SEPTEMBER 2001

NATIONAL STOCK EXCHANGE OF INDIA LIMITED

For private circulation only

CONTENTS
ARTICLES
The Monte Carlo Route to VaR 3
The Lebeds on the Other Side 8
Corporate Governance - A Perception Study of Select Indian Companies 10
Reforms in the Corporate Securities Market in India 13
GOVERNMENT NEWS 22
Powers of SEBI 22
RBI NEWS 22
I. FII Investments 22
II. Bank Financing for Margin Trading 22
SEBI NEWS 22
I. Board Meeting 22
II. Financial Market Reforms 23
III. Stock Futures 23
IV. AMFI Certification Programme 23
V. Accounting Treatment of Equity Index Futures 23
NSE NEWS 24
I. Record Turnover 24
II. Reduction in Interest Rates 24
III. Transaction Charges in F&O Segment 24
IV. Direct Payout to Investors Account 24
V. NCFM Basics / Dealers Module 24
MARKET REVIEW 25
Membership 25
Capital Market 25
Trading 25
Indices 27
Settlement 29
Derivatives Market 29
Wholesale Debt Market 30
Investor Grievances 31
Arbitration 31
System and Telecom 31
NSE's Certification in Financial Markets 31
ANNEXURES
'NSENEWS' is normally published in the second week of the succeeding month. * Articles on subjects of interest to Professionals in the
securities market are welcome. * Authors (other than employees of NSE group) are suitably rewarded. * Views expressed by authors are their
own and NSE does not accept any responsibility. * All rights reserved. No part of the NSENEWS may be reproduced or copied in any form by
any means without the written permission of NSE.

September 2001 Web site : http : / / www.nseindia.com September 2001 Web site : http : / / www.nseindia.com 1
 MANAGERIAL PERSONNEL OF NSEIL The Monte Carlo Route to VaR
NAME DESIGNATION DEPARTMENT TEL. NO. EXTN.
Mr Ravi Narain Managing Director and CEO 6598200 3000 Ajay Shah *
Ms Chitra Ramkrishna Director, Business Operations WDM, Capital Market, IPO, HRD, 6598201 5000
Corporate Communication, Administration
& Membership
Mr Raghavan Putran Director, Business Operations Development & Projects, Listing, Premises, 6598202 4000 Most practitioners of finance have now encountered to adapt to market conditions from day to day.
Investor Grievances & Arbitration VaR. The VaR of a position at a 99% level on a one day
1
Mr J Ravichandran Sr. Vice President & Legal, Secretarial, Finance, 6598203 5001 Figure 1 : VaR for a linear portfolio with the normal
Company Secretary Accounts & Compliance horizon is the loss which will be exceeded with a 1%
distribution
Mr M L Soneji Sr. Vice President NSCCL 6598204 4001 probability. For a concrete example, consider a long
Mr M S Sahoo Economic Advisor Economic Analysis & Policy & NCFM 6598208 3002
position on the Nifty futures worth Rs. 200,000. When On August 7, 2001, we have a position of long Rs.
Mr D Satish Kumar Asst. Vice President Legal 6598227 5129
Mr Framroze Pochara Asst. Vice President Investor Grievances, Arbitration & Listing 6598209 5005 we say that the VaR at a 99% level on a one day horizon is 1,000,000 in the Nifty August futures contract. We need
Mr Joseph Hadrian Bosco Asst. Vice President Membership, Marketing & Corporate Communication 6598210 4002 to calculate the VaR for this portfolio, for which we need
Rs. 9,000, this means that there is a 1% probability that
Mr Mahesh Haldipur Asst. Vice President Premises 6598211 4003 to know the volatility of the portfolio. Once we know
Mr Nayan Mehta Asst. Vice President Finance & Accounts 6598220 3081 the loss tomorrow will be worse than Rs. 9,000.2 the volatility, we use the normal distribution tables to
Mr Neeraj Kulshrestha Asst. Vice President NSCCL- F & O 6598221 4075
Mr R Nanda Kumar Asst. Vice President NSCCL - Development 6598223 4027 VaR has proved to be the centre-piece of risk find out what is the point on the lower tail of the
Mr R Sundararaman Asst. Vice President Capital Market, IPO & Derivatives Market 6598212 5003
management in finance today. In every situation where distribution, to calculate the 95% VaR.
Ms Kumudini S Hajra Dy. Economic Advisor Economic Analysis & Policy 6598218 3034
Mr Arup Mukherjee Manager IISL 6598232 2026 VaR is computed, there are two main elements of the The family of models which seems to work in
Mr A Sebastin Manager Chennai Office (044) 8227824 124
solution: describing the fluctuations of Nifty is called the “ARCH”
Mr Bhupesh Mistry Manager Premises 6598451 4105
Mr Chalapathi Satya Venkata Manager NSCCL - Risk Management 6598214 4088
models. Using these, we find that the model for Nifty
Mr Dhruvkumar Patil Manager NSCCL - Securities 6598215 4060
A model : When you have a portfolio composed of volatility is:
Mr Girish Raipuria Manager NCFM 6598216 3030 Nifty options and Nifty futures, the first thing we need
Mr Golaka C Nath Manager WDM 6598217 5107 is a model which tells us how Nifty fluctuates. σt2 = 0.32 + 0.099 * rt 2– 1 + 0.803 + σt2 – 1
Mr Hari K Manager F&O 6598152 6056
Mr N Ravi Manager Calcutta Office (033)2805424 101
1. In this model, rt – 1 is the percentage change in Nifty
A technique for obtaining VaR : Once we have a model value from August 6 to August 7, 2001. From the
Mr Narendra Kumar Ahlawat Manager Development 6598219 4040
Mr Rajesh V Bagwe Manager HRD 6598224 5032 for Nifty, and a portfolio of products based on Nifty, August 6 to August 7 Nifty dropped from 1075.25
Mr R Jayakumar Manager Legal & Secretarial 6598222 5120 we need a technique through which VaR is obtained. to 1072.10. Therefore, rt – 1 = - 0.29%.
Mr Raj Kumar Manager NSCCL - Risk Management 6598264 4082
Mr Ravi Varanasi Manager Inspection & Investigation 6598225 5139 This article is about the second question – how When the model was applied to the previous day, it
Mr S Sivakumar Manager Development 6598226 4028
Mr T Venkata Rao Manager New Delhi Office (011) 3344335 127 VaR is obtained once a model is in hand. was found that σt2– 1 (the volatility of Nifty for
Mr Tapas Das Manager NSCCL - Margin & Clearing House 6598228 4063 August 7, 2001) was 1.26.
The Simplest Case
2. We use these numbers in the model, and calculate
There is exactly one case in which the VaR that the standard deviation for August 8, is 1.007.
MANAGERIAL PERSONNEL OF NSE.IT computation is easy: this is the case where (a) the model 3. We know from the tables for the standard normal
Mr Satish Naralkar CEO 6598205 3001 says that Nifty returns are normally distributed and (b) distribution that the 95% VaR is - 2.248σ. Hence,
Mr C Kajwadkar Vice President 6598206 2001 the products of interest are linear products (i.e. spot or the 95% VaR for the Rs. 1,000,000 portfolio is a
Mr G M Shenoy Vice President 6598207 2000
futures). loss of Rs. 22,640 (= 1,000,000*(-2.264/100)).
Mr Rohit Punja Vice President 6598254 2004
Mr. Anil Gidh Group Head 6598473 2005 The requirement that Nifty returns be normally Similarly, we find that with 1% probability the returns
Mr Yatrik R Vin Asst. Vice President 6598138 3003
distributed is less restrictive than is commonly assumed. on 9th can be - 3.178%. This means that the 99%
Ms T. S. Jagadharini Asst. Vice President 6598466 5112
Specifically, the mean and variance of the returns can VaR for the portfolio is a loss of Rs.31,780
Ms Lalitha M Sr. Consultant 6598222 -
Mr Pravin Soman Sr. Consultant 6598464 3087 fluctuate from day to day, thus giving the model an ability (= 1,000,000*(-3.178/100)).
Mr Anand Pachchhapur Sr. Manager 6598488 3088
Mr K H Shriram Sr. Manager 6598480 3090
Mr Ashish Dandekar Manager 6598229 2117
Ms Chandra Bhattacharjee Manager 6598468 5122
Ms Mamatha Rangaprasad Manager 6598461 2095 *Associate Professor, Indira Gandhi Institute for Development Research, Mumbai. The view expressed and the approach suggested in the paper
Mr Manoj Joshi Manager 6598231 2089 are of the author and not necessarily of his employee or of NSE. The author can be reached on email : ajayshah@igidr.ac.in.
Mr M Vasudev Rao Manager 6598471 3091 1
Jorion (2000) and Shah (1998) are useful introductions to VaR.
Mr Puneet Kohli Manager (Delhi Office) (011) 3344503 105
Mr P. R. Visvas Manager 6598100 2130
2
Thomas and Shah (1999) have material on VaR in Indian settings. Shah and Thomas (1999) show some ideas on utilising VaR for solving
Mr Shripad Bhanap Manager 6598472 5111 problems of prudential regulation. Culp et al. (1998) gives useful insights on the use and misuse of VaR.

September 2001 Web site : http : / / www.nseindia.com 2 September 2001 Web site : http : / / www.nseindia.com 3
 If Nifty returns are normally distributed, then the
returns on any linear portfolio is also normally
distributed. In this case, it is easy to read off a percentile
point on the normal distribution, which is VaR. Figure
1 offers one example of such a calculation.
This method is infeasible once either of the two
requirements breaks down. If we have models which
are not based on the normal distribution, or if we have
nonlinear products (such as options), then we need new
ideas.
The Greeks
Once options come into the picture, we need new
ways of thinking about risk. This is because options
are nonlinear products.
The greeks are one important element of thinking
about the risk of portfolios involving options. The
greeks measure exposure – e.g. Delta is the change in
the value of a position (measured in rupees) when Nifty
moves by Rs. 1. The delta of a long position on a Nifty
futures contract is Rs. 200, because a 1 point change in
Nifty increases the value of one contract by Rs. 200.
Suppose, we have a Nifty call with X = 900 and
T=
1
. When Nifty is at 1200, this call is deep in
12
the money, and it is almost like a Nifty futures
(with W = 0.999982). When Nifty is at 600, this call is
deep out of the money, and it is almost like cash (with
W = 0). This is in contrast with a futures position,
which always has W = 1, no matter how Nifty moves.
The greeks are useful diagnostic tools. Given a
position, they numerically show the bets involved in
the position. Specifically, we have:
• Delta : sensitivity of C to S
• Gamma : sensitivity of W to S
• Rho : sensitivity of C to r
• Theta : sensitivity of C to t
• Vega : sensitivity of C to σ.
September 2001
The greeks are useful to traders for cross-checking
whether the position accurately expresses the view of
the trader. For example, suppose an options trader
thinks Nifty will go up, and buys call options.
Computing the greeks is very revealing, because he will
find that this position also has a high vega – he has a
side bet that Nifty volatility will also go up. If this is
not his view, he should “sell volatility” so as to have a
position with a high delta (i.e. betting that Nifty will go
up) and a low vega (i.e. being agnostic about movements
in volatility).
Similarly, the theta of a position is interpreted
as the exposure to the passage of time. A position
with a high theta has a high rate of “time decay”, it is
a rapidly wasting asset. That is, it is expensive for the
trader to sit on this position. The trader should feel
strongly that he is likely to earn profits on this
position.
The greeks are thus an extremely useful diagnostic
tool, which help in ensuring that a trader is taking a
position which actually expresses his views. The greeks
have a great strength, which is that they deal with the
full portfolio of spot, futures and options based on
any one underlying; they help the trader in avoiding
the my-opia that comes from thinking about one
security at a time. However, the greeks are not VaR.
They are not associated with any probability statement,
while VaR can find us the magnitude of a loss which
will only be exceeded with a 1% probability.
The Method of Monte Carlo
Suppose we agree on a bet, where we will toss a
coin five times. We will count n, the number of heads
we got, and you will get a payoff of 2n. So if the
experiment yields HTTTH, you will get Rs. 4, while if
the experiment yields THTHTH, you will get Rs. 8.
How much do you get out of this bet, on average?
This question can be answered mathematically, but
it is slightly complicated. Alternatively, we can ask a
computer to do this experiment thousands of times.
Thousands of times, the computer can toss a coin five
Web site : http : / / www.nseindia.com
times, and calculate your payoff. Averaging across these Figure 2 : Monte Carlo simulation for the bet involving
thousands of experiments, we would have a fairly five coin tosses
accurate idea of what you would get from this bet, on #!/usr/bin/perl -w
average. my($debug)=1;
my($draws)=5;
This is called a Monte Carlo simulation. We now my($sum)=0;
know how to simulate all kinds of random variables in
for (1..$draws) {
the mind of a computer, so whether we have a coin
$sum += &experiment;
that is tossed (where we get heads with a 50% }
probability and tails otherwise), or we have normally print "On average, you got ", $sum/
distributed returns on Nifty, or any complicated models, $draws, "\n";
it is always possible for us to write a computer program sub experiment {
which will simulate from the model. my($heads, $payoff)=(0,0);
for (1..5) {
For those with some exposure to computer my($thistoss) = rand() > 0.5;
prog ramming, Figure 2 shows a computer print $thistoss ? "H":"T"
program, written in the Perl programming language if ($debug);
$heads++ if ($thistoss);
(http://www. perl.com), which simulates five
}
coin tosses. The function rand() in perl returns a
$payoff = 2**$heads; print "
uniformly distributed random number from 0 to 1, so $payoff\n" if ($debug);
there is a probability of 50% of it coming out above return $payoff;
0.5. Running this program, and experimenting with a }
few changes to it, is strongly recommended for
• The core of a Monte Carlo simulation is one
understanding these issues.
experiment, where one draw is made from a model,
and one payoff is calculated. As mentioned above,
Figure 3 shows the results that we obtain by running
mathematicians have understood how to simulate
this program a few times. Each Monte Carlo simulation
random numbers from all known distributions, so
yields a different answer. In Figure 3, we get 7.6, 6.6,
while the efficiency and “quality” of random
5.2, and 6 – each of which is an average of five
numbers generated could vary, the basic capacity to
experiments.
do so is certain. Figure 5 offers a useful function, in
The variability across experiments drops sharply perl, which simulates a draw from the N(0, 1)
when we increase the size of the experiment. This is standard normal distribution.
controlled by the variable $draws in the program, • This is done a “very large” number of times. This
which was set to 5. Figure 4 shows four simulations could be anything from 1000 to 100,000 experiments,
where we are now using 10,000 draws. Here, $debug depending on the compute power available.
has been set to 0, so we do not get copious details
• Each run of a Monte Carlo simulation will yield a
about each of the 10,000 experiments. Based on this,
different answer. There is an irreducible imprecision
we can say with some confidence that this bet yields
about answers obtained using Monte Carlo
something between Rs. 7.6 and 7.7, however we cannot
simulations.
be more precise than this.
• The payoffs obtained from these experiments can
This example is a quintessential example of a be studied in various ways. Above, we reported the
Monte Carlo simulation. The key properties of such
average payoff. It is easy to sort them, and report a
simulations are: VaR.
4 September 2001 Web site : http : / / www.nseindia.com 5
VaR for Products Off Nifty Figure 5 : A perl function to simulate a draw from the interest. At this time, we face the cost of calculating • It requires an order statistic off a vector of N
standard normal distribution out the value of this portfolio in each of these N elements.
Suppose we had a model which described the
sub ranstdn { scenarios, and then sorting the losses. Pre–calculating and storing the L matrix eliminates
fluctuations of Nifty. We could use this model to simulate
a wide variety of scenarios. One simulation could involve
my($r, $u, $v); 2. The calculations for two different clients are the cost of the first two steps. Once this is done, the
Nifty standing still; another could involve Nifty rising
L50:
completely unrelated. Hence, these calculations can cost of obtaining a VaR estimate for one portfolio drops
$u = rand; $v = rand; to the matrix multiply and the order statistic. Srinivasan
by 4%, yet another could involve a sharp fall in Nifty of be done in parallel on separate CPUs. This allows
$v = ($v - 0.5) * 1.7156; and Shah (2000) offer sharp improvements on these two
7%. Each of these simulations is like a scenario. us to harness multiple CPUs into the task.
$r = $v/$u; problems.
Suppose we had theoretical models which predicted goto L50 if ($r*$r > -4*log($u)); 3. In a recent paper Improved techniques for using Monte
the price of futures and options in each of these return $r; Carlo in VaR estimation by Ashok Srinivasan and Ajay
References
scenarios. In this case, we could compute VaR as follows: } Shah, we obtain large improvements in efficiency
by avoiding the calculation of portfolio loss for Christopher L. Clup, Merton H. Miller, and Andrea M.
Figure 3 : A few simulation runs with 5 draws 1. Simulate N scenarios out of the model, for what
scenarios which will not figure in the worst 0.01N P. Neves. “Value at risk: Uses and abuses.” Journal of
$ ./demomc.pl could happen to Nifty over one day.
HHTHH 16 losses.3 Applied Corporate Finance, 10(4):pages 26–38 (Winter
THTHH 8 2. In each of these models, reprice the portfolio using Mathematical Approach 1998).
HTHTH 8 theoretical models, like the cost of carry model for
HTTTT 2 futures and the Black–Scholes formula for options. The direct approach to VaR is as follows: Ajay Shah. “Value at risk: A conceptual examination.”
THTHT 4
• There can be T underlyings and M financial products. In: “Derivatives markets in India,” (editor) Susan
On average, you got 7.6 3. This will yield the value of the portfolio, and hence
$ ./demomc.pl Thomas, chapter 23, pages 215–224. Tata McGraw–
the loss, in each of the N scenarios. • We simulate N draws from the T-variate joint
THHHH 16 Hill, 1998.
distribution.
THTHT 4 4. Sort the N values of the losses, and report the
TTTTT 1 0.01Nth worst value as the 99% VaR. Ajay Shah and Susan Thomas. “Rethinking prudential
• At each draw, we reprice all M financial products
TTHTH 4 regulation.” In: “India Development Report
using theory. This gives us a matrix of scenarios
THTHH 8 Computational Efficiencies 1999-2000,” (editor) Kirit S. Parikh, chapter 17, pages
On average, you got 6.6 that we call the L matrix. This matrix has N rows
(for N scenarios) and M columns (for M products 243–255. Oxford University Press, 1999.
$ ./demomc.pl The algorithm shown above is a fairly expensive
THTTH 4 affair. On a modern CPU, the cost works out to between of interest).
THTTT 2 Susan Thomas and Ajay Shah. “Risk and the Indian
10 to 50 seconds per VaR calculation. In a situation like
HHTTT 4 • Given a portfolio w, we calculate Lw, the vector of economy.” In: “India Development Report 1999-
NSCC’s monitoring of clearing members, or a broker’s
THHTH 8 N draws from the distribution of the portfolio value. 2000,” (editor) Kirit S. Parikh, chapter 16, pages 231–
THTHH 8 monitoring of clients, there is a need for a real–time
Here w is a M–matrix, with zero elements for 242. Oxford University Press, 1999.
On average, you got 5.2 system, which can compute out collateral requirements
products where the position is 0.
$ ./demomc.pl an instant after the trade takes place. This is particularly
Philippe Jorian. Value at Risk : The Benchmark for Controlling
HTHTT 4 challenging when we seek to handle NSCC’s peak load, • VaR is an order statistic off this vector.
THHTT 4 Market Risk. McGraw Hill, 2000, 2nd edition.
which is over 100 trades per second (i.e. 200 VaR This involves computational cost at the following steps:
HTHHH 16
calculations per second). Ashok Srinivasan and Ajay Shah. “Improved techniques
TTHTT 2
• Simulating N random vectors.
TTTHH 4 There are three strategies through which we can for using Monte Carlo in VaR estimation.” Technical
On average, you got 6
obtain improvements in the computational performance: • It could require N M evaluations of derivative report, Department of Computer Science, UCSB, and
Figure 4 : A few simulation runs with 10,000 draws pricing formulas. IGIDR (2000).
$ ./demomc.pl 1. When we closely examine the algorithm, we see that
• It requires a (N % M) % (M % 1) matrix multiply. ooo
On average, you got 7.5977 the bulk of the work does not vary from portfolio
$ ./demomc.pl to portfolio. Hence, at the start of the day, we can
On average, you got 7.6465 simulate N scenarios, and reprice all products in all
$ ./demomc.pl
scenarios. This information can be kept ready, in
On average, you got 7.7067
$ ./demomc.pl advance.
On average, you got 7.6271 Srinivasan and Shah (2000). This paper was funded by the NSE Research Initiative. Ashok Srinivasan is at Florida State University.
3
While trading is running, we get the portfolio of

September 2001 Web site : http : / / www.nseindia.com 6 September 2001 Web site : http : / / www.nseindia.com 7
 The Lebeds on the Other Side
FTEC is starting to break out! Next week, this thing will EXPLODE … Currently FTEC is trading for just $ 2½.
I am expecting to see FTEC at $ 20 VERY SOON…. You will probably never come across an opportunity this HUGE
ever again in your entire life……..
This could well be a bullish buy recommendation
of the FTEC stock by a seasoned market analyst. But
certainly one would not expect this as an e-mail message
posted over two hundred times in the Internet by a fifteen
year old boy Jonathan Lebed, in the US. And if that
teenager happens to be the first minor to be charged
with stock market fraud for using the Internet to trade
and promote stocks from his bedroom assuming multiple
fictitious names, then one certainly is chartering unknown
territory.
Internet – the Ubiquitous Medium
The Internet is a trading medium, an information
source and a communication device, all rolled into one.
As a trading medium, Internet based systems are either
construed as alternative trading systems or as order
routing systems. In the former, investors have an
additional trading facility for trading in securities listed
in established exchanges. Such systems can be designed
as mere order matching systems or as crossing networks
using prices from other exchanges. In the latter, the
Internet is used to bring additional order flow to the
exchange. The legal and regulatory issues in both these
cases are distinct and unprecedented.
As a communication and information medium, the
Internet permits real-time, simultaneous communication
and sharing of information by a large numbers of
persons spread across the globe, with anonymity. And
the communication is instantaneous. Spanning the time-
space conundrum, users can assume identities, begin and
end interaction at their convenience and will at any time.
The power of the Internet has had a profound
impact on the functioning of the capital market. Stock
exchanges have the potential to become global;
information access and analysis has been democratised;
* Director (Finance), Karnataka Power Corporation Ltd. The views expressed and the approach suggested in this paper are of the author and
not necessarily of his employer or of NSE.
September 2001
R. Ramaseshan*
control has shifted from the intermediary to the investor
at a much less cost; and information dissemination and
transaction execution is now possible in a split second.
But alongside, new forces have been unleashed. Investor
protection and preserving the market integrity are
emerging as key issues. That is the challenge posed by
technology, particularly the Internet.
The possibility of trading from a remote location
in a distinctly different market spanning across time
zones, accessing information and communicating
simultaneously and instantaneously provides enormous
power to the less benevolent. And the anonymity that
it provides with no limitations of the sovereign,
compounds the situation. An information superhighway,
with no signposts and policing!
Internet Abuse
Developed markets, especially the US, where on
line trading has gained more acceptance, are grappling
with Internet abuse. This could be an indicator of things
to come. Counter measures and strategies are evolving.
Abuse of the reach and potential of the Internet is
essentially with a motive to reap profits from
extraordinary price increase – the classic pump and dump
technique. Of course, the reverse is also possible in a
bear market.
Online bulletin boards – newsgroups or web-
based bulletin boards – are increasingly becoming a
popular forum for investors to share information.
Bulletin boards typically feature threads made up
of numerous messages on various investment
opportunities. And then there are on line newsletters
that offer investors seemingly unbiased information free
of charge about featured companies or recommending
stock picks of the month.
Web site : http : / / www.nseindia.com
E-mail messages are also widely used to urge
investors to buy a particular stock. Spam allows the
unscrupulous to target many more potential investors
than mass mailing. Using a bulk e-mail program,
spammers can send personalised messages to thousands
and even millions of Internet users at a time.
Dedicated web sites offering investment advice
either freely or on payment of a subscription fee add to
the hype. While some on line messages may be true, many
turn out to be false or even misleading and pretend to
reveal inside infor mation about upcoming
announcements, new products, or lucrative opportunities
like mergers and acquisitions.
Thus the potential to create investor frenzy is
virtually unlimited. Trading volumes soar and so does
the price. And then the expected happens. After sufficient
interest is developed, and unwitting investors purchase
the stock, the fraudsters behind the scheme sell their
shares at the peak and stop hyping the stock, the price
plummets, and investors lose their money.
Nothing different from what happens in any market;
but the speed and the number of investors that can get
involved, thereby increasing the potential for profits is
what makes Internet abuse a nightmare. In a traditional
environment, diligent investigation can establish the paper
trail and can bring the violators to book. But in an Internet
environment, the geographical spread and the anonymity
of the net makes the task difficult, if not insurmountable.
And to compound matters, the nexus between pumping
the stock and the profits raked in may be difficult to
ascertain, as they could be in different locations, and
establishing the money trail could be torturous.
Hackers’ skills and the reach of the Internet are a
formidable combination. A precursor of what is in store
may be appreciated from the Pairgain case prosecuted
in the US1 . A message on the possible takeover of
Pairgain, a maker of telecommunications equipment
based in California, was posted with a link to what it
stated was the Bloomberg News story reporting the
impending merger. When users clicked on the link in
the message, they were directed to a deceptively similar
Bloomberg News web page containing details of the
merger. The page looked exactly like a real Bloomberg
page, even to the point of including other links that took
1
United States v. Hoke (PairGain). 1999.
2
On Line trading-Investor Protections have improved but continued Attention is needed, Report of the Government Accounting Office, USA July, 2001.
8 September 2001
the reader back to the real Bloomberg service; but the
message was false. The stock rose over 31 percent and
the volume transacted soared over ten times the normal,
only to crash when the bluff was called off.
The spectre of a hacker gaining access to a
company’s web site and posting misleading information
to take advantage of investor interest looms large today.
But more sinister would be gaining access to confidential
information from the company’s computer system and
using such privileged information for trading. Detection
and prevention of such hacking is rather difficult. And
insider trading law as it exists today may not be adequate
to deal with such instances.
Not withstanding these concerns, on line trading
continues to grow. The US has reported doubling of
on line brokerage accounts to 17 million between the
first quarter of 1999 and the second quarter of 20002 .
The trend is likely to be similar elsewhere, as the Internet
offers unparalleled convenience to the investor. Thus
the challenge is to make the Internet environment safer
and more acceptable.
The Net Challenge
The niche that the Internet has created for itself –
locational indifference – is the toughest challenge that it
poses to the regulator and the law.
With the investor in one location, accessing the
Internet through a service provider in another location
and trading in a market in the third what jurisdiction is
he subject to? Who would discipline him in cases of
delinquency? And if a regulator in a country chooses to
take action against a non-resident, who is to enforce the
action?
Regulators like the SEC in the USA have been very
aggressive in asserting jurisdiction over persons outside
the country who violate US securities laws. The doctrine
of minimum contacts, namely, that the individual should
have derived some benefit from his dealings in the USA
is used to establish personal jurisdiction over a non-
resident. Yet this is one of the contentious issues posed
by the Internet. There is no consensus; yet countries
are going ahead on setting precedence or are enacting
laws to enhance the jurisdiction of their regulators and
courts over foreigners.
(Contd. on Page 21)
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 Corporate Governance - A Perception Study of Select Indian Companies
There is enough empirical evidence in Europe and
USA to show that good corporate governance invariably
leads to good corporate performance and excellence.
There have been attempts to measure the level of
corporate governance or even develop a ‘governance
index’. This is, however, an attempt to find out how
Indian companies are perceived in terms of different
corporate governance parameters.
Methodology
Stratified and purposive sampling techniques were
used to select a sample of 21 companies out of 50 in
the CNX S&P Nifty. After extensive deliberations, eight
distinct constituents and the responsibilities of the
companies towards them were identified. These are
shareholders, management, employees, customers, other
Shashikala Rao, Gopal Chalam and Ganpati Nadkarni*
considered in the important activities of the company.
(b) Management: Is the company’s management
satisfying the requirements of good corporate
governance?
A common feature of well-managed companies is
that they have systems in place, which allow sufficient
freedom to the boards and management to take decisions
towards the progress of their companies and to innovate,
while remaining within a framework of effective
accountability. In other words they have a system of good
corporate governance. This also calls for companies to
devise an internal procedure for adequate and timely
disclosure, reporting requirements and code of conduct.
(c) Employees: Is the company doing enough to
promote employee development and well-being?
In a nutshell, all activities of a company should be of its actions on all, from shareholders to the society at
focussed on customer expectations and meeting them. large. All acts of a company should not only be the right
course of action, but also be perceived so. The means
(e) Other Stakeholders: Is the company recognising
are as equal, if not more, important than the goals.
the rights and fulfilling its obligations towards the other
stakeholders? On reviewing the perception of the experts, it was
considered desirable to combine Management with
There is widespread recognition that corporate
Corporate Ethics and Environment with Society, as it was
obligations extend to a variety of constituencies or
found that the perception on these parameters were almost
stakeholders and that these responsibilities are central
similar and seemed overlapping. The perception in respect
to the ethical role of a company. Suppliers, competitors,
of other stakeholders was not very clear. The top 10
local communities, creditors, government, etc are basic
companies in terms of these parameters, as perceived by
constituencies that should be considered in planning and
the experts, are presented in charts 1 through 5.
executing of corporate policy and action.
(f) Environment: Is the company sensitive to
environment impact of its products, both in production Chart 1: Perception on Shareholders
and in use?
4
Corporates should take every possible measure to 3.8
adhere to the environment standards (for the particular 3.6
industry) both on the national and international front.
Corporates are also responsible to look into the pollution 3.4

stakeholders, environment, society and ethical practices. level in the society and take significant steps to minimize 3.2

100 experts from different segments and professions Employees expect fair pay, equal growth
the same. Companies are required to move in the 3
opportunity, adequate training, safe and healthy

IC IC I
(comprising Chartered Accountants, Cost Accountants,

INFOSYS

P&G
RANBAXY
HLL

RIL
W IPRO

SATYAM
direction of the environmentalists “three R’s” - reduce,

HDFC

Company Secretaries, Management Consultants, Finance
Consultants, Equity Analysts, Bankers, Academicians,
Industrialists, etc.) were identified, explained the objective
of the study, and were asked to reveal their perception
on a scale of 5 to 1 (Excellent, Very Good, Good,
Satisfactory and Not So Good) about these 21 companies
towards the eight constituents. Structured questionnaire
workplaces, financial security, personal privacy, freedom
of expression and concern for their quality of life.
Experience has shown that employees perform well for
companies which have earned their loyalty, rewarded their
performance and involved them in the decision-making
process. At the same time, companies need to weigh
employee benefits in the light of competition around
ITC
reuse and recycle.
(g) Society: Is the company doing enough to improve
the standard of living and quality of life of the society? Chart 2: Perception on Employees
Operating in national and multinational spheres, 4
corporations affect the lives of people around the world.
They are expected to respond to concerns and issues of
3.8

followed by interview was used to collate and interpret the world and the fundamental necessity to produce national and international significance. At the same time, 3.6

data.
The eight constituents and the responsibilities of
the companies towards them are discussed below:
profits to support the continuing existence of the the corporation’s first responsibility to society is to 3.4
enterprise. maintain its economic viability as a producer of goods 3.2
(d) Customers: Is the product or service so priced as and services, as an employer and as a creator of jobs. 3
They are expected to look into the local needs and

IC IC I

C OLGATE
INFOSYS
to be affordable to the people to whom it is marketed?

P&G

RANBAXY
HLL

W IPRO

(a) Shareholders: Is the company doing enough to
maintain and enhance shareholder value?
Shareholders have a special relationship with the
companies. As providers of risk capital, they are the
prime suppliers of funds for corporate birth, growth
and development. Any approach to corporate
responsibility must begin with the practical recognition
that the company must be profitable enough to provide
shareholders a return that will encourage continuation
of investment. The interest of shareholders must be
L&T
SATYAM
HDFC
Does the company provide adequate, necessary and problems viz. schools, health, recreation for the people
proper customer service? of the community in which or in the vicinity of which
they are located.
Customers have a primary claim for corporate
attention. Without them, the enterprise will fail. If (h) Corporate Ethics: Does the company satisfy the Chart 3: Perception on Customers
customer expectations are not satisfied, the company general public expectations of fairness and ethical 4
suffers long-term as well as short-term damage. conduct?
3.8
Customers should be made aware of all harmful or Companies are surrounded by a complicated 3.6
unsafe ingredients or characteristics of the product. pattern of economic, social and political ideas and 3.4
Similarly, the product or services should fulfil a social expectations. They have a responsibility to themselves,
need and not merely promote frivolous consumerism. to one another and to their constituencies to make a
3.2

3
reasonable and effective response. A corporation’s

IC IC I
INFOSYS

P&G
RANBAXY
HLL
W IPRO

DABU R
L&T

SATYAM
HDFC
responsibilities include how the whole business is
conducted every day. It must be a thoughtful institution,
* Fellow members of the Institute of Company Secretaries of India. The perceptions reflected in this paper are not necessarily those of the NSE. which rises above the bottom line to consider the impact

September 2001 Web site : http : / / www.nseindia.com 10 September 2001 Web site : http : / / www.nseindia.com 11
 Chart 4: Perception on environment & Society automobile companies like Bajaj Auto Ltd. and Mahindra
& Mahindra Ltd. are not favourably perceived on the
3.8
environmental aspect possibly on account of the need
for better product development and improvisation.
3.6
Similarly, ITC Ltd. gets a brunt primarily by virtue of its
3.4 product being in tobacco industry. This is strongly reflected
3.2 in the environment and societal parameters.
Conclusion
3 enhancing transparency, preventing unfair trade practices
IC IC I
C OLGATE
INFOSYS
RANBAXY
HLL
W IPRO
TELC O
L&T
SATYAM
HDFC
As is blatantly obvious, the companies chosen for
the study are flagship companies of the groups they
represent or pioneers in the industry they belong to.
Governance practices varies across these corporates and
Chart 5: Perception on Management & Corporate Ethics industry sectors depending on the ownership and control
that exists across these corporates. While some of them
4
are characterised by widely dispersed ownership (outsider
3.8
systems), others tend to be characterised by concentrated
3.6 ownership or control (insider systems).
3.4
These companies have generally been complying with
3.2 the statutory requirements of corporate governance as
3 recommended by the SEBI appointed Kumar Mangalam
Birla report and the listing agreement, even before they
IC IC I
C OLGATE
IN FOSYS
P& G
H LL
L&T
RAN BAXY
W IPRO
TELC O
H DFC
were required to do so. In fact, many of these companies
have also set up audit committees and appointed
independent directors on the Board. Some of the
companies like Infosys, Wipro, Reliance, etc. have adapted
Overall Results
the GAAP accounting. Infosys has gone further ahead and
Based on the perception of the experts, the
set new standards in disclosure by preparing and publishing
companies are grouped in clusters based on their overall
their financial statements in substantial compliance with
scores. The first cluster comprises best five companies,
the GAAP requirements of several countries like Australia,
the second comprises next best five and the third
Canada, France, Germany, Japan and U.K. Most of these
comprises remaining eleven. On an overall analysis of the companies are already in compliance with respect to
perception, Infosys Technologies Limited, HDFC, transparency, disclosure and openness in accounting
Hindustan Lever, Wipro and ICICI form the top cluster. practices. Some of these companies have been publishing
These companies strongly reflect professional their quarterly results much before it was made mandatory
management and good corporate practices. These have and companies like Infosys have even been circulating these
laid the grounds for creation and distribution of wealth results to their shareholders.
at all levels. Most of these companies are ploughing back
Regarding performance of these companies across
their income to strengthen and build themselves up in the
the parameters defined for the study, while there has been
global scenario. Larsen & Toubro, Ranbaxy Labs Ltd., significant variation, interestingly the financial performance
Satyam Computers, Proctor & Gamble Ltd., and Colgate
of these companies are reflected in the perception of the
Palmolive Ltd., which form the next cluster, exhibit a society across the various parameters. The study shows
healthy and sustained growth and development. These
that business ethics and stakeholder relations can have an
companies have been rated well on the management &
impact on the reputation and long term success of a
corporate ethics parameter. However, being in the core
company. It can be concluded that the companies faring
consumer products industry, these companies have
financially better are probably doing so on account of
received a slightly lower rating on customers, shareholders good practices adopted by them in the course of achieving
and societal parameters as compared to the top cluster their business objectives. Good corporate governance
companies. The other companies, which form the next seeks to achieve a balance between business and ethics i.e.
cluster are Reliance Industries, Dabur, Bajaj Auto, Telco, the process of achieving the business goals has to be ethical
ITC, Mahindra & Mahindra, Grasim Industries, BSES, and fair on all fronts.
Zee Telefilms, State Bank of India and MTNL. The ooo
September 2001 Web site : http : / / www.nseindia.com
Reforms in the Corporate Securities Market in India
Reforms in the 1990s
With the objectives of improving market efficiency,
and bringing the Indian market up to international
standards, a package of reforms consisting of measures
to liberalise, regulate and develop the securities market
was introduced. The practice of allocation of resources
among different competing entities as well as its terms
by a central authority was discontinued. The secondary
market overcame the geographical barriers by moving
to screen based trading. Trades enjoyed counter-party
guarantee. Physical security certificates almost
disappeared. The settlement period shortened to one
week and is approaching to one day. The following
paragraphs discuss the principal reform measures
undertaken since 1992.
SEBI Act, 1992: It created a regulator (SEBI),
empowered it adequately and assigned it with the
responsibility for (a) protecting the interests of investors
in securities, (b) promoting the development of the
securities market, and (c) regulating the securities market.
Its regulatory jurisdiction extends over corporates in the
issuance of capital and transfer of securities, in addition
to all intermediaries and persons associated with
securities market. All market intermediaries are registered
and regulated by SEBI. They are also required to appoint
a compliance officer who is responsible for monitoring
compliance with securities laws and for redressal of
investor grievances. The courts have upheld the powers
of SEBI to impose monetary penalties and to levy fees
from market intermediaries.
Enactment of SEBI Act is the first attempt towards
integrated regulation of the securities market. SEBI was
given full authority and jurisdiction over the securities
market under the Act, and was given concurrent/
delegated powers for various provisions under the
Companies Act and the Securities Contracts Regulation
Act, 1956 [SC(R)A]. Many provisions in the Companies
Act having a bearing on securities market are
administered by SEBI. The Depositories Act, 1996 is
* Economic Adviser, NSE. The views expressed and the approach suggested in this paper are of the author and not necessarily of his employer.
12 September 2001
M. S. Sahoo*
also administered by SEBI. A high level committee on
capital markets has been set up to ensure co-ordination
among the regulatory agencies in capital markets.
DIP Guidelines: Major part of the liberalisation process
was the repeal of the Capital Issues (Control) Act, 1947
in May 1992. With this, Government’s control over issue
of capital, pricing of the issues, fixing of premia and
rates of interest on debentures etc. ceased and the market
was allowed to allocate resources to competing uses. In
the interest of investors, SEBI issued Disclosure and
Investor Protection (DIP) guidelines. The guidelines
contain a substantial body of requirements for issuers/
intermediaries, the broad intention being to ensure that
all concerned observe high standards of integrity and
fair dealing, comply with all the requirements with due
skill, diligence and care, and disclose the truth, whole
truth and nothing but truth. The guidelines aim to secure
fuller disclosure of relevant information about the issuer
and the nature of the securities to be issued so that
investors can take informed decisions. For example,
issuers are required to disclose any material ‘risk factors’
and give justification for pricing in their prospectus. The
guidelines cast a responsibility on the lead managers to
issue a due diligence certificate, stating that they have
examined the prospectus, they find it in order and that it
brings out all the facts and does not contain anything
wrong or misleading. Issuers are now required to comply
with the guidelines and then access the market. The
companies can access the market only if they fulfil
minimum eligibility norms such as track record of
distributable profits and net worth. In case they do not
do so, they can access the market only through book
building with minimum offer of 60% to qualified
institutional buyers. The norms for continued disclosure
by listed companies also improved availability of
information. The information technology helped in easy
dissemination of information about listed companies
and market intermediaries. Equity research and analysis
and credit rating improved the quality of information
about issues.
Screen Based Trading: The trading on stock exchanges
Web site : http : / / www.nseindia.com 13
in India used to take place through open outcry without
use of information technology for immediate matching
or recording of trades. This was time consuming and
inefficient. This imposed limits on trading volumes and
efficiency. In order to provide efficiency, liquidity and
transparency, NSE introduced a nation-wide on-line
fully-automated screen based trading system (SBTS)
where a member can punch into the computer quantities
of securities and the prices at which he likes to transact
and the transaction is executed as soon as it finds a
matching sale or buy order from a counter party. SBTS
electronically matches orders on a strict price/time
priority and hence cuts down on time, cost and risk of
error, as well as on fraud resulting in improved
operational efficiency. It allows faster incorporation of
price sensitive information into prevailing prices, thus
increasing the informational efficiency of markets. It
enables market participants to see the full market on
real-time, making the market transparent. It allows a large
number of participants, irrespective of their geographical
locations, to trade with one another simultaneously,
improving the depth and liquidity of the market. It
provides full anonymity by accepting orders, big or small,
from members without revealing their identity, thus
providing equal access to everybody. It also provides a
perfect audit trail, which helps to resolve disputes by
logging in the trade execution process in entirety. This
sucked liquidity from other exchanges and in the very
first year of its operation, NSE became the leading stock
exchange in the country, impacting the fortunes of other
exchanges and forcing them to adopt SBTS also.
Technology was used to carry the trading platform
to the premises of brokers. NSE carried the trading
platform further to the PCs in the residences of investors
through the Internet and to hand-held devices through
Wireless Application Protocol (WAP) for convenience
of mobile investors. This made a huge difference in terms
of equal access to investors in a geographically vast
country like India.
Trading Cycle: The trades accumulated over a trading
cycle and at the end of the cycle, these were clubbed
together, and positions were netted out and payment of
cash and delivery of securities settled the balance. This
trading cycle varied from 14 days for specified securities
to 30 days for others and settlement took another
fortnight. Often this cycle was not adhered to. Many
things could happen between entering into a trade and
its performance providing incentives for either of the
parties to go back on its promise. This had on several
occasions led to defaults and risks in settlement. In order
September 2001
to reduce large open positions, the trading cycle was
reduced over a period of time to a week. The exchanges,
however, continued to have different weekly trading
cycles, which enabled shifting of positions from one
exchange to another. It has now been made mandatory
for all exchanges to follow a uniform weekly trading cycle.
In respect of about 400 major securities, which are traded
and settled under rolling settlement, the trading cycle
has been reduced to a day and transactions in these
securities are settled after 5 days from the trade date
w.e.f. July 2001. The balance securities are traded and
settled under uniform weekly settlement cycle. These
would also be traded under rolling settlement from
January 2001. The market also had a variety of deferral
products like modified carry forward system, which
encouraged leveraged trading by enabling postponement
of settlement. The deferral products have been banned.
The market has moved close to spot/cash market.
Derivatives Trading: To assist market participants to
manage risks better through hedging, speculation and
arbitrage, SC(R)A was amended in 1995 to lift the ban
on options in securities. However, trading in derivatives
did not take off, as there was no suitable legal and
regulatory framework to govern these trades. Besides, it
needed a lot of preparatory work- the underlying cash
markets strengthened with the assistance of the
automation of trading and of the settlement system; the
exchanges developed adequate infrastructure and the
information systems required to implement trading
discipline in derivative instruments. The SC(R)A was
amended further in December 1999 to expand the
definition of securities to include derivatives so that the
whole regulatory framework governing trading of
securities could apply to trading of derivatives also. A
three-decade old ban on forward trading, which had lost
its relevance and was hindering introduction of
derivatives trading, was withdrawn. Derivative trading
took off in June 2000 on two exchanges. The market
presently offers index futures, index options and stock
options and would soon offer stock futures.
Demutualisation: Historically, brokers owned,
controlled and managed stock exchanges. In case of
disputes, the self often got precedence over regulations
leading inevitably to conflict of interest. The regulators,
therefore, focussed on reducing dominance of members
in the management of stock exchanges and advised them
to reconstitute their governing councils to provide for
at least 50% non-broker representation. This did not
materially alter the situation. In face of extreme volatility
in the securities market, Government proposed in March
Web site : http : / / www.nseindia.com
2001 to corporatise the stock exchanges by which
ownership, management and trading membership would
be segregated from one another. A few exchanges have
already initiated demutualisation process.
NSE, however, adopted a pure demutualised
governance structure where ownership, management and
trading are with three different sets of people. This
completely eliminated any conflict of interest and helped
NSE to aggressively pursue policies and practices within
a public interest (market efficiency and investor interest)
framework.
Depositories Act: Settlement system on Indian stock
exchanges gave rise to settlement risk due to the time
that elapsed before trades are settled. Trades were settled
by physical movement of paper. This had two aspects.
First, the settlement of trade in stock exchanges by
delivery of shares by the seller and payment by the
purchaser. The stock exchange aggregated trades over a
period of time to carry out net settlement through the
physical delivery of securities. The process of physically
moving the securities from the seller to the ultimate buyer
through the seller’s broker and buyer’s broker took time
with the risk of delay somewhere along the chain. The
second aspect related to transfer of shares in favour of
the purchaser by the company. The system of transfer
of ownership was grossly inefficient as every transfer
involved physical movement of paper securities to the
issuer for registration, with the change of ownership
being evidenced by an endorsement on the security
certificate. In many cases the process of transfer took
much longer, and a significant proportion of transactions
ended up as bad delivery due to faulty compliance of
paper work. Theft, forgery, mutilation of certificates and
other irregularities were rampant, and in addition the
issuer had the right to refuse the transfer of a security.
All this added to costs, and delays in settlement, restricted
liquidity and made investor grievance redressal time
consuming and at times intractable.
To obviate these problems, the Depositories Act,
1996 was passed to provide for the establishment of
depositories in securities with the objective of ensuring
free transferability of securities with speed, accuracy and
security by (a) making securities of public limited
companies freely transferable subject to certain exceptions;
(b) dematerialising the securities in the depository mode;
and (c) providing for maintenance of ownership records
in a book entry form. In order to streamline both the
stages of settlement process, the Act envisages transfer
of ownership of securities electronically by book entry
14 September 2001
without making the securities move from person to person.
In order to promote dematerialisation, the regulator
mandated trading and settlement in demat form in an ever-
increasing number of securities in a phased manner. The
stamp duty on transfer of demat securities was waived.
Two depositories, viz. NSDL and CDSL, have come up
to provide instantaneous electronic transfer of securities.
At the end of June 2001, 39,948 million securities worth
Rs. 3,265 billion have been dematerialised with NSDL.
The market capitalisation of the companies that have
joined NSDL has reached Rs. 5,398 billion at the end of
June 2001. 202 depository participants are rendering
depository services at 2,639 locations all over the country
serving 4 million investors who have opened beneficial
accounts with NSDL. The securities of 3,154 companies
are available for demat trading. Demat settlement accounts
for over 99% of turnover settled by delivery. This has
almost eliminated the bad deliveries and associated
problems.
To prevent physical certificates from sneaking into
circulation, it has been mandatory for all new IPOs to
be compulsorily traded in dematerialised form. The
admission to a depository for dematerialisation of
securities has been made a prerequisite for making a
public or rights issue or an offer for sale. It has also
been made compulsory for public listed companies
making IPO of any security for Rs. 10 crore or more to
do the same only in dematerialised form.
Risk Management: Market integrity is the essence of
any financial market. To pre-empt market failures and
protect investors, the regulator/exchanges have
developed a comprehensive risk management system,
which is constantly monitored and upgraded. It
encompasses capital adequacy of members, adequate
margin requirements, limits on exposure and turnover,
indemnity insurance, on-line position monitoring and
automatic disablement, etc. They also administer an
efficient market surveillance system to curb excessive
volatility, detect and prevent price manipulations.
Exchanges have set up trade/settlement guarantee funds
for meeting shortages arising out of non-fulfillment/
partial fulfillment of funds obligations by the members
in a settlement.
The fact that an anonymous electronic order book
ushered in by the NSE does not allow members to assess
credit risk of the counter-party necessitated some
innovation in this area. To effectively address this issue,
NSE introduced the concept of a novation, and set up
the first clearing corporation, viz. National Securities
Web site : http : / / www.nseindia.com 15
Clearing Corporation Ltd. (NSCCL), which commenced
operations in April 1996. The NSCCL assures the
counterparty risk of each member and guarantees
financial settlement. Counterparty risk is guaranteed
through a fine tuned risk management system and an
innovative method of on-line position monitoring and
automatic disablement. A large Settlement Guarantee
Fund, which stood at Rs. 2,916 crore at NSCCL as on31st
March 2001, provides the cushion for any residual risk.
The market has now full confidence that settlements
will take place in time and will be completed irrespective
of default by isolated trading members. In fact such
confidence is driving volumes on exchanges.
Traditionally, brokerage firms in India have been
proprietary or partnership concerns with unlimited
liabilities. This restricted the amount of capital that such
firms can raise. The growing volume of transactions
made it imperative for such firms to be well capitalised
and professional. The necessary legal changes were
effected to open up the membership of stock exchanges
to corporates with limited liability, so that brokerage firms
may be able to raise capital and retain earnings. In order
to boost the process of corporatisation, capital gains
tax payable on the difference between the cost of the
individual’s initial acquisition of membership and the
market value of that membership on the date of transfer
to the corporate entity was waived. In response, many
brokerage firms reorganised themselves into corporate
entities. At the end of March 2001, 3,808 brokers out
of 9,782 were corporate bodies.
Investor Protection: The SEBI Act establishes SEBI with
the primary objective of protecting the interests of
investors in securities and empowers it to achieve this
objective. SEBI specifies the matters to be disclosed and
the standards of disclosure required for the protection
of investors in respect of issues and issues directions to
all intermediaries and other persons associated with the
securities market in the interest of investors or of orderly
development of the securities market.
DEA, DCA, SEBI and exchanges have set up
investor grievance cells for redressal of investor
grievance. The exchanges maintain investor protection
funds to take care of investor claims, which may arise
out of non-settlement of obligations by a trading
member for trades executed on the exchange. DCA has
also set up an investor education and protection fund
for the promotion of investors’ awareness and protection
of interest of investors. All these agencies and investor
associations are organising investor education and
September 2001
awareness programmes. Government is considering the
report of N. L. Mitra committee, which has, among
others, recommended that there should be a specific Act
for protecting investors’ interest.
Globalisation: Indian securities market is getting
increasingly integrated with the rest of the world. Indian
companies have been permitted to raise resources from
abroad through issue of ADRs, GDRs, FCCBs and
ECBs. ADRs/GDRs have two-way fungibility. Indian
companies are permitted to list their securities on foreign
stock exchanges by sponsoring ADR/GDR issues
against block shareholding. NRIs and OCBS are allowed
to invest in Indian companies. FIIs have been permitted
to invest in all types of securities, including government
securities. The investments by FIIs enjoy full capital
account convertibility. They can invest in a company
under portfolio investment route upto 24% of the paid
up capital of the company. This can be increased to 49%
with the approval of the shareholders. Indian Stock
Exchanges have been permitted to set up trading
terminals abroad. The trading platform of Indian
exchanges is now accessed through the Internet from
anywhere in the world. Mutual Funds have been
permitted to set up off-shore funds to invest in equities
of other countries. They can also invest in ADRs/GDRs
of Indian companies.
Research in Securities Market: In order to deepen
the understanding and knowledge about Indian capital
market, and to assist in policy-making, SEBI has been
promoting high quality research in capital market. It has
set up an in-house research department, which brings
out working papers on a regular basis. In collaboration
with NCAER, SEBI brought out a ‘Survey of Indian
Investors’, which estimates investor population in India
and their investment preferences. SEBI has also tied up
with reputed national and international academic and
research institutions for conducting research studies/
projects on various issues related to the capital market.
In order to improve market efficiency further and to set
international benchmarks in the securities industry, NSE
administers a scheme called the NSE Research Initiative
with a view to develop an information base and a better
insight into the working of securities market in India.
The objective of this initiative is to foster research, which
can support and facilitate (a) stock exchanges to better
design market micro-structure, (b) participants to frame
their strategies in the market place, (c) regulators to frame
regulations, (d) policy makers to formulate policies, and
(e) expand the horizon of knowledge. The Initiative has
received tremendous response.
Web site : http : / / www.nseindia.com
Testing and Certification: The intermediaries, of all
shapes and sizes, who package and sell securities, compete
with one another for the chance to handle investors/
issuers’ money. The quality of their services determines
the shape and health of the securities market. In
developed markets and in some of the developing
markets, this is ensured through a system of testing and
certification of persons joining market intermediaries
in the securities market.
A testing and certification mechanism that has
become extremely popular and is sought after by the
candidates as well as employers is an unique on-line
testing and certification programme called National Stock
Exchange’s Certification in Financial Markets (NCFM).
It is an on-line fully automated nation-wide testing and
certification system where the entire process from
generation of question paper, invigilation, testing,
assessing, scores reporting and certifying is fully
automated - there is absolutely no scope for human
intervention. It allows tremendous flexibility in terms
of testing centres, dates and timing and provides easy
accessibility and convenience to candidates as he can be
tested at any time and from any location. It tests practical
knowledge and skills, that are required to operate in
financial markets, in a very secure and unbiased manner,
and certifies personnel who have a proper understanding
of the market and business and skills to service different
constituents of the market. It offers eight securities
market related modules. About 15, 000 personnel have
been certified in these modules.
Further Reforms
The above reforms have come in stages. As some
deficiency is noted or some malpractice surfaces in the
working of the market, the authorities initiate further
reforms and corrective steps. Most of the reforms have
gained wide acceptance among market participants and
yielded desirable results. A few of them like clearing
corporation, demutualised exchange governance need to
permeate the whole of the market. A few more fresh
initiatives are called for to provide a more peaceful life
to investors, broaden the choice for market participants,
and further improve efficiency and transparency of the
market place. Some of these have been discussed in the
following paragraphs.
Exchange Related
Exchange Governance: Reforms focussed on reducing
dominance of trading members in the management of
stock exchanges by prescribing composition of
16 September 2001
governing council and strengthening the position of
executive director. Such attempts made for decades to
improve the working of the exchanges while retaining
the basic structure has not yielded any appreciable result.
The broker-managed exchanges continue to witness
different types of malaise from time to time. The post-
mortem of these has generally revealed complicity of
elected directors. It has now been realised that there is
no alternative to demutualisation. A complete overhaul
– not just corporatisation, but also demutualisation - of
the exchanges has been announced. This needs to
operationalised soon.
Regional Exchanges: There was a time when we needed
a large number of exchanges spread across the length
and breadth of the country. In the changed on-line
environment, while one large exchange could possibly
be adequate to meet the demand for securities
transactions in India, at least two or three would be
essential to ensure competition. Clearly there is not
enough space for 24 of them. Other could explore
mergers, alliances or other niche markets, which they
can profitably serve. They could also consider providing
non-exchange intermediation services.
Business Continuity Plan: NSE has established a
disaster back-up site at Pune alongwith its entire
infrastructure including the satellite earth station and the
high speed optical fibre link with its main site at Mumbai.
The site at Pune is a mirror replica of the complete
production environment at Mumbai. The transaction
data is backed up on near real time basis from the main
site to the disaster back-up site through the 2 mbps high-
speed link to keep both the sites all the time synchronised
with each other. Such business continuity plans need to
be replicated by all stock exchanges and depositories to
provide uninterrupted service to investors.
Central Listing Agency: A security not found suitable
for listing on an exchange gets listed on a different
exchange, as they follow different criteria for listing
securities. This creates an anomalous situation that a
security, which is not found suitable for investors in one
locality, is suitable for investors in another locality. It is,
therefore, desirable that there is only one central agency,
which considers all requests for listing and grants listing
if it finds a security suitable for investors across the
country. A security granted listing by the agency is
available for trading on all exchanges that do not waste
resources in terms of duplication of efforts on listing
and monitoring compliance. The security is monitored,
and suspended and withdrawn from trading centrally by
Web site : http : / / www.nseindia.com 17
the listing agency. The investors and market participants
get all the company related information, which are
mandatorily required to be filed by companies with stock
exchanges or any other agency, at one central location
preferably a web-site. This is all the more necessary as
the exchanges get demutualised and in turn seek listing
on exchanges.
Trading Related
Derivatives Trading: The derivatives trading in India
has so far been introduced in a fairly limited range of
products. Index futures and options are available only
on two indices. Stock options have been introduced on
a few securities. In order to provide wider option to
market participants, new derivative products, such as
stock futures, index futures/options on other popular
indices, derivatives on exchange rate, interest rate or gold
as the underlying could be introduced.
In the absence of a specific provision regarding
taxability of income from derivatives, since derivative
contracts are essentially cash settled, it is possible that
these may be termed as speculative transactions and if
so, any loss arising out of these trades will not be eligible
for set off against any other income. Since derivatives
are essentially hedging instruments used by the investors
to hedge against the potential loss, these must not be
considered speculative transactions. These must,
however, be taxed as normal business income.
Accounting issues relating to all types of derivatives
need to be finalised. All types of market participants
like mutual funds, FIIs should be permitted to trade in
all types of derivatives. All securities should be traded in
the cash segment only under rolling settlement.
Trading of MF Units: The market for units of MFs
has not developed appreciably. The easiest way to develop
the market for units of MFs is to consider them to be
securities explicitly under the SC(R)A so that the
regulatory framework applicable to trading of securities
would also apply to trading of units of MFs and SEBI
which has mandate to protect the interest of investors
in securities, can protect the interest of holders of units
of MFs.
Margin Trading: Margin trading is purchasing securities
by borrowing a portion of the transaction value and using
the securities in the portfolio as collateral. It is a form
leveraged trading in the sense that backed by the
collateral, one can buy assets, which are far greater in
value than the value of the collateral. It thus leads to an
increase in the purchasing/selling power of the
September 2001
participants and hence enables them to magnify their
gains if the stock market moves on expected lines. In
the absence of any leveraged trading, like MCFS and
ALBM/BLESS, margin trading can address the liquidity
concerns in the market.
Settlement Related
Clearing Corporation:: The anonymous order book
does not allow participants to assess the counter party
risk. It is, therefore, necessary that the exchanges use a
clearing corporation to provide novation and settlement
guarantee. NSCCL provides such novation for all trades
executed on NSE. Similar facility should be provided
for trades on other exchanges. It is not necessary that
each stock exchange must have its own exclusive clearing
corporation. It may be better if the stock exchanges use
the services of a clearing corporation or a few clearing
corporations, as they share the depository services. Such
an arrangement allows the clearing corporation to have
an overall view of gross exposure position of traders
across the stock exchanges and is much better geared to
manage the risk. However, to provide for necessary
competition, it is essential that there are at least two
clearing corporations, just as this has been ensured in
the case of depositories.
The clearing corporation ensures financial
settlement of trades on the appointed day and time
irrespective of default by members to bring in the
required funds and/or securities, with the help of a
‘Settlement Guarantee Fund’. This has revolutionised
the volumes in the secondary market. It is important to
keep improving the value of the Settlement Guarantee
Fund by adding back all the accruals to the fund, subject
to administrative expenses, to retain and build up the
faith that the retail and foreign investment have reposed
in the settlement mechanism. For this purpose, it is
necessary to exempt the income of the Clearing
Corporation from the purview of income tax.
As the clearing corporation guarantees financial
settlement, it is necessary that it has first lien over the
assets of insolvent clearing members.
It is meaningful for a clearing corporation to net
all liabilities falling due on any given day for all types of
settlement. As long as the clearing corporation is a
centralised legal counter-party, risk management would
dictate that it nets all obligations vis-à-vis each counter-
party to itself.
Continuous Net Settlement (CNS): A migration from
account period settlement to rolling settlement is
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inevitable, as was from floor trading to electronic screen
trading. SEBI has mandated rolling settlement for about
400 major scrips from July 2001 and for all scrips from
January 2001.
In the rolling settlement environment where the
obligations are to be performed in a shorter period, there
is greater likelihood of non-performance/ inadequate
performance in terms of delivery on the appointed day
and time. CNS offers a facility to a member having a
deliverable obligation and going short in delivery of
securities on the pre-determined day and time, to make
an alternate arrangement of obtaining delivery of
securities so as to meet the obligation on the succeeding
settlement. Alternatively, a member may take a counter
position on the succeeding trading day to create a
receivable obligation in the succeeding settlement. This
ensures that the unsettled obligation is added or merged
with the settlement obligations of the succeeding day
where on account of multilateral netting, there will be
benefit of offsetting of deliverable obligations and
thereby no settlement obligation on the succeeding day.
Funds Clearing: Settlement of trades requires smooth,
preferably instantaneous, movement of securities and
funds in accordance with the prescribed schedule of pay-
in and pay-out. The securities can now move
instantaneously since all the participants have accounts
with either of the two depositories, which are connected
to each other and are connected to the Exchanges. The
movement of funds is not so instantaneous as only a
few banks empanelled as clearing banks have the facility
to transfer funds electronically. As participants have
accounts in different banks at different places, movement
of funds among participants invariably requires clearance
through RBI’s payment system. Further, the funds
coming in and the funds going out of a clearing bank
for settlement purposes rarely match requiring
movement of funds from one clearing bank to another
by using the RBI clearing system. This constrains same
day pay-in and pay-out. The funds do not reach the
accounts of investors on the pay-out day from the
accounts of the trading members. This can be facilitated
if the clearing corporation directly participates in the
RBI’s clearing.
A radical, but enduring solution would be to provide
for movement of funds related to securities transactions
directly between clearing banks without recourse to RBI
subject to prudential checks and balances. As inter-
depository transfer of securities does not need to be
cleared by any regulator/central depository/any other
18 September 2001
third entity, inter-bank transfer of funds related to
securities transactions need not also be cleared through
RBI. The movement of funds and securities would be
synchronised if funds move among the clearing banks
as securities move among the depositories.
Straight Through Processing (STP): It is necessary to
introduce STP to eliminate settlement risks. Under this
system, the selling client’s DP account is checked as soon
as broker gets sale order through the Internet for
securities balances and, similarly, buying client’s bank
account is checked for cash balances. Only if this check
confirms availability of adequate balances of either stock
or cash, the order is routed by the broker’s trading
terminal for trade execution.
Cross Margining: The optimum utilisation of resource
dictates that a member/client is allowed to take an
aggregate position across products / market segments
/ exchanges. The clearing corporation should allow a
member/client to take positions in different products/
markets/exchanges as long as he does not exceed the
permitted aggregate exposure. It should also compute
and levy a single net margin amount after netting
positions of a member/client in different products/
segments/exchanges.
VaR based Margin: A 99% VaR based margin system
is followed for trades in rolling settlement. Margins for
each trading member is arrived at by summing up scrip-
wise margins based on scrip-wise VaRs multiplied by
their positions in each stock. This approach treats the
risk of a portfolio as equal to the sum of risks of each
scrip in the portfolio. This ignores the fact a portfolio is
a diverse set of correlated positions and the risk of well-
diversified portfolios is expected to be less than that of
the sum of the risks of individual parts. Therefore the
current approach levies a higher margin which adversely
affects the market activity.
Regulatory Issues
Regulatory Jurisdiction: There are several statutes
regulating different aspects of the securities market.
These cause a lot of confusion not only in the minds of
investors, but also among the various agencies who
administer these legislations. The greater the number of
laws, the greater is the scope for inconsistency among
them and greater is the possibility for regulatory overlaps
and gaps.
There are also as many regulators as the number
of laws. As a result the responsibility for supervision
and development of the securities market is fragmented
Web site : http : / / www.nseindia.com 19
among different agencies. As the roles of various agencies
overlap, there is scope for duplicate and inconsistent
regulations.
The interest of investors requires a consolidation
of all laws relating to securities market into a single piece
of legislation, preferably called the Securities Act and
assigning its administration to one agency. And it should
prevail over general laws like the Companies Act, the
UTI Act, the Consumer Protection Act, the Contracts
Act, etc and the agency responsible for its administration
works in close coordination with regulators for other
areas of financial market.
The securities market has the potential to destabilise
other sectors of the economy. It is therefore necessary
that the penalty for offences in the securities market is
deterrent. The first step in this regard is to make all the
offences in the securities market cognisable, as a few
offences under the SC(R)A are. It is desirable that all
offences under the securities laws are tried by an
adjudicating officer who should award any type of
punishment, while the regulator concentrates on
developmental and regulatory work. In addition to
rationalising the rates of penalty, these needs to be
increased substantially.
Private Placement: The convenience of structuring
of the issues to match the needs of issuers with those
of investors coupled with savings in terms of time and
cost has contributed to rapid growth of market for
private placement. The issues by private placement do
not require prospectus, disclosures, or a rating. This route
accounted for 91.3% of resources mobilised domestically
by corporate sector during 2000-01. This development
reflects regulatory arbitrage. If this route is to continue
as a major source of resources, this requires to be
subjected to regulatory discipline.
Asset Based Securitisation: The market for
securitisation has not appreciably developed in India
because of lack of legal clarity and conducive regulatory
environment. A RBI Working Group has identified
various impediments, viz., lack of investor base, capital
market infrastructure, regulatory framework, legal
provisions, accounting and taxation issues and
standardisation and recommended a number of
measures for securitisation to take off in the country.
The recommendations include rationalisation/reduction
of stamp duties, inclusion of securitised instruments in
the definition of “securities” under the SC(R)A, removal
of prohibition on investment in mortgage backed
securities by mutual fund schemes, tax neutrality of SPV,
September 2001
etc. These recommendations need to be quickly
translated into policy and regulations.
Quality Intermediation: The confidence of the
investors can be maintained and enhanced by making
provision for professional intermediation services
through a system of certification. Industry/SROs/
Regulators have made a modest beginning, but not
adequate given the dimensions of the market. SEBI
regulations, which lay down various requirements for
registration as an intermediary, should specify
certification as a mandatory requirement for persons
joining market intermediaries. While this requirement
should apply at the entry point for all new employees
joining the intermediaries and all intermediaries joining
the market, regulation may allow a breathing time for
the existing intermediaries and employees to qualify the
certification. These people should also be required to
update their skills and expertise by seeking certification
at intervals of five years. There should be an arrangement
to maintain a database of certified professionals and
enforce a code of conduct for them so as to enable the
prospective employers access the database to meet their
personnel requirements.
Corporate Governance: Listing agreement is being
used as the only means available for bringing about
discipline in corporate sector, particularly when non-
compliance with listing agreement can at best invite a
penalty up to Rs. 1, 000. Trading of securities can be
suspended or withdrawn, but this becomes a penalty on
the investor. If the corporate governance norms are to
be implemented in all seriousness, the coercive
mechanism needs to be strengthened.
Market Misconduct: Despite vast improvements in
market design and consequently the operational
efficiency, the market is still plagued by high volatility
and price manipulations. The 1990s witnessed a series
of episodes which included Harshad (1992), M.S.Shoes
(1991), Sesa Goa (1995), Rupangi Impex and Magan
Industries Limited (1995), CRB (1997), BPL& Videocon
(1998), Ketan (2001). Of the 68 cases taken up by SEBI
for investigation during 2000-01, 47 related to price
manipulation and price rigging. The regulators and SROs
need to strengthen their capability to detect unfair trade
practices, investigate them expeditiously and award
exemplary punishment to the miscreants. They need to
have right quality and quantity of people to enforce
securities laws.
Investor Protection: An investor normally deals with
securities through an intermediary, whose acts of
Web site : http : / / www.nseindia.com
omission and commission can cause loss to him. In order
for the investor to choose the right intermediary through
whom he may transact business, it may be useful to help
him in taking informed decision by making details of
intermediaries available to him. One way to do so would
be to display details of SEBI-registered intermediaries
on a web-site. The details may include the form of
organisation, management, capital adequacy, liabilities,
defaults and penal actions taken by regulator and self-
regulatory organisations against the intermediary in the
past. Similarly, issuer related information should also be
(Contd. From Page 9)
The Lebeds on the Other Side
Another issue coming to the fore is enforcing
contractual obligations. In the physical world, a contract
is concluded through paper documents. But how does
one conclude contracts in the Internet environment? If
one looks at the developments in the USA, some clarity
emerges in this regard3 . It has been accepted that by
clicking on the I agree icon a contract (called a clickwrap
contract) comes into existence and can be legally
enforced. But even here, the applicable law in cases of
dispute, could become a matter of contention, unless
addressed up front.
With the Internet being an open medium, privacy
and security issues are also areas of concern. The online
behaviour and investing habits and strategies of investors
can be tracked, analysed, exploited in a lax environment
and used to perpetuate frauds.
Whether a separate law is necessary to govern
transactions in cyberspace is a moot point today. The
present legal system and laws were established in the
national context and never contemplated cross border
transactions of this variety. On line fraudsters seek to
take shelter under the inadequacy of the existing law.
Quite often, it is inevitable to redefine and reinterpret
existing laws. In a classic case in the USA, the defence
taken by the accused was that by rendering investment
advice over the Internet, one did not become an investment
adviser within the meaning of the Investment Advisers
Act. Fortunately, the Court dismissed this line of
argument4 .
3
Hotmail Corporation v. Van Money Pie Inc. (1998).
4
SEC v. Park a/k/a Tokyo Joe, 2000.
20 September 2001
available at one central web site. They should be under
obligation to file all the information electronically. They
may also be rated in terms of corporate governance and
such rating is displayed in the web site.
The law may provide a special mechanism, like
consumer forum, to dispose of all investor grievances
summarily. There may also be a mechanism to
compensate investors upto say Rs.10,00,000 from a
central investor protection fund as the depositors in the
banks are protected by DIGC.
ooo
While the legal challenges are still being grappled
with, apprehending on line violators calls for skills
hitherto unknown. Investigation agents and prosecutors
must be technically savvy and react very quickly in
tracking down Internet criminal perpetrators. For
instance in the Pairgain case, investigators verified IP
addresses, message board postings and other digital trails
to establish the identity of the fraudster. Logs of IP
addresses are maintained only for a limited period and
any delay would render investigation well nigh impossible.
Unlike traditional fraud cases that can be investigated
for many months or even years, crimes committed on
the Internet must be tracked promptly or the digital trail
will run cold.
It also underlines the need for greater international
co-operation in understanding the challenge posed by
the Internet and forging a regulatory regime that would
exploit the potential of this medium for the benefit of
the investor, while offering adequate protection to the
investor.
While regulators and lawmakers are yet to come to
grips with the problem, the likes of Jonathan Lebed,
agile and more at ease with technology, on the other
side of the law should not outsmart them and have the
last laugh!
ooo
Web site : http : / / www.nseindia.com 21
GOVERNMENT NEWS
Powers of SEBI
On 11.12.2000 the Appellants made a public
announcement for acquiring 20% of the equity share
capital of Castrol (India) Ltd. The Respondent by its
letter dated 16.2.2001 directed the appellants to revise
the minimum offer price. By its letter dated 23.7.2001 it
further directed the merchant banker of the Appellants
to proceed with the offer formalities within 15 days from
the date of receipt of the letter and to pay interest
@ 15% per annum on the open offer price for the period
from 14.3.2000 till the actual date of payment of
consideration to the share holders under the public offer.
On being aggrieved by the letter dated 23.7.2001, the
Appellants preferred an appeal before the Securities
Appellate Tribunal (SAT) on the grounds, among others,
that there are no provisions in the SEBI Act or in the
Regulations empowering the Respondent to issue such
a direction. The contention that the Respondent is
empowered to levy interest under section 11(1) of the
SEBI Act is untenable, as the said section contains a
general provision, which cannot justify levy of interest
particularly in the nature of penalty.
The SAT, while modifying the Respondent’s letter as
regards the date from which interest is payable, relied
on the judgement of Hon’ble Gujarat High Court in
SEBI vs. Alka Synthetics and held that SEBI is legally
entitled to issue directions to the concerned persons to
pay interest to the shareholders to whom payment of
consideration against the shares acquired was delayed.
Source: Appeal No. 37/2001 in the matter of B. P. Plc and
others Vs. SEBI.
RBI NEWS
I. FII Investments
Under the FEMA (Transfer on Issue of Security by a
Person Resident outside India) 2000, the total holdings
of all FIIs put together shall not exceed 24% of the
paid-up capital. These regulations were amended to
provide that the limit of 24% can be increased up to the
sectoral cap/statutory ceiling, as applicable, provided this
has the approval of the Indian company’s board of
directors and also its general body.
Source: RBI Notification No. FEMA 45/2001-RB Dated
September 20, 2001.
September 2001
II. Bank Financing for Margin Trading
The RBI-SEBI Technical Committee examined the
issues involved in introducing margin trading and
recommended that it should be permitted by banks in
India. Based on this recommendations, on an
experimental basis, RBI decided to permit banks to
extend finance to stockbrokers for margin trading within
the ceiling of 5% prescribed for exposure of banks to
capital market. Banks can finance the brokers for margin
trading in actively traded scrips forming part of NSE
Nifty or BSE Sensex. The shares to be purchased with
margin should be in dematerialised mode, under pledge
to the lending bank. The banks must maintain a minimum
margin of 40% on funds lent for margin trading. They
must have systems for monitoring the margin. In case a
stockbroker fails to meet the margin calls, the lending
bank should liquidate the collateral/shares purchased
immediately and adjust the loan. They should also ensure
that no ‘nexus’ develops between interconnected stock
broking entities/stockbrokers and the bank in respect
of margin trading. The banks should also ensure end-
use of funds lent under margin trading.
Source: RBI Circular DBOD.BP.BC/27/21.04.137-2001
Dated September 22, 2001.
SEBI NEWS
I. Board Meeting
SEBI in its Board meeting held on September 4, 2001
took the following decisions:
(i) It discussed various legal, taxation and operational
issues related to corporatisation and demutualisation
of the stock exchanges. Since these issues need to
be looked into in detail, a meeting of the Board
would be convened shortly to take a final view on
the subject.
(ii) In order to rationalise the fee structure for option
contracts, it decided that the turnover fee on the
option contracts be calculated on the premium
traded and in the cases where the options are
exercised/settled, the turnover fee be calculated on
the notional value of the option contract.
(iii) It approved the introduction of a new class of
trading-cum-clearing member who would settle and
clear trades on his own behalf and on behalf of
his clients. The net worth requirement for this new
class of trading-cum-clearing member would be
Rs.1 crore without any other change in the risk
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containment measures as against the current net
worth requirement of Rs.3 crore for the clearing
member who clears his own trades as well as trades
of other trading members. This new class of
trading-cum-clearing member will however, not be
permitted to clear trades of any other trading
member.
(iv) It approved in principle the introduction of futures
on individual stock initially in 31 scrips in which
currently individual stock options have been
permitted. It, however, desired that the Advisory
Committee on Derivatives should devise details of
time frame, infrastructure and risk containment
measures. On receipt of the recommendations from
the Advisory Committee, the final approval would
be given.
Source: SEBI Press Release Ref. No. PR 151/2001 Dated
September 4, 2001.
II. Financial Market Reforms
US sponsored technical assistance would be focussed
on two initiatives involving SEBI. First, the USAID
funded Financial Institutions Reform and Expansion
(FIRE) programme would make efforts to make Indian
markets safer for investors. It would support the second
generation of reform in the Indian financial markets and
would basically focus on strengthening the oversight and
risk management capacity of the regulators and self-
regulatory organisations, advancing disclosure standards
and information dissemination, expanding investor
education and supporting insurance and pension
reforms. The second initiatives would involve a three-
year agreement with the US Securities and Exchange
Commission (SEC) to advise SEBI on strengthening
securities regulation and provide highly specialised
technical co-operation and training in specific areas of
regulation to SEBI.
Source: USAID Press Release Dated September 6, 2001.
III. Stock Futures
The Advisory Group on Derivatives set up SEBI met to
discuss the various modalities for the introduction of Stock
Futures in the Indian Securities Market. The committee
decided to first introduce cash settled stock futures
contracts, which would become delivery settled after three
to four months. It agreed to adopt the existing risk
management framework in the derivative market for stock
futures also. It proposed imposition of stricter position
limits at client/customer and trading member level.
22 September 2001
Source: SEBI Press Release Ref. No. 162/2001 Dated
September 17, 2001.
IV. AMFI Certification Programme
With a view to improving professional standards, SEBI
made it mandatory for all mutual funds to appoint
agents/distributors who have obtained AMFI
certification w.e.f November 1, 2001. The existing
agents/distributors are expected to pass the certification
programme by March 31, 2003. In case of firms/
companies, the requirement of certification may be made
applicable to the persons engaged in sales and marketing.
The existing and new employees of mutual funds,
particularly those who are involved in sales and
marketing, shall be encouraged to pass the certification
process by December 2002. Compliance of the above
requirements and progress made in their implementation
shall be reported to SEBI in the quarterly compliance
reports of AMCs and half yearly reports of the Trustees.
Source: SEBI Circular Ref. No. MFD/Cir No. 10/310/01
Dated September 25, 2001.
V. Accounting Treatment of Equity Index Futures
The Institute of Chartered Accountants of India issued
guidance note on accounting for index futures from the
viewpoint of the parties who enter into such futures
contracts as buyers or sellers. For other parties involved
like brokers, trading members, clearing members and
clearing corporations, a trade in equity index futures is
similar to a trade in, say shares, and does not pose any
peculiar accounting problems. Following are guidelines
for accounting transactions in the index futures in the
books of the client:
(i) A client is required to pay an initial margin
determined by the Clearing Corporation as per the
bye laws/regulations of the Exchange for entering
into the index futures contracts. Such initial margin
paid/payable should be debited to the “Initial
Margin-Equity Index Futures Account”. Any
additional margins should also be accounted for in
the same manner.
(ii) Payments made or received on account of daily
settlement by the client would be credited/debited
to the bank account and the corresponding debit
or credit for the same should be made to the Mark-
to-Market Margin-Equity Index Futures Account.
(iii) When a series of contract expires, the profit/loss
on final settlement of the contracts in the series is
Web site : http : / / www.nseindia.com 23
 calculated as the difference between final settlement turnover of the futures on the S&P CNX Nifty has Dealers module would be a pre-requisite for those Capital Market
price and contract prices of all the contracts in the increased by almost 119% from Rs. 1,305 crore to Rs. seeking registration as dealers/user of a trading member
series. The profit/loss, so calculated would be 2,857 crore during the same period. from July 6, 2001. Trading
shown in the profit and loss account by The Capital Market (CM) segment of NSE registered a
II. Reduction in Interest Rates Source: NSE Circular Ref. No. NSE/Mem/2828 Dated
corresponding debit/credit to Mark-to-Market turnover of Rs. 35,323 crore with about 135 lakh trades
September 4, 2001.
Margin-Equity Index Futures Account. Same kind NSE has decided to reduce the interest rate from 24% during September 2001. The average daily turnover for
of accounting treatment would be given when the p.a. to 18% p.a. on delayed payment of dues. This the month was Rs. 1,766 crore as compared to Rs. 1,401
contract is squared up by entering into a reverse reduced rate of interest would be applicable for all the MARKET REVIEW crore during the preceding month. On an average, over
contract. Accordingly, if more than one contract in overdue amounts remaining unpaid on or after October The dimensions of the different market segments of 6.7 lakh trades were transacted daily during the month.
respect of the relevant series of index futures 1, 2001. NSE during the month of September 2001 are presented The average trade size during the month was Rs. 26,095.
contract to which the squared-up contract pertains Source: NSE Circular Ref. No. NSE/F&A/2890 Dated below: The demat turnover accounted for 99.99% of the total
is outstanding at the time of the squaring-up of September 27, 2001. September turnover. Figure 1 presents movement in turnover in
Market At the end of September 2001
the contract, the contract price of the 2001 terms of value and quantity during the month. The
Segment
aforementioned contract would be determined III. Transaction Charges in F&O Segment business growth of CM segment is presented in Figure
No. of No. of Market Turnover
using First-In, First-Out (FIFO) method. The trading member in the futures segment were required Members Securities Capitalisation (Rs. crore) 2 and Annexure I. The details of daily trades are given
to pay transaction charges on the trades executed by him (Rs. crore) in Annexure II.
(iv) On the settlement of index futures contract, the
initial margin paid in respect of the contract is at the rate of Rs. 2 per lakh of traded value (0.002%) CM 959 987a 509,105 35,323
Figure 1:
released which would be credited to Initial Margin- each side or Rs. 1,00,000 annually, whichever was higher.
WDM 92 1,621 678,161 63,199 Value and Quantity of Turnover: September 2001
Equity Index Futures Account and a corresponding This was, however, waived till June 30, 2001. It has now
debit be given to the bank account or the deposit been decided to waive the minimum transaction charges Derivatives 379 1,713b - 5,281d
account. of Rs. 1,00,000 up to March 31, 2002 and only the 2,900 1,300

Total 965c 4,321 1,187,266 103,803 1,200

transaction charges @ 0.002% of the traded value would 2,400 1,100

Tr aded Quantity
(v) In case of any defaults made by the clients in respect be payable. Similarly the transaction charges on the a excludes suspended securities.
1,000

Tur nover
1,900
900
of daily settlement, the contract is closed out and Options segment would be payable by each trading b 3 index futures, 72 index options and 1,638 stock option 1,400
800
700
the amount not paid by the client is adjusted against member on the trades executed by him at the rate of Rs.
contracts. 900 600
500
the initial margin. In the books of the client, the c do not add up to total because of multiple membership.
2 per lakh of contract value (0.002%) (each side) with d includes notional turnover [(strike price + premium) % quantity]
400 400

03-Sep-2001
04-Sep-2001
05-Sep-2001
06-Sep-2001
07-Sep-2001
10-Sep-2001
11-Sep-2001
12-Sep-2001
13-Sep-2001
14-Sep-2001
17-Sep-2001
18-Sep-2001
19-Sep-2001
20-Sep-2001
21-Sep-2001
24-Sep-2001
25-Sep-2001
26-Sep-2001
27-Sep-2001
28-Sep-2001
amount so adjusted should be debited to Mark-to- effect from July 1, 2001. For this purpose, the contract in index options and stock options.
Market- Equity Index Futures Account with a value would mean strike price multiplied by the quantity Date
corresponding credit to Initial margin-Equity Index traded. The member would contribute at the rate of Rs. T urnover (R s. cr.) T raded Quantity (Lakh shares)
Shares)

Futures Account. Membership

(vi) The amount of bank guarantee, and book value as
also the market value of securities lodged should
be disclosed in respect of outstanding contracts at
the year-end, where initial margin has been paid by
10 per crore of traded value (0.001%)(each side) of the
option segment with effect from June 4, 2001 to the
Investor Protection Fund pertaining to option segment.
Source: NSE Circular ref. No. NSE/F&A/2889 Dated
September 27, 2001.
There were 965 members as on September 30, 2001, Figure 2:
88% of which were corporate members.
Business Growth of Capital Market Segment
The composition of members as on September 30, 2001
is presented in Table 1. There were 13 registered
160,000 8,000

way of bank guarantee and/or lodging of securities. professional clearing members as at end of 140,000 7,000

IV. Direct Payout to Investors Account September 2001.

Aver age Daily Tur nover

120,000 6,000
The total number of contracts entered and gross 100,000 5,000

number of units of equity index futures traded

Tur nover
NSCCL introduced the facility of direct pay-out to clients’ Table 1: Distribution of Membership as on 80,000 4,000

should be disclosed in respect of each series of account on both the depositories. Source: NSE Circular September 30, 2001
60,000 3,000

40,000 2,000
equity index futures. Ref. No. NSCC/SEC/2001/0767 Dated September 6, 2001. 20,000 1,000
CM WDM CM & CM, CM & Total
Source: Institute of Chartered Accountants of India web site.
0 0

V. NCFM Basics/Dealers Module Segment Segment WDM WDM F&O

Nov-1994

Feb-1996

Oct-1997
Apr-1995

May -1997

Jan-1999

Nov-1999

Feb-2001
Apr-2000
Dec-1996
Sep-1995

Jul-1996

Mar-1998

Aug-1998

Jun-1999

Sep-2000

Jul-2001
Segments & F&O Segments
NSE permitted the Dealers/Users of the trading Segments Month & Year

NSE NEWS members on the capital market segment, who have been Corporates 453 6 46 40 305 850
T urnover (R s. cr.) Average Daily T urnover (R s. cr.)

I. Record Turnover allotted the user ids between March 1, 2000 to July 6,
2001, to pass either the NCFM Basic module or the High Volume Securities
Individuals 39 - - - 18 57
Derivative segment recorded the highest daily turnover NCFM Dealers module certification programme by The ‘5’ most traded securities in the month of September
of Rs. 239 crore on September 6, 2001. The segment December 31, 2001. The Dealers/Users who do not meet 2001 accounted for 52% of the total turnover (Table 2).
Firms 42 - - - 16 58
has registered a growth of 96% during September, 2001 this requirement by December 31, 2001 would be Similarly, the shares of top ‘10’ and ‘100’ securities in
with the turnover almost doubling to Rs. 5,281 crore as disabled till such time these requirements are met. The total turnover during the month were 75% and 99%
against Rs. 2,697 crore in the preceding month. The Total 534 6 46 40 339 965
pass in either the NCFM Basic module or the NCFM respectively. This indicates that trading is concentrated

September 2001 Web site : http : / / www.nseindia.com 24 September 2001 Web site : http : / / www.nseindia.com 25
in only a limited number of securities and is very thin in Market Capitalisation Indices Figure 4:
a large number of securities. The details of top ‘10’
As at end-September 2001, 987 companies, 694 listed S&P CNX Nifty Movement of S&P CNX Nifty: September 2001
securities in terms of turnover for the month of
companies and 293 permitted companies, were available R eturn = - 13.28%

September 2001 are presented in Annexure III. The S&P CNX Nifty index closed at 913.85 on
Avg. daily volatility = 2.52%
for trading. The list of securities admitted for trading 1100
1059.90

Table 2: Contribution of Top ‘N’ Securities on the CM segment and the list of securities suspended September 28, 2001, registering a decrease of 139.90 1050

(In per cent) from trading during the month are presented in points (13.3%) during the month as compared to closing 1000

Index value
Top 'N' 2000-01 August September
Annexure VI (a) and VI (b) respectively. value of 1053.75 on August 31, 2001. It recorded a high 950

Securities 2001 2001 The market capitalisation of securities available for of 1059.9 on September 3, 2001 and a low of 849.95 on 900

September 21, 2001. The market capitalisation of S&P

850

5 52 45 52
trading in the CM segment decreased during September 800
849.95

2001 from Rs. 5,75,242 crore at end-August 2001 to CNX Nifty decreased from Rs. 281,798 crore on August

3-Sep-01

4-Sep-01

5-Sep-01

6-Sep-01

7-Sep-01

10-Sep-01

11-Sep-01

12-Sep-01

13-Sep-01

14-Sep-01

17-Sep-01

18-Sep-01

19-Sep-01

20-Sep-01

21-Sep-01

24-Sep-01

25-Sep-01

26-Sep-01

27-Sep-01

28-Sep-01
10 73 69 75 Rs. 5,09,105 crore at end-September 2001. The market 31, 2001 to Rs. 2,45,484 crore on September 28, 2001, a Date
capitalisation of S&P CNX Nifty securities and CNX decrease of Rs. 36,314 crore (12.9%). The daily Close High Low

25 89 90 92 Nifty Junior securities decreased by 12.9% and 14.8% movement of S&P CNX Nifty is presented in Annexure
respectively during the month. The Nifty and Junior Nifty CNX Nifty Junior
50 95 96 97 VII and in Figure 4. The distribution of industry-wise
securities accounted for 48.2% and 4.6% of total market The CNX Nifty Junior Index closed at 1084.4 on
weightage for S&P CNX Nifty is presented in Table 5.
100 98 99 99 capitalisation respectively at the end of September 2001.
September 28, 2001 representing a decline of 192.95
The growth of market capitalisation as well as number Table 5: S&P CNX Nifty Industry-wise Weightage
of companies available for trading in CM segment is points (15.1%) as compared to 1277.35 on August 31,
High Volume Members
presented in Figure 3. Sl. Industry Weightages (%) Returns (%) 2001. During September 2001, the CNX Nifty Junior
The share of top ‘N’ trading members in total turnover No. touched a high of 1292 on September 6, 2001 and a low
is presented in Table 3. The share of top ‘10’ members Figure 3:
1 Aluminium 1.55 (23.78) of 1038.75 on September 18, 2001. The market
in turnover was 13% in September 2001. Growth of market capitalisation on CM Segment capitalisation of CNX Nifty Junior index decreased from
2 Automobiles - 2 & 3 Wheelers 2.54 (0.25)
Table 3: Share of the Top ‘N’ Trading Members 1,200,000 1,600 3 Automobiles - 4 Wheelers 0.96 (11.40) Rs. 27,303 crore on August 31, 2001 to Rs. 23,273 crore
on September 28, 2001, i.e., a decrease of Rs. 4,030 crore

Trading
(In per cent) 1,400
4 Banks 6.27 (13.08)

T rading
1,000,000
1,200
(14.8%). The daily movement of CNX Nifty Junior is

Available forfor
Capitalisation

Top 'N' 2000-01 August September 5 Cement and Cement Products 1.76 (6.10)
Capitalisation

800,000

of Companies Available
1,000

Members 2001 2001 600,000 800

6 Cigarettes 5.80 (19.50)
presented in Annexure VII and in Figure 5.

No.Companies
Market

Figure 5:
600
7 Computers - Software 8.48 (32.19)
Market

5 8 7 8
400,000
400
200,000
200 8 Computers - Hardware 0.07 3.30 Movement of CNX Nifty Junior Index:

No. of
10 13 13 13 - -
9 Diversified 21.36 (6.80) September 2001
Nov-94

Mar-95
Jul-95

Nov-95

Mar-96
Jul-96

Nov-96
Mar-97
Jul-97

Nov-97

Mar-98
Jul-98

Nov-98

Mar-99
Jul-99

Nov-99

Mar-00
Jul-00

Nov-00

Mar-01
Jul-01
25 23 26 25 Month/Year
Month/Year 10 Electrical Equipment 1.53 (20.36) R eturn = - 15.11%
Market Capitalisation (R s. cr.) No. of Companies Available for T rading Avg. daily volatility = 2.68%
11 Finance - Housing 3.05 (11.55) 1350

50 34 38 39 1300 1292.00

12 Financial Institution 1.51 (11.39) 1250

Index values
100 49 55 56
Debentures 1200

13 Food & Food Processing 3.40 (0.33) 1150

During September 2001, 3 trades involving 4 debentures 14 Hotels 0.23 (29.19)

1100
1050 1038.75

Advance/Decline Ratio for Rs. 0.04 lakh were reported. The details of trades in 15 Lubricants 1.29 (1.23)
1000

3-Sep-01

4-Sep-01

5-Sep-01

6-Sep-01

7-Sep-01

10-Sep-01

11-Sep-01

12-Sep-01

13-Sep-01

14-Sep-01

17-Sep-01

18-Sep-01

19-Sep-01

20-Sep-01

21-Sep-01

24-Sep-01

25-Sep-01

26-Sep-01

27-Sep-01

28-Sep-01
debentures are presented in Table 4.
The advance/decline ratio for September 2001 is 16 Media & Entertainment 1.46 (25.73) Date
Table 4: Debenture Volume 17 Paints 0.71 2.65 High Low Close
presented in Annexure IV. On an average, 432 securities
No. of Traded Turnover
advanced and 541 declined during the month. The largest Year
Trades Quantity (Lakh) (Rs. Lakh)
18 Personal Care 2.16 (5.31)
number of advances took place on September 18, 2001 19 Petrochemicals 11.76 (14.90) S&P CNX Defty
when approximately 752 stocks surged in value. 1995-96 17,227 44.84 3,922.13 20 Pharmaceuticals 9.44 (0.36)
The S&P CNX Defty closed at 661.60 on September
1997-98 52,278 161.49 10,754.63 21 Power 1.88 (4.88)
City-wise Turnover 28, 2001 registering a decline of 112.95 points (14.6%)
22 Refineries 8.17 (20.84) over its previous month’s close of 774.55 on August 31,
1998-99 47,158 104.33 8,571.00
During September 2001, contribution of Mumbai to the 23 Steel and Steel Products 1.04 (13.48) 2001. During the month under review, Defty reached a
total turnover increased to 41% from 39.9% in August 1999-00 28,240 136.11 10,367.27 24 Tea and Coffee 0.30 (16.65) high of 779.05 on September 3, 2001 and touched the
2001. Contributions of Delhi and Kolkata were 19.3% 25 Telecommunication - Services 3.30 3.63 low of 613.55 on September 21, 2001. The daily
2000-01 4,152 2.01 1,195.15
and 8.1% respectively. The city-wise contribution to the movement of Defty is presented in Annexure VII and
turnover is presented in Annexure V. April-Sept.01 571 0.53 101.43 Total 100.00 (13.28)
in Figure 6.

September 2001 Web site : http : / / www.nseindia.com 26 September 2001 Web site : http : / / www.nseindia.com 27
Figure 6: FMCG Index and S&P CNX Pharmaceuticals Settlement Product Contract No. of Turnover Open
outperformed the Nifty index during the entire month, expiring on Contracts (Rs. cr.)* Interest
Movement of S&P CNX Defty: September 2001 Traded (No. of
whereas S&P CNX Petrochemicals and CNX IT During September 2001, in terms of quantity of shares contracts
Retur n = - 14.58%
2.57%
Avg. daily volatility = 2.573% underperformed Nifty throughout the month. CNX traded, 18.9% of shares were delivered and the balance as at end
800 of month)
775
779.05
Finance followed a pattern similar to that of Nifty. The were squared up/netted. In value terms, however, only 27-Sep-2001 9,330 187.14 4,431**
750
CNX IT Index touched new low during the month. 11.7% of shares were settled by delivery and the balance
725
25-Oct-2001 2,642 51.68 1,685
Figure 7: was squared up/netted. 99.9% of shares delivered were
Index value

700 Call
675 29-Nov-2001 216 4.37 172
650 Performance of the Select Indices: September 2001 in demat form. These indicate preference for settling
625
trades in high value scrips in demat form. Such high Index 27-Dec-2001 0 0.00 0
600 613.55
575 120 orders of demat settlement reassures success of rolling Options 27-Sep-2001 6,431 134.43 1,858**
settlement. The percentage of unrectified bad delivery
10-Sep-01

11-Sep-01

12-Sep-01

13-Sep-01

14-Sep-01

17-Sep-01

18-Sep-01

19-Sep-01

20-Sep-01

21-Sep-01

24-Sep-01

25-Sep-01

26-Sep-01

27-Sep-01

28-Sep-01
3-Sep-01

4-Sep-01

5-Sep-01

6-Sep-01

7-Sep-01

110
Put 25-Oct-2001 1,720 32.24 1,368
100

Date 90 to delivery has also decreased considerably because of 29-Nov-2001 111 1.98 101
High Low Close 80 high demat settlements. The details of settlement of 27-Dec-2001 0 0.00 0
trades on NSE are presented in Annexure X.
70

The details of individual scrips in S&P CNX Nifty and 60

27-Sep-2001 53,565 1,133.86 13,931**
CNX Nifty Junior are presented in Annexure VIII and
50
The corpus of the Settlement Guarantee Fund at the 25-Oct-2001 10,763 187.98 5,195

31-Aug-2001

03-Sep-2001

04-Sep-2001

05-Sep-2001

06-Sep-2001

07-Sep-2001

10-Sep-2001

11-Sep-2001

12-Sep-2001

13-Sep-2001

14-Sep-2001

17-Sep-2001

18-Sep-2001

19-Sep-2001

20-Sep-2001

21-Sep-2001

24-Sep-2001

25-Sep-2001

26-Sep-2001

27-Sep-2001

28-Sep-2001
end of September 2001 was Rs. 1,870 crore. Call
IX respectively. 29-Nov-2001 16 0.25 13
Date
Other Indices Stock 27-Dec-2001 0 0.00 0
FMCG IT FINANCE PETROCHEMICALS PHARMACEUTICALS NIFTY
Derivatives Market
An analysis of the monthly, quarterly, half yearly and Options 27-Sep-2001 29,077 617.09 4,200**
yearly performance of the indices as of end-September Overseas Indices The total turnover of the derivatives segment amounted Put 25-Oct-2001 4,403 72.93 2,522
2001 (Table 6) reveals that the indices, in general, A correlation analysis for the major overseas stock market to Rs. 5,281 crore in the month of September 2001. 29-Nov-2001 0 0.00 0
performed poorly over last 1 month, 3 months, 6 months indices was carried out for the month of September Index futures recorded a total turnover of Rs. 2,857 crore
27-Dec-2001 0 0.00 0
and one year period. The extent of decline is more in 2001. Table 7 presents the returns and the volatility of and the near month futures contract recorded the highest
these indices and Table 8 presents the respective * Notional turnover [(Strike Price + Premium) % Quantity] in
the longer period of 6 months and one year. For example, turnover of Rs. 1,923 crore during the month. The case of index options and stock options.
the basket of IT companies, captured by the CNX IT correlation. movement of Nifty as compared to Nifty futures in the ** As on expiry day.
index, suffered a decline of 69.9% and 37.6% over longer Table 7: Returns and Volatility of Select Overseas month of September 2001 is presented in Figure 8. Figure 8:
period of one year and six months respectively. The Indices during September 2001 Movement of Nifty vs. Nifty Futures: September 2001
corresponding decline over past one month and 3 The index options recorded a total turnover of Rs. 412
(In per cent)
months was 30.7% and 33.1% respectively. A similar crore during the month with the near month option
Indices Monthly Volatility of contract recording the highest notional turnover of Rs.
1075
trend is observed for all other indices. CNX IT Index Returns Returns* 1025
was the worst performer as compared to other indices. 187 crore for call option and Rs. 134 crore for put option.

Close Price
DJIA -11.08 2.72 975
CNX Nifty Junior also performed quite badly over longer
HANG SENG -10.28 3.08 The total turnover of stock options during the month 925
periods of one year and 6 months.
was Rs. 2,012 crore. The option expiring on 875

FTSE -8.26 2.66

Table 6: Performance of various indices as of end September 27, 2001 recorded the highest notional turnover 825

03-Sep-2001

04-Sep-2001

05-Sep-2001

06-Sep-2001

07-Sep-2001

10-Sep-2001

11-Sep-2001

12-Sep-2001

13-Sep-2001

14-Sep-2001

17-Sep-2001

18-Sep-2001

19-Sep-2001

20-Sep-2001

21-Sep-2001

24-Sep-2001

25-Sep-2001

26-Sep-2001

27-Sep-2001

28-Sep-2001
September 2001 NIKKEI -8.76 2.78
of Rs. 1,134 crore for call option and Rs. 617 crore for
(In per cent) NASDAQ 100 -16.96 2.82 put option. The trade details of the derivatives segment Date

1 month 3 months 6 months 1 year S&P CNX NIFTY -13.28 2.52 for the month of September 2001 are presented in Table NIFTY

NOVEMBER FUTURES
SEPTEMBER FUTURES

DECEMBER FUTURES
OCTOBER FUTURES

S&P CNX Nifty -13.28 -17.52 -20.41 -28.14 * Volatility is the standard deviation of daily returns for September 2001. 9. The business growth of derivatives market segment is
Table 8: Correlation between Select Overseas presented in Annexure XI and Figure 9 respectively. Figure 9:
S&P CNX 500 -14.71 -19.61 -22.63 -36.94
Indices during September 2001 Table 9: Trade Details of Derivatives Market for Business Growth of Derivatives Segment
S&P CNX Defty -14.58 -18.97 -22.46 -30.78
CNX Nifty Junior -15.11 -23.39 -32.30 -54.23 Indices DJIA HANG FTSE NIKKEI NAS- S&P September 2001 6000 300

SENG 100 DAQ CNX 5000 250

CNX MidCap 200 -9.06 -14.92 -19.88 -34.52 100 Nifty Product Contract No. of Turnover Open
expiring on Contracts (Rs. cr.)* Interest 4000 200

Average Daily Turnover

CNX IT Index -30.67 -33.12 -37.59 -69.95 Traded (No. of

Turnover
DJIA 1 0.72 0.41 0.61 0.92 0.68
contracts 3000 150

HANG SENG 1 0.11 0.77 0.68 0.65 as at end

Yet another exercise of comparing the performance of of month)
2000 100

five major sectoral indices, viz., S&P CNX Petrochemicals FTSE 100 1 -0.33 0.42 0.19 1000 50

NIKKEI 1 0.43 0.39 27-Sep-2001 103,201 1,923.47 2,356**

Index, S&P CNX Finance Index, CNX FMCG Index, Index
0 0

S&P CNX Pharma Index and CNX IT Index, with that 25-Oct-2001 41,596 758.62 4,063

Jun-00

May-01

Jun-01
Jul-00

Aug-00

Nov-00

Dec-00
Sep-00

Oct-00

Jan-01

Feb-01

Mar-01

Apr-01

Jul-01

Aug-01

Sep-01
NASDAQ 100 1 0.65
Futures
of S&P CNX Nifty Index during September 2001 is S&P CNX 1 29-Nov-2001 9,409 173.29 1,121 Month/Year

presented in Figure 7. During September 2001, CNX NIFTY 27-Dec-2001 92 1.67 33 Turnover (Rs. cr.) Average Daily Turnover (Rs. cr.)

September 2001 Web site : http : / / www.nseindia.com 28 September 2001 Web site : http : / / www.nseindia.com 29
Wholesale Debt Market Indian banks accounted for 31.8% of the total turnover. Investor Grievances Figure 13:
The WDM segment witnessed turnover of Rs. 63,199 The share of primary dealers in turnover was 24.2% Growth of VSATs and Cities
crore during September 2001, as against Rs. 75,784 crore and that of foreign banks was 14.5% in September 2001. The Exchange has an active and efficient dispute 450 4000

in August 2001. The first six months of the current fiscal Distribution of turnover for various categories of resolution process through which disputes between 400 3500

year registered a growth of 189.5% in turnover over the participants is presented in Figure 12. investors and trading members are settled. The details
350

300
3000

same period in the preceeding year. The average daily

No. of VSATs
2500
regarding investor grievances for September 2001 are

No. of Cities

No. of VSATs
No. of Cities
250
turnover in September 2001 was Rs. 2,528 crore as against 2000

Rs. 3,158 crore in the preceding month. Daily turnover Figure 12: available in Annexure XV. 200
1500
150
ranged widely between Rs. 572 crore on September 29, Participant-wise Distribution of WDM Trades, 100
1000

2001 and Rs. 4,012 crore on September 11, 2001. The September 2001 Arbitration 50 500

business growth of WDM segment since inception is 0 0

presented in Figure 10 and Annexure XII.

Nov-94
Mar-95

Nov-95
Mar-96

Nov-96
Mar-97

Nov-97
Mar-98

Nov-98
Mar-99

Nov-99
Mar-00

Nov-00
Mar-01
Jul-95

Jul-96

Jul-97

Jul-98

Jul-99

Jul-00

Jul-01
Corporates/MFs A status report on the arbitration cases till September
Figure 10: Fin. Inst.
2.02%
2.15%
2001 is presented in Annexure XVI. No. of Cities
Month & Year
No. of VSATs
Primary Dealers Indian banks
Business Growth of WDM Segment 24.19% 31.78%

System and Telecom NSE’s Certification in Financial Markets

90,000 4,000 (NCFM)
80,000 3,500 Average Daily Turnover NSE Network
70,000
3,000
Foreign Banks NCFM is a fully automated, on-line nation-wide testing
60,000
2,500
T rading Members
14.53% The expansion of NSE network in different cities and and certification system. It tests practical knowledge and
Turnover

50,000 25.33%
2,000
40,000

30,000
1,500 number of VSATs since November 1994 is presented skill required to operate in financial market in a secure and
20,000
1,000
in Figure 13. The list of towns and cities having NSE unbiased manner to improve the quality of intermediation
10,000 500
During September 2001, 49 more securities with a total VSAT terminals is presented in Annexure XVII. As on
0 0
by ensuring that the calibre of persons entering the field is
outstanding debt of Rs. 12,299 crore were made available
Jul-94

Nov-94

Mar-95

Jul-95

Nov-95

Mar-96

Jul-96

Nov-96

Mar-97

Jul-97

Nov-97

Mar-98

Jul-98

Nov-98

Jul 99

Nov-99
Mar 99

Mar-00

Jul-00

Nov-00

Mar-01

Jul-01

September 30, 2001, NSE had 3,094 VSATs in 380 cities kept high in the best interests of a mature and vibrant
Month & Year
for trading. Total market capitalisation of securities
Turnover (Rs. cr.) Average Daily Turnover (Rs. cr.) across the country. Distribution of VSATs across 380 market. Module-wise and centre-wise break up of the
available on WDM stood at Rs. 6,78,161 crore on
cities is presented in Table 11. number of candidates who have taken the NCFM test by
The Subsidiary General Ledger reported trades worth September 29, 2001. The market capitalisation of various
Rs. 1,08,974 crore in September 2001. Trades on WDM Table 11: Distribution of VSATs across cities as at September 30, 2001 is presented in Table 12.
securities on WDM segment as on September 29, 2001
accounted for 56.7% of SGL turnover. is presented in Table 10. end September 2001 Table 12: Module-wise and Centre-wise Break-up
The ten most active securities accounted for 75.7% of of Candidates Tested
the turnover on the segment. Details of these securities Table 10: Market Capitalisation of WDM Segment
No. of VSATs No. of Cities No. of VSATs
are presented in Annexure XIII. in a City in the Cities Test Deri- Capital NSDL - AMFI- Insu- Oth- Total
as on September 28, 2001 Centre vatives Market Depository Mutual rance ers
Government securities reported turnover of Rs. 59,804 1 171 171
Core Modules Operations Fund Modules
crore contributing 94.6% of total turnover during Security Type Market Capitalisation Share in Total
September 2001. Treasury Bills accounted for Rs. 2,137 Module Module Modules
(Rs. cr.) (%) 2 70 140
crore or 3.4% of the total turnover. Institutional bonds,
Govt. Securities 474,779 70.01 Mumbai 2,678 2,648 1,875 1,425 1,062 157 9,845
bonds issued by banks and other securities accounted 3 28 84
for Rs. 1,258 crore or 2.0% of total turnover. Distribution PSU Bonds 42,781 6.31
of turnover of securities traded during the month on Delhi 1,599 1,713 1,208 659 715 177 6,071
4 26 104
WDM is presented in Figure 11. State Loans 50,217 7.40
Figure 11: Kolkata 830 898 850 383 654 75 3,690
MF Units 37,843 5.58 5 16 80
Security-wise Distribution of WDM Trades, Fin Institutions 26,499 3.91 Chennai 706 749 569 518 632 149 3,323
September 2001 6-10 38 270
Inst Bonds Treasury Bills 23,347 3.44
T Bills Hyderabad 221 376 382 137 201 8 1,325
0.67% Others 11-25 18 296
3.38% 1.32% Corporate Bonds 14,685 2.17

Others* 8,010 1.18 Ahmedabad 373 157 456 133 284 4 1,407
26-50 6 222
Total 678,161 100.00 Pune 155 164 198 161 531 0 1,209
51-100 3 228
*Others include securitised debt and bonds of local bodies. Others 827 802 1,112 669 202 0 3,609
>100 4 1,499

Govt Sec MIBID/MIBOR Rates for September 2001 are Total 7,386 7,507 6,650 4,085 4,281 570 30,479
Total 380 3,094
94.63% presented in Annexure XIV.

September 2001 Web site : http : / / www.nseindia.com 30 September 2001 Web site : http : / / www.nseindia.com 31
 ANNEXURE I
BUSINESS GROWTH ON CAPITAL MARKET SEGMENT
Month/ No. of No. of No. of No. of No. of No. Traded Turnover Average Average Demat Demat Market S&P CNX Nifty Index# CNX Nifty Junior Index##
Year Comp - Comp - Compa - Trad - Compa - of Quan - (Rs. Daily Trade Securi - Turnover Capital -
anies anies nies ing nies Trades tity cr.) Turnover Size ties (Rs. isation High Low Close High Low Close

September 2001
Listed* Perm - Available Days Traded (Lakh) (Lakh) (Rs. (Rs.) Traded cr.) (Rs.
itted* for cr.) (Lakh) cr.)*
Trading* @
Nov 94-Mar 95 135 543 678 102 -- 3 1,391 1,805 17 56,310 -- -- 363,350 -- -- -- -- -- --
1995-96 422 847 1,269 246 -- 66 39,912 67,287 276 101,505 -- -- 401,459 1067.49 813.12 985.3 -- -- --
1996-97 550 934 1,484 250 -- 264 135,561 295,403 1,176 112,086 -- -- 419,367 1203.11 775.43 963.3 1208.87 907.02 1032.95
1997-98 612 745 1,357 244 -- 381 135,685 370,193 1,520 97,054 -- -- 481,503 1297.10 929.05 1116.90 1395.25 1016.65 1339.40
1998-1999 648 609 1254 251 -- 546 165,327 414,474 1,651 75,954 8,542 23,818 491,175 1247.15 800.10 1078.05 2079.10 1177.20 2069.20
1999-2000 720 479 1152 254 -- 984 242,704 839,052 3,303 85,244 153,772 711,706 1,020,426 1818.15 916.00 1528.45 5365.90 1631.90 3695.75
Apr-00 725 473 1,145 18 1,059 74 13,390 57,229 3,179 77,649 11,679 52,021 846,391 1636.95 1311.30 1406.55 3771.80 2572.65 2788.65
May-00 733 431 1,109 22 1,050 111 16,477 79,037 3,593 71,501 14,538 72,995 790,478 1436.60 1201.50 1380.45 2870.00 2059.20 2448.70
Jun-00 741 423 1,109 22 1,058 132 19,607 119,373 5,426 90,694 17,392 111,926 852,554 1539.10 1345.10 1471.45 2989.50 2424.55 2672.45
Jul-00 747 410 1,094 21 1,050 122 19,114 110,056 5,241 89,881 17,114 101,847 746,402 1564.75 1269.25 1332.85 2812.50 2348.00 2464.95
Aug-00 751 410 1,089 22 1,038 138 23,456 125,347 5,698 91,004 21,177 116,186 794,516 1398.90 1295.45 1394.10 2612.65 2284.75 2548.25
Sep-00 758 379 1,070 20 1,035 142 25,946 142,480 7,124 100,428 24,167 135,714 730,350 1482.00 1249.35 1271.65 2855.85 2346.55 2369.30
Oct-00 764 377 1,067 21 993 131 24,154 106,854 5,088 81,553 21,860 99,567 707,121 1306.45 1108.20 1172.75 2393.90 2054.05 2234.30
Nov-00 767 376 1,070 22 1,006 151 31,905 122,731 5,579 81,196 28,857 113,335 764,177 1281.00 1177.10 1268.15 2516.70 2238.75 2477.25
Dec-00 775 350 1,050 20 1,008 163 35,790 131,415 6,571 80,764 32,159 120,774 760,391 1369.50 1207.95 1263.55 2737.70 2280.70 2426.05
Jan-01 778 348 1,050 22 978 186 42,152 148,830 6,765 80,212 40,789 143,912 807,641 1396.05 1248.55 1371.70 2555.75 2282.85 2407.70
Feb-01 782 320 1,026 20 984 192 48,268 135,932 6,797 70,923 48,222 135,850 789,600 1362.25 1294.60 1351.40 2158.55 2023.10 2141.45
Mar-01 785 320 1,029 21 964 135 29,277 60,226 2,868 44,723 29,268 60,211 657,847 1399.55 1098.75 1148.20 2258.75 1570.20 1601.80
2000-01 785 320 1,029 251 1,201 1,676 329,536 1,339,510 5,337 86,980 307,222 1,264,337 657,847 1636.95 1098.75 1148.20 3771.80 1570.20 1601.80
Apr-01 790 319 1,031 19 951 114 20,782 35,616 1,875 31,133 20,735 35,605 653,720 1171.85 1000.10 1125.25 1638.05 1362.50 1525.20
May-01 789 318 1,030 22 954 141 25,715 48,329 2,197 34,276 25,714 48,329 592,437 1207.00 1096.25 1167.90 1676.25 1472.40 1627.15
Jun-01 790 292 1,001 21 963 133 22,336 42,783 2,037 32,151 21,935 42,625 569,797 1175.80 1060.05 1107.90 1638.90 1397.60 1415.40
Jul-01 785 294 994 22 924 99 13,142 27,228 1,238 27,476 13,137 27,227 574,260 1127.15 1046.90 1072.85 1438.25 1304.25 1342.55
Aug-01 786 293 994 21 931 112 15,937 29,417 1,401 26,350 15,931 29,415 575,242 1084.00 1051.75 1053.75 1370.25 1275.20 1277.35
Sep-01 788 293 987 20 917 135 17,342 35,323 1,766 26,095 17,342 35,323 509,105 1059.90 849.95 913.85 1292.00 1038.75 1084.40

* At the end of the period.

@ Excludes suspended companies.
# S&P CNX Nifty Index commenced from November 3, 1995.

Web site : http : / / www.nseindia.com

## CNX Nifty Junior commenced from November 4, 1996.

32
Date

Total

ITC Ltd
Wipro Ltd
28-Sep-2001
27-Sep-2001
26-Sep-2001
25-Sep-2001
24-Sep-2001
21-Sep-2001
20-Sep-2001
19-Sep-2001
18-Sep-2001
17-Sep-2001
14-Sep-2001
13-Sep-2001
12-Sep-2001
11-Sep-2001
10-Sep-2001
07-Sep-2001
06-Sep-2001
05-Sep-2001
04-Sep-2001
03-Sep-2001

Securities

September 2001
Total Turnover
Zee Telefilms Ltd
Ranbaxy Labs Ltd
Digital Globalsoft Ltd

HCL Technologies Ltd

Reliance Industries Ltd

Dr. Reddy's Laboratories

Infosys Technologies Ltd

Satyam Computer Services

Total Turnover of Top Ten Securities

917
1,062
1,023
1,009
1,074
1,013
1,078
1,002
1,025
1,018
1,067
1,125
1,036
1,042
1,075
1,062
1,089
1,043
1,052
1,045
1,081
Traded
No. of Companies

No. of
Trades

1,050,454

1,176,814
575,217
751,322

794,464

7,583,299
910,534

290,340
721,129
988,297

13,536,286
324,728
1,130

2,156
822
151

8,192
75
508
364

17,342
194
1,519
1,274
Traded
Quantity
(Lakh shares)
No. of
Trades
ANNEXURE II

13,536,286
797,360
779,547
752,032
748,911
665,074
698,621
768,128
731,312
893,464
624,848
724,698
621,269
624,270
536,317
572,787
710,101
655,389
539,585
605,406
487,167

ANNEXURE III

3,562

3,066
2,050
4,407

1,255
1,365
4,177

35,323
3,172

1,506

26,586
2,026
(Rs. cr.)
Turnover
TRADE STATISTICS: SEPTEMBER 2001

178

153
102
220

1,766
63
68
209

159

75

1,329
101
(Rs. cr.)
Turnover
17,342
1,115
1,001
949
979
848
862
1,023
982
1,205
866
916
697
779
644
697
914
818
623
796
629
(Lakh)

Average Daily
Traded Quantity

TOP TEN SECURITIES ON THE CM SEGMENT: SEPTEMBER 2001

8.68
10.08

5.80
12.48

100.00
3.55
3.87
11.82

8.98

4.26
5.74

75.26
Total
Share in

Turnover (%)
35,323
1,753
1,820
1,521
1,516
1,654
1,503
1,993
1,799
1,740
1,595
1,616
2,111
1,972
1,739
1,779
1,322

1,893
1,776
1,860
2,361
(Rs. cr.)
Turnover

0.22
0.41

0.21

Web site : http : / / www.nseindia.com

0.14
0.60

0.14
0.26

0.11

0.42
0.22
Impact
Average

Cost (%)

33
 ANNEXURE IV ANNEXURE V
ADVANCES/DECLINES (NO. OF SECURITIES) CITY-WISE CONTRIBUTION TO THE TURNOVER
Month/Date Advances Declines Advance / Decline Ratio Sl. City Share in Turnover (%)
Apr-2000 394 583 0.68 No. 1999-2000 2000-2001 August-2001 Sept.-2001

May-2000 447 485 0.92 1 MUMBAI 44.26 48.35 39.96 41.00

June-2000 448 485 0.92
2 DELHI/GHAZIABAD 17.77 17.03 19.36 19.34
July-2000 418 487 0.86

Aug-2000 419 427 0.98 3 KOLKATA/HOWRAH 9.85 8.24 8.80 8.18

Sep-2000 365 486 0.75
4 CHENNAI 3.88 3.40 3.47 3.53
Oct-2000 352 425 0.83

Nov-2000 455 382 1.19 5 AHMEDABAD 2.66 2.68 2.33 1.99

Dec-2000 424 431 0.99
6 HYDERABAD/SECUNDERABAD/KUKATPALLY 2.47 2.30 3.18 3.15
Jan-2001 399 451 0.89

Feb-2001 405 478 0.85 7 BANGALORE 1.42 1.69 3.25 3.05

Mar-2001 318 499 0.64

8 PUNE 1.25 1.07 1.05 0.92
Apr-2001 372 421 0.88
May-2001 426 401 1.06 9 JAIPUR 1.22 1.06 1.09 1.20

June-2001 328 474 0.69

10 CHANDIGARH/MOHALI/PANCHKULA 1.07 0.86 1.34 1.12
July -2001 395 525 0.75

August -2001 480 488 0.98 11 INDORE 1.06 1.13 1.03 1.25

03-Sep-2001 456 551 0.83

12 GAJUWAKA/VISHAKHAPATNAM 0.88 0.95 1.45 1.48
04-Sep-2001 440 511 0.86

05-Sep-2001 381 581 0.66 13 BARODA 0.81 0.73 0.56 0.55

06-Sep-2001 317 630 0.50

14 COCHIN/ERNAKULAM/PARUR/KALAMSERRY 0.74 0.75 0.67 0.64
07-Sep-2001 400 611 0.65
10-Sep-2001 589 395 1.49 15 KANPUR 0.63 0.55 0.81 0.97

11-Sep-2001 431 535 0.81 16 COIMBATORE 0.59 0.59 0.50 0.53

12-Sep-2001 152 841 0.18
17 RAJKOT 0.46 0.38 0.28 0.35
13-Sep-2001 433 503 0.86

14-Sep-2001 105 976 0.11 18 VIJAYAWADA 0.45 0.33 0.33 0.29

17-Sep-2001 111 906 0.12
19 SURAT 0.26 0.41 0.54 0.53
18-Sep-2001 752 206 3.65

19-Sep-2001 647 314 2.06 20 LUDHIANA 0.21 0.18 0.56 0.57

20-Sep-2001 260 670 0.39
21 NAGPUR 0.19 0.15 0.08 0.10
21-Sep-2001 343 645 0.53

24-Sep-2001 646 306 2.11 22 LUCKNOW 0.16 0.16 0.27 0.25

25-Sep-2001 444 542 0.82
23 BHAVANAGAR 0.15 0.17 0.16 0.16
26-Sep-2001 479 423 1.13
27-Sep-2001 585 351 1.67 24 OTHERS 7.56 6.84 8.95 8.87
28-Sep-2001 663 331 2.00
TOTAL 100.00 100.00 100.00 100.00
Average 432 541 0.80

September 2001 Web site : http : / / www.nseindia.com 34 September 2001 Web site : http : / / www.nseindia.com 35
 ANNEXURE VI (a) ANNEXURE VI (b)
SECURITIES INTRODUCED: SEPTEMBER 2001 SECURITIES SUSPENDED: SEPTEMBER 2001
A. New Issues by Listed Companies
a. Funds raised by issue of equity
SL. SYMBOL SECURITY NAME COMPANY NAME SERIES SUSPENSION SUSPENSION
SL. SYMBOL NAME OF COMPANY SERIES DESCRIPTION NO. OF ISSUE FUNDS
NO. DATE TYPE
NO. SECURITIES PRICE RAISED
ISSUED (Rs. lakh)
1 ATULPROD Atul 15% NCD-2002 Atul Ltd. N4/U4 3-Sep-01 Permanent
1 CADBURY Cadbury India Ltd. EQ Rights shares of Rs.10/- each issued at a 32 150 0.05
premium of Rs.140/- per share which were
earlier held in abeyance 2 21STCENMGM 21st Century Mgmt Ser Ltd 21st Century Management Services Ltd. EQ 3-Sep-01 Temporary
2 CADBURY Cadbury India Ltd. EQ Rights shares of Rs.10/- each issued at a 4,784 150 7.18
premium of Rs.140/- per share which were
earlier held in abeyance 3 ANTGRAPHIC Antarctica Graphics Ltd Antarctica Ltd. EQ/BE 3-Sep-01 Temporary

3 CADBURY Cadbury India Ltd. EQ Rights shares of Rs.10/- each issued at a 100 150 0.15
premium of Rs.140/- per share which were 4 APOWERTOOL Consortex Karl Doelitzch Consortex Karl Doelitzsch (India) Ltd. EQ/BE 3-Sep-01 Temporary
earlier held in abeyance

4 HDFCBANK HDFC Bank Ltd. EQ Equity shares of Rs.10/- each allotted against 32,537,958 217 70,678.95
ADS (Price in US$13.83) (1US$=Rs.47.12) 5 EMTEXIND Emtex Industries (I) Ltd. Emtex Industries ( India ) Ltd. EQ/BE 3-Sep-01 Temporary
5 HDFCBANK HDFC Bank Ltd. EQ Equity shares of Rs.10/- each issued against ADS 4,880,694 217 10,604.28

6 L&T Larsen & Toubro Ltd.. EQ Equity shares of Rs.10/- each issued at par to 104,318 10 10.43 6 MAFATLAFIN Mafatlal Finance Ltd Mafatlal Finance Ltd. EQ/BE 3-Sep-01 Temporary
employees of the company under the Employee
Stock Ownership Scheme
7 OSWALAGRO Oswal Agro Mills Ltd Oswal Agro Mills Ltd. EQ/BE 3-Sep-01 Temporary
7 WIPRO Wipro Ltd. EQ Equity shares of Rs.2/- each issued at a price of 400 1,086 4.34
Rs.1086/- per share on exercise of
Stock Options by Employees 8 PARASPETRO Paras Petrofils Limited Paras Petrofils Ltd. EQ/BE 3-Sep-01 Temporary
Total 81,305.39

b. Other issues where no funds have been raised 9 RUPANGIMPX Rupangi Impex Ltd. Rupangi Impex Ltd. EQ/BE 3-Sep-01 Temporary
1 KOTAKMAH Kotak Mahindra Finance Ltd. EQ Equity shares of Rs. 10/- each issued in the 15,000,250
ratio 25:1 to the shareholders of erstwhile Pannier 10 SHAKTIGAS Shri Shakti LPG Ltd. Shri Shakti LPG Ltd. EQ/BE 3-Sep-01 Temporary
Trading Company Private Ltd. pursuant to the
Scheme of Amalgamation with the company.

2 POLARIS Polaris Software Lab Ltd. EQ Equity shares of Rs.5/- each issued to the share- 17,062,400 11 SRGINFOTEC* SRG Infotec (India) Ltd. SRG Infotec (India) Ltd. EQ/BE 7-Sep-01 Temporary
holders of the company as bonus in the ratio of 1:2

B. Funds raised by issue of debt 12 GIPCL GIPCO LTD 18% NCD Gujarat Industries Power Co. Ltd. N3/U3 10-Sep-01 Permanent
1 ICICI0701** ICICI Ltd. U1 ICICI Encash Bond 31,487 5,000 1,574.35
2 ICICI0701** ICICI Ltd. U2/N2 ICICI Regular Income Bond-Option I (Monthly Interest) 9,013 5,000 450.65 13 TISCO TISCO-16.75% RIB-5T-2006 Tata Iron And Steel Co. Ltd. U4 17-Sep-01 Permanent
3 ICICI0701** ICICI Ltd. U3/N3 ICICI Regular Income Bond-Option II (Half yearly interest) 13,327 5,000 666.35
4 ICICI0701** ICICI Ltd. U4/N4 ICICI Regular Income Bond-Option III (Yearly interest) 294,021 5,000 14,701.05 14 TISCO TISCO-TBB-6.1T-2006 Tata Iron And Steel Co. Ltd. U5 17-Sep-01 Permanent
5 ICICI0701** ICICI Ltd. U5/N5 ICICI Money Multiplier Bond-Option I 5,901 5,000 295.05
6 ICICI0701** ICICI Ltd. U6/N6 ICICI Money Multiplier Bond-Option II 23,092 5,000 1,154.60 15 TISCO TISCO-DB-5.1T-2007 Tata Iron And Steel Co. Ltd. U6 17-Sep-01 Permanent
7 ICICI0701** ICICI Ltd. U7/N7 ICICI Children Growth Bond-Option I 5,874 5,000 293.70
8 ICICI0701** ICICI Ltd. U8/N8 ICICI Children Growth Bond-Option II 13,359 5,000 667.95 16 GTNTEXT GTN TEXTILES RS 4 GTN Textiles Ltd B1 24-Sep-01 Permanent
PAID UP
9 ICICI0701** ICICI Ltd. U9/N9 ICICI Pension Bond-Option I 1,902 5,000 95.10
10 ICICI0701** ICICI Ltd. UA/NA ICICI Pension Bond-Option II 436 5,000 21.80 17 ICICI ICICI0898-DDB-54EA-5T-01 ICICI Ltd. MU/YU 24-Sep-01 Permanent
11 ICICI0701** ICICI Ltd. UB/NB ICICI Pension Bond-Option III 728 5,000 36.40
12 DALMIACEM*** Dalmia Cement (Bharat) Ltd. U1/N1 6% Secured Non-Convertible Debentures of Rs.10/- 7,651,621 10 765.16 18 ICICI ICICI0898-Multi-1-4T-01 ICICI Ltd. MW/YW 24-Sep-01 Permanent
each issued on rights basis

Total 20,722.16
19 ICICI1298 ICICI1298-12.5-88-5T-2001 ICICI Ltd. N2/U2 24-Sep-01 Permanent
C. Other debt issues where no funds have been raised
1 UNITEDPHOS United Phosphorous Ltd. U8 17% NCDs-25-2002 3,846,850
20 ICICI1298 ICICI1298-12.5-54EA-5T-01 ICICI Ltd. N4/U4 24-Sep-01 Permanent
D. Other issues where no funds have been raised (other than equity and debt)
1 DALMIACEM Dalmia Cement (Bharat) Ltd K1/W1 Detachable warrants attached to 6% NCD 7,651,621 * The trading in the equity shares of the company was restarted on September 12, 2001 following completion of formalities for execution of corporate action
** Although the above issue of ICICI Bonds have been listed on the Exchange w.e.f August 30, 2001, the trading in the same was granted w.e.f. September 05, 2001 as intimated by the depository.
*** Although the above issue of debentures has been listed on the Exchange w.e.f September 18, 2001 , the trading in the same is granted w.e.f. October 01, 2001

September 2001 Web site : http : / / www.nseindia.com 36 September 2001 Web site : http : / / www.nseindia.com 37
 ANNEXURE VIII

Close

709.75

670.05

632.05

651.20

658.50

648.15

616.65

627.10

623.25

632.40

644.35

661.60
717.85
757.65

748.90
770.35

770.45

767.65

761.40

760.25
S&P CNX NIFTY INDEX: SEPTEMBER 2001

Sl. Name of Issued Capital Market Weightage Beta R2 Average Daily Monthly
Low No. Security (Rs. cr.) Capitalisation (%) Volatility Return

707.75

657.65

623.90

628.25

649.45

630.05

613.55

615.50

621.40

621.90

628.65

645.05
700.15
756.25

746.95
769.10

766.85

766.40

759.45

753.85
(Rs. cr.) (%) (%)
S&P CNX Defty

1 ABB 41 818 0.33 0.79 0.25 3.50 (13.99)

2 AC C 171 2,127 0.87 1.25 0.32 4.95 (3.08)
3 ASIANPAINT 64 1,743 0.71 0.28 0.05 1.84 2.65
High

725.30

710.00

663.85

658.55

660.50

656.50

652.40

634.00

646.35

634.80

646.55

667.90
747.85
766.40

759.20
779.05

774.20

772.45

770.30

761.85
4 BAJAJAUTO 101 2,498 1.02 0.36 0.05 1.48 (3.38)
5 BHEL 245 2,931 1.19 1.08 0.22 4.34 (22.14)
6 BRITANNIA 28 1,406 0.57 0.11 0.01 1.40 (10.42)
7 BSES 138 2,569 1.05 0.65 0.17 2.91 2.78
8 CASTROL 124 3,169 1.29 0.62 0.16 1.61 (1.23)
Open

717.40

708.20

663.85

630.90

649.45

656.35

652.40

615.50

628.85

623.50

632.15

645.60
747.85
758.85

756.20
775.20

770.45

769.30

769.95

761.10
9 CIPLA 60 6,771 2.76 0.79 0.24 3.73 (8.22)
10 COCHINREFN 138 413 0.17 0.92 0.22 3.35 (5.67)
11 COLGATE 136 2,137 0.87 0.30 0.10 1.72 (4.67)
12 DABUR 29 1,653 0.67 0.64 0.23 3.18 3.30
MOVEMENT OF INDICES: SEPTEMBER 2001

13 DIGITALEQP 33 758 0.31 2.20 0.50 6.87 (51.11)

Close

1209.15

1136.50

1046.70

1086.40

1107.40

1078.25

1054.80

1068.05

1057.80

1054.90

1065.95

1084.40
1208.05
1264.25

1249.55
1281.00

1276.70

1274.60

1276.00

1266.15

14 DRREDDY 38 6,845 2.79 0.53 0.11 2.81 1.04

15 GLAXO 60 1,353 0.55 0.43 0.10 3.33 (13.57)
16 GRASIM 92 2,383 0.97 1.10 0.33 3.20 (3.83)
17 GUJAMBCEM 147 2,194 0.89 0.87 0.25 2.88 (9.03)
CNX Nifty Junior
Low

1207.00

1123.95

1040.25

1038.75

1083.10

1066.55

1046.45

1053.90

1055.95

1048.15

1051.20

1065.85
1182.70
1250.30

1245.80
1277.35

1270.90

1271.75

1274.05

1264.05

18 HCL-INSYS 32 169 0.07 2.07 0.44 6.35 (26.37)

19 HDFC 120 7,492 3.05 0.29 0.05 4.07 (11.55)
ANNEXURE VII

20 HDFCBANK 281 6,105 2.49 0.66 0.23 3.55 (8.22)

21 HEROHONDA 40 3,733 1.52 0.29 0.03 2.89 1.85
22 HINDALCO 74 3,794 1.55 0.42 0.09 2.83 (23.78)
High

1221.20

1209.05

1134.95

1098.50

1115.85

1106.05

1076.40

1076.00

1089.45

1060.30

1069.50

1090.10
1239.70
1276.20

1274.10
1287.80

1284.60

1283.65

1292.00

1276.00

23 HINDLEVER 220 45,462 18.52 0.74 0.28 3.62 (5.35)

24 HINDPETRO 339 4,225 1.72 0.77 0.15 4.50 (3.60)
25 ICICI 785 3,695 1.51 1.01 0.23 5.27 (11.39)
26 INDHOTEL 45 569 0.23 0.54 0.12 3.88 (29.19)
Open

1208.35

1208.50

1134.95

1046.05

1084.00

1106.05

1076.40

1055.15

1068.25

1057.70

1055.25

1066.25
1235.85
1250.35

1264.90
1278.25

1281.00

1278.05

1274.60

1276.00

27 INFOSYSTCH 33 15,662 6.38 1.81 0.49 5.31 (33.11)

28 IPCL 250 990 0.40 1.27 0.46 4.10 (13.17)
29 ITC 245 14,228 5.80 0.52 0.15 3.38 (19.50)
30 L&T 249 3,916 1.60 1.07 0.37 4.93 (25.43)
31 M&M 110 593 0.24 1.09 0.36 4.12 (19.93)
Close

971.70

919.70

872.25

900.20

912.20

898.80

854.20

869.05

861.40

873.70

890.00

913.85
1033.40

1023.40

982.20
1048.05

1048.20

1045.00

1036.10

1035.20

32 MTNL 630 8,089 3.30 0.88 0.23 3.95 3.63

33 NESTLE 96 5,158 2.10 0.27 0.06 1.61 5.80
34 NIIT 39 415 0.17 1.81 0.27 5.95 (34.32)
35 NOVARTIND 16 644 0.26 0.49 0.09 2.22 (8.92)
Low

1031.45

1020.70

969.00

902.70

861.05

868.50

899.70

873.70

849.95

853.00

858.85

859.20

868.30

891.00
1046.35

1043.30

1043.30

1033.40

1026.45

957.95

36 ORIENTBANK 193 604 0.25 0.61 0.19 2.99 (8.47)

S&P CNX Nifty

37 P&G 22 864 0.35 0.52 0.16 3.13 (18.26)

38 RANBAXY 116 7,563 3.08 0.82 0.23 3.66 8.51
39 RECKCOLMAN 33 643 0.26 0.50 0.13 2.77 (12.12)
40 RELIANCE 1,054 27,882 11.36 1.03 0.42 5.20 (14.96)
High

993.05

974.50

916.15

910.35

915.00

910.35

903.75

878.60

893.35

877.00

893.05

922.55
1045.30

1037.45

1023.25
1059.90

1053.25

1051.55

1048.20

1037.35

41 RELPETRO 5,202 15,423 6.28 1.14 0.53 4.82 (25.97)

42 SATYAMCOMP 63 3,993 1.63 2.33 0.52 5.92 (24.77)
43 SBIN 526 8,681 3.54 0.88 0.34 4.09 (16.82)
44 SMITKLBECH 45 1,791 0.73 0.29 0.09 2.45 (10.07)
45 TATACHEM 181 666 0.27 1.11 0.31 2.31 (6.71)
Open

1035.00

1033.35

1023.25
1054.65

1048.20

1047.25

1047.70

1036.35

982.20

972.05

916.15

872.15

899.70

910.20

903.75

853.00

869.15

861.35

873.15

891.75

46 TATAPOWER 204 2,043 0.83 1.07 0.20 2.32 (14.52)

47 TATATEA 56 728 0.30 1.12 0.35 3.12 (16.65)
48 TELCO 256 1,767 0.72 1.25 0.30 3.34 (8.54)
49 TISCO 368 2,551 1.04 1.18 0.40 3.10 (13.48)
50 ZEETELE 41 3,578 1.46 2.14 0.38 5.52 (25.73)
Total 13,608 245,484 100 1.00 - 2.52 (13.28)
10-Sep-01

11-Sep-01

12-Sep-01

13-Sep-01

14-Sep-01

17-Sep-01

18-Sep-01

19-Sep-01

20-Sep-01

21-Sep-01

24-Sep-01

25-Sep-01

26-Sep-01

27-Sep-01

28-Sep-01

2
Note : 1. Beta & R are calculated for the period October 1, 2000 to September 28, 2001. Beta measures the degree to which any portfolio of stocks is
3-Sep-01

4-Sep-01

5-Sep-01

6-Sep-01

7-Sep-01

affected as compared to the effect on the market as a whole. The coefficient of determination (R2) measures the strength of relationship between
Date

two variables the return on a security versus that of the market.

2. Volatility is the standard. deviation of the daily returns for the period September 1, 2001 to September 28, 2001.
3. Last day of trading was September 28, 2001
4. Figures in brackets indicate negative values.

September 2001 Web site : http : / / www.nseindia.com 38 September 2001 Web site : http : / / www.nseindia.com 39
 9
8
7
6
5
4
3
2
1
Sl.

50
49
48
47
46
45
44
43
42
41
40
39
38
37
36
35
34
33
32
31
30
29
28
27
26
25
24
23
22
21
20
19
18
17
16
15
14
13
12
11
10
No.

Note :
ICI

IFCI

SPIC

Total
TITAN
ROLTA
Security

PFIZER
PHILIPS
Name of

September 2001
APTECH

EMERCK

SIEMENS
ESCORTS
CADBURY

WARTSILA
ITCHOTEL
INDIACEM

RAYMOND
ICICIBANK

LICHSGFIN
FINCABLES
ASHOKLEY

2
CORPBANK
BATAINDIA

SILVERLINE
NICOLASPIR
CARRIERAIR

VYSYABANK
TATAUNISYS
NAGARFERT

SUNPHARMA
INGERRAND
GESHIPPING

PUNJABTRAC
MADRASCEM
BOMDYEING

GLOBLTRUST

INDSHAVING

SMITHKLPHA
PENTSFWARE
HIMACHLFUT

UNITEDPHOS
APOLLOTYRE

GERMANREM

HUGHESSOFT
BOOTSPHARM

CHENNPETRO

ORCHIDCHEM
BANKBARODA
AUROPHARMA

BURRWELCOM

THOMASCOOK
47
23

35
28

25
35
34
144

29
44

46
33

15
86
417
1
121
119

16

61
30
79
72
20
31
36

3,934
51
296

36

18

12
23
42
33
9

88
41

64
32
140
41
17

61
23
640
220
216

75
120

8
(Rs. cr.)

4. Figures in brackets indicate negative values.

Issued Capital

the return on a security and that of the market.

3. Last trading day of the month is September 28, 2001.

195

2,507
691
190

76
768
498
306

340
115

329
494
644

369
198

217
215
696

23,273
801
142
254
394

325
349
110
146

173

184

141
248
125
134
1,079

887
1,403

59
159

253
343
421
236
446

447
941
189
539

270
212

1,580
1,437
Market

(Rs. cr.)
Capitalisation
ANNEXURE IX

10.77
0.84

2.97
0.82
0.85
2.14

0.33
1.46
0.49
3.30

1.41
2.77
1.32

1.58
0.92
2.12

100.00
2.99

0.93
3.44
0.61
1.09
1.69
1.50
0.47

1.40
0.63

0.74

0.61
1.06
0.54
0.79
0.57
4.64

0.25
1.01
6.03

4.04
1.16
3.81
0.81
2.32
0.68

1.09
1.92
1.47
1.81
0.91
1.92

6.79
6.17
(%)
Weightage

0.72
1.19

0.52
0.62

0.63

1.00
0.70
1.94
0.75

1.18
0.61
1.44

0.55
0.84

0.65
0.62
0.65
0.90
0.93

2.07
0.56
0.53
2.56
0.39
1.87

1.08
0.98

1.05

0.86
0.64
0.98
0.77
0.70
0.76
0.81

1.13
0.43
0.46
0.93
0.80
0.43
0.87

0.30

1.77
0.51
0.65
1.21
0.62
0.55

1.07
0.83
Beta

-
CNX NIFTY JUNIOR INDEX: SEPTEMBER 2001

R2

0.25
0.25

0.20
0.15

0.27

0.32
0.51

0.13
0.30

0.26

0.43
0.23
0.33
0.19
0.33
0.23
0.20

0.34
0.14

0.59
0.19
0.17
0.57
0.48

0.37

0.19
0.18
0.09
0.25
0.36

0.30
0.24
0.22
0.35
0.17
0.13
0.34
0.20
0.34
0.23

0.13

0.20
0.61
0.13
0.25
0.38
0.25
0.23
0.22
0.22

2. Volatility is the standard deviation of the daily returns for the period September 01, 2001 to September 28, 2001
(%)

3.35
4.72

2.30
2.94

2.68
2.64

3.36
8.22

2.93

2.75
5.12

4.01
4.70

4.93
3.23
10.33
2.94
3.51

3.66
2.99

1.57
3.15
1.69
4.26
3.30
8.15
2.84
2.88
2.55
6.46

3.19
2.63
4.23
5.63

3.60
5.22

8.30
2.47
3.74

4.95
3.27

6.11
2.89
2.76

6.67
6.26
3.84
3.62
3.53
5.10
2.55
Volatility
Average Daily

Web site : http : / / www.nseindia.com

(%)

(13.72)

0.02
6.50
(51.77)

(11.97)
(5.90)
(1.57)

(12.24)
(6.71)

(15.11)
(5.00)
(11.21)
(5.26)
(9.57)

(4.45)
(5.64)
(8.85)
(1.67)
(57.97)
(9.91)
(5.14)

(32.39)
(10.17)

(12.35)
(8.80)

(8.52)
(21.78)

(22.54)
(3.42)

(14.05)
(11.26)
(18.90)
(38.22)
(12.54)
(33.89)

(23.79)
(1.84)
(4.65)

17.49
(12.32)

(24.02)
(16.26)
(14.15)
(11.32)
(31.33)
(17.14)
(1.85)
(16.19)

(8.42)

(14.10)
(38.17)
Return
Monthly

affected as compared to the effect on the market as a whole. The coefficient of determination (R2) measures the strength of relationship between
1. Beta & R are calculated for the period October 1, 2000 to September 28, 2001. Beta measures the degree to which any portfolio of stocks is

40
ANNEXURE X
SETTLEMENT STATISTICS
Month/ No of Traded Delivered % of Turnover Delivered % of Delivered % of Demat Delivered % of Demat Short % of Unrecti- % of Funds- Settle-
Year Trades Quantity Quantity Delivered (Rs. Value Delivered Quantity Delivered Value in Delivered Delivery Short fied Bad Unrecti- Pay in ment

September 2001
(Lakh) (Lakh) (Lakh) Quantity cr.) (Rs. Value to in Demat Quantity Demat Value to (Aucti- Delivery Delivery fied Bad (Rs. cr.) Guar-
to Traded cr.) Total Mode to Total Mode Total oned to (Auctioned Delivery antee
Quantity Turnover (Lakh) Delivered (Rs. cr.) Delivered Quantity) Delivery Quantity) to Fund
Quantity Value (Lakh) (Lakh) Delivery (Rs. cr.)*
Nov 94-Mar 95 3 1,330 688 51.74 1,728 898 51.98 -- -- -- -- 6 0.85 1.76 0.26 300 --

1995-96 64 39,010 7,264 18.62 65,742 11,775 17.91 -- -- -- -- 179 2.46 32.17 0.44 3,258 --

1996-97 262 134,317 16,453 12.25 292,314 32,640 11.17 -- -- -- -- 382 2.32 66.25 0.40 7,212 --

1997-98 383 135,217 22,051 16.31 370,010 59,775 16.15 -- -- -- -- 333 1.51 72.90 0.33 10,827 --

1998-99 550 165,310 27,991 16.93 413,573 66,204 16.01 6,179 22.08 11,571 17.48 305 1.09 69.73 0.25 12,175 584

1999-2000 958 238,605 48,713 20.42 803,050 82,607 10.29 26,063 53.50 67,047 81.16 635 1.30 110 0.23 27,992 1,391

Apr-00 69 11,490 2,446 21.28 63,091 7,278 11.54 1,812 74.11 6,805 93.49 34 1.40 2.90 0.119 4,826 1,358

May-00 116 18,643 2,910 15.61 80,848 7,209 8.92 2,381 81.81 6,878 95.40 36 1.23 2.03 0.070 4,991 1,342

Jun-00 118 16,925 2,568 15.17 100,382 7,418 7.39 2,059 80.18 7,100 95.71 27 1.05 1.53 0.060 3,070 1,503

Jul-00 114 17,257 2,461 14.26 101,014 7,417 7.34 2,119 86.11 7,177 96.76 26 1.06 1.06 0.043 3,232 1,494

Aug-00 143 21,678 2,976 13.73 119,020 8,470 7.12 2,664 89.52 8,272 97.66 26 0.87 1.21 0.041 4,121 2,161

Sep-00 130 23,549 2,986 12.68 132,457 8,559 6.46 2,850 95.45 8,482 99.10 29 0.98 0.57 0.019 3,941 2,339

Oct-00 124 21,721 3,203 14.75 97,739 7,661 7.84 3,113 97.19 7,567 98.77 19 0.58 0.41 0.013 2,879 2,303

Nov-00 122 22,782 3,055 13.41 91,593 6,023 6.58 2,995 98.04 5,986 99.39 19 0.62 0.19 0.006 2,561 2,378

Dec-00 156 32,722 4,304 13.15 119,295 7,606 6.38 4,231 98.30 7,558 99.37 25 0.57 0.42 0.010 3,172 2,528

Jan-01 195 38,203 5,268 13.79 146,326 11,014 7.53 5,172 98.18 10,939 99.32 27 0.51 0.57 0.011 4,513 2,889

Feb-01 170 42,188 8,167 19.36 124,154 14,240 11.47 8,065 98.75 14,165 99.47 31 0.38 0.36 0.004 3,644 2,972

Mar-01 155 37,038 9,859 26.62 87,979 13,383 15.21 9,795 99.36 13,318 99.52 41 0.41 0.32 0.003 4,988 2,916

2000-2001 1,614 304,196 50,203 16.50 1,263,898 106,277 8.41 47,257 94.13 104,246 98.09 339 0.68 11.58 0.023 45,937 2,916

Apr-01 87 16,323 5,643 34.57 28,226 6,083 21.55 5,620 99.59 6,070 99.79 16 0.28 0.04 0.0008 1,915 2,751

May-01 155 27,764 6,428 23.15 51,835 7,371 14.22 6,405 99.64 7,353 99.76 15 0.24 0.02 0.0003 1,976 2,620

Jun-01 127 22,797 5,134 22.52 43,136 5,960 13.82 5,114 99.61 5,945 99.75 14 0.27 0.01 0.0002 1,626 2,409

Jul-01 97 13,149 2,971 22.59 29,092 3,721 12.79 2,964 99.76 3,717 99.89 21 0.70 0.002 0.0001 1,830 2,110

Aug-01 111 15,512 3,018 19.46 28,572 3,962 13.87 3,006 99.60 3,951 99.72 31 1.03 0.003 0.0001 1,847 2,102

Sep-01 124 16,554 3,136 18.94 33,718 3,933 11.66 3,124 99.62 3,931 99.95 16 0.51 0.000 0.0000 2,068 1,870
Web site : http : / / www.nseindia.com

* Balance at the end of period.

41
 ANNEXURE XI ANNEXURE XIII
BUSINESS GROWTH OF DERIVATIVES SEGMENT TOP 10 SECURITIES ON THE WDM SEGMENT: SEPTEMBER 2001
Month/ Year Index Futures Index Options Stock Options Total Average Security Type Security Name Issue Name No. of Trades Turnover (Rs. cr.) % of Turnover
Call Put Call Put Daily GS CG2012 11.03% 1,745 10,231 16.19
No. of Turnover No. of Notional No. of Notional No. of Notional No. of Notional No. of Turnover Turnover GS CG2008 11.40% 1,352 8,675 13.73
Contracts (Rs. cr.) Contracts Turnover Contracts Turnover Contracts Turnover Contracts Turnover Contracts (Rs. cr.) (Rs. cr.) GS CG2011A 11.50% 1,435 8,411 13.31
Traded Traded (Rs. cr.) Traded (Rs. cr. ) Traded (Rs. cr.) Traded (Rs. cr.) Traded
GS CG2012 9.40% 870 5,702 9.02
Jun-00 1,191 35.25 - - - - - - - - 1,191 35.25 2.35 GS CG2013 9.81% 831 5,217 8.25
Jul-00 3,783 108.48 - - - - - - - - 3,783 108.48 5.17 GS CG2004 12.50% 465 3,180 5.03
Aug-00 3,301 89.85 - - - - - - - - 3,301 89.85 4.08
GS CG2011A 9.39% 359 2,181 3.45
Sep-00 4,376 118.91 - - - - - - - - 4,376 118.91 5.95
GS CG2016 10.71% 213 1,584 2.51
Oct-00 6,388 152.85 - - - - - - - - 6,388 152.85 7.28
Nov-00 9,892 247.10 - - - - - - - - 9,892 247.10 11.23 GS CG2010 11.30% 213 1,330 2.10
Dec-00 9,208 237.02 - - - - - - - - 9,208 237.02 11.85 GS CG2002 11.15% 118 1,304 2.06
Jan-01 17,860 471.22 - - - - - - - - 17,860 471.22 21.42 Total of top ten securities 7,601 47,815 75.66
Feb-01 19,141 523.59 - - - - - - - - 19,141 523.59 26.18 Total 9,562 63,199 100.00
Mar-01 15,440 381.15 - - - - - - - - 15,440 381.15 18.15
Jun-00 to Mar-01 90,580 2,365.00 - - - - - - - - 90,580 2,365.00 11.59 ANNEXURE XIV
Apr-01 13,274 291.73 - - - - - - - - 13,274 291.73 15.35
May-01 10,048 230.46 - - - - - - - - 10,048 230.46 10.48
NSE MIBID/MIBOR RATES
Jun-01 26,805 590.24 5,232 118.53 3,429 76.60 - - - - 35,466 785.37 37.40 MONTH/ OVERNIGHT 14 DAY 1 MONTH RATE 3 MONTH RATE
Jul-01 60,644 1,308.65 8,613 190.83 6,221 135.23 13,082 290.16 4,746 105.72 93,306 2030.59 92.30
DATE AT 9.40 A.M. AT 11.30 A.M. AT 11.30 A.M. AT 11.30 A.M.
Aug-01 60,979 1,304.61 7,598 165.32 5,533 119.32 38,971 843.70 12,508 263.25 65,915 2696.20 128.39
Sep-01 154,298 2,857.05 12,188 243.19 8,262 168.65 64,344 1322.09 33,480 690.01 121,131 5280.99 264.05 MIBID MIBOR MIBID MIBOR MIBID MIBOR MIBID MIBOR
Note: 1. Notional Turnover = (Strike Price + Premium) % Quantity. 29-Apr-00 6.96 7.06 7.35 8.11 8.03 8.68 8.78 9.47
2. Index Futures, Index Options and Stock Options were introduced in June 2000, June 2001 and July 2001 respectively. 31-May-00 6.92 7.02 7.76 8.66 8.25 9.12 8.92 9.64
30-Jun-00 - - 9.80 11.25 9.71 10.92 9.78 11.13
31-Jul-00 8.20 8.33 9.14 10.11 9.62 10.49 10.28 11.11
ANNEXURE XII 31-Aug-00 13.94 14.31 13.02 14.33 12.54 13.61 11.58 12.67
30-Sep-00 10.10 10.28 10.29 11.23 10.55 11.49 10.75 11.76
BUSINESS GROWTH ON THE WDM SEGMENT 31-Oct-00 8.10 8.26 8.77 9.48 9.34 10.16 9.89 10.73
Month/Year Number of Turnover Average Daily Average Trade 30-Nov-00 7.98 8.06 8.68 9.33 9.12 9.82 9.73 10.54
Trades (Rs. cr.) Turnover (Rs. cr.) Size (Rs. cr.) 29-Dec-00 8.24 8.46 9.21 9.96 9.49 10.20 9.85 10.64
31-Jan-01 9.66 9.85 9.41 10.05 9.63 10.28 10.00 10.57
Jun 94 - Mar 95 1,021 6,781 35 6.64 28-Feb-01 7.71 7.84 8.11 8.80 8.67 9.38 9.40 10.10
1995-96 2,991 11,868 41 3.97 31-Mar-01 10.22 12.18 9.03 9.89 9.08 9.86 9.26 10.25
1996-97 7,804 42,278 145 5.42 30-Apr-01 7.25 7.39 7.55 8.33 8.15 8.83 8.83 9.54
1997-98 16,821 111,263 385 6.61 31-May-01 6.79 6.95 7.40 8.04 7.89 8.57 8.41 9.08
29-Jun-01 7.20 7.34 7.25 7.85 7.69 8.41 8.16 8.87
1998-99 16,092 105,469 365 6.55
31-Jul-01 6.91 7.04 7.29 7.88 7.58 8.17 7.99 8.66
1999-2000 46,987 304,216 1,035 6.47 31-Aug-01 6.92 7.03 7.01 7.40 7.34 7.82 7.82 8.32
Apr-00 4,978 34,183 1,709 6.87 1-Sep-01 6.83 6.97 7.00 7.33 7.35 7.83 7.81 8.33
May-00 4,653 32,875 1,315 7.07 3-Sep-01 6.82 6.95 7.06 7.44 7.38 7.83 7.81 8.27
Jun-00 2,771 17,445 698 6.30 4-Sep-01 6.77 6.90 7.06 7.48 7.33 7.91 7.83 8.39
5-Sep-01 6.81 6.93 7.00 7.50 7.31 7.93 7.74 8.32
Jul-00 4,275 28,311 1,089 6.62
6-Sep-01 6.91 7.02 7.02 7.44 7.26 7.84 7.71 8.26
Aug-00 2,682 16,440 658 6.13 7-Sep-01 7.09 7.25 7.06 7.37 7.32 7.75 7.80 8.27
Sep-00 3,404 21,419 857 6.29 8-Sep-01 7.01 7.15 7.05 7.43 7.28 7.77 7.76 8.28
Oct-00 3,910 25,019 1,137 6.40 10-Sep-01 6.98 7.09 7.14 7.54 7.38 7.84 7.73 8.27
Nov-00 5,519 36,285 1,451 6.57 11-Sep-01 7.02 7.14 7.11 7.56 7.36 7.92 7.74 8.35
12-Sep-01 7.08 7.24 7.11 7.57 7.40 7.92 7.83 8.37
Dec-00 6,092 38,222 1,593 6.27
13-Sep-01 7.26 7.45 7.20 7.68 7.40 7.98 7.87 8.44
Jan-01 10,095 66,400 2,554 6.58 14-Sep-01 7.20 7.38 7.23 7.73 7.49 8.08 7.91 8.49
Feb-01 9,080 63,212 2,873 6.96 15-Sep-01 7.04 7.18 7.25 7.76 7.57 8.15 7.96 8.53
Mar-01 7,011 48,771 2,032 6.96 17-Sep-01 7.14 7.37 7.33 7.91 7.73 8.30 8.07 8.72
2000-2001 64,470 428,582 1,483 6.65 18-Sep-01 7.12 7.27 7.29 7.87 7.92 8.60 8.30 8.96
19-Sep-01 7.00 7.13 7.35 7.88 8.02 8.56 8.30 8.86
Apr-01 6,606 46,285 2,314 7.01
20-Sep-01 7.54 7.87 7.44 8.06 8.14 8.69 8.39 9.00
May-01 12,220 83,982 3,359 6.87 21-Sep-01 9.60 10.66 7.93 8.76 8.45 9.20 8.50 9.36
Jun-01 11,936 82,329 3,430 6.89 22-Sep-01 7.02 7.24 7.47 8.09 8.15 8.80 8.50 9.11
Jul-01 12,575 84,629 3,255 6.73 24-Sep-01 7.02 7.18 7.46 7.93 7.93 8.49 8.25 8.84
Aug-01 11,622 75,784 3,158 6.52 25-Sep-01 7.09 7.24 7.56 8.08 7.98 8.54 8.29 8.89
26-Sep-01 7.00 7.15 7.49 7.99 7.99 8.58 8.20 8.78
Sep-01 9,526 63,199 2,528 6.63
27-Sep-01 7.00 7.11 7.49 8.03 8.07 8.63 8.30 8.85
28-Sep-01 7.77 8.21 7.52 8.14 8.07 8.70 8.33 8.98

September 2001 Web site : http : / / www.nseindia.com 42 September 2001 Web site : http : / / www.nseindia.com 43
 ANNEXURE XV ANNEXURE XVI
INVESTOR GRIEVANCES CELL STATUS REPORT OF ARBITRATION MATTERS AS ON SEPTEMBER 30, 2001
Status report: September 2001 YEAR WISE STATISTICS OF CASES RESOLVED/PENDING
(No. of cases)
I) Complaints against Trading Members

Sl. No. Details of complaints April 2001 August 2001 September 2001 Calendar Year Total No. of Cases Withdrawn Awards Pending

1 No. of new complaints received during the month 141 58 61

1998 164 2 161 1
2 No. of complaints carried forward from earlier month 108 326 348
1999 : CM 153 5 144 4
3 No. of complaints resolved 18 36 48

4 No. of complaints pending at the end of the month 231 348 361 1999 : WDM 2 0 1 1

2000 : CM 149 5 137 7

List of Trading Members with more than 5 complaints pending for more than 2 months

Sl. No. Name of the Trading Member No. of Complaints on September 30, 2001 Remarks 2000 : WDM 1 0 0 1

1 Bhavesh Dhirajlal stock Broking Co. Ltd 103 Expelled 2001 : CM 237 13 87 137

2 Century Consultants Ltd. 83 Expelled

2001 : WDM 0 0 0 0
3 Indraprastha Holdings Ltd. 7 Suspended
Total 706 25 530 151

II) Complaints against Companies traded on the Exchange

STAGE-WISE BREAK-UP OF CASES
Sl. No. Details of Complaints April 2001 August 2001 September 2001 (No. of cases)

1 No. of new complaints received 35 51 83 Regions On hand Received Awards Awards Scheduled Awaiting Pending
at the during passed / awaited for response for
2 No. of complaints carried forward from earlier month 359 331 313
beginning the cases hearing from more than
3 No. of complaints resolved during the month 61 69 58 of the month withdrawn respondents 4 months
month during the
4 No. of complaints pending at the end of the month 333 313 338 month

Mumbai : CM 68 34 12 14 46 30 25
List of Companies with more than 5 complaints pending for more than 2 months
: WDM 2 0 0 0 0 2 2
Sl. No. Name of the Trading Member No. of Complaints on September 30, 2001 Remarks

1. Vatsa Corporation Ltd. 57 Suspended Delhi 18 0 1 4 11 2 2

2. Sterlite Industries India Ltd. 8 -- Calcutta 1 0 0 0 1 0 0

3. Essar Oil Ltd. 7 --
Chennai 49 9 17 8 18 15 10
4. Cauvary Software Engineering Systems Ltd. 6 --

5. Enkay Texofood Industries Ltd. 6 Suspended Total 138 43 30 26 76 49 48

September 2001 Web site : http : / / www.nseindia.com 44 September 2001 Web site : http : / / www.nseindia.com 45
 ANNEXURE XVII
LIST OF CITIES AND VSATs AT THE END OF THE SEPTEMBER 2001
STATE

Andhra Pradesh
LIST OF TOWNS AND CITIES

Anantpur, Amalapuram, Adoni, Bhimavaram, Bhadrachalam, Chittor, Chirala, Cuddapah,

Dharamavaram, Eluru, Gudiwada, Gujuwaka, Guntur, Guntakal, Hindupur, *Hyderabad,
Kasibugga, Kakinada, Kamareddy, Kandukur, Karimnagar, Khammam, Koratla, Kothagudem,
Kurnool, Kukatpally, Mancherial, Mandapeth, Markapur, Madanpalle**, Mirialguda, Nalgonda,
Nandyal, Narsaraopeta, Narsapur, Nellore, Nirmal, Nizamabad, Ongole, Palakol, Parvatipuram,
Piduguralla, Proddatur, Rajamundry, Ramagandum, Secundarabad, Siddhipet, *Srikakulam, Suryapet,
Tanuku, Tenali, Tirupathi, Tuni, Vijayawada, Vizag, Vizianagaram, Warangal.
NO. OF
CITIES
57

4
NO. OF
VSATs
237

11
N S E
Research
Assam *Guwahati, Jorhat, Silchar, Tinsukia.
Bihar Begusarai, Bhagalpur, Jamshedpur, Muzzaffarpur,*Patna. 5 26
Chhattisgarh
Delhi
Bilaspur, Korba, Raipur, Raigarh.
*Delhi.
4
1
11
451
Initiative
Goa Panaji. 1 6 An opportunity to be at the cutting edge of the
Gujarat *Ahmedabad, Amreli, Anand, *Baroda, Bharuch, Bhavnagar, Bhuj, Botad, Dahod, Deesa, Dhoraji, 37 234 securities market in India
Dhrangadhra, Ghandhidham, Gandhinagar, Jamnagar, Junagadh, Kadi, Kalol, Mahuva, Mandvi,
Mehsana, Morbi, Nadiad, Navsari, Okha, Patan, Petlad, Porabnder, *Rajkot, Savarkundla, Surat,
Surendranagar, Unjha, Veraval, Vapi, Una, Valsad.
National Stock Exchange of India Limited (NSE) Please visit web site http://www.nseindia.com/
Haryana Ambala , Bhiwani, Faridabad, Fatehabad, Ganaur, Gurgaon, Gohana**, Hissar, Jagadhri, Jind, 21 78
Kaithal, Karnal, Kurukshetra, Panipat, Panchkula, Pehowa, Rewari, Rohtak, Sirsa, Sonepat, Yamuna invites research proposals with a view to developing research/researchindex.htm for a detailed list of
Nagar. information base and insight in to the working of issues which are considered highly relevant to the
Himachal Pradesh Parwanoo, Shimla. 2 3 securities market in India. NSE Research Initiative.
Jammu & Kashmir Jammu, Srinagar. 2 11 Objective : The objective of the NSE Research Process : On receipt of a proposal it would be sent
Jharkhand Bokaro, Dhanbad,Deogarh, Dumka, Giridih, Hazaribaug, Ranchi. 7 17 Initiative is to foster research which can support and to two referees for their opinion on its methodology
Karnataka *Bangalore, Bellary, Belgaum, Bijapur, Chickmagalur, Dandeli, Hubli, Hassan, Madikeri, *Mangalore, 19 116 facilitate (a) stock exchanges to design market micro and relevance. If found suitable, the research would
Manipal, Mulky, Mysore, Sagar, Sirisi, Shimoga, Sullia, Tumkur, Udupi. - structure, (b) participants to frame their strategies commence and the first tranche of Rs. 20,000 would
Kerala Alappuzha, Angamaly, Attinagal, Aluva(Alwaye), Calicut, Changancherry, Chalakudy, Eraviperur, 42 112 in the market place, (c) regulators to frame be released to the researcher. He would be required
*Kochi, Ernakulam, Guruvaryur, Irinjalakuda, Kalpetta, Kayamkulam, Kanjirapally, Kannur,
Kasaragode, Kodungallore, Kozhencherry, Kollam, Kothamangalam, Kottayam, Mannarkkad, regulations, (d) policy makers to formulate policy and to produce the research paper in three months and
Mattancherry, Mavelikara, Muddakayam, Muvattupuzha, Ottapalam, Pala, Palakkad, Pathanamthitta, (e) broaden the horizon of knowledge about the make a presentation in a seminar at NSE. He may
Palarivattom, Payannu, Ranni, Sultan Bathery, Thalassery, Thiruvalla, Thodupuzha, Trichur,
Thiruvananthapuram, Tripunithura, Vatanapalii. securities market. revise his paper on the basis of the feedback
received. The revised paper would be sent for a
Madhya Pradesh Bhatapara, Bhilai, Bhopal, **Bhuranpur, Chhindwada,Gwalior, *Indore, Jabalpur, Jhabua, Katni, 20 82 Broad Areas of Research : Research proposals
Morena, Nagda, Neemuch, Ratlam, Rewa, Sagar, Satna, Sheopur, Ujjain, Piparia. detailed refereeing. If the work is acceptable the
on issues that have a bearing on the securities
Maharashtra Aurangabad, Ahmednagar, Akola, Amravati, Beed, Bhusawal,Chandrapur, Dhule, Jalgaon, Kolhapur, 18 835
second and final tranche of Rs. 20,000 would be
market in India are welcome. Proposals may be in
Kopargaon, Malegaon, *Mumbai, Nagpur, Nashik, *Pune, Satara, Sangli. released. Accepted papers would be disseminated
any area including, Market Micro-structure and
Orissa Berhampur,*Bhubaneshwar, Cuttack, Rayagada **Rourkela, Sambalpur . 6 13 on the NSE web site, along with complete associated
Market Design, Information Infrastructure, Market
Punjab Abohar, Amritsar, Betala, Bhatinda, Barnal, Budhlada, Chandigarh, Faridkot, Ferozepur, Gurdaspur, materials (i.e. proposal, referee reports, chronology
27 111 Efficiency, Asset Pricing, Fund Management,
Gobinagarh, Hoshiyarpur, Jalandhar, Kapurthala, Kotakpura, Khanna, *Ludhiana, Mandi Mansa, of dates, etc.) NSE would be free to use or
Moga, Mohali, Muktsar, Nabha, Pathankot, Patiala, Rajpura, Sangrur, Threekay. Cor porate Finance, Fixed Income Market,
redistribute this work in any manner, while fully
Rajasthan Ajmer, Alwar, Beawar, Bhadra, Bharatpur, Bhilwara, Bikaner,Chirawa, Chittorgarh, Dungarpur, Derivatives, Risk Measurement and Management,
26 113 acknowledging the authorship.
Gulabpura, *Jaipur, Jodhpur, Kota, Hindaun**Hanumangarh, Makrana, Nathdwara, Newai, Policies and Regulations, Investor Protection, etc.
Pratapgarh, Sikar**, Suratgarh, Sujangarh, Sri Ganganagar, Sadar Sahar, Udaipur.
For further details log in to www.nseindia.com or
Tamil Nadu *Chennai, Chidambaram, *Coimbatore, Erode, Gudiyatham, Gobichettipalayam, Hosur, Karaikal, Proposal : Brief and focussed research proposals
27 188 e-mail research@nse.co.in.
Karaikudi, Karur, Kumbakonam, Madurai, Nagercoil, Namakkal, Neyveli, Rajapalayam, Salem, of about 1000-1500 words may be
Sivakasi, Thanjavur, Tirunelveli, Tirupur, Trichy, Tuticorin,Theni, Virudhunagar, Vellore, Ranipeth.
e-mailed on research@nse.co.in. The proposal
Uttar Pradesh Agra, Aligarh, Allahabad, Banda, Bareilly, Bijnore, Bulandshahar, Chandausi, Dhampur, Faizabad, 42 206 should present a well-posed issue and a research
Firozabad, Gorakhphur, Ghaziabad, Gujrala, Haldwani, Hapur, Jaunpur, Jhansi, Jagdisdhpur,
Kasganj, Kashipur, Kotdwara, *Kanpur, Khatauli, Lucknow, Mathura, Meerut, Moradabad, strategy through which this issue will be addressed.
Mussoorie, Muzzafarnagar, Najibabad, Modinagar, Rampur, Rishikesh, Roorkee, Rudrapur, The proposal may seek to address specific issues
Sahibabad, Saharanpur, Shahjahanpur, Shikohabad, Unnao,Varanasi.
such as, (a) How does inclusion or exclusion from
Uttaranchal Dehradun, Haridwar. 2 11 THE NATIONAL STOCK EXCHANGE OF INDIA LTD.
the market index impact on the liquidity, stock price
West Bengal Asansol, *Calcutta, Coochbehar, Durgapur, Howrah, Jalpaiguri, Raniganj**, Siliguri, Purulia. Exchange Plaza, Bandra Kurla Complex,
9 218 and cost of capital for firms? (b) How should no- Bandra (East), Mumbai - 400 051.
Union Territory Pondicherry. 1 4 arbitrage models be calibrated on the Indian fixed Tel. : 659 8100 - 114 • Fax : 659 8120
Total 380 3,094 income market, and how they can be used to value E-mail : research@nse.co.in
* Indicates cities which have a Regional Stock Exchange. options on interest rates?
** Cities activated in September 2001.

September 2001 Web site : http : / / www.nseindia.com 46 September 2001 Web site : http : / / www.nseindia.com 47
 EXCHANGE PLAZA

NSE - Branch Offices

AHMEDABAD KOLKATA CHENNAI

406 Sakar II, Near Ellis Bridge, Ideal Plaza, 11/1, Sarat Bose Road, Lakshmineela Ritechoice Chamber 5,
Ahmedabad 380 006. Kolkata 700 020. Bazullah Rd., T. Nagar, Chennai - 600 017.
Tel No: (079) 658 0212/ 658 0213. Tel No: (033) 280 1202-05, 280 5950-55. Tel No: (044) 824 1723 / 24 / 25
Fax No: (079) 657 6123. Fax No: (033) 240 9783, 280 5957. Fax No: (044) 824 1721.

DELHI HYDERABAD PUNE

"Thapar House" Western Wing,
Mezzanine Floor, Janpath Lane,
124 Janpath, New Delhi 110 001.
Tel No: (011) 3344313 to 3344327.
Fax No: (011) 3366658.
8-2-677/A/3/, Road No. 12,
Banjara Hills, Hyderabad: 500034.
Tel No: (040) 332 4880/ 4883.
Fax No: (040) 332 4632.
Mantri Centre, 928, F.C. Road,
Pune 411 004.
Tel No: (020) 5674061-69, 5672184,
5672187.
Fax No: (020) 5671551.

NATIONAL STOCK EXCHANGE OF INDIA LIMITED

Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051.
• Tel. : 659 8100 - 114 • Fax : 659 8120 • e-mail address: postmaster@nse.co.in

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