INDIAN STOCK MARKETS

BY:
ANKIT SAHNEY.
DARSHAN.K.P.
JAYDEEP GHOSH.
SIDDHARTH
01/20/10 IIPM
KUMAR.
stock market
 STOCK EXCHANGE is an organized market place,
either corporation or mutual organization, where
members of the organization gather to trade
company stocks or other securities.


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Indian Stock Exchanges
 Earlier the stock exchanges in India are formed as association
of stock brokers were mutual organizations managed by
members in a single city with huge population.
 They were registered as section 25 companies or as not-for-
profit organization.
 Organizational profit making was never the motive; the
exchanges required funds only the extent of meeting its
expenses.
 Any surplus made by the exchange resulted in reduced access
fees for members.
 The members, who provide brokerage services also own,
control and manage the exchange.

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TWO MAJOR STOCK MARKETS

BSE ▪NSE
 (BOMBAY STOCT EXCHANGE )  (NATIONAL STOCK

EXCHANGE)


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Some of the Regional
Stock Exchanges in India
 Vadodara Stock Exchange
 Magadh Stock Exchange
 Jaipur Stock Exchange
 Ludhiana Stock Exchange
 Saurashtra Kutch Stock
Exchange
 Delhi Stock Exchange
 Bhubaneshwar Stock
Exchange
 Cochin Stock Exchange
 Inter Connected Stock
Exchange
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 Pune Stock Exchange
 Bangalore Stock Exchange
 Ahmedabad Stock
Exchange
 Calcutta Stock Exchange
 Madras Stock Exchange
 Madhya Pradesh Stock
Exchange
 Gauhati Stock Exchange
 Hyderabad Stock
Exchange.

 Players in the Stock Market
ØStock exchanges
Ø
ØBrokers
Ø
ØRegistrars
Ø
ØDepositories and their participants
Ø
ØSecurities and Exchange Board of India (SEBI)

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 MARKET INDICES:
ØStock market indices are the barometer of the stock market.
Ø
ØBSE SENSEX,NSE-50 etc are some of the market indices.

Their usefulness:
Ø Indices help to recognize broad trends in the market.
Ø
ØThe investor can use the indices to allocate the funds rationally among the
stocks.
Ø
Ø Technical analysts use these indices to predict the future market.
Ø
Ø Indices function as a status report on the general economy.

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Market indicies
examples - India
 BSE Sensex (also called BSE 30)
 S&P CNX Nifty
 CMIE COSPI
 BSE 100
 BSE 200
 BSE 500
 BSE TECK
 BSE IT
 BSE FMCG
 BSE CD
 BSE Metal
 BSE PSU
 BSE mid-cap
 BSE small cap
 BSE Auto
 BSE Pharma
 BSE REALTY
 Nifty Jr.

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 Expenses during a Transaction

ØCapital gains tax

ØSecurities transaction tax

ØBrokerage
ØDepository fees

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HOW DOES ONE BUY SHARES?
There are basically two ways in which you can invest in shares:

Purchase shares from

the primary market
(i.e. IPO's)

Trade in the
secondary
market, i.e.
stock exchanges.

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B O M B AY STO C K EX C H A N G E
( BSE )
 Is the oldest Stock Exchange in Asia with a rich heritage.

 BSE was established in 1875 as “The Native Share & Stock
Brokers”.

 First Stock Exchange in the country to obtain permanent
recognition in 1956 from GOI.

 Around 3500 Indian companies listed with Stock Exchange.

 As of 2005, it is among the five biggest Stock Exchanges in
the world in terms of transactions volume.

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  The BSE or Bombay stock exchange sensitive
Index(Sensex) is a value weighted index. Composed
of 30stocks with the base April 1979=100.

 The abbreviated from Sensex was coined by Deepak
Mohoni around 1990 while writing market analysis
columns for some business newspaper.

 The index has increased by over13 times from June
1990 to today. Using information from April 1979
onwards the long run rate of return on the BSE
Sensex can be estimated to be 0.52%per week
(continuously compounded) with a standard
deviation of 3.67%.this translates to 27%per annum,
which translate to roughly 18% pa after
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compensating
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for inflation.
F U N C T IO N S O F B S E
 It ensures the measure of safety and fair dealing.

 It performs an ‘act of magic’ by translating short-term
investments into long-term funds for companies.

 It directs the flow of capital in the most profitable channels.

 It induces companies to raise their standard of performance.

 It offers guidance to management about the cost of capital.

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LISTINGsting in BSE
 Listing means formal admission of a security to the trading platform of the
Exchange.
 In BSE, the securities may be
 a. any public limited company.
 b. Central or State Government.
 c. quasi governmental and other financial institutions/corporations, municipalities,
etc.


 The objectives of listing are mainly to :

 a. provide liquidity to securities;
 b. mobilize savings for economic development;
 c. protect interest of investors by ensuring full disclosures.


 The Exchange has a separate Listing Department to grant approval for listing of
securities of companies in accordance with the provisions of the Securities
Contracts (Regulation) Act, 1956, Securities Contracts (Regulation) Rules, 1957,
Companies Act, 1956, Guidelines issued by SEBI and Rules, Bye-laws and
Regulations of the Exchange.

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
 Some of the requirements
are:
 Minimum Listing Requirements for new companies
 Minimum Listing Requirements for companies listed on other stock
exchanges
 Minimum Requirements for companies delisted by this Exchange
seeking relisting of this Exchange
 Permission to use the name of the Exchange in an Issuer Company's
prospectus
 Submission of Letter of Application
 Allotment of Securities
 Trading Permission
 Requirement of 1% Security
 Payment of Listing Fees
 Compliance with Listing Agreement
 Cash Management Services (CMS) - Collection of Listing Fees


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W h y C o m p a n ie s g e t L iste d w ith
S to ck E x ch a n g e ?

ü Securities are freely transferable.

ü Easy liquidity of securities.
ü Easy availability of prices of securities.
ü Reputation, Image, Goodwill.
ü Public awareness.
ü More transparency.
ü Helps in obtaining loans from Banks/Institutions.
ü Helps in marketing its Products.

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Trading

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



 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 ask (selling) prices. He
provides some stability and continuity to the market.

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 IIPM
  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

(c) establishes transparent audit

trails.

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Settlement
 The settlement of transactions is done on a settlement
period basis.

 Earlier, the settlement period was 7 days, but now it is T+1
settlement.

 T+1 includes the day of trade and an additional day.

 During a settlement period, buying and selling transactions
in a particular security can be squared up.

 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
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transactions
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are squared within the settlement period.
NATIONAL STOCK EXCHANGE

 The NSE of India limited was created on the basis of the report of
the high powered study group on establishment of new stock
exchanger, which recommended promotion of NSE by financial
institution to provide access to investors from all across the
country on an equal footing.

 In 1992, NSE was incorporated as a tax paying company unlike
other stock exchange in the country.

 In April 1993,NSE was recognized as a stock exchange under the
securities contract(regulation) act,1956.

 The capital market (equities) segment commenced operation Nov.
1994 and operations in derivatives segment were started in
June 2000.

 NSE launched S&P CNX NIFTY in April 1996.NSE is one largest
interactive VSAT based stock exchange in the world. Presently
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IIPM VSATS.
OBJECTIVE OF NSE

 Establishing nationwide trading facilities for all types of

securities


 Ensuring equal access to investors all over the country

through an appropriate telecommunication network.


 Providing fair , efficient & transparent securities market

using electronic trading system.


 Meeting international benchmark and standards.

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LISTING
 Listing NSE plays an important role in helping an Indian
companies access equity capital, by providing a liquid and
well-regulated market. NSE has about 1319 companies
listed representing the length, breadth and diversity of the
Indian economy which includes from hi-tech to heavy
industry, software, refinery, public sector units,
infrastructure, and financial services.

 Listing on NSE raises a company’s profile among investors in
India and abroad. Trade data is distributed worldwide
through various news-vending agencies. More importantly,
each and every NSE listed company is required to satisfy
stringent financial, public distribution and management
requirements. High listing standards foster investor
confidence and also bring credibility into the markets.

NSE lists securities in its Capital Market (Equities) segment

and its Wholesale Debt Market segment
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At NSE, the following criterias are to be
fulfilled when one applies to be listed:

 Approval of Memorandum and Articles of Association

 Approval of draft prospectus
 Submission of Application
 Listing conditions and requirements

 Once a company fulfils these criterias then they have to submit the
following to the board:
 A brief note on the promoters and management.
 Company profile.
 Copies of the Annual Report for last 3 years.
 Copies of the Draft Offer Document.
 Memorandum & Articles of Association.

The listing fees depend on the companies paid up capital at both NSE and
BSE. While the initial listing fee at NSE is Rs.7,500, it is Rs.20,000 at BSE.
The annual listing fees for a company with a paid up capital upto Rs. 5
Crores is Rs. 10,000 at BSE while it is Rs. 8,400 at NSE. For a company with
paid up capital between 5 to 10 crores, BSE charges Rs. 15,000 while NSE
charges Rs. 10,000.
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Trading system on NSE

 The NSE provides a facility for screen based trading with order matching
facility. The members are connected from their respective offices at
dispersed locations to the main system at the NSE premises through a
high- speed efficient satellite telecommunication network.

 The trading system is an order driven, automated order matching
system which does not reveal the identity of parties to an order or a
trade. This helps orders whether large or small to be placed without
the members being disadvantaged by disclosure of their identity.

 Orders are matched automatically by the computer keeping the system
transparent, objective and fair. Where an order does not find a
match it remains in the system and is displayed to the whole
market, till a fresh order which matches, comes in or the earlier order
is cancelled or modified. 

 The trading system provides tremendous flexibility to the users in terms

of the type of orders that can be placed on the system. Several time
related, price related or volume related conditions can easily be
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Settlement on NSE
 Primary responsibility of settling trades concluded in the
WDM segment rests directly with the participants and
the exchange monitors the settlements. 

 Trades are settled gross, i.e. on trade for trade basis
directly between the constituents/participants to the
trade and not through any Clearing House mechanism.

 Thus, each transaction is settled individually and netting of
transactions is not allowed. 

 Settlement is on a rolling basis, i.e. there is no account
period settlement.

 Each order has a unique settlement date specified upfront
at the time of order entry and used as a matching
parameter.


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Contd..
 It is mandatory for trades to be settled on the predefined
settlement date.

 The Exchange currently allows settlement periods ranging
from same day (T+0) settlement to a maximum of three
working days (T+2).

 On the scheduled settlement date, the Exchange provides
data/information to the respective member/participant
regarding trades to be settled on that day with details like
security, counterparty and consideration.

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Contd…
 Government securities including treasury bills are settled by the
participants through their Subsidiary General Ledger (SGL) account (a
book entry settlement system) with RBI or through exchange of
physical certificates.

 Other instruments are settled through delivery of physical securities.
§ The required settlement details, i.e. certificate no., SGL form no., Cheque
no., etc. are reported by the member/participant to the Exchange.
§
§ The exchange closely monitors the settlement of transactions through the
reporting of settlement details by members and participants. In case of
deferment of settlement or cancellation of trade, participants are
required to seek prior approval from the Exchange
§
§ For any dispute arising in respect of the trades or settlement, the
exchanges has established arbitration mechanism for resolving the
same.

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COMPARISON.

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 CONTD…
BSE
Geographical spread: Presence in 417+ cities Presence NSE
in 1,486+ cities

Number of listed companies: 30 50

Number of members: 951 (Oct 2007) 1,009 as on March 2007

Market capitalization of listed Rs. 4,670,227 crore Rs. 3,367,350 crore.

companies:

Number of trader workstations: 15,151(Oct 2007)

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DRAWBACKS OF INDIAN STOCK
MARKET:


Ø Unethical practices.
Ø
Ø Big irrational greed, excessive speculation.
Ø
Ø Lack of protection to interests of the genuine and small
investors.
Ø
Ø Trading is extremely thin and restricted.
Ø
Ø Structural and organizational imbalance in the growth of the
stock market.
Ø
Ø Volatility of theIIPMmarket has increased over the years.
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 REMEDY:
vSo in order to make it flawless system authorities should initiate certain
measures such as

Ø Single authority

ØDemutualization.
Ø
Ø Prescribing capital adequacy norms.
Ø
Ø Stricter registration of brokers
Ø
Ø Margin requirements .

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 Thank You

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