Professional Documents
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PROJECT REPORT ON
CERTIFICATE
This is to certify that SHEKHAR Y. MAHALE Bonafied Student of the Bachelor of Business Administration (BBA) course, Specialization in FINANCIAL MANAGEMENT, session 2009-2010, of the KAMALA NEHRU
MAHAVIDYALAYA, NAGPUR. The candidate has worked under the supervision of PROF. SANDESH TITRE and has satisfactory conducted project work for not less than one academic session. The project submitted by him is his own work and is
complete so as to warrant its presentation for examination. This project work entitled A GENERAL STUDY OF INDIAN SHARE MARKET Which is in partial fulfillment requirement for the above course, is being forwarded to
SANDESH TITRE
DR.A. K. SHENDE
(PROJECT GUIDE )
( PRINCIPAL)
DECLARATION
I SHEKHAR Y. MAHALE here by declare that with the exception of the suggestion and guidance received from my supervisor a this p roject titled A GENERAL STUDY OF INDIA SHARE MARKET is my original work. This
dissertation as one, which is substantially the same as this has not been submitted by me for any other examination of this university or any other university.
Nagpur Date: -
ACKNOWLEDGEMENT
This project is the outcome of the help and encouragement provided by all faculty members, who were a continuous source of inspiration and who guided me in all my endeavors. I take this opportunity to thank all those who were a great su pport behind this project and without their unconditional support this project on this paper would not have been completed. First of all I would like to thank my parents for giving me back -up and full support in completing this project. My heart felt gratitude to Prof Head of Department, KAMLA NEHRU
MAHAVIDYALAYA Nagpur for making available all the resources. I am indebted to PROF. SANDESH G.TITRE my chief guide without whose support and timely suggestion this report would not have been completed. I express my sincere thanks to other staff members of my institute who directly or indirectly helped me in preparation of my project. Last but not least I would like to thank all those who are not mentioned, but whose contribution has been instrumental towards completion on of this project. SHEKHAR Y. MAHALE (BBA Final year)
INDEX
Serial no. 1 Introduction 2 Research Methodology 3 Hypothesis 4 Data collection 5 Data Analysis 6 Conclusion
Chapters
Page No.
Bibliography
Chapter 1 introduction
purchase or sell their share of business as and they wished to do so. This implies that ownership in business has to be broken up into a larger number of small units, such that each unit may be independently & easily bought and sold without hampering the business activity as such. Also, such breaking of business ownership would help mobilize small savings in the economy into entrepreneurial ventures. This end is achieved in a modern business through the mechanism of shares.
What is a share?
A share represents the smallest recognized fraction of ownership in a publicly held business. Each such fraction of ownership is represented in the form of a certificate known as a share certificate. The breaking up of total ownership of a business into small fragments, each fragment represented by a share certificate, enables them to be easily bought and sold.
ownerships of companies. And for that very reason, activities relating to stock exchanges are also appropriately enough, known as stock market or security market. Also a stock exchange is distinguished by a specific locality and characteristics of its own; mostly a stock exchange is also distinguished by a physical location and characteristics of its own. In fact, according to H.T.Parekh, the earliest location of the Bombay Stock Exchange, which for a long period was known as the native share and stock brokers association , was probably under a tree around 1870! The stock exchanges are the exclusive centers for the trading of securities. The regulatory framework encourages this by virtually banning trading of securities outside exchanges. Until recently, the area of operation/ jurisdiction of exchange were specified at the time of its recognition, which in effect precluded competition among the exchanges. These are called regional exchanges. In order to provide an opportunity to investors to invest/ trade in the securities of local companies, it is mandatory foe the companies, wishing to list their securities, to list on the regional stock exchange nearest to their registered office
Exchange and other such instruments of short-term maturities (i.e. not exceeding 1 year with regard to the original maturity)
B) CAPITAL MARKET
Capital market is a market for long-term debt and equity shares. In this market, the capital funds comprising of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as organized markets like stock exchanges.
Capital market can be divided into Primary and Secondary Markets. A) PRIMARY MARKET B) SECONDARY MARKET A) PRIMARY MARKET
In the primary market, securities are offered to public for subscription for the purpose of raising capital or fund. Secondary market is an equity trading avenue in which already existing/pre- issued securities are traded amongst investors. Secondary market could be either auction or dealer market. While stock exchange is the part of an auction market, Over-the-Counter (OTC) is a part of the dealer market. In addition to the traditional sources of capital from family and friends, startup firms are created and nurtured by Venture Capital Funds and Private Equity Funds. According to the Indian Venture Capital Association Yearbook (2003), investments of $881million were injected into 80 companies in 2002, and investments of
$470 million were injected into 56 companies in 2003. The firms which received these investments wiredrawn from a wide range of industries, including finance, consumer goods and health. The growth of the venture
capital and private equity mechanisms in India is critically linked to their track record for successful exits. Investments by these funds only commenced in recent years, and we are seeing a rapid buildup in a full range of channels for exit, with a mix of profitable and unprofitable outcomes. This success with Exit suggests that investors will allocate increased resources to venture funds and private equity funds operating in India, who will (in turn) be able to fund the creation of new firms.
B) SECONDARY MARKET
Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in the secondary market. Secondary market comprises of equity markets and the debt markets. For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduit by facilitating value-enhancing control activities, enabling implementation of incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions.
OBJECTIVE OF STUDY
DATA IS PRIMARILY OF TWO KINDS:a) Primary data b) Secondary Data a) Primary data:
Primary collection Methods can also be classified as. a) Observation, b) Experimentation c) Simulation d) Projective technique. Secondary Data Secondary data may be defined as data that has been collected earlier for some purpose other than the purpose of the present study. Any data that is available prior to the commencement of the research project is secondary data & therefore secondary data is also called as historical data. Secondary data collection saves valuable time efforts & Money.
MEANING OF RESEARCH:Research as a scientific and systematic search for pertinent information on a specific topic. In fact, research is an art of scientific investigation. It is an academic activity as such the term should be used in a technical sense. Research is, thus an original contribution to the existing stock of knowledge making for its advancement .it is a per-suite of truth with the help of study, observation, comparison and experiment. In short, the search for knowledge through objective & systematic method of finding solution to a problem is Research .
DEFINATION:1) According to Advanced Learner s Dictionary, A research is a careful investigation or inquiry especially through search for new facts in any branch of knowledge . 2) According to Clifford Woody, Research comprises defining and redefining problems, formulating hypothesis or suggested solutions; collecting and evaluating data; making deduction and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis .
TYPES OF RESEARCH:1) 2) 3) 4) 5) Descriptive vs. Analytical Applied vs. Fundamental Quantitative vs. qualitative Conceptual vs. Empirical Some other types of research.
1) Descriptive vs. Analytical:Descriptive research includes surveys and fact-finding enquiries of different kinds. The main feature of this method is that the research has no control over the variables; he can only report what has happened or what happening. For Eg: - Survey method of all kinds, including comparative and co relational methods.
2) Applied vs. Fundamental:Research can either be applied (or action) research or fundamental (to basis or pure) research. Applied research aims at finding a solution for an immediate problem facing a society or an industrial/business organization. For Eg: - Research studies, concerning human behavior carried on with a view to make generalizations about human behavior.
3) Quantitative vs. Qualitative:Quantitative research is based on the measurement of quantity or amount. It is applicable to phenomena that can be expressed in terms of quantity. Qualitative research, on the other hand, is concerned with qualitative phenomenon.
4) Conceptual vs. Empirical:Conceptual research is that related to some abstract idea(s) or theory. It is generally used by philosophers and thinkers to develop new concepts. On the other hand, empirical research relies on experience or observation alone. It is data-based research.
5) Some other types of research:i. ii. iii. iv. v. One time research or long term research Field setting research or laboratory research Clinical or diagnostic research Historical research Conclusion oriented research
RESEARCH PROCESS:Following are the steps which are guideline regarding the research process:-
a) Formulating the research problem:There are two types of research problem:For e.g.: - Those which relate to state of nature and those which relate to relationships between variables. The formulation of a general topic into a specific research problem, thus constitutes the first step in a scientific enquiry, essentially two steps are involved in formulating the research problem1) Understanding the research problem thoroughly. 2) Rephrasing the same into meaningful terms from an analytical point of view.
b) Extensive literature survey:Once the problem is formulated, a brief summary of it should be written down. It is compulsory for a research worker writing a thesis for a Ph.D. degree to write a synopsis of the topic & submit it to the Research Board for approval. For this purpose, the abstracting and indexing journals,
conference proceedings, government reports, books etc. must be tapped depending on the nature of the problem. A good library will be a great help to the researcher at this stage.
c) Development of working hypotheses:Working hypothesis is tentative assumption made in order to draw out and test its logical or empirical consequences. As such manner in which research hypotheses are developed is particularly important since they provide the focal point for research. Hypothesis should be very specific and limited to the piece of research in hand because it has to be tested. It sharpens his thinking and focuses attention on the more important facets of the problem. It also indicates the type of data required and the type of methods of data analysis to be used.
d) Preparing the research design:The research problem having been formulated in clear cut terms, the researcher will be required to prepare a research design, i.e. he will have to state the conceptual structure within which research would be conducted. The preparation of such a design facilitates research to be as efficient as possible yielding maximal information. In other words, the function of research design is to provide for the collection of relevant evidence with minimal expenditure of efforts, time and money.
e) Determining sample design:The researcher must decide the way of selecting a sample or what is popularly known as the sample design. In other words, a sample is a definite plan determined before any data are actually collected for obtaining a sample from a given population. Probability samples are
those based on simple random sampling, systematic sampling, stratified sampling, cluster/areas sampling whereas non-probability samples are those based on convenience sampling, judgment sampling and quota sampling techniques.
g) Execution of the project:Execution of the project is very important steps in the research process. If the execution of the project proceeds on correct lines, the data to be collected would be adequate and depenable7. The researcher should see that the project is executed in a systematic manner and time. If the survey is to be conducted by a means of structured questionnaires, data can be readily machine-processed. If some of the respondents do not cooperate, some suitable methods should be designed to tackle this problem.
h) Analysis of data:After the data have been collected, the researcher turns to the task of analyzing them. The analysis of data requires a number of closely related operations such as establishment of categories, the application of these categories to raw data through coding, tabulation and them drawing statistical inferences. Thus, researcher should classify the raw data into some purposeful and usable categories. Editing is the procedure that improves the quality of the data for coding. With coding the stage is ready for tabulation. Tabulation is a part of technical procedure where in the classified data are put in the form of tables.
i) Hypothesis testing:After analyzing the data as stated above, the researcher is in a position to test hypotheses. Various tests, such as Chi square test, t-test, have been developed by the statisticians for the purpose. The hypothesis may be tested through the use of one or more of such test, depending upon the nature and object of the research inquiry. Hypothesis-testing will result in either accepting the hypothesis or in rejecting it.
j) Generalization and interpretation:If a hypothesis is tested and upheld several time, it may be possible for the researcher to arrive at a generalization, i.e. to build a theory. If the researcher had no hypothesis to start with, he might seek to explain his findings on the basis of some theory. It is known as interpretation.
K)
Preparation of the
1) Descriptive vs. Analytical:2) Applied vs. Fundamental:3) Quantitative vs. Qualitative:4) Conceptual vs. Empirical:5) Some other types of research:-
RESEARCH PROCESS:a)
b)
c) d) e) g) h) i) j) K)
Development of working hypotheses:Preparing the research design:Determining sample design:Execution of the project:Analysis of data:Hypothesis testing:Generalization and interpretation:Preparation of the report or the thesis:-
1. The Preliminary Pages:Finally, the researcher has to prepare the report of what has been done by him. Writing of report must be done with great care keeping in view the following1. The Preliminary Pages. 2. The Main Text. 3. The End Matter.
1. The Preliminary Pages:In this case the report should carry title and depth followed by acknowledgement and foreword. Then there should be a table of content followed by a list of tables and list of graphs and charts, if any, give in the report.
2. The main Text:The main text of the report should have the following partsa) Introduction It should contain a clear statement of the objective of the research and an explanation of the methodology adopted in accomplishing the research. b) Summary of findings After introduction there would appear a statement of findings and recommendation in non-technical language. c) Main Report The main body of the report should be presented in logical sequence. d) Conclusion Towards the end of the main text, researcher should again put down the results of his research clearly and precisely. In fact, it is final summing up.
Bombay stock exchange National stock exchange Nse family Listings of securities Membership administration Dematerialization Investment Broker and sub-broker Auction
wide reach with a presence in 417 cities and towns of India. The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth. The Exchange provides an efficient and transparent market for trading in equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietary system of the Exchange and is BS 7799-2-2002 certified. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified. Bombay Stock Exchange Limited (BSE) which was founded in 1875 with six brokers has now grown into a giant institution with over 874 registered Broker-Members spread over 380 cities across the country. Today, BSE's Wide Area Network (WAN) connecting over 8000 BSE Online Trading (BOLT) System Trader Work Stations (TWS) is one of the largest of its kind in the country. With a view to provide efficient and integrated services to the investing public through the members and their associates in the operations pertaining to the Exchange, Bombay Stock Exchange Limited (BSE) has set up a unique Member Services and Development to attend to the problems of the Broker-Members. Member Services and Development Department is the single point interface for interacting with the Exchange Administration to address to Members' issues. The Department takes care of various problems and constraints faced by the Members in various products such as Cash, Derivatives, Internet Trading, and Processes such as Trading, Technology, Clearing and Settlement, Surveillance and Inspection, Membership, Training, Corporate Information, etc
VISION OF BSE
Emerge as the premier Indian stock exchange by Establishing global benchmarks"
OBJECTIVES OF BSE
The BSE SENSEX is the benchmark index with wide acceptance among individual investors, institutional investors, foreign investors, foreign investors and fund managers. The objectives of the index are:
COMMODITY EXCHANGES
The three exchanges are: National Commodity & Derivatives Exchange Limited (NCDEX) 1. Multi Commodity Exchange of India Limited (MCX) 3. National Multi-Commodity Exchange of India Limited (NMCEIL)
All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India.
online trading, clearing and settlement operations for commodity futures markets across the country. MCX started offering trade in November 2003 and has built strategic alliances with Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of India, Pulses Importers Association and Shetkari Sanghatana.
Capital market reforms in India have outstripped the process of liberalization in most other sectors of the economy. However, the creation of an independent capital market regulator was the initiation of this reform process. After the formation of the Securities Market regulator, the Securities and Exchange Board of India (SEBI), attention were drawn towards the inefficiencies of the bourses and the need was felt for better regulation, discipline and accountability. A Committee recommended the creation of a 2nd stock exchange in Mumbai called the "National Stock Exchange". The Committee suggested the formation of an exchange which would provide investors across the country a single, screen based trading platform, operated through a VSAT network. It was on this recommendation that setting up of NSE as a technology driven exchange was conceptualized. NSE has set up its trading system as a nation-wide, fully automated screen based trading system. It has written for itself the mandate to create a world-class exchange and use it as an instrument of change for the industry as a whole through competitive pressure. NSE was incorporated in 1992 and was given recognition as a stock exchange in April 1993. It started operations in June 1994, with trading on the Wholesale Debt Market Segment. Subsequently it launched the Capital Market Segment in November 1994 as a trading platform for equities and the Futures and Options Segment in June 2000 for various derivative instruments.
OBJECTIVES OF NSE
Establishing a nationwide trading facility for all types of securities; Ensuring equal access to investors all over the country through an appropriate communication network; Providing a fair, efficient and transparent securities market using electronic trading system; Enabling shorter settlement cycles and book entry settlements; and Meeting international benchmarks and standards. NSE has been able to take the stock market to the doorsteps of the investors. The technology has been harnessed to deliver the services to the investors across the country at the cheapest possible cost. It provides a nation-wide, screen-based, automated trading system, with a high degree of transparency and equal access to investors irrespective of geographical location. The high level of information dissemination through on-line system has helped in integrating retail investors on a nation-wide basis. The standards set by the exchange in terms of market practices, products, technology and service standards have become industry benchmarks and are being replicated by other market participants. Within a very short span of time, NSE has been able to achieve all the objectives for which it was set up. It has been playing a leading role as a change agent in transforming the Indian Capital Markets to its present form.
The Exchange provides trading in 3 different segments viz. Wholesale debt market (WDM) Capital market (CM) segment and The futures & options (F&O) segment.
NSE started trading in the equities segment (Capital Market segment) on November 3, 1994 and within a short span of 1 year became the largest exchange in India in terms of volumes transacted. The Equities section provides you with an insight into the equities segment of NSE and also provides real-time quotes and statistics of the equities market. In-depth information regarding listing of securities, trading systems & processes, clearing and settlement, risk management, trading statistics etc are available here.
NSE FAMILY
NSCCL
National Securities Clearing Corporation Ltd. (NSCCL), a wholly-owned subsidiary of NSE, was incorporated in August 1995 and commenced clearing operations in April 1996. It was the first clearing corporation in the country to provide notation/settlement guarantee that revolutionized the entire concept of settlement system in India. It was set up to bring and 9 sustain confidence in clearing and settlement of securities; to promote and maintain short and consistent settlement cycles; to provide counter-party Risk guarantee, and to operate a tight risk containment system. It carries out the clearing and settlement of the trades executed in the equities and derivatives segments of the NSE. It operates a welldefined settlement cycle and there are no deviations or deferments from this cycle. It aggregates trades over a trading period T, nets the positions to determine the liabilities of members and ensures movement of funds and securities to meet respective liabilities. It also operates a Subsidiary General Ledger (SGL) for settling trades in government securities for its constituents. It has been managing clearing and settlement functions since its inception without a Single failure or clubbing of settlements. It assumes the counter-party risk of each member and guarantees financial settlement. It has tied up with 10 Clearing Banks viz., Canara Bank, HDFC Bank, IndusInd Bank, ICICI Bank, UTI Bank, Bank of India, IDBI Bank and Standard Chartered Bank for funds settlement while it has direct connectivity with depositories for settlement of securities. It has also initiated a working capital facility in association with the clearing banks that helps clearing members to meet their working capital requirements. Any clearing bank interested in utilizing this facility has to enter into an
agreement with NSCCL and with the clearing member. NSCCL has also introduced the facility of direct payout to clients account on both the depositories. It ascertains from each clearing member, the beneficiary account details of their respective clients who are due to receive pay out of securities. It has provided its members with a front-end for creating the file through which the information is provided to NSCCL. Based on the information received from members, it sends payout instructions to the depositories, so that the client receives the pay out of securities directly to their accounts on the pay-out day. NSCCL currently settles trades under T+2 rolling settlement. It has the credit of continuously upgrading the clearing and settlement procedures and has also brought Indian financial markets in line with international markets. It has put in place online real-time monitoring and surveillance system to keep track of the trading and clearing members outstanding positions and each member is allowed to trade/operate within the pre-set limits fixed according to the funds available with the Exchange on behalf of the member. The online surveillance mechanism also generates various alerts/reports on any price/volume movements of securities not in line with the normal trends/patterns.
IISL
India Index Services and Products Limited (IISL), a joint venture of NSE and Credit Rating Information Services of India Limited (CRISIL), was set up in May 1998 to provide indices and index services. It has a consulting and licensing agreement with Standard and Poor's (S&P), the world's leading provider of invest able equity indices, for co-branding equity indices. IISL pools the index development efforts of NSE and CRISIL into a coordinated whole. It is India's first specialized company which
focuses upon the index as a core product. It provides a broad range of products and professional index services. It maintains over 70 equity indices comprising broad based benchmark indices, sectoral indices and customized indices. Many investment and risk management products based on IISL indices have been developed in the recent past. These include index based derivatives on NSE, a number of index funds and India's first exchange traded fund.
NSDL
Prior to trading in a dematerialized environment, settlement of trades required moving the securities physically from the seller to the ultimate buyer, through the seller's broker and buyer's broker, which involved lot of time and the risk of delay somewhere along the chain. Further, the system of transfer of ownership was grossly inefficient as every transfer involved physical movement of paper 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 than stipulated in the then regulations. Theft, forgery, mutilation of certificates and other irregularities were rampant. All these added to the costs and delays in settlement and restricted liquidity. To obviate these problems and to promote dematerialization of securities, NSE joined hands with UTI and IDBI to set up the first depository in India called the "National Securities Depository Limited" (NSDL). The depository system gained quick acceptance and in a very short span of time it was able to achieve the objective of eradicating paper from the trading and settlement of securities, and was also able to get rid of the risks associated with fake/forged/stolen/bad paper. Dematerialized delivery today constitutes almost 100% of the total delivery based settlement.
NSE.IT
NSE.IT Limited, a 100% technology subsidiary of NSE, was incorporated in October 1999 to provide thrust to NSE s technology edge, concomitant with its overall goal of harnessing latest technology for optimum business use. It provides the securities industry with technology that ensures transparency and efficiency in the trading, clearing and risk management systems. Additionally, NSE.IT provides consultancy services in the areas of data warehousing, internet and business continuity plans. Amongst various products launched by NSE.IT are NEAT XS, a Computer-ToComputer Link (CTCL) order routing system, NEAT iXS, an internet trading system and Promos, professional broker s back office system. NSE.IT also offers an e learning oral, invarsitywww.finvarsity.com) dedicated to the finance sector. The site is powered by Enlister - a learning management system developed by NSE.IT jointly with an e-learning partner. New initiatives include payment gateways, products for derivatives segments and Enterprise Management Services (EMSs). NCDEX NSE joined hand with other financial institutions in India viz., ICICI Bank, NABARD, LIC, PNB, CRISIL, Canara Bank and IFFCO to promote the NCDEX which provide a platform for market participants to trade in wide spectrum of commodity derivatives. Currently NCDEX facilitates trading of 37 agro based commodities, 1 base metal and 2 precious metal.
LISTING OF SECURITIES
The stocks, bonds and other securities issued by issuers require listing for providing liquidity to investors. Listing means formal admission of a security to the trading platform of the Exchange. It provides liquidity to investors without compromising the need of the issuer for capital and ensures effective monitoring of conduct of the issuer and trading of the securities in the interest of investors. The issuer wishing to have trading privileges for its securities satisfies listing requirements prescribed in the relevant statutes and in the listing regulations of the Exchange. It also agrees to pay the listing fees and comply with listing requirements on a continuous basis. All the issuers who list their securities have to satisfy the corporate governance requirement framed by regulators.
Listing Criteria
The Exchange has laid down criteria for listing of new issues by companies, companies listed on other exchanges, and companies formed by amalgamation/restructuring, etc. in conformity with the Securities Contracts (Regulation) Rules, 1957 and directions of the Central Government and the Securities and Exchange Board of India (SEBI). The criteria include minimum paid-up capital and market capitalization, project appraisal, company/promoter's track record, etc. The issuers of securities are required to adhere to provisions of the Securities Contracts (Regulation) Act, 1956, the Companies Act, 1956, the Securities and Exchange Board of India Act, 1992, and the rules, circulars, notifications, guidelines, etc. prescribed there under.
Listing Agreement
All companies seeking listing of their securities on the Exchange are required to enter into a listing agreement with the Exchange. The agreement specifies all the requirements to be continuously complied with by the issuer for continued listing. The Exchange monitors such compliance. Failure to comply with the requirements invites suspension of trading, or withdrawal/delisting, in addition to penalty under the Securities Contracts (Regulation) Act, 1956. The agreement is being increasingly used as a means to improve corporate governance
MEMBERSHIP ADMINISTRATION
The trading in NSE has a three tier structure-the trading platform provided by the Exchange, the broking and intermediary services and the investing community. The trading members have been provided exclusive rights to trade subject to their continuously fulfilling the obligation under the Rules, Regulations, Byelaws, Circulars, etc. of the Exchange. The trading members are subject to its regulatory discipline. Any entity can become a trading member by complying with the prescribed eligibility criteria and exit by surrendering trading membership. There are no entry/exit barriers to trading membership.
Eligibility Criteria
The Exchange stresses on factors such as corporate structure, capital adequacy, track record, education, experience, etc. while granting trading rights to its members. This reflects a conscious effort by the Exchange to ensure quality broking services which enables to build and sustain confidence in the Exchange's operations. The standards stipulated by the Exchange for trading membership are substantially in excess of the minimum statutory requirements as also in comparison to those stipulated by other exchanges in India. The exposure and volume of transactions that can be undertaken by a trading member are linked to liquid assets in the form of cash, bank guarantees, etc. deposited by the member with the Exchange as part of the membership requirements. The trading members are admitted to the different segments of the Exchange subject to the provisions of the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992, the rules, circulars, notifications, guidelines, etc., issued there under and the byelaws, Rules and Regulations of the Exchange. All trading members are registered with SEBI.
In case of purchase:1. The broker will receive the securities in his account on the payout day 2. The broker will give instruction to its DP to debit his account and credit Investor s account
3. Investor will give Receipt Instruction to DP for receiving credit by filling Appropriate form. However one can give standing instruction for credit Into ones account that will obviate the need of giving Receipt Instruction every time.
In case of sale:The investor will give delivery instruction to DP to debit his account and credit the broker s account. Such instruction should reach the DP s office at least 24 hours before the pay-in as otherwise DP will accept the instruction only at the investor s risk.
INVESTMENT
Investment means the use of money for the purpose of making more money, to gain income or increase capital, or both. 1) Short Term Investment 2) Long Term Investment
Short Term Investment:It is more risky A successful short term trading mindset instead requires iron discipline, intense focus and steely devotion. Short term trading can be divided in 3 sections
y Day Trading y Swing Trading y Position Trading
Day Trading
Day traders buy and sell stocks throughout the day in the hope that the price of the stocks will fluctuate in value during the day, allowing them to earn quick profits. A day trader will hold a stock anywhere from a few seconds to few hours, but will always sell all of those stocks close of the day. The day trader will therefore not own any position at the close of the each day, and there is overnight risk. The objective of day trading is to quickly get in and out of any particular stock for profits anywhere from few cents to several points per share on an intra-day basis. Day trading can be further sub-divided into number of styles, including. Scalpers: This style of day trading involves the rapid and repeated buying and selling of a large volume of stocks within seconds or minutes. The objective is to earn a small per share profit on each transaction while minimizing the risk.
Momentum Traders: This style of day trading involves identifying and trading stocks that are in a moving pattern during the day, in an attempt to buy stocks at bottoms and sell at tops.
Swing Trading
The principal difference between day trading and swing trading is that swing traders will normally have a slightly longer time horizon than day traders for holding a position in a stock. As is the case with day traders, swing traders also attempt to predict the short term fluctuation in a stock s price. However swing traders are willing to hold the stocks for more than one day, if necessary, to give to stock price some time to move or to capture additional momentum in the stock s price. Swing traders will generally hold on to their stock positions anywhere from a few hours to several days. Swing trading has the capability of providing higher returns than day trading. However, unlike day traders who liquidate their positions at the end of each day, swing traders assume overnight risk. There are some significant risks in carrying positions overnight. For example news events and earnings warnings announced after the closing bell can result in large, unexpected and possibly adverse changes to a stock's price
Position Trading
Position trading is similar to swing trading, but with a longer time horizon. Position traders hold stocks for a time period anywhere from one day to several weeks or months. These traders seek to identify stocks where the technical trends suggest a possible large movement in price is likely to occur, but which may not be fully played out for several weeks or months.
A broker is a member of a recognized stock exchange, who is permitted to do trades on the screen-based trading system of different stock exchanges. He is enrolled as a member with the concerned exchange and is registered with SEBI.
Sub broker
A sub broker is a person who is registered with SEBI as such and is affiliated to a member of a recognized stock exchange.
Proof of identity submitted either as MAPIN UID Card/Pan No./Passport/Voter ID/Driving license/Photo Identity card issued by Employer registered under MAPIN
Further, SEBI (Stock brokers and Sub brokers) Regulations, 1992 stipulates that sub broker cannot charge from his clients, a commission which is more than 1.5% of the value mentioned in the respective purchase or sale note.
Rolling Settlement
In a Rolling Settlement trades executed during the day are settled based on the net obligations for the day. Presently the trades pertaining to the rolling settlement are settled on a T+2 day basis where T stands for the trade day. Hence, trades executed on a Monday are typically settled on the following Wednesday (considering 2 working days from the trade day). The funds and securities pay-in and pay-out are carried out on T+2 day.
AUCTION
WHAT IS AN AUCTION? The Exchange purchases the requisite quantity in the Auction Market and gives them to the buying trading member. The shortages are met through auction process and the difference in price indicated in contract note and price received through auction is paid by member to the Exchange, which is then liable to be recovered from the client.
ECONOMIC ANALYSIS
Investors are concerned with those forces in the economy, which affect the performance of organizations in which they wish to participate, through purchase of stock. A study of the economic forces would give an idea about future corporate earnings and the payment of dividends and interest to investors. Some of the broad forces within which the factors of investment operate are:
1. POPULATION: Population gives an idea of the kind of labor force in a country. In some countries the population growth has slowed down whereas in India and some other third world countries there has been a population explosion. Population explosion will give demand for more industries like hotels, residences, service industries like health, consumer demand like refrigerators and cars. Likewise, investors should prefer to invest in
industries, which have a large amount of labor force because in the future such industries will bring better rates of return. 2. RESEARCH AND TECHNOLOGICAL DEVELOPMENTS: The economic forces relating to investments would be depending on the amount of resources spent by the government on the particular technological development affecting the future. Broadly the investor should invest in those industries which are getting a large amount of share in the funds of the development of the country. For example, in India in the present context automobile industries and spaces technology are receiving a greater attention. These may be areas, which the investor may consider for investments. 3. CAPITAL FORMATION: Another consideration of the investor should be the kind of investment that a company makes in capital goods and the capital it invests in modernization and replacement of assets. A particular industry or a particular company which an investor would like to invest can also be viewed at with the help of the economic indicators such as the place, value and property position of the industry, group to which it 110ngs and the year-to-year returns through corporate profits. 4. NATURAL RESOURCES AND RAW MATERIALS: The natural resources are to a large extent responsible for a country's economic development and overall improvement in the condition of corporate growth. In India, technological discoveries recycling of materials, nuclear and solar energy and new synthetics should give the investor an opportunity to invest in untapped or recently tapped resources which would also produce higher investment opportunity.
COMPANY ANALYSIS
Company analysis is a study of the variables that influence the future of a firm both qualitatively and quantitatively. It is a method of assessing the competitive position of a firm earning and profitability, the efficiency with which it operates its financial position and its ful1l with respect to the
earning of its shareholders. The fundamental nature of this analysis is that each share of a company has an intrinsic value, which is dependent on the company's financial performance, quality of management and record of its earnings and dividend. They believe that the market price of share in a period of time will move towards its intrinsic value. If the market price of a share is lower than the intrinsic value, as evaluated by the fundamental analysis, then the share is supposed to be undervalued and it should be purchased but if the current market price shows that it is more than intrinsic value then according to the theory the share should be sold. This basic approach is analyzed through the financial statements of an organization. The basic financial statements, which are required as tools of the fundamental analyst, are the income statement, the balance sheet, and the statement of changes in financial position. These statements are useful for investors, creditors as well as internal management of a firm and on the basis these statements the future course of action may be taken by the investors of the firm. While evaluating a company, its statement must be carefully judged to find out that they are: (a) Correct, (b) Complete,
TECHNICAL ANALYSIS
Technical analysis is simply the study of prices as reflected on price charts. Technical analysis assumes that current prices should represent all known information about the markets. Prices not only reflect intrinsic facts, they also represent human emotion and the pervasive mass psychology and mood of the moment. Prices are, in the end, a function of supply and demand. However, on a moment to moment basis, human emotions fear, greed, panic, hysteria, elation, etc. also dramatically effect prices. Markets may move based upon people s expectations, not necessarily facts. A market "technician" attempts to disregard the emotional component of trading by making his decisions based upon chart formations, assuming that prices reflect both facts and emotion.
Analysts use their technical research to decide whether the current market is a BULL MARKET or a BEAR MARKET.
5 Day Technical Analysis Chart of Indian stock market BSE Sensex Index
1 Year Technical Analysis Chart of Indian stock market BSE Sensex Index
Chapter 6 Conclusion
Share market is a high risk-high reward, permanent source of long term finance for corporate enterprises and short term earning for shareholders. The investors, who desire to share the risk, return and control associated with ownership of companies would invest in equity capital. Today, the Indian Equity Market is one of the most technologically developed in the world and is on par with other developed markets abroad. The introduction of on-line trading system, dematerialization, and introduction of rolling settlement have facilitated quick trading and settlements which lead to larger volumes. The setting up of the National Stock Exchange of India Limited has revolutionized the face of the stock market. NSE is the only stock exchange which covers majority equity investments every day. Also equity capital market encourages capital formation in the country. The specific factor, which influences equity market, is the investor s sentiment towards the stock market as a whole. So investor first has to analyze and invest and not speculate in shares. The introduction of online trading has given a much-needed impetus to the Indian equity markets. In this technological world things are needed to move at a faster pace, and with the introduction of methods of marketing securities in the stock exchange has expanded its business at a tremendous speed. According to economic times, the research states the major reason behind the irregularities of market (up and down in sale and purchase, price of share) is mainly because of forcasting mid set of equity investors. So, the stock exchanges must disregards the emotional component of trading by making investors decisions based upon chart formations, assuming that prices reflect both facts and emotion. And also by creating the awareness of fundamental analysis (Fundamental analysis is a method of finding out the future price of a stock, which an investor wishes to buy) among the investors to avoid the irregularities while
trading. So to increase the volume of equity investment, the stock exchanges should strive to increase transparency, strictly enforce corporate governance norms, provide more value-added services to investors, and take steps to increase investor confidence. These stock exchanges will have to plan strategic tie-ups with their foreign counterparts to get an international platform. face international competition every Indian stock exchange has to stress on innovation and sustained investment in technology to remain ahead.
BIBLIOGRAPHY
Books Referred
1. Investment Management -Preeti Singh 2. Indian Financial Market -T R Venkatesh 3. Financial Market -P K Bandgar 4. Merchant Banking & Financial Services -Anil Agashe.
Magazines
1. Business Today 2. India Today 3. Business World
Websites
1. www.nseindia.com 2. www.indiainfoline.com. 3. www.equitymaster.com 4. www.bseindia.com 5. www.sebi.gov.in 6. www.financialexpress.com