The Indian economy

passes through here

Secondary markets
an Overview
National Stock Exchange of India Ltd.

Securities Market Pre 90s

Open Out-Cry

Indian Capital Markets pre 90s

Governance and ownership with brokers

Lack of transparency
Outdated trading and settlement system
Localised markets
Floor based exchanges (open outcry)
High cost of trading
Lack of focus of risk management

Reforms
High powered committee set up in 1991 under Mr. M. J.
Pherwani, erstwhile Chairman, UTI

Committee looked into various issues :

Trading and settlement
Governance
Lack of an integrated markets etc.

Recommended setting up of a National Stock Exchange

Seperation of ownership and trading rights

Banks, Insurance
Cos., Financial
Institutions

Professionals

OWNERS

Investors
Sub Brokers
Brokers (offer trading
facilities to investors)

MANAGEMENT

DEMUTUALISATION

Listed Companies

Participants

Mutual Funds
Financial Institutions

Merchant
Bankers
Custodians

Depository
Participants

Securities Markets post 90s

Savings and Investments

Are we taught to save?
And we save.

Are we taught to invest?

And do we invest?

Household Savings Rate

40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0

Savings vs. Investment

Short term vs. Longer term

Emergency vs. Planned Outlay
Low returns vs. Beating the
inflation

China

Korea

India

US

France Germany Japan

Equity Investor Household

(Percent of Total Household)
12%

Urban

10%
8%
6%
4%

Rural

2%
0%

All-India
All-India

Urban

Rural

We are so busy saving that we forget to invest

Source: Chart 1: OECD Data & Saving in Asia: Issues for Rebalancing Growth. ADB Working Paper Series. ADB. Manila
Chart 2: SEBI Handbook of Statistics 2009

Where do I Invest?
There are many options today to invest your money in

STOCKS

MUTUAL
FUNDS

CORPORATE
DEBT

REAL ESTATE

EXCHANGE
TRADED
FUNDS

GOLD

PPF

SMALL
SAVING
SCHEMES

GOVT.
BONDS

But are they all equal?

 Definitely not
All products have different risks and
returns
Always pick a product that suits your
needs and expectations

But one thing needs to

be taken care of
Inflation

How Inflation Eats Your Money

120
100
80
60

Inflation is the reduction in 40

20
the purchasing power of
money
0
2002
2003
2004
2005
2006
2007
2008
2009
So we need to ensure more The above chart shows effective value of Rupee
over 2002-2009. The base is taken at 100 in year
returns than inflation can
2002
Source: Inflation Data retrieved from CIA
eat away

Why Capital Markets?

Historically outperformed all
other asset classes CAGR of
over 18%
Returns are tax efficient

9000
8000
7000
6000
5000
4000
3000
2000
1000
0

returns of over
600% since 2001

NIFTY Total Returns Index

Allows investments customized

to personal risk appetite
6

Quick and easy investment and

redemption

NIFTY Total Returns Index

CAGR = 18%
Nifty has given

NIFTY Index

Value of investment of Rs. 1 Lac invested in Jan

2003
Figures in Lac
Rupees

5
4
3

5.24

2
1
1.00
0

1.00
37622

1.00

NIFTY RETURNS

KVP Returns

1.71
40179

Bank Returns

1.44

To introduce nation-wide
To electronic
introduce nation-wide
trading platform
electronic trading platform

Single Stock Futures Notional Turnover (USD Mn)

1,000,000

To setup clearing corporation

To setup clearing corporation

FIRST IN
FIRST IN
INDIA
INDIA

900,000
800,000
700,000
600,000

To propose and implement

To index
propose
implement
andand
equity
derivatives
index and equity derivatives

500,000
400,000
300,000
200,000

To pioneer Internet Trading

To pioneer Internet Trading

100,000
0

Number of Equity Trades (000)

3,000,000

WORLD
WORLD
ACCOLADES
ACCOLADES

Largest exchange in notional

Largest
exchange
in notional
turnover
for single
stock futures
turnover for single stock futures

2,500,000
2,000,000

Fourth largest exchange in

Fourth
largest
exchange in
number
of trades
number of trades

Source:
World Federation of Exchanges
Wiki National Stock Exchange of India

1,500,000
1,000,000
500,000
0

NYSE Euronext (US)

Shanghai SE

Shenzhen SE

Bombay SE

TSX Group

NSE Today Facts & Figures

Market capitalization: around Rs. 60 lakh crores
1500+ brokers
250,000+ trading terminals
Presence in 2500+ cities
Average Daily Turnover around 1.5 Lakh Crores
Average no. of trades : exceeds 80 lakhs
A well established BCP Infrastructure

Equity Segment
Launched in 1994

Investing in Equities
1461 listed securities, 31 permitted securities
Participation through primary market
Online NEAT CM system for entering orders
Market timings 9 A.M to 3.30 P.M.
Settlement between Broker and Investor
Settlement on T + 2 basis
Make Margin, Securities and Funds
pay in on time

Types of Orders
Market order :Buy or sell orders are to be
executed immediately at current market
prices
Limit order: Specify prices at which buy or
sell orders are executed
Stop-loss orders: Sell stocks when price falls
below a stipulated level, to stop further losses
from accumulating or buy stock when price
rise above a stipulated level.

Orders
When any order enters the trading system, it is an
active order. It tries to find a match on the other side
of the books. If it finds a match, a trade is generated.
If it does not find a match, the order becomes a
passive order and goes and sits in the order book.

Order matching rule

Trading screen shows the unmatched orders

Buy side
Quantity

11:00 am

Sell Side

1000
2000
2500
3000

Price
(Rs.)
100
99
98
97

Quantity
Price
(Rs.)
2000
101
500
102
1500
103
2500
104

2800

96

3500

105

Best Buy Order Order with the Highest Price

Best Sell Order Order with the Lowest price

Order matching rule

Buy side
Quantity
1000
2000
2500
3000
2800

11:00 am
Price
(Rs.)
100
99
98
97
96

Sell Side

Quantity
Price
(Rs.)
2000
101
500
102
1500
103
2500
104
3500
105

- A new Buy order for 1000 shares @ Rs. 101.50 comes in at 11:01
am. It is the active order.
- This Buy order will match immediately with the top sell order

Order matching rule

Buy side
Quantity
1000
2000
2500
3000
2800

11:01 am
Price
(Rs.)
100
99
98
97
96

Sell Side

Quantity
Price
(Rs.)
1000
101
500
102
1500
103
2500
104
3500
105

Message : Traded Quantity 1000. Traded Price Rs. 101. Traded Time : 11:01 am
Active Order matches with a Passive order and trade takes place at the Passive
Order Price

Price Time Priority

Buy side
Quantity
1000
2000
2500
3000
2800

11:02 am
Price
(Rs.)
100
99
98
97
96

Sell Side

Quantity
Price
(Rs.)
1000
101
500
102
1500
103
2500
104
3500
105

A Buy order comes in at 11:02 am of 1000 Quantity @ Rs. 100.50

It will sit on top of the Buy Side Price Priority

Price Time Priority

Buy side
Quantity
1000
1000
2000
2500
3000

11:02 am
Price
(Rs.)
100.50
100
99
98
97

Sell Side

Quantity
Price
(Rs.)
1000
101
500
102
1500
103
2500
104
3500
105

A Buy order comes in at 11:02 am of 1000 Quantity @ Rs. 100.50

It will sit on top of the Buy Side Price Priority

Price Time Priority

Buy side
Quantity
1000
1000
2000
2500
3000

11:03 am
Price
(Rs.)
100.50
100
99
98
97

Sell Side

Quantity
Price
(Rs.)
1000
101
500
102
1500
103
2500
104
3500
105

A Buy order comes in at 11:03 am of 1500 Quantity @ Rs. 100.75

(Order A). Another order comes in at 11:03:01 am of 1500 Quantity
@ Rs. 100.75 (Order B)
Order A will sit on top of the Buy order Book Price Time Priority

Price Time Priority

Buy side
Quantity
1500
1500
1000
1000
2000

11:03 am

Sell Side

Price
Quantity
Price
(Rs.)
(Rs.)
100.75 (A)
1000
101
100.75 (B)
500
102
100.50
1500
103
100
2500
104
99
3500
105

Order A sits on top price time priority

MFSS
Launched in 2009

THE NEW OPTION

MFSS at NSE
Online NEATMFSS system for entering orders
Subscription and redemption facility
Option of Physical and depository settlement
Market timings 9 A.M to 3 P.M.
Real time confirmation slip
NAV of transaction day is considered
Settlement on T + 1 basis

Advantages
Small Investment
Professional Fund Management
Spreading Risk
SIP Systematic Investment Plan

EXCHANGE TRADED FUNDS

Launched in 2002

GOLD ETFS
INVEST SMARTLY IN GOLD

A smarter way to investment in Gold

Have all the benefits of physical gold.

Typically,

1 ETF unit 1g of
Gold in spot
ETFs
They

are safe and secure

are backed by

physical gold of very high

quality

SIMPLE

SAFE
TRUSTE
D

You can buy just one unit

It is very easy to buy

Buy it unit by unit as you

want and build wealth

You can be assured of

quality
Demat holding allows
security
Accepted as collateral for
loans

JUST REMEMBER

ETF is easy, safe and smart

way to invest in gold

A smarter way to investment in Gold

NIFTY ETF

Launched in 2002
Simple way to access markets
Diversified portfolio
No bias towards sectors or
stocks
Minimum expense ratio

STOCKS

NIFTY
MUTUAL
FUND

NIFTY
ETF

EXPOSURE

Narrow

Broad

Broad

VOLATILITY

High

Low

Low

Low

High

Low

High

Low

Low

Market
Rates

NAV at
EOD

Market
Rates

COST OF
MAINTENA
NCE
CAPITAL
REQ
PRICE

Nifty ETF is the simple and safe way to

access equity markets

Derivative Segment
Launched in 2000

Derivatives
Instrument whose value is derived from an underlying
Underlying - commodity, equity, Index, interest rate, etc.
Settlement : Cash OR by delivery of underlying
Trading : on Exchange OR OTC
Mainly used for risk management
Types of Derivatives : Futures, Options, Forwards, etc.

Futures
Future contract is
an agreement between two parties
a promise to deliver a specific asset
on a specific future date
for a predetermined price (Futures
Price)
to be paid on the delivery date or later

Options
Option contract is
right to buy or sell
but not an obligation (for the buyer)
stated quantity
stated date
stated price (Option Premium)

Options
Toyota is launching a car.
Price is Rs. 0.5 million.
You can book the car by paying Rs.
50,000 [deposit]

Options
By booking the car, what have you bought?
A RIGHT to buy the car
When booking matures, can Toyota force you to
buy car ?
No. Toyota has only an OBLIGATION
Can you force Toyota to sell the car to you?
Yes. As Buyer you have the RIGHT

Use of Derivatives
To hedge risks
To take a view on the future direction of the
market
Leverage

Leverage in Derivatives

Derivatives Trading - NSE

Electronic, anonymous , screen based, Order driven market

Products : Futures and Options
Underlying : Indices & single stocks
Indices : NIFTY, NFTYMCAP50, CNXIT & BANKNIFTY
Stocks 241 single stocks
Cash settled
Near 3 months duration contracts
All contracts have an expiry date = Final Settlement Date
Expiry - last Thursday of the month
Contract Descriptor : FUTIDX NIFTY 30APR2012
: FUTSTK ACC 30APR2012
:OPTSTK ACC 30APR2012 500 CA
:OPTIDX NIFTY 30APR2012 5200 PE

How to trade ?

Trading @ NSE

Getting Started
It is so easy to start
OPEN A
DEMAT
ACCOUNT*

OPEN A
TRADING
ACCOUNT

START
INVESTING

Just approach any of the 36000+ branches of NSE brokers to open a Demat
Account. They will also open a trading account for you
And you are done !
Now you can invest using any of the following
Via Phone (Call In Trades) #
At brokers branch
Via Internet

* A bank account & PAN card is assumed to be available with the client
# Depending on facility provided by the broker

Safety measures for Invesors

Pro-active steps for Protecting your assets

Deal only with SEBI registered Broker/Sub-Broker

All funds and Securities movement only to and from
Broker
Make sure that your transactions are executed only
in your account
Do not get carried away by promises of high return
Decide on Speculation Vs investing
Be Clear on the risk that you are capable of taking
and have clear stop loss goals
Opt for internet option only if you are computer
literate

Rights and Obligation

Right To
Get Unique Client Code (UCC) allotted
Get a copy of KYC and other documents executed
Get trades executed in only his/her UCC
Contract note for trades executed
Receive funds and securities on time
Statement of account

Rights and Obligation

Under Obligation To
Execute Know Your Client (KYC) documents and provide
supporting documents
Pay funds and securities for settlement on time
Verify details of trades, contract notes and statement of account
Verify bank account and DP account for funds and securities
movement

Investing in Equities

Investing in Equities

Investors Alert

Investors Alert

Investors Alert

Investors Alert

Investors Alert

Thank You
For more information
Contact: rbhandari@nse.co.in
Visit www.nseindia.com
www.nsegold.com