index 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.

Awards •

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.

•

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.

Milestones of BSE DATE

POINTS

JULY-25-1990

1000

MARCH-30-1992

4000

FEBRUARY-11-2000

6000

DECEMBER-09-2005

9000

APRIAL-20-2006

12000

JULY-06-2007

15000

OCTOMBER-15-2007

19000

JANUARY-08-2008

21000

Current Sensex

Graph of BSE for the month of December

DATE 1-Dec-08 2-Dec-08 3-Dec-08 4-Dec-08 5-Dec-08 8-Dec-08 10-Dec-08 11-Dec-08 12-Dec-08 15-Dec-08 16-Dec-08 17-Dec-08 18-Dec-08 19-Dec-08 22-Dec-08 23-Dec-08 24-Dec-08 26-Dec-08 29-Dec-08 30-Dec-08 31-Dec-08

CLOSE 8,839.87 8,739.24 8,747.43 9,229.75 8,965.20 9,162.62 9,654.90 9,645.46 9,690.07 9,832.39 9,976.98 9,715.29 10,076.43 10,099.91 9,928.35 9,686.75 9,568.72 9,328.92 9,533.52 9,716.16 9,647.31

CHANG E -100.63 8.19 482.32 -264.55 197.42 492.28 -9.44 44.61 142.32 144.59 -261.69 361.14 23.48 -171.56 -241.60 -118.03 -239.80 204.60 182.64 -68.85

%CHANG E -1.138365 0.0937152 5.5138481 -2.866275 2.2020702 5.3726991 -0.097774 0.4624974 1.46872 1.4705479 -2.622938 3.7172334 0.233019 -1.698629 -2.433436 -1.218469 -2.506082 2.1931799 1.9157667 -0.708613

EXPLANATION The month of December is started with a point of 8839.87 points and on the second day itself sensex has lost nearly 100 points. On 4th December sensex has gain a 482.32 points with a 5% increase and on 10th December sensex gain nearly 500 points. From 22nd December to 26th December sensex has lost nearly 700 points and after this sensex has gained 204 points. At last of day of the year sensex is closed with a negative value by losing 68 points.

Name of 30 BSE companies

ACC, BHARTI AIRTEL, BHEL, DLF, GRASIM, HDFC, HDFC BANK, HINDALCO, HUL, ICICI BANK, INFOSYS, ITC, JAIPRAKASH ASSOCIATES, L&T, MAHINDR & MAHINDRA, MARUTI SUZUKI, ONGC, NTPC, RANABAXY LAB, RELIENCE, RELIENCE COMM, RELIENCE INFRASTRUCTURE, SATYAM, SBI, STERLITE INDUSTRY, TATA MOTORS, TATA POWER, TATA STEEL. TCS, WIPRO.

NASDAQ History of NASDAQ

When the NASDAQ stock exchange began trading on February 5, 1971, the NASDAQ was the world's first electronic stock market. At first, it was merely a computer bulletin board system and did not actually connect buyers and sellers. The NASDAQ helped lower the spread (the difference between the bid price and the ask price of the stock) but

somewhat paradoxically was unpopular among brokerages because they made much of their money on the spread. NASDAQ was the successor to the over-the-counter (OTC) and the "Curb Exchange" systems of trading. As late as 1987, the NASDAQ exchange was still commonly referred to as the OTC in media and also in the monthly Stock Guides issued by Standard & Poor's Corporation. Over the years, NASDAQ became more of a stock market by adding trade and volume reporting and automated trading systems. NASDAQ was also the first stock market in the United States to advertise to the general public, highlighting NASDAQ-traded companies (usually in technology) and closing with the declaration that NASDAQ is "the stock market for the next hundred years." Its main index is the NASDAQ Composite, which has been published since its inception. However, its exchange-traded fund tracks the large-cap NASDAQ 100 index, which was introduced in 1985 alongside the NASDAQ 100 Financial Index. Until 1987, most trading occurred via the telephone, but during the October 1987 stock market crash, market makers often didn't answer their phones. To counteract this, the Small Order Execution System (SOES) was established, which provides an electronic method for dealers to enter their trades. NASDAQ requires market makers to honor trades over SOES. In 1992, it joined with the London Stock Exchange to form the first intercontinental linkage of securities markets. NASDAQ's 1998 merger with the American Stock Exchange formed the NASDAQ-Amex Market Group, and by the beginning of the 21st century it had become the largest electronic stock market (in terms of both dollar value and share volume) in the United States. NASD spun off NASDAQ in 2000 to form a publicly traded company, the NASDAQ Stock Market, Inc. The term Circuit Breaker has been used to describe the halted state of the NASDAQ in the United States during a complete suspension of the stock market. The only Circuit Breaker was October 27, 1997. On November 8, 2007, Gunter bought the Philadelphia Stock Exchange (PHLX) for US$652 million. PHLX is the oldest stock exchange in America, having been in operation since 1790. NASDAQ lists approximately 3,200 securities, of which 335 are non-U.S. companies from 35 countries representing all industry sectors. To qualify for listing on the exchange, a company must be registered with the SEC, have at least three market makers (financial firms that act as

brokers or dealers for specific securities), and meet minimum requirements for assets, capital, public shares, and shareholders. Nasdaq OMX now has a dual listing agreement with the Tel Aviv Stock Exchange. It would now seem to count (charged by federal prosecutors on December 11 2008) one of its former chairmen, Bernard Madoff, among one of the greatest securities fraudsters in history.

About NASDAQ The NASDAQ (National Association of Securities Dealers Automated Quotations) is an American stock exchange. It is the largest electronic screen-based equity securities trading market in the United States. With approximately 3,200 companies, it has more trading volume per day than any other stock exchange in the world. It was founded in 1971 by the National Association of Securities Dealers (NASD), who divested themselves of it in a series of sales in 2000 and 2001. It is owned and operated by the NASDAQ OMX Group, the stock of which was listed on its own stock exchange in 2002, and is monitored by the Securities and Exchange Commission (SEC). With the completed purchase of the Nordic-based operated exchange OMX, following its agreement with Borse Dubai, NASDAQ is poised to capture 67% of the controlling stake in the aforementioned exchange, thereby inching ever closer to taking over the company and creating a trans-atlantic powerhouse. The group, now known as Nasdaq-OMX, controls and operates the NASDAQ stock exchange in New York City -- the second largest exchange in the United States. It also operates eight stock exchanges in Europe and holds one-third of the Dubai Stock Exchange. It has a double-listing agreement with OMX, and will compete with NYSE-Euronext group in attracting new listings.

Business The NASDAQ Composite index NASDAQ allows multiple market participants to trade through its Electronic Communication Networks (ECNs) structure, increasing competition. The Small Order Execution System (SOES) is another NASDAQ feature, introduced in 1987, to ensure that in 'turbulent' market conditions small market orders are not forgotten but are automatically processed. With approximately 3,200

companies, it lists more companies and, on average, its systems trade more shares per day than any other stock exchange in the world. NASDAQ will follow the New York Stock Exchange in halting domestic trading in the event of a sharp and sudden decline of the Dow Jones Industrial Average.

Milestone of NASDAQ 1) It was incorporated in 1971 as the first electronic stock exchange in the world. 2) In the year 1994 NASDAQ beat the NYSE in annual shares traded. 3) In the year 1998 the NASDAQ merged with the American Stock Exchange.

DOW JONES History of DOWJONES The DJIA was first published in Customer's Afternoon Letter. It was published on May 26, 1896, and represented the average of twelve stocks from important American industries The average is computed from the stock prices of 30 of the largest and most widely held public companies in the United States. When it was first published, the index stood at 40.94. It was computed as a direct average, by first adding up stock prices of its components and dividing by the number of stocks in the index. The Dow averaged 5.3% compounded annually for the 20th century, a record Warren Buffett called "a wonderful century"—when he calculated that to achieve that return again, the index would need to reach nearly 2,000,000 by 2100.Many of the biggest percentage price moves in The Dow occurred early in its history, as the nascent industrial economy matured. The index hit its all-time low of 28.48 during the summer of 1896. On July 30, 1914, when the New York Stock Exchange was closed for the next four months, the index stood at 71.42. Some historians believe the Exchange closed because of a concern that markets would plunge as a result of panic over the onset of World War I. An alternative explanation is that the Secretary of the Treasury, William Gibbs

McAdoo, closed the exchange because he wanted to conserve the US gold stock in order to launch the Federal Reserve System later that year with enough gold to keep the US on the gold standard. When the markets reopened on December 12, 1914, the index closed.

About DOWJONES The Dow Jones Industrial Average (NYSE: DJI, also called the DJIA, Dow 30, INDP, or informally the Dow Jones or The Dow) is one of several stock market indices, created by nineteenth-century Wall Street Journal/ editor and Dow Jones & Company co-founder Charles Dow. Dow compiled the index to gauge the performance of the industrial sector of the American stock market. It is the second-oldest U.S. market index, after the Dow Jones Transportation Average, which Dow also created.

Milestone of DOWJONES POINT S 1,000 2,000 3,000 4,000 5,000 6,000 7,000

DATE 14-Nov-72 8-Jan-87 17-Apr-91 23-Feb-95 21-Nov-95 14-Oct-96 13-Feb-97

POINT S 8,000 9,000 10,000 11,000 12,000 13,000 14,000

DATE 16-Jul-97 6-Apr-98 29-Mar-99 16-Jul-99 19-Oct-06 25-Apr-07 19-Jul-07

Major falls in DOWJONES DATE

POINTS

DATE

Sep 29 2008 Oct 15 2008 Sep 17 2001 Oct 9 2008

777.68 733.08 684.81 678.91

Oct 27 1997 Oct 22 2008 Aug 31 1998 Jun 10 2008

POINTS 554.26 514.45 512.62 508.39

Apr 14 2000

617.77

Oct 19 1987

508.00

Calculation mythology of DOWJONES To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the DJIA divisor. The divisor is adjusted in case of splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. The initial divisor was the number of component companies, so that the DJIA was at first a simple arithmetic average; the present divisor, after many adjustments, is less than one (meaning the index is actually larger than the sum of the prices of the components). That is:

Where p is the prices of the component stocks and d is the Dow Divisor. Events like stock splits or changes in the list of the companies composing the index alter the sum of the component prices. In these cases, in order to avoid discontinuity in the index, the Dow divisor is updated so that the quotations right before and after the event coincides:

How the stocks are picked in DOWJONES The editors of the journal “The Wall Street Journal” select the stocks or companies to be traded in DOWJONES. In selecting a company they take border view of the company means what industrial means. In selecting a new company to be traded in DJIA they look among substantial industrial companies and with the history of successful growth and wide interest among investors. The components of the DJIA are not changed often. If one of the stocks to be acquired or to be changed then all other stocks are also to be reviewed. E.g.: In September 2008, the insurance giant AIG prompted its ejection from the index and a replacement by Kraft Foods.

Companies of DOWJONES COMPANY 3M Alcoa American Express AT&T Bank of America Boeing Caterpillar Chevron Citigroup Coca-Cola DuPont ExxonMobil

SECTOR Industrials Aluminum Financial communication Retail banking Aerospace Construction Oil and gas Banking Beverages chemicals oil & gas

General Electric General Motors Hewlett-Packard

Conglomerate Automobiles Computers

COMPANY Home Depot Intel IBM Johnson & Johnson JPMorgan Chase Kraft Foods McDonald's Merck Microsoft Pfizer Procter & Gamble United Technologies Verizon Communications Wal-Mart Walt Disney

SECTOR Home Items Semiconductors Computers Pharmaceuticals Banking Food processing Restaurants Pharmaceuticals Software Pharmaceuticals Household items Aerospace Communication Retailers Entertainment