Professional Documents
Culture Documents
Introduction
BSE Limited is the oldest stock exchange in Asia What is now popularly
known as the BSE was established as "The Native Share & Stock Brokers'
Association" in 1875.
Over the past 135 years, BSE has facilitated the growth of the Indian
corporate sector by providing it with an efficient capital raising platform.
Today, BSE is the world's number 1 exchange in the world in terms of the
number of listed companies (over 4900). It is the world's 5th most active in
1
BSE also successfully launched the BSE IPO index and PSU
website
BSE revamped its website with wide range of new features like
'Live streaming quotes for SENSEX companies', 'Advanced Stock
Reach', 'SENSEX View', 'Market Galaxy', and 'Members'
With its tradition of serving the community, BSE has been undertaking
Corporate Social Responsibility (CSR) initiatives with a focus on Education,
Health and Environment. BSE has been awarded by the World Council of
Corporate Governance the Golden Peacock Global CSR Award for its
initiatives in Corporate Social Responsibility (CSR).
Other Awards:
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
Drawing from its rich past and its equally robust performance in the recent
times, BSE will continue to remain an icon in the Indian capital market.
Vision
benchmarks"
The Stock Exchange, Mumbai is now BSE Limited a new name, and an entirely new
perspective... a perspective born out of corporatisation and demutualisation. As a corporate
entity, our new logo reflects our new mission... smoother, seamless, and efficient,
whichever way you look at it.
BSE is Asia's oldest stock exchange...carrying the depth of knowledge of capital markets
acquired since its inception in 1875. Located in Mumbai, the financial capital of India,
BSE has been the backbone of the country's capital markets
Heritage
The first ever stock exchange in Asia (established in 1875) and the first in the country to
be granted permanent recognition under the Securities Contract Regulation Act, 1956, BSE
Limited has had an interesting rise to prominence over the past 133 years
While BSE Limited is now synonymous with Dalal Street, it was not always so. The first
venues of the earliest stock broker meetings in the 1850s were in rather natural environs under banyan trees - in front of the Town Hall, where Horniman Circle is now situated. A
decade later, the brokers moved their venue to another set of foliage, this time under
banyan trees at the junction of Meadows Street and what is now called Mahatma Gandhi
Road. As the number of brokers increased, they had to shift from place to place, but they
always overflowed to the streets. At last, in 1874, the brokers found a permanent place,
6
Management Team
(As of July 2011)
Sl.
No.
Name
Designation
PJ.
Towers
Floor
15th
15th
13th
3
4
5
6
7
8
9
14th
28th
28th
15th
25th
24th
GUGULOTHU
10
Mr. BALASUBRAMANIAM
V.
25th
(Rs. in Lakhs)
For The Quarter
Ended 30.06.11
(Unaudited)
INCOME
Operating Income
Other Income
Total Income
13,867.08
686.02
14,553.10
49,766.27
4,038.48
53,804.75
EXPENDITURE
Employee Costs
Computer Technology Related Expenses
Administration and Other Expenses
Depreciation
1,968.34
1,178.50
1,565.14
801.95
7,002.81
5,825.93
6,180.72
3,779.16
Particulars
Total Expenditure
Profit Before Interest, Exceptional Item &
Tax
Interest
Profit before tax
Tax Expenses
Net Profit For The Period
Less: Minority Interest
Add: Share of Profit of Associate (Net)
Profit after tax and share of associate
Paid up Equity Capital (Face Value Per
Share Re. 1 Each)
Reserves (Excluding Revaluation
Reserve)
Basic EPS after Extraordinary Item
(*Not Annualised)
Diluted EPS after Extraordinary Item
(*Not Annualised)
5,513.94
22,788.62
9,039.16
31,016.13
37.24
9,001.92
2,585.53
6,416.39
732.87
5,683.52
75.70
30,940.43
7,766.79
23,173.64
1,967.53
358.38
21,564.49
1,034.08
1,034.08
211,446.73
4.67*
19.05
4.67*
19.05
Notes:
1. The above unaudited financial results for the quarter and period ended June 30,
2011 have been reviewed by the Audit Committee and approved by the Board of
Directors on 24th August, 2011.
2. The Statutory Auditors have carried out a Limited Review of the financial
results.
3. As per the definition of 'business segment' and 'geographical segment',
contained in Accounting Standard-17 "Segment Reporting", the Management is of
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the opinion that the Exchange's operations comprise of two segments viz.
a) Stock Exchange Activity
b) Depository Services
(Rs. in Lakhs)
For the Quater Ended
June 30, 2011
Particulars
I Segment Revenue
(a) Stock Exchange Activity
(b) Depository Activity
Total
Less: Inter Segment Revenue
Total Income
10,684.73
3,237.20
13,921.93
13,921.93
II Segment Results
(a) Stock Exchange Activity
(b) Depository Activity
Total
Add : Unallocated Corporate Income
Less : Unallocated Corporate Expenses
Profit before tax
Tax Expenses
Profit after tax
7,078.99
2,452.52
9,531.51
631.17
1,160.75
9,001.93
2,585.53
6,416.40
III
As at
June 30,2011
189,933.97
Capital Employed
27,719.63
481.53
218,135.13
Mumbai,
August 24, 2011
BSE
s
LIMITED
Madhu
Kannan
MD &
CEO
Scams
Harshad Shantilal Mehta -- the magician during the rise in the Bombay Stock
Exchange in 1992 -- was also the architect of India's biggest, largest and the
most devastating stock markets scam. TIMES NOW scoops out the Rs 5,000
crore securities scam that created craters in the banks treasury and left
thousands of investors gasping.
Harshad Mehta was an Indian stockbroker and is alleged to have engineered
the rise in the BSE stock exchange in the year 1992. Exploiting several
loopholes in the banking system, Harshad and his associates siphoned off
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The authors explain: ?The crucial mechanism through which the scam was
effected was the ready forward (RF) deal. The RF is in essence a secured
short-term (typically 15-day) loan from one bank to another. Crudely put, the
bank lends against government securities just as a pawnbroker lends against
jeweller. The borrowing bank actually sells the securities to the lending bank
and buys them back at the end of the period of the loan, typically at a slightly
higher price.
It was this ready forward deal that Harshad Mehta and his cronies used with
great success to channel money from the banking system.
A typical ready forward deal involved two banks brought together by a broker
in lieu of a commission. The broker handles neither the cash nor the securities,
though that wasnt the case in the lead-up to the scam.
?In this settlement process, deliveries of securities and payments were made
through the broker. That is, the seller handed over the securities to the broker,
who passed them to the buyer, while the buyer gave the cheque to the broker,
who then made the payment to the seller.In this settlement process, the buyer
and the seller might not even know whom they had traded with, either being
known only to the broker.
This the brokers could manage primarily because by now they had become
market makers and had started trading on their account. To keep up a
semblance of legality, they pretended to be undertaking the transactions on
behalf of a bank.
Another instrument used in a big way was the bank receipt (BR). In a ready
forward deal, securities were not moved back and forth in actuality. Instead,
the borrower, i.e. the seller of securities, gave the buyer of the securities a BR.
As the authors write, a BR Confirms the sale of securities . It acts as a receipt
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for the money received by the selling bank. Hence the name bank receipt. It
promises to deliver the securities to the buyer. It also states that in the mean
time, the seller holds the securities in trust of the buyer.
Having figured this out, Mehta needed banks, which issue fake BRs, or BRs
not backed by any government securities. Two small and little known banks the Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB) came in handy for this purpose. These banks were willing to issue BRs as and
when required, for a fee,? the authors point out.
Once these fake BRs were issued, they were passed on to other banks and the
banks in turn gave money to Mehta, obviously assuming that they were
lending against government securities when this was not really the case. This
money was used to drive up the prices of stocks in the stock market. When
time came to return the money, the shares were sold for a profit and the BR
was retired. The money due to the bank was returned.
The game went on as long as the stock prices kept going up, and no one had a
clue about Mehta?s modus operandi. Once the scam was exposed though, a lot
of banks were left holding BRs which did not have any value - the banking
system had been swindled of a whopping Rs 4,000 crore. When the scam was
finally revealed, the Chairman of the Vijaya Bank committed suicide by
jumping from the office roof because he knew that if people come to know
about his involvement in issuing cheques to Harshad Mehta, people would
accuse him.
Mehta made a brief comeback as a stock market guru, giving tips on his own
website as well as a weekly newspaper column. This time around, he was in
cahoots with owners of a few companies and recommended only those shares.
This game, too, did not last long.Interestingly, by the time he died, Mehta had
been convicted in only one of the many cases filed against him.
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BSE categories
Bombay Stock Exchange or the BSE is the largest stock exchange in India in
terms of highest number of companies listed with the stock exchange. If you
consider the market capitalization of the companies listed with BSE even then
the stock exchange is the largest in the country. There are thousands of
companies listed at the stock exchange and they are divided into different
categories depending on various factors including market capitalization,
parameters set by the Securities and Exchange Board of India or the SEBI,
number of years of listing at the exchange, equity capital of the company,
liquidity of the company and so many other factors.
Market capitalization of the company is a determining factor for dividing the
stocks in different groups. Market capitalization of a company is calculated by
multiplying the number of outstanding stocks of the company at the market
with the current price of the stock at the market. Along with that the bonds at
the debt market of the company are also taken into consideration. Depending
on the market capitalization stocks are divided mainly into three categories
the large cap stocks, mid cap stocks and the small cap stocks. Generally the
biggest companies with a market capital of more than $10 billion are
considered to be large cap stocks. The range for determining the mid cap
stocks is between $ 2 billion to $ 10 billion. Companies that have a market
capitalization of the less than $ 2 billion are grouped under the small cap
stocks.
Securities and Exchange Board of India is the governing body for all the stock
exchanges in India and they frame the rules and regulations for the stock
exchanges. Starting right from the listing of the companies, issuing of
securities, trading of stocks at the stock market, everything is controlled by the
Securities and Exchange Board of India or SEBI. Based on the guideline and
parameters of trading by the SEBI authorities, the stocks listed at the BSE are
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divided. That means there are different trading guidelines and rules for each of
the categories of stocks listed at the Bombay Stock Exchange.
Other factors like the number of years of listing of the company are
considered for determining the authenticity of the company and the business
potential of the company. The equity capital of the company and the asset of
the companies are also considered for examining the financial potential of the
company. When a company applies for listing at the Bombay Stock Exchange
they have to fulfill all the set conditions and then the BSE authority carries out
a due diligence to examine the company. After that depending on the
parameters of the categorization the company is listed at the appropriate
group. Often times listed stocks are rearranged by the BSE. That is the group
or the category of the stocks is changed on the basis of the parameters that are
set for determining the category of the stock. Here we are presenting the
existing groups or categories in which the BSE stocks are divided.
Primarily there are five groups in which the listed stocks are divided and
they are A, B, T, Z, and F.
A
The A group comprises stocks that have fairly good growth rate. These
companies offer dividend to the investors and have good capital appreciation
over the time. The stocks that are listed with A category have the facility to
carry forward to the next settlement cycle. This is an advantage from the
margin and derivative trading point of view.
B
The category B is basically a subset of all the listed stocks and the stocks
listed in this category have greater market capitalization that the rest of the
stocks. The trading of the stocks that are listed in the T category needs to be
settled on the very trading day and the deals can not be carried forward. This
is done by BSE to restrict any unwanted movement in these scripts.
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Z
The stocks in the Z group are marked for not complying with the rules and
regulations of the stock exchange and these stocks are often suspended from
trading.
F
The F group is reserved for the stocks listed at the debt market.
BSE is one of the factors Indian Economy depends upon. BSE has played
a major role in the development of the country. Through BSE, Foreign
Investors have invested in India. Due to inward flow of foreign currency
the, the Indian economy 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 market it not only affects the
companies listed but also affects many families. In the few extreme
cases, it is observed that the bread winner of a family tends to suicide
due to the losses occurred.
In most of major industrial cities all over the world, where the
businesses were evolving and required investment capital to grow and
thrive, stock exchanges acted as the interface between Suppliers and
Consumers of capital. One of the key advantages of the stock
exchanges is that they are efficient medium for raising resources and
channeling savings from the general public by the way of issue of Equity
Debt Capital by joint stock companies which are listed on stock
exchanges.
Not to forget that the taxes and other statutory charges paid by BSE are
substantial and make a sizeable contribution to the Government
exchequer (Financial resources; funds). For example, transactions on
the stock exchanges are subject to stamp duties, which is paid to the
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State Government. The annual revenue from this source ranges from Rs
75 100 crores
With the opening up of the financial markets to Foreign Investors a
number of foreign institutional investors and brokers have established a
sizeable presence in Mumbai.
With no doubt we can clearly state without BSE, the Indian Economy
would have been a complete different story. Various companies wouldnt
have been a strong and successful as they are today and the brokers
and traders would have been elsewhere.
BSE is an asset to our country and its existence plays a vital role in
many peoples life who depends on it. Indeed, BSE has made a major
contribution to the industrial and economic development of India.
Act of Magic:
Most of the investors are interested in short-term investments. The
requirements of companies are, however, long-term in nature they
require equity capital on a more or less permanent basis and
debenture capital for 3 to15 years. Thanks to the negotiability and
transferability of securities, through the Bombay stock exchange, it is possible
for companies to obtain their long-term requirements from
investors with short-term horizons. While one investor is
substituted by another when a security is transacted, the company
is assured of availability of funds.
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Dematerialisation
Dematerialisation is the process of converting the physical form of shares into
electronic form. Prior to dematerialisation the Indian stock markets have faced
several problems like delay in the transfer of certificates, forgery of
certificates etc. Dematerialisation helps to overcome these problems as well as
reduces the transaction time as compared to the physical segment. The article
discusses the procedures, advantages and problems of dematerialisation.
The Indian Stock markets have seen a major change with the introduction of
depository system and scrip less trading mechanism. There were various
problems like inordinate delays in the transfer of share certificates, delay in
receipt of securities and inadequate infrastructure in banking and postal
segments to handle a large volume of application and storage of share
certificates .To overcome these problems physical dealing in securities should
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Advantages of dematerialisation
* There is no risk due to loss on account of fire, theft or mutilation.
* There is no chance of bad delivery at the time of selling shares as there is no
signature mismatch.
* Transaction costs are usually lower than that in the physical segment.
* The bonus /rights shares allotted to the investor will be immediately credited
into his account.
* Share transactions like sale or purchase and transfer/transmission etc. can be
24
Problems of Dematerialisation.
Prior to dematerialization there was almost a gap of three months between
application date and listing of shares .Dematerialisation has reduced this gap
to a great extent. But quick money brings with itself a host of problems.
Current regulations prohibit multiple bids or applications by a single
person.But the investors open multiple demat accounts and make multiple
applications to subscribe to IPO's in the hope of getting allotment.
The recent IPO allotment scam proves that even a highly automated system is
not the solution to prevent malpractices, if there is laxity. The scam of Yes
bank and IDFC reveal that the investor banker has failed to weed out multiple
applications either direct or benami. Not only the investor banker the DP and
the depository failed to detect the large number of demat accounts opened
with the same address but different names. Lack of coordination between
banks, DP's, brokers depositories, registrars and investment bankers and
clarity of their roles has given rise to such problems.
Remedial measures
* To prevent the sprouting of fictitious demat accounts at DP's the allotment
of shares should be checked thoroughly.
* The concerned DP should strictly enforce the Know your client (KYC)
norms rather than relying on bank documents and verification of brokers.
* DP's should be asked to give monthly figure of accounts opened for the
public.
* Coordination and Clear definition of roles is important to weed out
manipulations.
Though dematerialisation has several benefits the recent scam has the
potential to adversely affect the confidence of retail investors in the capital
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his account. He quotes his bid (buying) and ask (selling) prices. He
provides some stability and continuity to the market.
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+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.
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 sellers broker, from the sellers broker to the buyers broker
(through the clearing house of the exchange or directly), and from
the buyers broker to the buyer. Further the buyer has to lodge the
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 bad paper risks.
To mitigate the cost and the risks associated with the physical
delivery, settlement in the developed securities market is mainly
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INVESTMENT
Investment means the use of money for the purpose of making
more money, to gain income or increase capital, or both.
Short Term Investment
Long Term Investment
Day traders buy and sell stocks throughout the day in the hope that
the price of the stocks will fluctuate in value during the day,
allowing them to earn quick profits. A day trader will hold a stock
anywhere from a few seconds to few hours, but will always sell all
of those stocks close of the day. The day trader will therefore not
own any position at the close of the each day, and there is
overnight risk. The objective of day trading is to quickly get in and
out of any particular stock for profits anywhere from few cents to
several points per share on an intra-day basis. Day trading can be
further sub-divided into number of styles, including.
Scalpers: This style of day trading involves the rapid and repeated
buying and selling of a large volume of stocks within seconds or
minutes. The objective is to earn a small per share profit on each
transaction while minimizing the risk.
Scalpers: This style of day trading involves the rapid and repeated
buying and selling of a large volume of stocks within seconds or
minutes. The objective is to earn a small per share profit on each
transaction while minimizing the risk.
Momentum Traders: This style of day trading involves identifying and
trading stocks that are in a moving pattern during the day, in an
attempt to buy stocks at bottoms and sell at tops.
Swing Trading
The principal difference between day trading and swing trading is that
swing traders will normally have a slightly longer time horizon than day
traders for holding a position in a stock. As is the case with day traders,
swing traders also attempt to predict the short term fluctuation in a
stocks price. However swing traders are willing to hold the stocks for
more than one day, if necessary, to give to stock price some time to
move or to capture additional momentum in the stocks price. Swing
traders will generally hold on to their stock positions anywhere from a
few hours to several days.
Swing trading has the capability of providing higher returns than day
29
trading. However, unlike day traders who liquidate their positions at the
end of each day, swing traders assume overnight risk. There are some
significant risks in carrying positions overnight. For example news
events and earnings warnings announced after the closing bell can
result in large, unexpected and possibly adverse changes to a stock's
price
Position Trading
Position trading is similar to swing trading, but with a longer time
horizon. Position traders hold stocks for a time period anywhere from
one day to several weeks or months. These traders seek to identify
stocks where the technical trends suggest a possible large movement in
price is likely to occur, but which may not be fully played out for several
weeks or months.
volatility further.
So even though the portfolio investment by FIIs increases the flow of
money in the economic system, it may create problems of inflation
TRANSFORMATION OF THE STOCK
EXCHANGE, MUMBAI TO BSE LTD.
The change in the name of Asia's oldest stock exchange, from the Stock
Exchange, Mumbai to the Bombay Stock Exchange Ltd., (BSE Ltd.) is of
more than cosmetic significance. Along with the change in name comes
a new perspective, one brought about by a comprehensive change in its
ownership and management. Until now, the BSE like most other
exchanges in India was owned and managed by brokers, who also had
the sole right to trade in the exchanges. Conflicts of interest were bound
to arise in such situations. Until the advent of the National Stock
Exchange in 1994, the BSE was India's pre-eminent exchange,
accounting for an overwhelmingly large proportion of the share market
transactions of the country. Companies wherever located were advised
to seek a listing of their shares on the BSE so that they could have
access to its large reservoir of capital and investor base. Legally
speaking, it was enough if they listed their shares on any one of the
regional stock exchanges, closest to their registered office. This last
rule, like so many others connected with the securities market, had to
be discarded in the wake of the sweeping changes in the financial
markets since the 1990s. Perceptions of both investors and regulators
changed dramatically forcing the stock exchanges to overhaul
themselves.
A series of securities scams through the 1990s in which brokers were
invariably held accountable, the inability of the broker-dominated
exchanges to check malfeasance, and a vastly expanding role for the
capital market in the national economy necessitated a thorough review
of the age-old stock market structure. In the new demutualised and
corporatised exchanges that came about as part of a major capital
market reform a time-bound program for 10 other exchanges has since
been announced the right to trade is segregated from the right to
own and manage the exchange. The transition is not going to be easy as
it involves the imparting of a much greater degree of professionalism.
34
CONCLUSION
With the increasing Globalization, the Stock Exchanges have
tremendously affected the financial conditions of India.
The stock markets of the future will have a redefined pupose and
reinvented architecture due to the advent and widespread use of
technology. Information and stock price quotations are available
almost instantaneously, and, more importantly, investors can act on
this data by executing a trade from anywhere at anytime. This new
market will bring benefits to investors, the listed companies, and
the economies of the company. Trading will become cheaper, faster
and settlement will be simpler wit reduced risk. Raising capital for
companies will become easier, thereby contributing directly to the
Economic Growth.
Already, BSE has shown its proactive response by increasingly
using leading edge to technologies to effectively compete in the
global environment. In the not too distant future, once full capital
account convertibility is permitted in India, one could well witness
an expansion of trading volumes and its resultant economic benefits
to the thriving and ever young metropolis of Mumbai.
Inspite of all these positive predictions, the future of Stock
Exchanges is likely to be uncertain and even their survival is a
major question mark.
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