Stock Market in India

The East India company and few commercial banks floated shares. American Civil War made Indian COTTON

Manufactures exploited this situation and exported

large quantities of cotton New companies started coming up excessive

speculation and riskless buying became the order

 Native Shares Stock Brokers Association. (1887 BSE) 1894 Ahmadabad

1908 Culcutta (Swadeshi Movement)

Madras ( Due to British involvement in World War)

7 stock exchanges were setup( Due to Industrial Revolution)

12 more stock exchanges were setup

BOMBAY STOCK EXCHANGE

BSE
The origin of the Bombay Stock Exchange dates back to1875. It was organized under the name of The Native Stock and share brokers Association as non-profit making Association.

It was recognised on a permanent basis in 1957.

OBJECTIVES
The objectives of the stock exchange are To safeguard the interest of investing public having dealings on the exchange. To establish and promote honorable and just practices in securities transactions. To promote, develop and maintain well-regulated market for dealing in securities. To promote industrial development in the country through efficient resource mobilization by the way of investment incorporate securities.

BSE
Trading System: In March 1995, The Bombay Stock Exchange has introduced screen based trading called BOLT (Bombay On-Line trading) After getting approval from SEBI, BOLT connection have been installed in Ahmedabad, Rajkot, Pune, Vadodara and Calcutta

Securities traded:
The securities traded in the BSE are classified into three groups namely, A Group and non-specified securities. The latter is sub-divided into B1 and B groups.

A group contains with large outstanding shares, good track record and large volume of business.
A group contains 150 companies.

Relatively liquid securities come under the B1 group and it comprises of 746 companies
The remaining shares re placed under the B group

Surveillance system: There is a separate surveillance department in the stock exchange. The surveillance department aims at providing free and fair market, arresting unsystematic risk

Surveillance system: The Surveillance can be classified into

Price Surveillance

Pre-monitoring

a)Price Surveillance The surveillance department keeps a close watch over the price movements of scrip's and aims at an early detection of market manipulation like price rigging.

 Circuit Filters
The circuit filters decide the range within which the traded prices of a scrip can vary on a day compared to the previous days closing price
10 % 20% 1 hour a day

Margins
The trading members deposit part of their trades as a margin to the exchange
Type I Members - A group share - Daily margin of 15% Type II members on the basis of gross exposure or net exposure and higher the margin is charged

 Special margin
To curb the unwanted risk in the price and volume special margin has been imposed It is levied on the net cumulative purchase in which rise in price is abnormally high It ranges from 25% to 100%

b) Pre-monitoring Monitoring each and every to avoid default.

SALIENT FEATURES
NATIONWIDE REACH IN MORE THAN 359 CITIES FIRST EXCHANGE IN INDIA TO OBTAINISO 9001:2000 CETIFICATION FIRST EXCHANGE IN COUNTRY TO OBTAININFORMATION SECURITY MANAGEMENT SYSTEMSTANDARD BS 7799-22002 CERTIFICATION WEBSITE IN GUJRATI AND HINDI

 SENSEX IS AVALUE WEIGHTED INDEX COMPOSED OF 30 STOCKS REPRESENTINGVARIOUS SECTORS

THESE COMPANIES ACCOUNTS FOR ONE FIFTHOF MARKET CAPITALIZATION

BASE VALUE OF SENSEX IS 100 (APRIL 1,1979) BASE YEAR (1978-79

 FREE FLOAT CAPITALIZATION METHOD ICONIC STATURE-TRACKED WORLDWIDE

INDEX COOPERATION AGREEMENT WITH DEUTSCHEBORSE HAS MADE SENSEX AVAILABLE TO INVESTORSIN EUROPE AND AMERICA
ALSO AVAILABLE IN HONG KONG

 1991 : Pherwani Committee ( to establish the national stock market system)

Five Defects
Lack of liquidity in most of the markets
Lack of ability to develop markets for debt Lack of infrastructure facilities and outdated trading system Outdated settlement system that are inadequate to cater to the growing volume, leading to delays.

NSE

Lack of single market due to the inability of various stock

exchanges to function cohesively with legal structure and regulatory framework.

NSE
The NSE of India became operation the capital market segment on 3 rd November 1994 in Mumbai. Promoters of NSE:IDBI, ICICI, IFCI, LIC,GIC,SBI, Bank of Baroda, Canara Bank, Corporation Bank, Indian Bank , Oriental Bank of Commerce, Union Bank of India, Punjab National Bank under the company act, 1956 on 27th Nov 1992

 GOI has granted recognition with effect from 26th Apr 1993 , initially for a period of 5 years, IDBI as a lead manager. To form infrastructure IDBI appointed
International securities consulting Ltd. ECDS: Electronic Clearing and Depository System SHCIL: Stock Holding Corporation of India Ltd (Clearing and Settlements)

Objectives of NSE
To establish a nation wide trading facility for equity, debt instruments and hybrids

To ensure equal access to investors all over the country

through appropriate communication network To provide a fair, efficient and transparent securities market to investors using an e-system To enable shorter settlement cycle and book entry settlement system To meet current international standards of securities market

Membership: Membership is based on factors such as capital adequacy, corporate structure, track record, education experience etc Admission is a two stage process
Written examination INterview

Eligibility - WDM (Wholesale Debt Market) Trading members are bodies corporate, companies, institutions including subsidiaries of banks engaged in financial services and such other persons or entities as may be permitted from time to

time by RBI/SEBI
The whole-time directors should posses al least two years experience in any activity related to banking or financial services or treasury The applicant must possess a minimum networth of Rs. 2 cr

The applicant must be engaged solely in the business of securities

and must not be engaged in any fund based activities

Eligibility for Capital Market Segment

Individuals, registered firms, bodies corporate, companies

and such other persons may permitted under the SCRA, 1957

The applicant must be engaged solely in the business of

securities and must not be engaged in any fund based activities The min networth requirements prescribed are as follows
Individuals and registered firms Rs. 75 Lakh Corporate bodies Rs. 100 lakh In the case of registered partnership firm, each partner should

contribute atleast 5% of the minimum NW

 A corporate trading member should consist only of individuals

( max 4) who should directly hold atleast 40% of paid up

capital in case of listed companies and at least 51% in the case of other companies The minimum prescribed qualification of graduation and two years experience of handling securities as broker, sub-broker,

authorized assistant etc. must be fulfilled by

Min two directors in case the applicant is a corporate Min two partners in case of partnership firm The individual in case of individual or sole proprietary concerns

 Trading system in NSE (NEAT: National Exchange for Automated Trading) Members are connected with the central computer at NSE through leased lines and VSAT. Computer screen windows
window Title bar Tool Bar Display Current date, time and trading system Inquiry functions

Ticker
Market watch Inquiry window Market by order Market by price Outstanding order

Information about the trades as and when it takes places

Pre-selected securites, best buy, sell order price and values. Last traded price with order values

Trading books are arranged according to price and time, left side- buy order, right side sell order Aggregate outstanding orders in trading book at different prices Members own outstanding buy and sell orders

FEATURES NSE has a market capitalization of around Rs 47,01,923 crore (7 August 2009) and is expected to become the biggest stock exchange in India in terms of market capitalization by 2009 end. NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities

 As of 2008, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken as take in the NSE

It is the second fastest growing stock exchange in the world with a recorded growth of 16.6% 1587 is number of listings

Features and Functions of NSE

NSE is a ringless, national, computerized exchange NSE has two segments
Capital Market (June 1994)
Equities Debentures

Whole sale debt market (Nov 1994)

PSU bonds CPs

 NSE is the first exchange in the world to employ the satellite technology (VSAT: Very Small Aperture Terminals) with dedicated high speed lines lines to the central computer at Mumbai An order Driven system Conformation slip
Quantity Price Code number of counter party

Features and Functions of NSE

Identity of a trading member is not revealed Members are required to deliver securities and cash by a certain day All trades on NSE are guaranteed by the National Securities Clearing Corporation

Advantages of NSE:
Wider Accessibility Screen based trading Non-disclosure of the trading members identity.

Transparent transactions
Matching of orders

Effective settlement of corporate benefit.

Trading in dematerialized form

Subsidiary General Ledger facility in the debt market

Recent trends in NSE: 1.Expansion After establishing its operation in Mumbai, the NSE had expanded its operation to other cities.

NSE has installed 2580 VSATS in 317cities across the country.

Recent trends in NSE 2. Quality 3. More liquidity 4. Less Brokerage. 5. Insurance against risk 6. Quick clearing and settlement 7. Foreign Institutional investors trading

Organizational Structure of NSE

NSCCL
National Securities Clearing Corporation Limited

IISL
India Index Services & Products Limited

NSDL
National Securities Depository Limited

NSE .IT

NSCCL
Incorporated in Aug 1995 Fills confidence in the clearing and settlement

Promotes and maintains short & consistent

settlement cycle Provides counter party risk guarantee

IISL
In may 1998 Joint venture between NSE & CRISIL Provides variety of indices & index related services and products It has a consulting and licensing agreement with S&P for co-branding equity indices

NSDL
In Nov 1996, promoted by IDBI & UTI NSE .IT 100% subsidiary of NSE Enables the global financial services industry Promoted by DotEx International Limited (DotEx Plaza)

OTCEI
Over the Counter Exchange of India Started in 1992 Objective is to provide a market for the smaller companies that could not afford the listing fees of the large exchanges and did not fulfill the minimum capital requirement for listing.

Promoters: OTCEI is incorporated under sec 25 of the Indian Companies Act 1956. UTI, GIC, ICICI, IDBI, IFCI, LIC, SBICapital Markets, Canbank Financial Services

Players in the OTCEI Market: Act as brokers, buy and sell securities according to the instructions of the investors. Market makers in securities, they quote the prices at which members are willing to buy and sell the specified number of securities.

 Members may be public financial institutions, scheduled banks, mutualfunds, SEBI approved merchant bankers, banking subsidiaries, venture capital funds and other non-banking financial companies with minimum net worth of Rs 2.5 crores Members pay a one time non-refundable admission fee of Rs. 10 lakh and Rs. 5 lakh after 1 year. The annual subscription fee is Rs. 1 lakh.

Scrips to be traded:
1. The minimum capital requirement for a company to be listed on the OTCEI is Rs 3Crores and the maximum is Rs 50 crores.

2. For companies with an issued capital of more thanRs.30 lakhs but less than 300lakhs, the minimum public offer should be25 per cent of the issued capital or 20 lakhs worth of shares in face value which ever is higher 3. Companies with an issued capital of more than Rs 30 crores seeking to be listed have to comply with listing requirements and guidelines that are applicable to such companies in other stock exchanges.

 Revised listing norms:

Closely held existing corporate houses upto Rs. 100 cr

New companies with paid up base of upto Rs. 50 Cr

All currently listed companies on various stock exchange

Procedure adopted for the listing of the scrips: Sponsor appraises the project or company on technical, managerial, commercial, economical and financial aspects. The sponsor determines the price of the company shares offered The sponsor gets all statutory consent and compliance with all SEBI guidelines The sponsor registers the issue with OTCEI and places the equity The listing application has to be made to the OTCEI as per its rules and regulations After getting the approval the allotment is made.

Present situation: 1.Sluggish growth 2.Lack of liquidity