Submitted To:

CT Institute of Advance Management Studies, Jalandhar

The Partial Fulfillment of the requirements for the award of degree of MBA
PROJECT GUIDE: Miss Timsy Jyoti (lecturer in management) SUBMITTED BY: Mandeep Kaur Nahal MBA (3rd sem),CTIAMS.

CT Institute of Advance Management Studies Jalandhar

GUIDE CERTIFICATE

It is hereby certified that the project report on CAPITAL MARKET being submitted by Mandeep kaur Nahal student of MBA (3rd sem.) of CT Institute of Advance Management Studies , Jalandhar which is affiliated to All India Council of Technical Education (A.I.C.T.E) is an original work carried out successfully under my guidance and supervision and that no part of this project has been submitted for any other degree/ diploma. The sincerely efforts put in during the course of investigation is hereby acknowledged.

Project guide

DECLARATION

This project entitled Empirical Study on CAPITAL MARKET, is submitted in partial fulfilment of the requirement for the award of degree of master of business administration of Punjab technical university, Jalandhar. This research work is done by Mandeep kaur Nahal .This research work has been done only for MBA and none of this research work has been submitted for any other degree. The assistance and help during the execution of the project has been fully acknowledged.

MANDEEP KAUR NAHAL MBA 3RD TRIM. ROLL NO- 105742283781

PREFACE
The MBA program is well structured and integrated course of business studies. The main objective of practical training at MBA level is to develop skill in student by supplement to the theoretical study of business management in general. Industrial training helps to gain real life knowledge about the industrial environment and business practices. The MBA programmed provides student with a fundamental knowledge of business and organizational functions and activities, as well as an exposure to strategic thinking of management. In every professional course, training is an important factor. Professors give us theoretical knowledge of various subjects in the college but we are practically exposed of such subjects when we get the training in the organization. It is only the training through which I come to know that what an industry is and how it works. I can learn about various departmental operations being performed in the industry, which would, in return, help me in the future when I will enter the practical field Training is an integral part of MBA and each and every student has to undergo the training for 2 months in a company and then prepare a project report on the same after the completion of training.

ACKNOWLEDGEMENT
I take this opportunity to express my deep sense of gratitude to all my friends and seniors who helped and guide me to complete this project successfully. I am highly grateful and indebted to my project guide Ms. Timsy Jyoti completion of project report. her excellent and expert guidance in helping me in

Mandeep Kaur Nahal

Index
CHAPTER NO.
1
2

CONTENTS ABOUT THE STOCK EXCHANGE ABOUT THE TOPIC (INDIAN CAPITAL MARKET) introduction history Efficiency of Indian capital market Growth of capital market Trading platforms in india Segments of capital market

PG.NO
14 14 50 14 20 21 23 24 31 32 36 37 42 43 50

3 4 5

RESEARCH METHODOLOGY DATA INTERPRETATION ANALYSIS FINDINGS SUGGESTION LIMITATION CONCLUSION ANNEXURE BIBLIOGRAPHY QUESTIONNAIRE

51 53

AND 54 65
66 67 68 69 70 71 72- 74

CONTENTS OF TABLE TABLE NO

1 2 3 4

PARTICULARS Do you Invest in capital market Means of investing stock investment What is purpose of making investment Among the following avenues which would you Prefer to invest in What % of your total income do you invest What Kinds of returns generated from investment Are you Satisfied with returns in investment

PAGE NO
56 57 58 59

5 6 7 8

60 61 62

63 Do you consult a financial advisor LSE before making investment

Are you Satisfied with services of LSE

64

CONTENTS OF GRAPH GRAPH NO

1 2 3 4

PARTICULARS Do you Invest market

PAGE NO

in capital 56

Means of investing stock 57 investment What is purpose of making 58 investment Among the following 59 avenues which would you Prefer to invest in What % of your total 60 income do you invest What Kinds of returns 61 generated from investment Are you Satisfied with 62 returns in investment Do you consult a financial 63 advisor LSE before making investment Are you Satisfied with 64 services of LSE

5 6 7 8

ABOUT THE STOCK EXCHANGE

LUDHIANA STOCK EXCHANGE

The Ludhiana Stock Exchange Limited was established in 1981, by Sh. S.P. Oswal of Vardhman Group and Sh. B.M. Lal Munjal of Hero Group, leading industrial luminaries, to fulfill a vital need of having a Stock Exchange in the region of Punjab, Himachal Pradesh, Jammu & Kashmir and Union Territory of Chandigarh. Since its inception, the Stock Exchange has grown phenomenally. The Stock Exchange has played an important role in channelising savings into capital for the various industrial and commercial units of the State of Punjab and other parts of the country. The Exchange has facilitated the mobilization of funds by entrepreneurs from the public and thereby contributed in the overall, economic, industrial and social development of the States under its jurisdiction.

Ludhiana Stock Exchange is one of the leading Regional Stock Exchange and has been in the forefront of other Stock Exchange in every spheres, whether it is formation of subsidiary for providing the platform of trading to investors, for brokers etc. in the era of Screen based trading introduced by National Stock Exchange and Bombay Stock Exchange, entering into the field of Commodities trading or imparting education to the Public at large by way of starting Certification Programmes in Capital Market. Further, the Exchange has 295 members out of which 162 are registered with National Stock Exchange as Sub-brokers and 121 with Bombay Stock Exchange as sub-brokers through our subsidiary
10

LSE has a strong governance and administration, which encompasses a right balance of Industry Experts with highest level educational background, practicing professionals and independent experts in various fields of Financial Sector. The administration is presently headed by Sr. General Manager CUM Company Secretary and team of persons having in depth knowledge of Secretarial, Legal and Education & Training. The Governing Board of our Exchange comprises of eleven members, out of which two are Public Interest Directors, who are eminent persons in the fields of Finance and Accounts, Education, Law, Capital Markets and other related fields, Six are Shareholder Directors, and Three are Broker Member Director and the Exchange has four Statutory Committees namely Disciplinary Committee, Arbitration Committee, Defaults Committee and Investor Services Committee. In addition, it has advisory and standing committees to assist the administration. LSE has a Code of Conduct in place that governs the elected Board Members and the Senior Management Team. The same is monitored through periodic disclosure procedures. The Exchange has an Ethics Committee, which looks into any issue of conflict of interest and has in place general code of conduct for the Senior Officials.

THE COMPOSITION OF THE GOVERNING BOARD IS AS UNDER:Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 Name of Director Prof. Padam Parkash Kansal Sh. Joginder Kumar Sh. Rajinder Mohan Singla Sh. Satish Nagpal Sh. Vikas Batra Sh. Varun Chhabra Dr. Raj Singh Sh. Ashwani Kumar Sh. V.P. Gaur Sh. Jaspal Singh Sh. Sunil Gupta Mr Sanjay Anand Category Chairman (Shareholder Director) Vice Chairman (Shareholder Director) Shareholder Director Shareholder Director Shareholder Director Shareholder Director Registrar of Companies (Public Interest Director) Public Interest Director Public Interest Director Trading member Director Trading Member Director Trading Member Director

11

ABOUT THE TOPIC (INDIAN CAPITAL MARKET) Introduction History Efficiency of Indian capital market Growth of capital market Trading platforms in india Segments of capital market

12

13

14

INDIAN CAPITAL MARKET

Capital market is market for securities (debt or equity),where business enterprises and government can raise the long term funds .it is defined as a market in which money is provided for periods longer than a year. The capital market includes stock market (equity security) and bond market(debt) Capital market may be classified as

Capital market

Primary market

Secondary market

PRIMARY MARKET
Primary market provides an opportunity to the issuers of securities, both Government and corporations, to raise resources to meet their requirements of investment. Securities, in the form of equity or debt, can be issued domestic /international markets at face value, discount or premium.

SECONDARY MARKET
Secondary market refers to a market where securities are traded after being offered to the public in the primary market or listed on the Stock Exchange. Secondary market comprises of equity, derivatives and the debt markets. The secondary market is operated through two mediums, namely, the Over-the-Counter (OTC) market and the Exchange-Traded market. OTC markets are informal markets where trades are negotiated

15

DEFINITION OF CAPITAL MARKET

A market in which individuals and institutions trade financial securities. Organizations/institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds. Thus, this type of market is composed of both the primary and secondary markets.

Investopedia explains Capital Markets

Both the stock and bond markets are parts of the capital markets. For example, when a company conducts an IPO, it is tapping the investing public for capital and is therefore using the capital markets. This is also true when a country's government issues Treasury bonds in the bond market to fund its spending initiatives.

IMPORTANCES OF CAPITAL MARKET

1.

The capital market serves as an important source for the productive use of

economys savings. It mobilizes the saving of the people for further investment and thus avoids their wastage in unproductive uses.
2.

It provides incentives to saving and facilitates capital formation by offering

suitable rates of interest as the price of capital

3.

It provides an avenue for investors, particularly the household sector to invest in

financial assets which are more productive than physical assets. 4. The operations of different institutions in the capital market induce economic growth. They give quantitative and qualitative directions to the flow of funds and bring about rational allocation of scarce resources.

16

5.

A healthy capital market consisting of expert intermediaries promotes stability in values of securities representing capital funds. 6. Moreover, it serves as an important source for technological up gradation in the industrial sector by utilizing the funds invested by the public. Thus, a capital market serves as an important link between those who save and those who aspire to invest their savings

FUNCTIONS OF CAPITAL MARKET

1. The organised and regulated capital market motivates individual to save and invest funds.

The availability of safe and profitable source of investment is an essential criterion to create propensity to save and invest on the part of the earning public.
2. It provides for the investors safe and productive channels for investment of savings and

secures the recurring benefit of return thereon, as long as the savings are retained.
3. It provides liquidity to the savings of the investors, by developing a secondary capital

market, and thus makes even short term savings, consistently available for long-term users 4. It thus mobilizes savings of large number of individuals, families and associations and make the same available for meeting the large capital needs of organized industry, trade and business and for progress and development of the country as a whole and its economy.

ROLE OF CAPITAL MARKET Mobilization of Savings: Capital market is an important source for mobilizing idle savings
from the economy. It mobilizes funds from people for further investments in the productive channels of an economy. In that sense it activates the ideal monetary resources and puts them in proper investments.

Capital Formation: Capital market helps in capital formation. Capital formation is net
addition to the existing stock of capital in the economy. Through mobilization of ideal resources it generates savings; the mobilized savings are made available to various segments such as agriculture, industry, etc. This helps in increasing capital formation.

17

Provision of Investment Avenue: Capital market raises resources for longer periods of
time. Thus it provides an investment avenue for people who wish to invest resources for a long period of time. It provides suitable interest rate returns also to investors. Instruments such as bonds, equities, units of mutual funds, insurance policies, etc. definitely provides diverse investment avenue for the public.

Speed up Economic Growth and Development: Capital market enhances production

and productivity in the national economy. As it makes funds available for long period of time, the financial requirements of business houses are met by the capital market. It helps in research and development. This helps in, increasing production and productivity in economy by generation of employment and development of infrastructure.

Proper Regulation of Funds: Capital markets not only helps in fund mobilization, but it
also helps in proper allocation of these resources. It can have regulation over the resources so that it can direct funds in a qualitative manner.

Service Provision: As an important financial set up capital market provides various types of
services. It includes long term and medium term loans to industry, underwriting services, consultancy services, export finance, etc. These services help the manufacturing sector in a large spectrum.

Continuous Availability of Funds: Capital market is place where the investment avenue is
continuously available for long term investment. This is a liquid market as it makes fund available on continues basis. Both buyers and seller can easily buy and sell securities as they are continuously available. Basically capital market transactions are related to the stock exchanges. Thus marketability in the capital market becomes easy.

KEY INDICATORS OF CAPITAL MARKET Index

An Index is used to give information about the price movements of products in the financial, commodities or any other markets. Stock market indices are meant to capture the overall behavior of the equity markets. The stock market index is created by selecting a group of stocks that are representative of the whole market specified sector or segment of the market. The blue-chip index of NSE is S&P CNX Nifty.

18

Market Capitalization
Market capitalization is defined as value of all listed shares on the countrys exchanges. It is computed on a daily basis. Market capitalization of a particular company on a particular day can be computed as product of the number of shares outstanding and the closing price of the share. Here the number of outstanding shares refers to the issue size of the stock. Market Capitalization = Closing price of share * Number of outstanding shares Similarly, to compute the market capitalization of all companies listed on an Exchange we aggregate the market capitalization of all the companies traded on the Exchange.

Market Capitalization Ratio

The market capitalization ratio is defined as market capitalization of stocks divided by GDP. It is used as a measure of stock market size.

Turnover
Turnover for a share is computed by multiplying the traded quantity with the price at which the trade takes place. Similarly, to compute the turnover of the companies listed at the Exchange we aggregate the traded value of all the companies traded on the Exchange.

Turnover Ratio
The turnover ratio is defined as the total value of shares traded on a countrys stock Exchange for a particular period divided by market capitalization at the end of the period. It is used as a measure of trading activity or liquidity in the stock markets. Turnover Ratio= Turnover at Exchange / Market Capitalization at Exchange

PRODUCTS AND PARTICIPANTS OF CAPITAL MARKETS Products

Financial markets facilitate reallocation of savings from savers to entrepreneurs. Savings are linked to investments by a variety of intermediaries through a range of complex financial products called securities. Under the Securities Contracts (Regulation) Act [SC(R) A], 1956, securities include (I) shares, bonds, scraps, stocks or other marketable securities of like nature in or of any incorporate company or body corporate, (ii) government securities, (iii) derivatives of securities, (iv) units of collective investment scheme, (v) interest and rights in securities, and security receipt
19

or any other instruments so declared by the central government. Broadly, securities can be of three types - equities, debt securities and derivatives.

Participants
The securities market has essentially three categories of participants (I) the investors, (ii) the issuers, (iii) the intermediaries. These participants are regulated by the Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), Ministry of Corporate Affairs (MCA) and the Department of Economic Affairs (DEA) of the Ministry of Finance.

STRUCTURE OF INDIAN CAPITAL MARKET

Broadly speaking the capital market is classified in to two categories. They are the Primary market (New Issues Market) and the Secondary market (Old (Existing) Issues Market). This classification is done on the basis of the nature of the instrument brought in the market. However on the basis of the types of institutions involved in capital market, it can be classified into various categories such as the Government Securities market or Gilt-edged market, Industrial Securities market, Development Financial Institutions (DFIs) and financial intermediaries. All of these components have specific features to mention. The structure of the Indian capital market has its distinct features. These different segments of the capital market help to develop the institution of capital market in many dimensions. The primary market helps to raise fresh capital in the market.
20

In the secondary market, the buying and selling (trading) of capital market instruments takes place. The above chart will help us in understanding the organizational structure of the Indian Capital market.

Government Securities Market: This is also known as the Gilt-edged market. This refers
to the market for government and semi-government securities backed by the Reserve Bank of India (RBI).

Industrial Securities Market: This is a market for industrial securities i.e. market for
shares and debentures of the existing and new corporate firms. Buying and selling of such instruments take place in this market. This market is further classified into two types such as the New Issues Market (Primary) and the Old (Existing) Issues Market (secondary). In primary market fresh capital is raised by companies by issuing new shares, bonds, units of mutual funds and debentures. However in the secondary market already existing i.e old shares and debentures are traded. This trading takes place through the registered stock exchanges. In India we have three prominent stock exchanges. They are the Bombay Stock Exchange (BSE), the National Stock Exchange (NSE) and Over the Counter Exchange of India (OTCEI).

Development Financial Institutions (DFIs): This is yet another important segment of

Indian capital market. This comprises various financial institutions. These can be special purpose institutions like IFCI, ICICI, SFCs, IDBI, IIBI, UTI, etc. These financial institutions provide long term finance for those purposes for which they are set up.

Financial Intermediaries: The fourth important segment of the Indian capital market is
the financial intermediaries. This comprises various merchant banking institutions, mutual funds, leasing finance companies, venture capital companies and other financial institutions.

COMPONENTS OF CAPITAL MARKET

21

1 .Securities shares, bonds, debentures, futures, option, mutual fund. 2. Intermediaries broker, sub broker, custodians, share transfer agents, merchant bankers. 3 .issuers of securities-companies, bodies corporate, government, financial institutions, mutual funds, banks. 4. investors-individuals,companies,mutual funds,financial institutions investors. 5. Market regulations-SEBI,RBI,department of company affairs.

BENEFITS OF CAPITAL MARKET

1.
2.

Holding different shares or bonds allows an investor to spread investment risk. The secondary market gives important Capital markets provide the lubricant between

investors and those needing to raise market capital.

3.

Capital markets create price transparency and liquidity. They provide a safe platform for

a wide range of investors including commercial and investment banks, insurance companies, pension funds, mutual funds, and retail investorsto hedge and speculate.

22

HISTORY

HISTORY OF INDIAN CAPITAL MARKET

The history of the Indian capital markets and the stock market, in particular can be traced back to 1861 when the American Civil War began. The opening of the Suez Canal during the 1860s led to a tremendous increase in exports to the United Kingdom and United States.Several companies were formed during this period and many banks came to the fore to handle the finances relating to these trades. With many of these registered under the British Companies Act, the Stock Exchange, Mumbai, came into existence in 1875. It was an unincorporated body of stock brokers,which started doing business in the city under a banyan tree .Business was essentially confined to company owners and brokers, with very little interest evinced by the general public. There had been much fluctuation in the stock market on account of the American war and the battles in Europe. Sir Premchand Roychand remained a kingpin for many years. Sir Phiroze Jeejeebhoy was
23

another who dominated the stock market scene from 1946 to 1980. His word was law and he had a great deal of influence over both brokers and the government. He was a good regulator and many crises were averted due to his wisdom and practicality. The BSE building, icon of the Indian capital markets, is called P.J. Tower in his memory. The planning process started in India in 1951, with importance being given to the formation of institutions and markets The Securities Contract Regulation Act 1956 became the parent regulation after the Indian Contract Act 1872, a basic law to be followed by security markets in India. To regulate the issue of shares prices, controller of capital issues act (CCI) was passed in 1947.The stock markets have had many turbulent times in the last 140 years of their existence. The imposition of wealth and expenditure tax in 1957 by Mr. T.T. Krishnamachari, the then finance minister, led to a huge fall in the markets. The dividend freeze and tax on bonus issues in 1958-59 also had a negative impact. War with China in 1962 was another memorably bad year, with the resultant shortages increasing prices all round. This led to a ban on forward trading in commodity markets in 1966, which was again a very bad period, together with the introduction of the Gold Control Act in 1963 The markets have witnessed several golden times too. Retail investors began participating in the stock markets in a small way with the dilution of the FERA in1978. Multinational companies, with operations in India, were forced to reduce foreign share holding to below a certain percentage, which led to a compulsory sale of shares or issuance of fresh stock. Indian investors, who applied for these shares, encountered a real lottery because those were the days when the CCI decided the price at which the shares could be issued. There was no free pricing and their formula was very conservative.. The next big boom and mass participation by retail investors happened in 1980, with the entry of Mr.Dhirubhai Ambani. Dhirubhai can be said to be the father of modern capital markets. The Reliance public issue and subsequent issues on various Reliance companies generated huge interest. The general public was so unfamiliar with share certificates that Dhirubhai is rumoured to have distributed them to educate people. Mr. V.P. Singhs fiscal budget in 1984 was pathbreaking for it started the era of liberalization. The removal of estate duty and reduction of taxes led to a swell in the new issue market and there was a deluge of companies in 1985. Mr Manmohan singh as finance minister came with agenda in 1991. and this led to a resurgence of interest in the capital markets, only to be punctured by the Harshad Mehta scam in 1992. The mid-1990s saw a rise in leasing company shares, and hundreds of companies, mainly listed in Gujarat, and got listed in the BSE. The end- 1990s saw the emergence of Ketan Parekh
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and the information,communication and entertainment companies came into the limelight. This period also coincided with the dotcom bubble in the US, with software companies being the most favoured stocks. There was a melt down in software stock in early 2000.Mr. P Chidambaram continued the liberalization and reform process, opening up of the companies, lifting taxes on long-term gains and introducing short-term turnover tax. The markets have recovered since then and we have witnessed a sustained rally that has taken the index over 13000.. Several systemic changes have taken place during the short history of modern capital markets. The setting up of the Securities and Exchange Board (SEBI) in 1992. was a landmark development. It got its act together,obtained the requisite powers and became effective in early 2000.The setting up of the National Stock Exchange in 1984, the introduction of online trading in 1995, the establishment of the depository in 1996,trade guarantee funds and derivatives trading in 2000,have made the markets safer. The introduction of the Fraudulent Trade Practices Act, Prevention of Insider Trading Act, Takeover Code and Corporate Governance Norms, are major developments in the capital markets over the last few years that has made the markets attractive to foreign institutional investor This history shows us that retail investors are yet to play a substantial role in the market as long-term investors. Retail participation in India is very limited considering the overall savings of households. Investors who hold shares in limited companies and mutual fund units are about 20-30 million. Those who participated in secondary markets are 2-3 million.Capital markets will change completely if they grow beyond the cities and stock exchange centers reach the Indian villages. Both SEBI and retail participants should be active in spreading market wisdom and empowering investors in planning their finances and understanding the markets...

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EFFICIENCY OF INDIAN CAPITAL MARKET.

FUNCTION OF REGULATING BODY

Capital market is regulated by following governing bodies.
1. Securities and exchange board of india (SEBI).

2. Department of economic affairs (DEA). 3. Department of company affairs(DCA). 4. Reserve bank of india (RBI). 5. Stock exchange.

26

SECURITIES AND EXCHANGE BOARD

OF INDIA

Securities and Exchange Board of India (SEBI) was set up as an administrative arrangement in 1988. In 1992, the SEBI Act was enacted, which gave statutory status to SEBI. It mandates SEBI to perform a dual function: investor protection through regulation of the securities market, and fostering the development of this market. SEBI has been delegated most of the functions and powers under the Securities Contract Regulation (SCR) Act, which brought stock exchanges, their members, as well as contracts in securities which could be traded under the regulations of the Ministry of Finance.It has also been delegated certain powers under the Companies Act. In addition to registering and regulating intermediaries, service providers, mutual funds, collective investment schemes, venture capital funds, and takeovers, SEBI is also invested with power to issue directives to any person(s) related to the securities market or to companies in areas of issue of capital, transfer of securities, and disclosures. It also has powers to inspect books and records, suspend registered entities, and cancel registration.

FUNCTIONS OF SEBI.
One of the main functions of SEBI is to register and regulate the functioning of various types of intermediaries and persons associated with securities market in a manner as to ensure smooth functioning of the markets and protection of interests of the investors. These intermediaries, as detailed in the SEBI Act are: stock-brokers, sub- broker, share transfer agents, bankers to an issue, trustees of trust deed, registrars to an issue, merchant bankers, underwriters, portfolio managers,investment advisers, depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies, asset management companies, clearing members of
27

a clearing corporation, trading member of a derivative segment of a stock exchange, collective investment schemes, venture capital funds, mutual funds, and any other intermediary associated with the securities market.SEBI had issued regulations governing the registration and regulatory framework for each of these intermediaries. However, given the fact that many requirements and obligations of most intermediaries are common, SEBI has recently consolidated these requirements and issued the SEBI (Intermediaries) Regulations, 2008. These regulations were notified on May 26, 2009. These regulations apply to all the intermediaries mentioned above, except foreign institutional investors, foreign venture capital investors, mutual funds, collective investment schemes and venture capital fund. . 1 regulates Capital Market 2. Checks Trading of securities. 3. Checks the malpractices in securities market. 4. It enhances investor's knowledge on market by providing education. 5. It regulates the stockbrokers and sub-brokers. 6. To promote Research and Investigation

OBJECTIVES OF SEBI.

As an important entity in the market it works with following objectives 1. It tries to develop the securities market. 2. Promotes Investors Interest.

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3. Makes rules and regulations for the securities market.

RESERVE BANK OF INDIA (RBI).

Reserve Bank of India (RBI) has regulatory involvement in the capital market, but this has been limited to debt management through primary dealers,foreign exchange control, and liquidity support to market participants. It is RBI and not SEBI that regulates primary dealers in the Government securitiesmarket. RBI instituted the primary dealership of Government securities in March 1998. Securities transactions that involve a foreign exchange transaction need the permission of RBI. The Reserve Bank is the umbrella network for numerous activities, all related to the nations financial sector, encompassing and extending beyond the functions of a typical central bank

Functions of RBI.
Monetary Authority Issuer of Currency Banker and Debt Manager to Government Banker to Banks
29

 Regulator of the Banking System Manager of Foreign Exchange Regulator and Supervisor of the Payment and Settlement Systems Developmental Role

DEPARTMENT OF ECONOMIC AFFAIRS

Department of Economic Affairs came into existence in 1949 when the Ministry of Finance was bifurcated into two departments viz. the Department of Revenue and Expenditure and the Department of Economic Affairs.The newly created Department of Economic Affairs had three divisions Internal Finance, External Finance and the Budget. The Internal Finance Division looked after the work relating to the Reserve Bank of India, State Bank of India and its subsidiaries, administration of IFCI Act, banking legislation etc. as also currency and coinage work. While External Finance Division dealt with all external commercial relationship, the Budget Division was responsible not only for the budget work but also for the administration of the National Savings Organisation set up earlier. The department served as the Secretariat for the Economic Committee of the Cabinet. The Economic Division, headed by the Economic Adviser, which had continued its separate existence outside of the two departments but within the Ministry of Finance, was brought under the Department of Economic Affairs in 1955. With the nationalization of insurance in 1956, a new division, Insurance Division, was added to the department. With the nationalization of the major banks in 1969, Banking became a separate department headed by a secretary. While there were many changes in the intervening years for instance, Insurance Division was moved out of the department in 1964 to a separate Department of Company Affairs and Insurance then made part of the Department of Revenue in 1966 and then came back to the Department of Economic Affairs in 1975; Banking became a wing of the Department of Revenue and Banking and later in 1977 brought back into the fold of Department of Economic Affairs; and so on by 1980, the size and structure of Department of Economic Affairs had more or less stabilized with 7 broad areas of work Economic Division, Budget Division, Banking Division,

30

Insurance Division, Investment Division, External Finance Division and Currency and Coinage Division. This pattern has held well over the last two decades, though with minor realignments. The total number of officials at different levels has changed from time to time not only reflecting the changes in functions and responsibilities but also the usual promotion pressures of the various cadres. As on 31st March, 2000, this department which is headed by a Secretary, had 4 Secretary level officers, 19 Additional Secretary and Joint Secretary level officers, 59 Directors and Deputy Secretary level officers and 238 Under Secretary and other level officers with a support-staff complement of 1204. In addition, there is also a workforce of about 25000 in the various mints & presses directly administered by the department and staff strength of 1191 in the National Savings Organisation.

DEPARTMENT OF COMPANY AFFAIRS

In 1947, the Capital Issues (Control) Act was enacted, which formalized and continued initial controls on the issue of securities that were introduced during World War II. This Act was administered by the office of the Controller of Capital Issues (CCI), which was a part of the Ministry of Finance. In line with economic reforms, it was repealed in 1992 to liberalize capital issuance and pricing. While capital issuance used to be regulated by the office of the CCI, both private and public companies were governed by the Companies Act of 1956, which was and continues to be administered by the Department of Company Affairs (DCA) under the Ministry of Law, Justice and Company Affairs. Besides governing the incorporation, management, mergers, and winding up of companies, this Act also specifies certain aspects concerning capital issuance and securities trading, particularly the issue of prospectus for public offers, contents of the prospectus, completion of allotment, issue, and trading of securities, and transfer and registration of securities.

FUNCTIONS OF DCA

1. Organizational set up
31

2. Company law board 3. Monopolies and restricitive trade practices commission 4. Director General of Investigation and Registration

STOCK EXCHANGE
There are 22 stock exchanges in India, the first being the Bombay Stock Exchange (BSE), which began formal trading in 1875, making it one of the oldest in Asia. Over the last few years, there has been a rapid change in the Indian securities market, especially in the secondary market. Advanced technology and online-based transactions have modernized the stock exchanges. In terms of the number of companies listed and total market capitalization, the Indian equity market is considered large relative to the countrys stage of economic development. The number of listed companies increased from 5,968 in March 1990 to about 10,000 by May 1998 and market capitalization has grown almost 11 times during the same period. The debt market, however, is almost nonexistent in India even though there has been a large volume of Government bonds traded. Banks and financial institutions have been holding a substantial part of these bonds as statutory liquidity requirement. The portfolio restrictions on financial institutions statutory liquidity requirement are still in place. A primary auction market for Government securities has been created and a primary dealer system was introduced in 1995. There are six authorized primary dealers. Currently, there are 31 mutual funds, out of which 21 are in the private sector. Mutual funds were opened to the private sector in 1992. Earlier, in 1987, banks were allowed to enter this business, breaking the monopoly of the Unit Trust of India (UTI), which maintains a dominant position. Before 1992, many factors obstructed the expansion of equity trading. Fresh capital issues were controlled through the Capital Issues Control Act. Trading practices were not transparent, and there was a large amount of insider trading. Recognizing the importance of increasing investor protection, several measures were enacted to improve the fairness of the capital market. The Securities and Exchange Board of India (SEBI) was established in 1988. . The first exchange to be based on an open electronic limit order book was the National Stock Exchange (NSE), which started trading debt instruments in June 1994 and equity in November
32

1994 . In March 1995, BSE shifted from open outcry to a limit order book market. Currently, 17 of Indias stock exchanges have adopted open electronic limit order. Before 1994, Indias stock markets were dominated by BSE. In other parts of the country, the financial industry did not have equal access to markets and was unable to participate in forming prices, compared with market participants in Mumbai (Bombay). As a result, the prices in markets outside Mumbai were often different from prices in Mumbai. these pricing errors limited order flow to these markets.Explicit nationwide connectivity and implicit movement toward one national market has changed this situation (Shah and Thomas, 1997). NSE has established satellite communications which give all trading members of NSE equal access to the market. Similarly, BSE and the Delhi Stock Exchange are both expanding the number of trading terminals located all over the country. The arbitrages are eliminating pricing discrepancies between markets.Despite these big improvements in microstructure, the Indian capital market has been in decline during the last three years. The amount of capital issued has dropped from the level of its peak year,1994/95,and so have equity prices. In 1994/95, Rs276 billion was raised in the primary equity market. This figure fell to Rs208 billion in 1995/96 and to Rs142 billion in 1996/97. The BSE-30 index or Sensex the sensitive index of equity prices, peaked at 4,361 in September 1994 and fell during the following years. A leading cause was that financial irregularities and overvaluations of equity prices in the earlier years had eroded public confidence in corporate shares. Also, there was a reduced inflow of foreign investment the Mexican and Asian financial crises. In a sense, the market is now undergoing a period of adjustment. Thus, it is time for regulatory authorities to make greater efforts to recover investors confidence and to further improve the efficiency and transparency of market operations. SEBI issued directives that require that half the members of the governing boards of the stock exchanges be non broker public representatives and include a SEBI nominee. To avoid conflicts of interest, stock brokers are a minority in the committees of stock exchanges set up to handle matters of discipline default and investor-broker disputes. The exchanges are required to appoint a professional, nonmember executive director who is accountable to SEBI for the implementation of its directives on the stock exchanges. SEBI has introduced a mechanism to remedy investor grievances against brokers.

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GROWTH OF CAPITAL MARKET

34

REFORMS IN INDIAN CAPITAL MARKET

Over the last few years, SEBI has announced several far-reaching reforms to promote the capital market and protect investor interests. Reforms in the secondary market have focused on three main areas: structure and functioning of stock exchanges automation of trading and post trade systems, and the introduction of surveillance and monitoring systems Computerized online trading of securities, and setting up of clearing houses or settlement guarantee funds were made compulsory for stock exchanges. Stock exchanges were permitted to expand their trading to locations outside their jurisdiction through computer terminals. Thus, major stock exchanges in India have started locating computer terminals in far-flung areas, while smaller regional exchanges are planning to consolidate by using centralized trading under a federated structure. Online trading systems have been introduced in almost all stock exchanges. Trading is much more transparent and quicker than in the past. Until the early 1990s, the trading and settlement infrastructure of the Indian capital market was poor. Trading on all stock exchanges was through open outcry, settlement systems were paper-based, and market intermediaries were largely unregulated. The regulatory structure was fragmented and there was neither comprehensive registration nor an apex body of regulation of the securities market. Stock exchanges were run as brokers clubs as their management was largely composed of brokers. There was no prohibition on insider trading, or fraudulent and unfair trade practices Since 1992, there has been intensified market reform resulting in a big improvement in securities trading, especially in the secondary market for equity. Most stock exchanges have introduced online trading and set up clearing houses/corporations. A depository has become operational for scrip trading and the regulatory structure has been overhauled with most of the powers for regulating the capital market vested with SEBI. The Indian capital market has experienced a process of structural transformation with operations conducted to standards equivalent to those in the developed markets. It was opened up for investment by foreign institutional investors (FIIs) in 1992 and Indian companies were allowed to raise resources abroad through Global Depository Receipts (GDRs) and Foreign Currency Convertible Bonds (FCCBs). The primary and secondary segments of the capital market expanded rapidly, with greater institutionalization and wider participation of individual investors accompanying this growth. However many problems, including lack of confidence in stock investments, institutional
35

overlaps, and other governance issues, remain as obstacles to the improvement of Indian capital market efficiency.

REFORMS IN INDIAN SECURITIES MARKET SINCE 1992

The development in Indian securities market since 1992 can be summarized as follows: Capital Issues (Control) Act of 1947 repealed and the office of Controller of Capital Issues abolished control over price and premium of shares removed. Companies now free to raise funds from securities markets after filing prospectus with the Securities and Exchange Board of India (SEBI).

The power to regulate stock exchanges delegated to SEBI by the Government.

SEBI introduces regulations for primary and other secondary market intermediaries, bringing them within the regulatory framework.

Reforms by SEBI in the primary market include improved disclosure standards, introduction of prudential norms, and simplification of issue procedures Companies required to disclose all material facts and specific risk factors associated with their projects while making public issues.

Listing agreements of stock exchanges amended to require listed companies to furnish annual statement to the exchanges showing variations between financial projections and projected utilization of funds in the offer document and actual figures. This is to enable shareholders to make comparisons between performance and promises.

SEBI introduces a code of advertisement for public issues to ensure fair and truthful disclosures.

Disclosure norms further strengthened by introducing cash flow statements.

36

 New issue procedures introducedbook building for institutional investorsaimed at reducing costs of issue. SEBI introduces regulations governing substantial acquisition of shares and takeovers and lays down conditions under which disclosures and mandatory public offers are to be made to the shareholders. Regulations further revised and strengthened in 1996.

SEBI reconstitutes the governing boards of the stock exchanges and introduces capital adequacy norms for broker accounts.

Private mutual funds permitted and several such funds already set up. All mutual funds allowed to apply for firm allotment in public issuesalso aimed at reducing issue costs.

Regulations for mutual funds revised in 1996, giving more flexibility to fund managers while increasing transparency, disclosure, and accountability.

Over-the-Counter Exchange of India formed.

National Stock Exchange (NSE) establishment as a stock exchange with nationwide electronic trading.

Bombay Stock Exchange (BSE) introduces screen-based trading; 15 stock exchanges now have screened-based trading. BSE granted permission to expand its trading network to other centers.

Capital adequacy requirement for brokers enforced.

System of mark-to-market margins introduced in the stock exchanges.

37

 Stock lending scheme introduced.

Transparency brought out in short selling.

National Securities Clearing Corporation, Ltd. set up by NSE.

BSE in the process of implementing a trade guarantee scheme.

SEBI strengthens surveillance mechanisms and directs all stock exchanges to have separate surveillance departments

SEBI strengthens enforcement of its regulations. Begins the process of prosecuting companies for misstatements and ensures refunds of application money in several issues on account of misstatements in the prospectus.

Indian companies permitted to access international capital markets through Euro issues.

Foreign direct investment allowed in stock broking asset management companies, merchant banking, and other nonbank finance companies.

Foreign institutional investors (FIIs) allowed access to Indian capital markets on registration with SEBI.

FIIs also permitted to invest in unlisted securities and corporate and Government debt.

The Depositories Act enacted to facilitate the electronic book entry transfer of securities through depositories.

38

 Guidelines for Offshore Venture Capital Funds announced. SEBI regulations for venture capital Funds become effective.

TRADING PLATFORM IN INDIA

39

TRADING PLATFORM IN INDIA

1.Bombay stock exchange (BSE)

2.National stock exchange (NSE)

3.Regional stock exchange (RSE)

There are 23 stock exchanges in India. Among them two are national level stock exchanges namely Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE). The rest 21 are Regional Stock Exchanges (RSE).

BOMBAY STOCK EXCHANGE

BSE stands for Bombay Stock Exchange. The oldest market not only in the country, but also in Asia. In the early days, BSE was known as "The Native Share & Stock Brokers Association." It was established in the year 1875 and became the first stock exchange in the country to be recognized by the government. In 1956, BSE obtained a permanent recognition from the Government of India under the Securities Contracts (Regulation) Act, 1956.

40

In the past and even now, it plays a pivotal role in the development of the country's capital market. This is recognized worldwide and its index, SENSEX, is also tracked worldwide. Earlier it was an Association of Persons (AOP), but now it is a demutualised and corporatized entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatization and Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). The Stock Exchange, Mumbai, popularly known as BSE, was established in 1875, and is the oldest stock exchange in Asia. It accounts for over one third of the total trading volume in the country. The average number of daily trades on the Exchange is one million, giving it one of the highest per hour rates of trading in the world. In the financial year 2003-04, its average daily turnover exceeded US$ 450 million.

NATIONAL STOCK EXCHANGE

The National Stock Exchange of India (NSE) was incorporated in November 1992 as a tax-paying company. It is recognized under Securities Contracts (Regulation) Act, 1956 in 1993 as a stock exchange. In June 1994, it commenced operations in the Wholesale Debt Market (WDM). In November, the same year, the Capital Market (Equities) segment commenced operations and the Derivatives segment in June 2000. . The National Stock Exchange (NSE) operates a nation-wide, electronic market, offering trading in Capital Market, Derivatives Market and Currency Derivatives segments including equities,

41

equities based derivatives, Currency futures and options, equity based ETFs, Gold ETF and Retail Government Securities. Today NSE network stretches to more than 1,500 locations in the country and supports more than 2, 30,000 terminals.With more than 10 asset classes in offering, NSE has taken many initiatives to strengthen the securities industry and provides several new products like Mini Nifty, Long Dated Options and Mutual Fund Service System. Responding to market needs, NSE has introduced services like DMA, FIX capabilities, co-location facility and mobile trading to cater to the evolving need of the market and various categories of market participants. NSE has made its global presence felt with cross-listing arrangements, including license agreements covering benchmark indexes for U.S. and Indian equities with CME Group and has also signed a Memorandum of Understanding (MOU) with Singapore Exchange (SGX) to cooperate in the development of a market for India-linked products and services to be listed on SGX. The two exchanges also will look into a bilateral securities trading link to enable investors in one country to seamlessly trade on the other countrys exchange. NSE is committed to operate a market ecosystem which is transparent and at the same time offers high levels of safety, integrity and corporate governance, providing ever growing trading & investment opportunities for investors.

The NSE was set-up with the main objectives of: establishing a nation-wide trading facility for equities, debt instruments and hybrids,

42

ensuring equal access to investors all over the country through an appropriate communication network,

providing a fair, efficient and transparent securities market to investors using electronic trading systems,

enabling shorter settlement cycles and book entry settlements systems, and meeting the current international standards of securities markets.

NSE has been promoted by leading financial institutions, banks, insurance companies and other financial intermediaries:

Industrial Development Bank of India Limited Industrial Finance Corporation of India Limited Life Insurance Corporation of India State Bank of India ICICI Bank Limited IL & FS Trust Company Limited Stock Holding Corporation of India Limited SBI Capital Markets Limited Bank of Baroda Canara Bank General Insurance Corporation of India National Insurance Company Limited The New India Assurance Company Limited The Oriental Insurance Company Limited United India Insurance Company Limited Punjab National Bank Oriental Bank of Commerce Indian Bank Union Bank of India

REGIONAL STOCK EXCHANGE (RSE)

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There are 23 stock exchanges in India. Among them two are national level stock exchanges namely Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE). The rest 21 are Regional Stock Exchanges (RSE).

List of Regional Stock Exchanges in India

Ahmedabad Bangalore Bhubaneshwar Calcutta Cochin Coimbatore Delhi Guwahati Hyderabad Jaipur Ludhiana Madhya Pradesh Madras Magadh Mangalore Meerut OTC Exchange Of India Pune Saurashtra Kutch UttarPradesh Vadodara

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SEGMENTS OF CAPITAL MARKET

45

SEGMENTS OF CAPITAL MARKET

Primary Market

Secondary Market

Commodity Market

Derivative Market

Depositories

46

Future & Option

PRIMARY MARKET
it is a market where the securities are sold in order to raise the funds or the capital required by the company. The securities can be in many forms such as equity shares, preference shares, debt instruments, bonds etc. In the primary market, securities are offered to public for subscription for the purpose of raising capital or fund.

CHARACTERISTICS OF PRIMARY MARKET

The first characteristic is that the securities are being sold for the first time These securities can be sold to individual investors or group of investors or to another company This is a place where the company gets the long term capital

WAYS TO RAISE CAPITAL IN THE PRIMARY MARKET

There are 4 ways in which a company can raise the capital in the primary market

Public Issues Offer of Sale Rights Issue Private Placement

PUBLIC ISSUES In Public Issues the company offers the shares directly to the public/institutions. The shares are allotted at a stated price. It is done through document called a prospectus. It is one of the most common methods followed all over the world.
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OFFER OF SALE
In this type the company sells off all its securities to one issue houses or the share brokers. The share brokers sell these securities at higher price than the price at which they have purchased them from the company. The difference in the purchasing and selling price is called as turn or spread or Bought out Deals (BOD). The advantage of this kind of sale is that the company need not print and advertise the prospectus.

RIGHTS ISSUE
This is an FPO. In this type the company distributes the new shares or securities amongst the existing share holders. The distribution depends on the capital that has to be raised by the company and the number of the shares that the existing investors possess.

PRIVATE PLACEMENT
In this type the share brokers or issue houses purchase all the shares out-rightly from the company and issue them to their own clients at the same price or at the premium price.

BENEFITS

It provides a platform for a company to modernize or diversify its business. The companies can get the capital easily for a long term. The investors get a good opportunity to invest in the business and get good returns in the form of interest, dividends.

Even small investors can participate and buy the securities from the market

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

48

securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduitby facilitating value-enhancing control activities, enabling implementation of incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions.

COMMODITY MARKET Commodity market is an important constituent of the financial markets of any country. It is the market where a wide range of products, viz., precious metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market. This would help investors hedge their commodity risk, take speculative positions in commodities and exploit arbitrage opportunities in the market. The major commodity markets are in the United Kingdom and in the USA. In India there are 25 recognized future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are:

National Commodity & Derivatives Exchange Limited (NCDEX) Multi Commodity Exchange of India Limited (MCX) National Multi-Commodity Exchange of India Limited (NMCEIL) .

NATIONAL COMMODITY & DERIVATIVES EXCHANGE LIMITED (NCDEX)

National Commodity & Derivatives Exchange Limited (NCDEX) located in Mumbai is a public limited company incorporated on April 23, 2003 under the Companies Act, 1956 and had commenced its operations on December 15, 2003.This is the only commodity exchange in the country promoted by national level institutions. It is promoted by ICICI Bank Limited, Life Insurance Corporation of India (LIC), National Bank for Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSE). It is a professionally managed online multi commodity exchange. NCDEX is
49

regulated by Forward Market Commission and is subjected to various laws of the land like the Companies Act, Stamp Act, Contracts Act, Forward Commission (Regulation) Act and various other legislations.

MULTI COMMODITY EXCHANGE OF INDIA LIMITED (MCX)

Headquartered in Mumbai Multi Commodity Exchange of India Limited (MCX) is an independent and de-mutulised exchange with a permanent recognition from Government of India. Key shareholders of MCX are Financial Technologies (India) Ltd., State Bank of India, Union Bank of India, Corporation Bank, Bank of India and Canada Bank. MCX facilitates 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.

NATIONAL MULTI-COMMODITY EXCHANGE OF INDIA LIMITED (NMCEIL)

National Multi Commodity Exchange of India Limited (NMCEIL) is the first demutualized, Electronic Multi-Commodity Exchange in India. On 25th July, 2001, it was granted approval by the Government to organize trading in the edible oil complex. It has operationalised from November 26, 2002. It is being supported by Central Warehousing Corporation Ltd., Gujarat State Agricultural Marketing Board and Neptune Overseas Limited. It got its recognition in October 2002.

FUTURES & OPTIONS (F&O) SEGMENT:

This segment provides trading in derivatives instruments like index futures, index options, stock options, and stock futures, and commenced its operations at NSE in June 2000. Future contracts is an agreement made and traded on the exchange between two parties to buy or sell a commodity at a particular time in the future for a pre-defined price. Since both the parties are unaware of each other, the exchange provides a mechanism to give the party assurance of honored contract. The exchange specifies standardized features of the contract. The risk to the
50

holder is unlimited, and because the pay off pattern is symmetrical, the risk to the seller is unlimited as well Money lost and gained by each party on a futures contract are equal and opposite. In other words, a future trading is a zero-sum game. These are basically forward contracts, meaning they represent a pledge to make a certain transaction at a future date. The exchange of assets occurs on the date specified in the contract. These are regulated by overseeing agencies, and are guaranteed by clearinghouses. Hedgers often trade futures for the purpose of keeping price risk in check. Future contracts are often used by commercial enterprises as hedging tools to reduce the risk of expected future purchases or sales of the underlying asset. If used to speculate, risk increases. So risk depends on the underlying instrument and the use of the future.

Advantages of Futures Contracts

If price moves are favorable the producer realizes the greatest return with this marketing alternative. No premium charge is associated with futures market contracts.

Disadvantages of Future Contracts

Subject to margin calls Unable to take advantage of favorable price moves Net price is subject to Basis change Futures contracts are similar to Options. Both represent actions that occur in future. But Options are contract on the underlying futures contract where as futures are either to accept or deliver the actual physical commodity. To make a decision between using a futures contract or an options contract, producers need to evaluate both alternatives.

DERIVATIVE MARKET
A derivative is a financial instrument, whose value depends on the values of basic underlying variable. In the sense, derivatives is a financial instrument that offers return based on the return of some other underlying asset, i.e the return is derived from another instrument. Commodities
51

whose value is derived from the price of some underlying asset like securities, commodities, bullion, currency, interest level, stock market index or anything else are known as Derivatives. In simpler form, derivatives are financial security such as an option or future whose value is derived in part from the value and characteristics of another security, the underlying asset.It is a generic term for a variety of financial instruments. Essentially, this means you buy a promise to convey ownership of the asset, rather than the asset itself. The legal terms of a contract are much more varied and flexible than the terms of property ownership. In fact, its this flexibility that appeals to investors. When a person invests in derivative, the underlying asset is usually a commodity, bond, stock, or currency. He bet that the value derived from the underlying asset will increase or decrease by a certain amount within a certain fixed period of time. Futures and options are two commodity traded types of derivatives. An options contract gives the owner the right to buy or sell an asset at a set price on or before a given date. On the other hand, the owner of a futures contract is obligated to buy the asset. The other examples of derivatives are warrants and convertible bonds (similar to shares in that they are assets). But derivatives are usually contracts. Beyond this, the derivatives range is only limited by the imagination of investment banks. It is likely that any person who has funds invested an insurance policy or a pension fund that they are investing in, and exposed to, derivatives wittingly or unwittingly.Shares or bonds are financial assets where one can claim on another person or corporation; they will be usually being fairly standardized and governed by the property of securities laws in an appropriate country. On the other hand, a contract is merely an agreement between two parties, where the contract details may not be standardized. Derivatives securities or derivatives products are in real terms contracts rather than solid as it fairly so

DEPOSITORIES
A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant. It also provides services related to transactions in securities. National Securities Depository Limited Limited (CDSL) are registered with SEB (NSDL) and Central Depository Services (India)

52

RESEARCH METHODOLOGY

53

RESEARCH METHODOLOGY
Research Methodology refers to search of knowledge .one can also define research methodology as a scientific and systematic search for required information on a specific topic. The word research methodology comes from the word advance learner s dictionary meaning of research as a careful investigation or inquiry especially through research for new facts in my branch of knowledge for example some author have define research methodology as systematized effort to gain new knowledge.

A. DEFINING OBJECTIVES

THE

RESEARCH

PROBLEM

AND

RESEARCH

The definition of the problem includes the study of risk factor in capital market.

B. DEVELOPING THE RESEARCH PLAN.

It has the following types:

1. DATA SOURCES
Two types of data were taken into consideration i.e., primary data and secondary data. But major emphasis was given on gathering primary data. The secondary data was used only to supplement the primary and make things clear. a) Primary Data: the collection of data for this source includes personal interviews of people by the filling of questionnaire.
54

b) Secondary Data: In this study the secondary data is collected from the following.

Sources:
Companys website. Reports of company. Discussion with public and official person.

SAMPLING PLAN
An integral component of a research design is the sampling plan. Specifically the sampling plan address three questions: whom to survey, how many to survey, and how to select them. The following procedure is give below accordingly.

Population:
The population interviewed in the research is General public, employees of Ludhiana stock exchange.

Sample Size:
The sample size covered during the research is of 50. Sample Element: The sample element of the research is public & other officials. Research Duration: The sample duration between may 2011 and june 2011 Sampling technique: The sampling procedure followed is random sampling. Research Instrument: In this study the research instrument is Questionnaire: It consists of a set of 10 questions presented to respondents.

55

The questionnaire is structured with combinations of various close and open ended questions. Close ended questions already have the possible answers and the open-ended questions allow the respondents to answer in their own words.

56

DATA INTERPRETATION AND ANALYSIS

DATA INTERPRETATION AND ANALYSIS

Data interpretation and analysis is basically deals with the data which is collected for the research purpose is here evaluated and then the data which is relevant is to be used for the research purpose and finally is should be used for the data interpretation with help of various diagrams and tables which is being used for the properly defining the data which is collected from the various respondents accordingly.
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Q1. Do you invest in capital market?

Table no. 1

Options

Total no
58

Percentage

Yes No

50 00

100% 00

Fig no 1
120 100 80 60 40 20 0 Total no percentage
Yes No

Interpretation: In the above mentioned data and also represented with the help of
the histogram which clearly shows that 100% of the people invest in the capital market respectively.

Q2. Means of investing stock investment Table no 2 Mean Respondent

59

Percentage

News channels Financial advisors Friends and relatives Others

7 40 5 28

8.75% 50% 6.25% 35%

60

50 45 40 35 30 25 20 15 10 5 0 NC F A F &R Others

res pondent

Interpretation: In the above mentioned data and also represented with the help of
the graph which clearly shows that 50% of the people awared about capital market by financial advisors

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Q3.what is your purpose behind making investment? Table no 3 Purpose Safety Liquidity Tax planning Response 7 6 21 Percentage 8.75% 7.5% 26.25%

Returns Total

46 80

57.5% 100

Fig no 3

60 50 40 30 20 10 0 saf ety liquiditytax plan returns

response Percentage

Interpretation:

in the above mentioned data which is also clearly shown by the histogram and it represented that 57.5% people do investment for returns and 26.5% for tax planning and only 7.5% for liquidity.

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Q4. Among the following avenue which would you prefer to invest in? Table no 4 Avenue Equity Commodity Fixed income Real estate Others Total no 16 6 45 10 3 Percentage 20% 7.5% 56.75% 12.5% 3.75

Fig no 4

60 50 40 30 20 10 0 equity commodity f ixed real estate income others

Total no Percentage

Interpretation:

in the above mentioned data which is also represented by the histogram which is clearly shows that mostly people prefer fixed income for investment

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Q5. What percent of your total income do you invest?

Table no 5

Scale Upto 10% 10 -20% 20 -30% Above 30%

Total no 6 67 6 1

Percentage 7.5% 83.75% 7.5% 1.28%

Fig no 5

70 60 50 40 30 20 10 0 res pons e percentag e upto 10% 10 - 20% 20 - 30% above 30 %

Interpretation:

in the above mentioned data and it is also represented by the histogram which clearly shows that 83.75% of people invest 10 20% part of total income for stock market

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Q6. What kind of return have you generated on investment Table no 6 Scale Upto 10% 10 20% 20 30% Above 30% Total no 30 45 5 0 Percentage 37.5% 56.25% 6.25% 0%

Fig no 6

120 100 80 60 40 20 0 upto 10 10 to 20 20 to 30 above 30

Percentage Total no

Interpretation:

in the above mentioned data which is also clearly shown by the histogram and it represented that 56.25% of people have generated return 10 -20%.and 37.5% people generated return upto 10%. 6.25% people have generated return 20 30%.

65

Q7. Are you satisfied with return in investment?

Table no 7 Option Yes No Total no 26 54 Percentage 32.5% 67.5%

Fig no 7

70 60 50 40 30 20 10 0 res pons e percentag e yes no

interpretation: in the above mentioned data and it is also shown by the pie diagrams
that only 32.5% are satisfied and 67.5% are dissatisfied.

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Q8. Do you consult financial advisors of LSE before you make your investment

Page no 8 Option Yes No Total no 46 34 Percentage 57.5% 42.5%

Fig no 8
60 50 40 30 20 10 0 yes no
Total no Percentage

Interpretation: in the above mentioned data and also represented by the histogram
which clearly shows that 57.5% of people consult financial advisor of LSE and 42.5% of people do not consult.

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Q9. Are you satisfied with services of LSE ? Table no 9 Options Yes No Total no 50 30 Percentage 62.5% 37.5%

Fig no 9
70 60 50 40 30 20 10 0 tota no. l yes n o

68

Interpretation: In the above mentioned data and also represented with the help of
the histogram which clearly shows that 62.5% of people satisfied with services of LSE.

FINDINGS SUGGESTIONS LIMITATIONS OF THE STUDY

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 CONCLUSION

FINDINGS

100% of people invest in capital market. Mostly people purpose of making investment is returns .Mostly people want to invest in the fixed income avenue. 67.5% people are not satisfied from returns and 32.5% people are satisfied. 57.5% people consult financial advisors of LSE before making any investment. 50% people satisfied with services of LSE.

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SUGGESTION

Ludhiana stock exchange is good. But according to customer satisfaction the company has to provide the better service. Some Other Suggestions are: 1. better and quick email facilities should be provided to the investors. 2. proper information to the investor regarding securities should be given. 3. The interest of the investors should be protected from the irregularities of trading or fictitious securities.

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LIMITATIONS

Following were the limitations which I faced during doing this Research: The cost for doing the project was one of the limitations. There was also time constraint, as people were busy in their own work. Limited area is covered for doing this research work. Respondents were giving answer to the questions that were written on the questionnaire, but fewer efforts were made to get more and more information regarding their own views. The respondents were not paying proper attention while filling the questionnaires.

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CONCLUSION
Indian capital market is more volatile and its response highly according to the scenario changes in the world capital market responses. Today, the Indian capital 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, 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. A developed and vibrant secondary market can be an engine for the revival and growth of the primary market. So, to encourage Indian investment and face international competition every Indian stock exchange has to stress on the innovation sustained investment in technology to remain ahead.

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ANNUXURE
o o BIBLIOGRAPHY QUESTIONNAIRE
74

BIBLIOGRAPHY WEBSITES
lse.co.in nseindia.com wikipedia.com investopedia.com google.com

NEWSPAPER
The economic times The business standard

MAGAZINES
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The business outlook Business today

Questionnaire

Dear respondent I am MANDEEP KAUR, student of MBA 3 rd SEM. CT Institute of Advance Management Studies, Jalandhar. I am conducting a study on the topic CAPITAL MARKET . I assure you that the information provided by you will be kept confidential and will be used only for the research purpose.

General information

NameAgeGender Address. .... Education............Occupation 76

Contact no

Q1. Do you invest in capital market? a) Yes b) No

Q2. Means of making investment ? a) News channel c) friends and Relatives b) financial advisors d) others

Q3. What is your purpose behind making an investment ? a) safety c) liquidity b) tax planning d) returns

Q4. Among the following avenues which would you prefer to invest in a) Equity c) fixed income e) others b) Commodity d) Real estate

Q5. What percent of your total income is invested in different avenues. a) upto 10% c) 20 -30% b) 10 -20% d)above 30%

Q6. What kind of return have you generated in investment a) upto 10% c) 20 -30% b)10 -20% d) above 30%

Q7. Are you satisfied with return from investment a) yes b) no

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Q8. Do you consult financial advisor of LSE before you make your investment ? a) Yes b) No

Q9. Are you satisfied with services of LSE? a) Better e-mail c) Customer handling b) Customer Care d) Any other

Q10. Any suggestions for the improvement of the performance of the LSE.

Suggestions______________________________________________

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