Market trend analysis of national stock exchange of india

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DECLARATION

I, Divya Jyoti Arya, Student of BBA III year(Finance) Batch 2008-2011 at G.H RAISONI COLLEGE OF COMMERCE & SCIENCE TECHNOLOGY, Nagpur, declare that the project work entitled “Market Trend Analysis of National Stock Exchange of India” was carried by me in the partial fulfillment of BBA program under the University of Nagpur.
This project was undertaken as a part of academic curriculum according to the university rules and norms and it has not commercial interest and motive. It is my original work. It is not submitted to any other organization for any other purpose.

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Market trend analysis of national stock exchange of india

  1. 1. _______________________________________________________Introduction to the Topic INTRODUCTION TO THE TOPICMarket Trend Analysis of a Company:Analysis in terms of finance helps to find out the basic and critical factors affectingthe economy of company, market and nation. It can be practiced at major through twomethods: Fundamental and Technical.1. Fundamental Analysis: Fundamental analysis is the examination of the underlying forces that affect the interests of the economy, industry, and company. It tries to forecast the future movement of the capital market using signals from the economy, industry, and company. The presumption behind fundamental analysis is that a thriving economy fosters industrial growth which leads to development of companies. Fundamental analysis can be done by studying three prospects of capital market: a. Economic Analysis b. Industry Analysis c. Company Analysis Fundamental analysis is influenced by the other psychological factors such as perception, sentiment and so on, of investors. The proxy for the measure of this psychological factor is the past share price of company itself. Thus, an investor can not fully depend upon fundamental analysis for the decision of money investment and hence technical tools are used for better information and assurance of type of investment. ...1...
  2. 2. _______________________________________________________Introduction to the Topic2. Technical Analysis: A study of past share price behavior to predict the future trend is termed as technical analysis. Technical analysis is frequently used as a supplement to fundamental analysis. Technical analysis is based on the economic premise that forces of demand and supply determine the pattern of market price and the volume of trading in a share. Tools for technical analysis are listed here below: a. Charts [Line, Bar, Candlestick, Point and figure chart] b. Dow Theory c. Elliot Wave Theory d. Flow of Funds e. Market Structure f. Market Indicators ...2...
  3. 3. _____________________________________________________Rationale behind the Topic RaTIONalE bEHIND THE TOPICAs the tremendous growth of Indian economy continues in the world, capital marketcomes into limelight. All the major and minor companies are thriving to get intoIndian markets.The stock market plays an important role in defining the Indian economy. With thetremendous boom in stocks from past few years, there has been much hype about thestock exchange in country. I came across some of the stock exchanges but as NSEbeing the largest in country in terms of volume of transactions encouraged me to get aprofound knowledge of its history, records, trading and working with due respect tothe Indian Capital Market.The method of analysis used in this project is based on previous data available usingtechnical tools and fundamental interpretation. ...3...
  4. 4. __________________________________________________Objective, Scope & Limitations ObjECTIvE, SCOPE & lIMITaTIONSObjective and Scope of the studyThe objective of the study is to aget in-depth knowledge of National Stock Exchangewith reference to Indian Capital Market by using Technical analysis method and toolsusing data and findings available.Following points have been covered in the project:• History of Stock Market & NSE• NSE Indices• Overview of capital markets in India• Findings & Analysis of growth in NSE on various grounds• Listing Procedures• Conclusion & Suggestions ...4...
  5. 5. __________________________________________________Objective, Scope & LimitationsLimitations in the topicFollowing limitations were encountered while preparing this project:1. Limited Data: - This project is done based on the data collected by the source of secondary medium. This method is however not much helpful as it fails to provide the essential facts and findings necessary for exact interpretation and analysis. There were limitations for primary data collection because of inaccesibility and confidentiality of documents of company.2. Limited period: - This project is based on the data available of limited period of time e.g. not more than that of one financial period of company. Which is certainly not helpful to make this project report accurate in terms of various comaprisions and growth analysis.3. Limited area: - Also it was difficult to collect the data regarding the competitors and their financial information. Moreover, the topic chosen is very wide in terms of actual completion as there are various methods available for carrying out the analysis of a company. Whereas, data and area for the project are avaliable which make the situation contradictionary and limits the scope.4. Type of data used: - This project is completely based on secondary data collected from various sources like internet, magazines, newpapers and books etc. ...5...
  6. 6. _________________________________________________________Research Methodology RESEaRCH METHODOlOGYResearchResearch in common parlance refers to a search for knowledge. One can also defineresearch as scientific and systematic search for pertinent information on a specifictopic.In fact, a research is an art of scientific investigation. Some people consider researchas a movement from the known to the unknown. It is actually a voyage of discovery.We all possess the vita confronts us, we wonder and our inquisitiveness makes probeand attend full and fuller understanding of the unknown.This inquisitiveness is the mother of all knowledge and the method which mayemployed for obtaining the knowledge of whatever the unknown can be termed as“Research”.Meaning of ResearchResearch in common parlance refers to a search for knowledge. Research can also bedefined as scientific and system search for pertinent information on specific topic. Wecan also say research as an art of scientific investigation. ...6...
  7. 7. _________________________________________________________Research Methodology Research Methodology 1. Descriptive Vs Analytical 2. Applied Vs Analytical 3. Applied Vs Fundamental 4. Quantitative Vs Qualitative 5. Conceptual Vs Empirical(a) Descriptive Vs Analytical: Descriptive Research includes surveys and facts finding enquiries of different kinds. The major purpose of Descriptive Research is description of the state of affairs, as it exists at present. In Analytical Research the researcher has to use facts or information already available, and analyze these to make a critical evolution of the material.(b) Applied Vs Analytical: Applied Research aims at finding a solution for an immediate problem facing society or an industrial/business organization. In analytical research, on the other hand, the researcher has to use facts or information already available and analyze these to make a critical evaluation of the material.(c) Applied Vs. Fundamental: Applied Research aims at finding a solution for an immediate problem facing society or an industrial/business organization whereas a fundamental research is mainly concerned with generalization and with the formation of the theory.(d) Quantitative Vs Qualitative: Quantitative Research is bases on the measurement of quantity or amount. It is applicable to the phenomenon that can be expressed in terms of the quantity. Qualitative Research is especially important in the behavioral sciences where the aim is to discover the underline motives of human behaviors.(e) Conceptual Vs Empirical: Conceptual Research is related to some abstract idea(s). It is generally used by philosophers and thinkers to develop new concept or to interpret existing ones. Empirical Research relies on experience or observation alone often without due regard for system and theory. It is a ...7...
  8. 8. _________________________________________________________Research Methodology data based research, coming up with conclusions, which are capable of being verified, by observation or experiment.Some Other Types of ResearchThere may be other types of research such as Time Research or CongitudinalResearch from the point of time. Laboratory Research or Simulation Research,Historical Research, Exploratory Researches are some of the other types of research.Tools Used For Data CollectionThe tools used for this project is secondary data collection which involves informationfrom the internet, magazines, newspapers and various media sources etc. ...8...
  9. 9. ___________________________________________________Historical & Informative Data HISTORICal & INFORMaTIvE DaTaThe Stock Market“A stock market is a public market for trading of company stock and derivatives at anagreed price; these are securities listed on a stock exchange as well as those onlytraded privately.”The size of the world stock market was estimated at about $36.6 trillion US atbeginning of October 2008. The total world derivatives market has been estimated atabout $791 trillion face or nominal value, 11 times the size of the entire worldeconomy. The value of the derivatives market, because it is stated in terms of notionalvalues, cannot be directly compared to a stock or a fixed income security, whichtraditionally refers to an actual value. Moreover, the vast majority of derivatives‘cancel’ each other out (i.e. a derivative ‘bet on the event occurring is offset by acomparable derivative ‘bet’ on the event not occurring.). Many such relatively illiquidsecurities are valued as marked to model, rather than an actual market price.The stocks are listed and traded on stock exchanges which are entities of a corporationor mutual organization specialized in the business of bringing buyers and sellers ofthe organizations to a listing of stocks and securities together. The stock market in theUnited States is NYSE while in Canada; it is the Toronto Stock Exchange. MajorEuropean examples of stock exchanges include the London Stock Exchange, ParisBourse, and the Deutsche Borse. Asian examples include the Tokyo Stock Exchange,the Hong Kong Stock Exchange, and Bombay Stock Exchange. In Latin America,there are such exchanges as the BM&F Bovespa and the BMV.Participants in the stock market range from small individual stock investors to large ...9...
  10. 10. ___________________________________________________Historical & Informative Datahedge fund traders, who can be based anywhere. Their orders usually end up with aprofessional at a stock exchange, who executes the order.Some exchanges are physical locations where transactions are carried out on a tradingfloor, by a method known as open outcry. This type of auction is used in stockexchanges and commodity exchanges where traders may enter “verbal” bids and offersimultaneously. The other type pf stock exchange is a virtual kind, composed of anetwork of computers where trades are made electronically via traders.Actual traders are based on an auction market model where a potential buyer bids aspecific price for a stock and a potential seller asks a specific price for the stock.(Buying or selling at market means you will accept any ask price or bid price for thestock, respectively.) When the bid and ask prices match, a sale takes place, on a first-come-first-served basis if there are multiple bidders or askers at a given price.The purpose of a stock exchange is to facilitate the exchange of securities betweenbuyers and sellers, thus providing a marketplace (virtual or real). The exchangeprovide real-time trading information on the listed securities, facilitating pricediscovery.History of Stock MarketsHistorian Fernand Braudel suggests that in Cairo in the 11th century Muslim andJewish merchants had already set up ever form of trade association and hadknowledge of every method of credit and payment, disproving the belief that thesewere invented later by Italians. In the 12th century in France the courratiers de changewere concerned with managing and regulating the debts of agricultural communitieson behalf of the banks. In the late 13 th century Bruges commodity traders gatheredinside the house of a man called van der beruse, and in 1309 they became the “BrugseBeruse”, institutionalizing what had been, until then an informal meeting. The ideaquickly spread around Flanders and neighboring countries and “Beurzen” soonopened in Ghent and Amsterdam.In the middle of the 13th century Venetian bankers began to trading government ...10...
  11. 11. ___________________________________________________Historical & Informative Datasecurities. In1351, the Venetian government outlawed spreading rumors intended tolower the price of government funds, bankers in Pisa, Verona, Genoa, and Florencealso began trading in government securities during the 14th century. This was onlypossible because these were independent city states not ruled by a duke but a councilof influential citizens. The Dutch later started joint stock companies, which letshareholders invest in business ventures and get a share of their profits – or losses. In1602, the Dutch East India Company issued shares on the Amsterdam StockExchange. It was the first company to issue stocks and bonds.Stock Market in IndiaThe first organized stock market in India was started in Bombay when the NativeShare Stock Brokers’ Association known as Bombay Stock Exchange (BSE) wasformed by the brokers in Bombay. BSE was Asia’s oldest stock exchange. In 1894,the Ahemdabad Stock Exchange was started to facilitate dealings in shares of textilemills there. The Calcultta Stock Exchange was started in 1908 to provide a market forshares of plantations and jute mills. The Second World War saw great speculativeactivity in the country and the number of stock exchange rose from 7 in 1939 to 21 in1945. Besides, these organized exchanges, there were a number of unorganized andunrecognized exchanges known as Kerb markets which functioned under a set ofusages and conventions and did not have any set of rules which could enforced incourts of law. There were also illegal “Dabba” markets in which stocks and shareswere also bought and sold.Under the Securities Contracts (Regulation) Act of 1956, the Government of India hasso far recognized 23 stock exchanges. Bombay is the premier exchange in thecountry. With the setting up of National Stock Exchange, all regional stock exchangeshave lost relevance. ...11...
  12. 12. ___________________________________________________Historical & Informative DataImportance of Stock MarketThe stock market is one of the most important sources for companies to raise money.This allows businesses to be publicly traded, or raise additional capital for expansionby selling shares of ownership of the company in a public market. The liquidity thatan exchange provides affords investors the ability to quickly and easily sell securities.This ia an attractive feature of investing in stocks, compared to other less liquidinvestments such as real estate.History has shown that the price of shares and other assets is an important part of thedynamics of economic activity, and can influence or be an indicator of social mood.An economy where the stock market is on the rise considered to be an up and comingeconomy. Rising share prices, for instance, tend to be associated with increasedbusiness investment and vice versa. Share prices also affect the wealth of householdsand their consumption. Therefore, central banks tend to keep an eye on the controland behavior of the stock market and, in general, on the smooth operation of financialsystem functions.Exchanges also act as the clearinghouse for each transaction, meaning that theycollect and deliver the shares, and guarantee payment to the seller of a security. Thiseliminates the risk to an individual buyer or seller that the counterparty could defaulton the transactions.The smooth functioning of all these activities facilitates economic growth in thatlower costs and enterprise risks promote the production of goods and services as wellas employment. In this way the financial system contributes to increased prosperity.An important aspect of modern financial markets, however, including the stockmarkets, is absolute discretion. ...12...
  13. 13. ___________________________________________________Historical & Informative DataBusiness Transaction in Stock MarketA typical investment transaction in a stock exchange will consist of four stages:# Placing an order with a broker: A client places his order with a stock broker whoalone is entitled to transact business in a stock exchange either to buy or to sell theshares of a company at fixed prices or at best market prices.# Execution of the order: The broker or his authorized clerk will execute the orderand the same will appear in the Stock Exchange Daily Official List which will includethe number and price of shares which exchanged hands.# Reporting the deal to the client: As soon as the deal is transacted, the brokerssend a contract note to the client giving details of the security bought or sold, theprice, the broker’s commission, etc.# Settlement of transaction: there are two methods of settlement of transactions. Inthe case of ready delivery (or cash) transactions, payment has to be made immediatelyon the transfer of the securities for within a period of one to seven days. In the case offorward delivery, there is a system of carry-over i.e. post-ponement of delivery orpayment involving a payment by one to another. This system of carry-over providesgreat scope for speculation in the forward market. ...13...
  14. 14. ___________________________________________________Historical & Informative DataFunctions of Stock MarketStock market plays a very important role in developing the economy of a country.Some of the major functions are discussed here below:• Measure of Safety and Fair Dealing: The stock exchanges operate under a regulatory framework which are approved by the central government, and meant to ensure that a reasonable measure of safety is provided to investors and transactions take place in competitive conditions which are fair to all concerned.• Act of Magic: Most of the investors are interested in short-term to medium – term investments. The requirements of companies are, however, long-term in nature – they require equity capital on a more or less permanent basis and debenture capital for 3 to 15 years. Thanks to the negotiability and transferability of securities through the stock market it is possible for companies to obtain their long-term requirements from investors with short- term and medium-term horizons. While one investor is substituted by another when a security is transacted, the company is assured of availability of funds.• Flow of Capital to the Most Profitable Channels: Companies which have more profitable investment opportunities are normally able to raise substantial funds through the stock market, whereas companies which do not have such opportunities are normally not able to do so. As a result, the stock market facilitates the direction of the flow of the capital to the most profitable channels.• Inducement to Companies to Raise their Standard of Performance: When the equity capital of a company is listed on a stock exchange, the performance of the company is reflected in the market price of the equity stock, which is readily available for public consumption. Put differently, the company’s performance is more ‘visible’ in the eyes of the public. Such a public exposure normally induces companies to raise their standard of performance.• Guidance on Cost of Capital: The market values of the securities of company sre required for computing its cost of capital. Such values can be obtained from stock market quotations. Hence the stock market offers ...14...
  15. 15. ___________________________________________________Historical & Informative Data guidance on cost of capital. ...15...
  16. 16. ______________________________________________Overview of Capital Market in India OVERVIEW OF CapItal MaRKEt IN INDIa:Capital market is the market for long-term funds, just as the money market is themarket for short-term funds. It refers to all facilities and the institutional arrangementsfor borrowing and lending term funds (medium-term and long-term funds).The supplyof funds for the capital market comes largely from individual savers, corporatesavings, banks, insurance companies, specialized financing agencies and thegovernment.The Indian Capital Market is broadly divided into the Gilt-edged Market and theIndustrial Securities Market. The Gilt-edged market refers to the market forgovernment and semi-government securities, backed by Reserve Bank of India. TheIndustrial Securities Market refers to the market for shares and debentures of old andnew companies. Two other segments : DFIs (Development Financial Institutions) andFIs (Financial Intermediaries) also compose the capital market of India.Further categorization is pictured here below: CAPITAL MARKET IN INDIA Government Development Industrial Securities Financial Financial Securities (Gill-edged Institutions Intermediaries Market market) (DFIs) Old Issues Market New Issue Market [Stock Exchange] IFCI ICICI SFCs IDBI IIBI UTI Merchant Mutual Leasing Venture Capital Others Banks Funds Companies Companies ...16...
  17. 17. ______________________________________________Overview of Capital Market in IndiaCapital Markets of India –Stock Exchanges in India“In terms of the legal structure, the stock exchange which are recognized under thesecurities contracts (regulation) Act in India, could be separated into two broadgroups- 20 stock exchanges which are set up as companies, either limited byguarantees or by shares, and 3 stock exchanges which are functioning as Associationsof persons (AOP) viz. BSE, ASE and Indore stock exchange. The 20 stock exchangewhich are available in India are as follows:Banglore, Bhubhaneshwar, Kolkata, Cochin, Delhi, Hyderabad, Coimbatore, UttarPradesh, Ludhiana, Madras, Magadha, Vadodra, Guwahati, Pune, OTCEI,Ahmedabad, Bse, Madhya Pradesh. Of these, the stock exchanges of Ahmedabad,Banglore, Kolkata, Delhi, Hyderabad, Madhya Pradesh, Madras, Guwahati weregiven permanent recognition by central government of India at the time of setting upthese stock exchanges. Apart from the NSE, all stock exchanges whether establishedas corporate bodies or Association of Persons (AOP’s) are non-profit organizations.”(report of committee on corporatization and demutualization of stock exchanges.)Of these 23 stock exchanges in the country, 20 are regional stock exchanges and theremaining three with All India jurisdiction are NSE, BSE and OTCEI. Separatemodules are covered with regards to the structure and functioning andsystems/procedure followed in NSE and BSE. ...17...
  18. 18. ______________________________________________Overview of Capital Market in IndiaSecurity and Exchange Board of India (SEBI)It is a board (autonomous body) created by the government of India in 1988 and givenstatutory form in 1992 with SEBI acts 1992. Its head office is in Mumbai, and otheroffices in Chennai, Kolkata and Delhi. SEBI is the regulator of securities markets inIndia.In 1998, the Securities and Exchange Board of India (SEBI) was established by thegovernment of India throught an executive resolution, and subsequently upgraded as afully autonomous body (a statutory board) in the year 1992 with the passing of theSecurities and Exchange Board of India act (SEBI Act) on 30 th January 1992. In placeof government control, a statutory and autonomous regulatory board with definedresponsibilities, to cover both development and regulation of market, independentpowers has been set up. Paradoxically this is a positive outcome of the securities scamof 1990-91.The basic objectives of the board were defined as:• To protect the interests of investors in securities;• To promote the development of securities market;• To regulate the securities market and;• For matters connected therewith or incidental thereto.SEBI has introduced:• Comprehensive regulatory measures• Prescribed registration norms• Eligibility criteria• The code obligations• Code of conduct for different intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars, portfolio managers, credit rating ...18...
  19. 19. ______________________________________________Overview of Capital Market in India agencies, underwriters and others• It had frames bye-laws• Risk identification and risk management systems for clearing houses of stock exchanges, surveillance system etc.All this has made dealing in securities both safe and transparent to the end investor.Another significant event is the approval of trading in stock indices (like S&P CNXNifty & SENSEX) in 2000 a market index is a convenient and effective productbecause of the following reasons:• It acts as a barometer for market behavior• It is used to benchmark portfolio performance• It is used in benchmark instruments like index futures and index options• It can be used for passive fund management as in case of index funds.Over the Counter Exchange of India (OCTEI)OTCEI was incorporated in October 1990 as a section 25 company under thecompanies Act 1956 and is recognized as a stock exchange under section 4 of thesecurities contracts regulation act,1956. The object of the OCTEI is “ To provide analternate market for the securities of smaller companies, public-sector companies,closely-held companies desirous listing etc. It has been promoted jointly by UTI,ICICI, IDBI,SBI Capital Markets Ltd, IFCI, GIC and Canbank Financial ServicesLtd.The exchange was set up with a multi-tier securities exchange model to aidenterprising promoters in raising finance for new project in cost effective manner toprovide investors with a transparent and efficient mode of trading. OTCEI is intendedto provide easy marketability and better liquidity of securities to an investor. Besides,it also facilitate transfer of shares listed here. ...19...
  20. 20. ______________________________________________Overview of Capital Market in IndiaModeled along the lines of NASDAQ market, OTCEI introduces many novelconcepts to the Indian Capital Market such as screen based nation wide trading,sponsorship of companies, markets making and scrip less trading. As a measure ofsuccess of these efforts , the exchange today has 115 listings and has assisted inproviding capital for enterprises that has gone to build successful brand forthemselves like VIP, Sonara tiles & Brilliant mineral water etc.Bombay Stock Exchange (BSE)The BSE is the oldest stock exchange in Asia with rich heritage. Popularly known asBSE, it was established as “The native share and stock brokers’ association” in1875.It is the first stock exchange in country to obtain permanent recognition in 1956 fromthe government of India under the securities contracts (regulation) act, 1956. theexchanges pivotal and pre-eminent role in the development of Indian capital market iswidely recognized and its index, SENSEX, is tracked worldwide. Earlier anassociation of persons (AOP), the exchange is now a demutualized and corporatizedentity incorporated under the provisions of the companies act, 1956, pursuant to BSE(corporatization and demutualization) scheme, 2005notified by Securities andExchange Board of India, SEBI. Bombay stock exchange limited received itsCertificate of Incorporation on 8th August, 2005 and Certificate of Commencement on12th August, 2005. The “DUE DATE” for taking over the business and operations ofthe BSE was fixed for 19th August, 2005, under the scheme. The exchange hassucceeded the business and operations of BSE ongoing concern basis and itsrecognition as an exchange has been continued by SEBI.The exchange has a nation-wide reach with the presence of 417 cities and town ofIndia. The systems and processes of the exchange are designed to safeguard themarket integrity and enhance transparency in operations. During the year 2004-2005,the trading volumes on the exchange showed robust growth. ...20...
  21. 21. ______________________________________________Overview of Capital Market in IndiaRegional Stock ExchangesWith the automation of all stock exchanges and the expansion of trading terminals ofBSE and NSE across the country, investors have an easy access to the securitiesmarket. The nationwide reach of two stock exchange has affected the market structurein two ways:First, the business of other stock exchanges has declines significantly, as investorshave preferred to trade in BSE and NSE as they provide deeper marketsa.Secondly, with the declining of trading volumes in other stock exchanges, the issuersfeel that hardly any purpose is served by remaining listed in the regional stockexchange, which was introduced in the days of manual trading and open octroi systemto encourage mobilization of resources and development of equity cult across thecountry, has thus lost its relevance in the days of automated trading. It is thereforewidely felt that the concept of regional stock exchange needs to be abolished, similarrecommendations have been made the committee on delisting of shares and thecommittee on demutualization of stock exchanges set up by SEBI.Interconnected Stock Exchange of India (ICSE)Inter-connected stock exchanges of India limited (ICSE) has been promoted by 14regional stock exchanges to provide cost-effective trading linkage/connectivity to allmembers of the participating exchanges, with the objective of widening the market forthe securities listed on these exchanges, inter-connectivity of stock exchanges is amechanism to enable a trader or dealer (trading member directly enrolled by ICSE) todeal with another trader or dealer through his own local trader work station located inhis office. ICSE is a national-level stock exchange and provides trading, clearing,settlement, risk management and surveillance support to its traders and dealers. ICSEaims to address the needs of small companies and retail investors with the guidingprinciple of optimizing the existing infrastructure and harnessing the potential ofregional markets, so as to transform these into a liquid and vibrant market through theuse of state-of-the-art technology and networking. ...21...
  22. 22. ______________________________________________Overview of Capital Market in IndiaThe mission of ICSE is to Endeavor to consolidate the small, fragmented and lessliquid markets into a national-level, liquid market by using the state-of-the-artinfrastructure and support systems. Their objective is to create a single tradingnational level solution with access to multiple markets for providing high cost-effective service to millions of investors across the country. To create a liquid andvibrant national market for all listed companies in general and small capitalcompanies in particular. Optimally utilize the existing infrastructure and otherresources of participating stock exchanges, which are under-utilized now. Provide alevel playing field to small traders and dealers by offering an opportunity toparticipate in a national market having investment-oriented business. Reducetransaction cost; provide clearing and settlement facilities to the traders and dealersacross the country at their doorstep in a decentralized mode. Spreads demat tradingacross the country.The participating exchanges of ICSE have in all about 45oo stockbrokers, out ofwhich more than 200 have been currently registered as traders on ICSE. In order toleverage its infrastructure and to expand it nationwide reach, ICSE has also appointedaround 450 dealers across 70 cities other than the participating exchange centers.These dealers are administratively supported through the regional officers of ISE atDelhi(North), Kolkata(East), Coimbatore (South) and Nagpur (Central), besidesMumbai(West).The ICSE has also floated a wholly-owned subsidery, ISE securities & ServicesLimited (ISS), which has taken up corporate membership of the national stockexchange of India lt. (NSE) in both capital market and futures & options segmentsand stock exchange, Mumbai in the equities segment, so that traders and dealers ofICSE can access other markets in addition to the ICSE market and their local market.ICSE thus provides the investors in smaller cities a one-step solution for cost-effectivetrading and settlement in securities.# Thus, the above was the review of other capital markets in INDIA. ...22...
  23. 23. _______________________________________________National Stock Exchange of India NatIONal StOCK EXCHaNGE OF INDIaThe National Stock Exchange of India Limited (NSE) is a Mumbai-based stockexchange. It is largest stock exchange in India in terms of daily turnover and numberof trades, both for equities and derivatives trading. NSE has a market capitalization ofaround Rs. 47.01.923 crore(7 August 2009) and is expected to become the biggeststock exchange in India in terms of market capitalization by 2009 end. Though anumber of other exchanges exist, NSE and the Bombay Stock Exchange are the twomost significant stock exchanges in India and between them are responsible for thevast majority of share transactions. The NSE’s key index is the S&P CNX Nifty,known as the Nifty, an index of fifty major stocks weighted by market capitalization.NSE us mutually-owned by a set of leading financial institutions, banks, insurancecompanies and other financial intermediaries in India but its ownership andmanagement operate as separate entities. There are at least 2 foreign investors NYSEEuronext and Goldman Sachs who have taken a stake in the NSE. As of 2006, theNSE VSAT terminals, 2799 in total, cover more than 1500 cities across India.In October 2007, the equity market capitalization of the companies listed on the NSEwas US$ 1.46 trillion, making it the second largest stock exchange in South Asia.NSE is the third largest stock exchange in terms of the number of trades in equities. Itis the second fastest growing stock exchange in the world with a recorded growth of16.6%. ...23...
  24. 24. _______________________________________________National Stock Exchange of IndiaOriginsThe National Stock Exchange of India was promoted by leading financial institutionsat the behest of the Government of India, and was incorporated in November 1992 asa tax=paying company. In April 1993, it was recognized as a stock exchange underthe Securities Contracts (Regulation) Act, 1956. NSE commenced operations in theWholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities)segment of the NSE commenced operations in November 1994, while operations inthe Derivatives segment commenced in June 2000.InnovationsNSE has remained in the forefront of modernization of India’s capital and financialmarkets, and its pioneering efforts include:• Being the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in India. Since the success of the NSE, existent market and new market structures have followed the NSE model.• Setting up the first clearing Corporation “National Securities Clearing Corporation Ltd.” in India. NSCCL was a landmark in providing innovation on all spot equity market (and later, derivative market) trades in India.• Co-promoting and setting up of National Securities Depository Limited, first depository in India.• Setting up of S&P CNX Nifty.• NSE pioneered commencement of Internet Trading in February 2000, which led to the wide popularization of the NSE in the broker community.• Being th first exchange that, in 1996, proposed exchange traded derivatives, particularly on an equity index, in India. After four years of policy and regulatory debate and formulation, the NSE was permitted to start trading equity derivatives.• Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in India.• NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBC-TV18. ...24...
  25. 25. _______________________________________________National Stock Exchange of IndiaIt is the one of the most important stock exchanges in the world.MarketsCurrently, NSE has the following major segments of the capital market:• Equity• Futures and Options• Retail Debt Market• Wholesale Debt Market1. Equities: 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. Trading volumes in the equity segment have grown rapidly with average daily turnover increasing from Rs. 17 crores during 1994-95 to Rs. ,253 crores during 2005-2005. During the year 2008-2009, NSE reported a turnover of Rs. 1,569,556 crores in the equities segment.During the year 2009-10, NSE reported a turnover of Rs.3,812,032 crores in the equities segment.The equity segment provides you with an insight into the equities segment of NSE and also provides real-time quotes and statistics of the equities market.2. Futures and Options: The derivatives trading on NSE commenced on June 12, 2000 with futures trading on S&P CNX Nifty index. Subsequently, the product base has been increased to include trading in futures and options on S&P CNX Nifty index, CNX IT index, Bank Nifty index and single securities (188 stocks as stipulated bySEBI) and futures on interest rate. This segment has been considerable growth since inception.In the global market, NSE ranks first(1st) in the world in terms of number of contracts traded in the single stock futures, second (2nd) in Asia in terms of number of contracts in the single stock futures, second (2nd) in Asia in terms of number of contracts traded in equity derivatives instrument.3. Retail Debt Market: With the view to encourage wider participation of all classes of investors across the country (including retail investors) in ...25...
  26. 26. _______________________________________________National Stock Exchange of India government securites, the government, RBI and SEBI have introduced trading in government securities for retail investors. Trading in this retail debt market segment (RDM) on NSE has been introduced w.e.f. January 16, 2003. Trading shall take place in the existing capital market segment of the exchange.4. Wholesale Debt Market: The wholesale market segment deals in fixed income securities and is fast gaining ground in an environment that has largely focused on equities. The wholesale debt market (WDM) segment of the exchange commenced operations on June 30, 1994. This provided the first formal screen-based trading facilities for a variety of debt instruments including government securities, treasury bills and bonds issued by public sector undertakings/corporate/banks like floating rate bonds state government loans units of mutual funds and securitized debt by banks, financial institution, corporate bodies, trusts and others.NSE became the first stock exchange to get approval for interest rate futures asrecommended by SEBI-RBI committee, on 31st August 2009. a future contract basedon 7% 10 year GOI bond (NOTIONAL) was launched with quarterly maturities. ...26...
  27. 27. _______________________________________________National Stock Exchange of IndiaThe OrganisationThe National Stock Exchange of India Limited has genesis in the report of the HighPowered Study Group on Establishment of New Stock Exchanges. It recommendedpromotion of a National Stock Exchange by financial institutions (FIs) to provideaccess to investors from all across the country on an equal footing. Based on therecommendations, NSE was promoted by leading Financial Institutions at the behestof the Government of India and was incorporated in November 1992 as a tax-payingcompany unlike other stock exchanges in the country.The National Stock Exchange (NSE) operates a nation-wide, electronic market,offering trading in Capital Market, Derivatives Market and Currency Derivativessegments including equities, equities based derivatives, Currency futures and options,equity based ETFs, Gold ETF and Retail Government Securities. Today NSE networkstretches to more than 1,500 locations in the country and supports more than 2, 30,000terminals.With more than 10 asset classes in offering, NSE has taken many initiatives tostrengthen 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 andmobile trading to cater to the evolving need of the market and various categories ofmarket participants.NSE has made its global presence felt with cross-listing arrangements, includinglicense agreements covering benchmark indexes for U.S. and Indian equities withCME Group and has also signed a Memorandum of Understanding (MOU) withSingapore 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 lookinto a bilateral securities trading link to enable investors in one country to seamlesslytrade on the other country’s exchange.NSE is committed to operate a market ecosystem which is transparent and at the sametime offers high levels of safety, integrity and corporate governance, providing evergrowing trading & investment opportunities for investors. ...27...
  28. 28. _______________________________________________National Stock Exchange of IndiaIndicesNSE has also set up an index services firm known as India index services andproducts limited (IISL) and has launched several stock indices including thefollowing:An Index is used to give information about the price movements of products in thefinancial, commodities or any other markets. Financial indexes are constructed tomeasure price movements of stocks, bonds, T-bills and other forms of investments.Stock market indexes are meant to capture the overall behaviour of equity markets. Astock market index is created by selecting a group of stocks that are representative ofthe whole market or a specified sector or segment of the market. An Index iscalculated with reference to a base period and a base index value.Stock market indexes are useful for a variety of reasons. Some of them are:• They provide a historical comparison of returns on money invested in the stock market against other forms of investments such as gold or debt.• They can be used as a standard against which to compare the performance of an equity fund.• It is a lead indicator of the performance of the overall economy or a sector of the economy• Stock indexes reflect highly up to date information• Modern financial applications such as Index Funds, Index Futures, Index Options play an important role in financial investments and risk managementMajor Indices of NSE ...28...
  29. 29. _______________________________________________National Stock Exchange of India• S&P CNX NIFTY• CNX NIFTY JUNIOR• CNX 100(=S&P CNX NIFTY +CNX NIFTY JUNIOR)• CNX IT• BANK NIFTY• S&P CNX DEFTY• CNX MIDCAP• NIFTY MIDCAP 50CNX midcap introduced on 18 July 2005 replacing CNX midcap 200.S&P CNX NIFTYS&P CNX Nifty is a well diversified 50 stock index accounting for 23 sectors of theeconomy. It is used for a variety of purposes such as benchmarking fund portfolios,index based derivatives and index funds.S&P CNX Nifty is owned and managed by India Index Services and ProductsLtd. (IISL), which is a joint venture between NSE and CRISIL. IISL is Indias firstspecialized company focused upon the index as a core product. IISL has Marketingand licensing agreement with Standard & Poors (S&P), who are world leaders inindex services.• The total traded value for the last six months of all Nifty stocks is approximately 48% of the traded value of all stocks on the NSE• Nifty stocks represent about 56% of the Free Float Market Capitalization as on Sep 30, 2010.• Impact cost of the S&P CNX Nifty for a portfolio size of Rs.50 lakhs is 0.06%.• S&P CNX Nifty is professionally maintained and is ideal for derivatives tradingCNX NIFTY JUNIOR ...29...
  30. 30. _______________________________________________National Stock Exchange of IndiaThe next rung of liquid securities after S&P CNX Nifty is the CNX Nifty Junior. Itmay be useful to think of the S&P CNX Nifty and the CNX Nifty Junior as making upthe 100 most liquid stocks in India.As with the S&P CNX Nifty, stocks in the CNX Nifty Junior are filtered for liquidity,so they are the most liquid of the stocks excluded from the S&P CNX Nifty. Themaintenance of the S&P CNX Nifty and the CNX Nifty Junior are synchronized sothat the two indices will always be disjoint sets; i.e. a stock will never appear in bothindices at the same time. Hence it is always meaningful to pool the S&P CNX Niftyand the CNX Nifty Junior into a composite 100 stock index or portfolio.• CNX Nifty Junior represents about 11 % of the Free Float Market Capitalization as on Sep 30, 2010.• The traded value for the last six months of all Junior Nifty stocks is approximately 14% of the traded value of all stocks on the NSE• Impact cost for CNX Nifty Junior for a portfolio size of Rs.25 lakhs is 0.09%.CNX 100CNX 100 is a diversified 100 stock index accounting for 35 sector of the economy.CNX 100 is owned and managed by India Index Services & Products Ltd. (IISL).Which is a joint venture between CRISIL & NSE. IISL is India’s first specializedcompany focused upon the index as a core products. IISL has a licensing & marketingagreement with Standard & Poor’s (S&P), who are leader’s in index services.• CNX 100 represents about 67% of the Free Float market capitalization as on Sep 30, 2010.• The average traded value for the last six months of all CNX100 stocks is approximately 61 % of the traded value of all stocks on the NSE.S&P CNX 500The S&P CNX 500 is India’s first broad based benchmark of the Indian capital ...30...
  31. 31. _______________________________________________National Stock Exchange of Indiamarket. The S&P CNX 500 represents about 90% of the Free Float MarketCapitalization and about 87% of the total turnover on the NSE as on Sept 30, 2010.The S&P CNX 500 companies are disaggregated into 72 industry indices viz. S&PCNX Industry Indices. Industry weightages in the index reflect the industryweightages in the market. For e.g. if the banking sector has a 5% weightage in theuniverse of stocks traded on NSE, banking stocks in the index would also have anapprox. representation of 5% in the index.S&P CNX DEFTYAlmost every institutional investor and off-shore fund enterprise with an equityexposure in India would like to have an instrument for measuring returns on theirequity investment in dollar terms. To facilitate this, a new index the S&P CNX Defty-Dollar Denominated S&P CNX Nifty has been developed. S&P CNX Defty is S&PCNX Nifty, measured in dollars.Salient Features• Performance indicator to foreign institutional investors, off-shore funds, etc.• Provides an effective tool for hedging Indian equity exposure.• Impact cost of the S&P CNX Nifty for a portfolio size of Rs.50 Lakhs is 0.06%• Provides fund managers an instrument for measuring returns on their equity investment in dollar terms. ...31...
  32. 32. _______________________________________________National Stock Exchange of IndiaCalculation of S&P CNX DeftyComputations are done using the S&P CNX Nifty index calculated on the NEATtrading system of NSE and INR-USD exchange rate that is based on the real timepolled data feed. S & P CNX Nifty at time t * Exchange rate as on base dateS & P CNX Defty = Exchange rate at time tCalculation of closing value of S&P CNX DeftyClosing value of S&P CNX Defty is computed by considering average of INR-USDpolled data values (exchange rate) of last 30 minutes of the market.Closing value of S & P CNX Defty Closing value of S & P CNX Nifty * Exchange rate as on base date = Average of exchange rate of last 30 minutes of the marketSpecifications of S&P CNX DeftyBase date: 03 November 1995Base S&P CNX Defty Index Value: 1000S&P CNX Nifty Value as on Base date: 1000Exchange rate as on base date: 34.65Adjustment factor as on Base date:1.00CNX MIDCAPThe medium capitalised segment of the stock market is being increasingly perceivedas an attractive investment segment with high growth potential. The primary objectiveof the CNX Midcap Index is to capture the movement and be a benchmark of themidcap segment of the market.Method of Computation ...32...
  33. 33. _______________________________________________National Stock Exchange of IndiaCNX Midcap is computed using free float market capitalization* weighted methodw.e.f. February 26, 2010, wherein the level of the index reflects the free float marketvalue of all the stocks in the index relative to a particular base period. The methodalso takes into account constituent changes in the index and importantly corporateactions such as stock splits, rights, etc without affecting the index value.Base Date and ValueThe CNX Midcap Index has a base date of Jan 1, 2003 and a base value of 1000Criteria for Selection of Constituent StocksThe constituents and the criteria for the selection judge the effectiveness of the index.Selection of the index set is based on the following criteria :• All the stocks, which constitute more than 5% market capitalization of the universe (after sorting the securities in descending order of market capitalization), shall be excluded in order to reduce the skewness in the weightages of the stocks in the universe.• After step (a), the weightages of the remaining stocks in the universe is determined again.• After step (b), the cumulative weightage is calculated.• After step (c) companies which form part of the cumulative percentage in ascending order unto first 75 percent (i.e. upto to 74.99 percent) of the revised universe shall be ignored.• After, step (d), all the constituents of S&P CNX Nifty shall be ignored.• From the universe of companies remaining after step (e) i.e. 75th percent and above, first 100 companies in terms of highest market capitalization, shall constitute the CNX Midcap Index subject to fulfillment of the criteria mentioned below. Trading Interest ...33...
  34. 34. _______________________________________________National Stock Exchange of India All constituents of the CNX Midcap Index must have a minimum listing record of 6 months. In addition, all candidates for the Index are also evaluated for trading interest, in terms of volumes and trading frequency. Financial Performance All companies in the CNX Midcap Index have a minimum track record of three years of operations with a positive net worth. Others A company which comes out with a IPO will be eligible for inclusion in the index, if it fulfills the normal eligibility criteria for the index for a 3 month period instead of a 6 month period. *CNX Midcap Index was computed using market capitalization weighted method from the launch date till February 25, 2010.NIFTY MIDCAP 50The medium capitalized segment of the stock market is being increasingly perceivedas an attractive investment segment with high growth potential. The primary objectiveof the Nifty Midcap 50 Index is to capture the movement of the midcap segment ofthe market. It can also be used for index-based derivatives trading.Method of computationNifty Midcap 50 is computed using free float market capitalisation weighted method,wherein the level of the index reflects the total market value of all the stocks in theindex relative to a particular base period. The method also takes into accountconstituent changes in the index and importantly corporate actions such as stocksplits, rights, etc without affecting the index value.Base Date and ValueThe Nifty Midcap 50 Index has a base date of Jan 1, 2004 and a base value of 1000.Criteria for Selection of Constituent StocksThe constituents and the criteria for the selection judge the effectiveness of the index. ...34...
  35. 35. _______________________________________________National Stock Exchange of IndiaSelection of the index set is, inter alia, based on the following criteria:• Stocks with average market capitalization ranging from Rs.1000 Crore to Rs.5000 Crore at the time of selection.• Stocks which are not part of the derivatives segment are excluded.• Stocks which are forming part of the S&P CNX NIFTY index are excluded.Other statistics• Nifty Midcap 50 stocks represent about 6 % of the free float market capitalization as on September 30, 2010.• The traded volume for the last six months of all Nifty Midcap 50 stocks is approximately 10% of the traded volume of all stocks on the NSE.# Nifty Midcap 50 Index was computed using market capitalization weighted methodfrom the launch date till February 25, 2010 ...35...
  36. 36. _______________________________________________National Stock Exchange of IndiaOther Indices• CNX IT Index• CNX Bank Index• CNX FMCG Index• CNX PSE Index• CNX MNC Index• CNX Service Sector Index• S&P CNX Industry Indices• Customised Indices• CNX Energy Index• CNX Pharma Index• CNX Infrastructure Index• CNX PSU BANK Index• CNX Realty Index• S&P CNX Nifty Shariah / S&P CNX 500 Shariah• S&P ESG India Index ...36...
  37. 37. _______________________________________________National Stock Exchange of IndiaListingListing means admission of securities of an issuer to trading privileges on a stockexchange through a formal agreement. The prime objective of admission to dealingson the exchange is to provide liquidity and marketability to securities, as also toprovide a mechanism for effective management of trading.Listing on NSE provides qualifying companies with the broadest access to investors,to greatest market depth and liquidity, cost-effective access to capital, the highestvisibility, the fairest pricing and investor benefits. NSE trading terminals are nowsituated in various cities and towns across the length and breadth of India.Securities listed on the exchanges are required to fulfill the eligibility criteria forlisting. Various types of securities of a company are traded under a unique symboland different series.NSE plays an important role in helping an Indian economy’s access equity capital, byproviding a liquid and well-regulated market. NSE had about 1319 companies listedpresenting the length, breadth and diversity of the Indian economy which includesfrom hi-tech to heavy industry, software, refinery, public sector units, infrastructure,and financial services. Listing on NSE raises a company’s profile among investors inIndia and abroad. Trade data is distributed worldwide through various news-vendingagencies. More importantly, each and every NSE listed company is required to satisfystringent financial, public distribution and management requirements. High listingstandards foster investor confidence and also bring credibility into the markets.NSE lists securities in its capital market (equities) segment and its wholesale debtmarket segment. ...37...
  38. 38. _______________________________________________National Stock Exchange of IndiaListing CriteriaThe exchange has laid down criteria for listing of new issues by companies. IPO’s byknowledge based issuers, companies listed on other exchanges, and companiesformed by amalgamation/ restructuring, etc. in conformity with the securitiescontracts(regulation) rules, 1957 and directions of the central government and thesecurities and exchange board of India (SEBI).Following are the certain listing criteria in NSE:• The company should have the minimum paid-up capital and market capitalization.• Project appraisal by the concerned authority.• Company/Promoter’s track record, etc.• The issuers of securities are requires to adhere to provisions of the securities contracts (regulation) Act, 1956, the securities and exchange board of India Act, 1992.• They are also required to follow rules, circulars, notifications, guideline, etc. prescribed there under.Listing Procedure and DocumentationAn issuer has to take various steps prior to making an application for listing itssecurities on the NSE. These steps are essential to ensure the compliance of certainrequirements by the issuer before listing its securities on the NSE. The various stepsto be taken include:• Initial discussions• Approval of Memorandum and Articles of Association• Approval of draft prospectus• Submission of application• Fulfilling listing conditions and requirements ...38...
  39. 39. _______________________________________________National Stock Exchange of IndiaIn case the company fulfills the criteria, the following information anddocumentations are required for further processing:1. A brief note on the promoters and management2. Company profile3. Copies of annual report for last 3 years4. Copies of the draft offer document5. Memorandum & Articles of AssociationThe main entry norms for companies making a public issue (IPO or FPO) aresummarized as under following norms:Entry Form I (EN I)The company shall meet the following requirements:• Net tangible assets of atleast Rs.3 crores for full 3 years.• Distributable profits in atleast three years.• Net worth of atleast Rs. 1 Crore in three years.• If change in name, atleast 50% revenue for proceeding 1 year should be from the new activity.• The issue size does not exceed 5 times the pre-issue worth• To provide sufficient flexibility and also to ensure that genuine companies do not suffer on account of rigidity of the parameters.SEBI has provided two other alternative routes to company not satisfying any of theabove conditions, for accessing the primary market, as under:Entry Norm II (EN II)• Issue shall be through book building issue route, with atleast 50% to be mandatory allotted to the qualified institutional buyers (QIBs).• The minimum post-issue face value capital shall beRs. 10 crore or there shall be a compulsory market-making for atleast 2 years. ...39...
  40. 40. _______________________________________________National Stock Exchange of IndiaEntry Norm III(EN III):• The “project” is appraised and participated to the extent of 15% by FII’s/ scheduled commercial banks of which atleast 10% comes from the appraiser(s).• The minimum post-issue face value capital shall be Rs. 10 crore or there shall be a compulsory market-making for atleast 2 years.• In addition to satisfying the aforesaid eligibility norms, the company shall also satisfy the criteria of having atleast 1000 prospective allotees in its issue.Benefits of Listing on NSEThe benefits of listing on NSE are enumerated as below:• NSE provides a trading platform that extends across the length and breadth of the country listing on NSE thus, enables to reach and service investors across the country.• NSE being the largest stock exchange in terms of trading volumes, the securities trade at low impact cost and are highly liquid. This in turn reduces the cost of cost of trading to the investor.• The trading system of the NSE provides un-parallel level of trade and post- trade information. The best 5 buy and sell orders are displayed on the trading system and the total number of securities available for buying and selling is also displayed/this helps the investors to know the depth of the market. Further, corporate announcements, results, corporate actions etc. Are also on the trading system. Thus, reducing the scope for price manipulation or misuse.• The facility of making initial public offers (IPO’s), using NSE’s network and software, results in significant reduction in cost and time of issues.• NSE’s website www.nseindia.com provides a link to the web-sites of the companies that are listed on the NSE, so that visitors interested in any company can visit that company’s web-site from the NSE site.Listed companies are provided with monthly trade statistics for the securities of the company listed on the exchange. ...40...
  41. 41. ___________________________________________________________Findings & Analysis FINDINGS & ANALYSISNSE MILESTONESNSE Milestones November 1992 Incorporation April 1993 Recognition as a stock exchange May 1993 Formulation of business plan June 1994 Wholesale Debt Market segment goes live November 1994 Capital Market (Equities) segment goes live March 1995 Establishment of Investor Grievance Cell April 1995 Establishment of NSCCL, the first Clearing Corporation June 1995 Introduction of centralised insurance cover for all trading members July 1995 Establishment of Investor Protection Fund October 1995 Became largest stock exchange in the country April 1996 Commencement of clearing and settlement by NSCCL April 1996 Launch of S&P CNX Nifty June 1996 Establishment of Settlement Guarantee Fund November 1996 Setting up of National Securities Depository Limited, first depository in India, co-promoted by NSE November 1996 Best IT Usage award by Computer Society of India December 1996 Commencement of trading/settlement in dematerialised securities December 1996 Dataquest award for Top IT User December 1996 Launch of CNX Nifty Junior February 1997 Regional clearing facility goes live November 1997 Best IT Usage award by Computer Society of India May 1998 Promotion of joint venture, India Index Services & Products Limited (IISL) May 1998 Launch of NSEs Web-site: www.nse.co.in July 1998 Launch of NSEs Certification Programme in Financial Market August 1998 CYBER CORPORATE OF THE YEAR 1998 award February 1999 Launch of Automated Lending and Borrowing Mechanism April 1999 CHIP Web Award by CHIP magazine October 1999 Setting up of NSE.IT January 2000 Launch of NSE Research Initiative February 2000 Commencement of Internet Trading June 2000 Commencement of Derivatives Trading (Index Futures) September 2000 Launch of Zero Coupon Yield Curve ...41...
  42. 42. ___________________________________________________________Findings & Analysis November 2000 Launch of Broker Plaza by Dotex International, a joint venture between NSE.IT Ltd. and i-flex Solutions Ltd. December 2000 Commencement of WAP trading June 2001 Commencement of trading in Index Options July 2001 Commencement of trading in Options on Individual Securities November 2001 Commencement of trading in Futures on Individual Securities December 2001 Launch of NSE VaR for Government Securities January 2002 Launch of Exchange Traded Funds (ETFs) May 2002 NSE wins the Wharton-Infosys Business Transformation Award in the Organization-wide Transformation category October 2002 Launch of NSE Government Securities Index January 2003 Commencement of trading in Retail Debt Market June 2003 Launch of Interest Rate Futures August 2003 Launch of Futures & options in CNXIT Index June 2004 Launch of STP Interoperability August 2004 Launch of NSE’s electronic interface for listed companies March 2005 ‘India Innovation Award’ by EMPI Business School, New Delhi June 2005 Launch of Futures & options in BANK Nifty Index December 2006 Derivative Exchange of the Year, by Asia Risk magazine January 2007 Launch of NSE – CNBC TV 18 media centre March 2007 NSE, CRISIL announce launch of IndiaBondWatch.com June 2007 NSE launches derivatives on Nifty Junior & CNX 100 October 2007 NSE launches derivatives on Nifty Midcap 50 January 2008 Introduction of Mini Nifty derivative contracts on 1st January 2008 March 2008 Introduction of long term option contracts on S&P CNX Nifty Index April 2008 Launch of India VIX April 2008 Launch of Securities Lending & Borrowing Scheme August 2008 Launch of Currency Derivatives August 2009 Launch of Interest Rate Futures November 2009 Launch of Mutual Fund Service System December 2009 Commencement of settlement of corporate bonds February 2010 Launch of Currency Futures on additional currency pairs March 2010 NSE- CME Group & NSE - SGX product cross listing agreement April 2010 Financial Derivative Exchange of the Year Award by Asian Banker July 19, 2010 Commencement of trading of S&P CNX Nifty Futures on CME July 19, 2010 Real Time dissemination of India VIX. July 28, 2010 LOI signed with London Stock Exchange Group October 12, 2010 Introduction of Call auction in Pre-open session October 28, 2010 Introduction of European Style Stock Options October 29, 2010 Introduction of Currency Options on USD INR ...42...
  43. 43. ___________________________________________________________Findings & Analysis Market Trend and Analysis Business Growth in Capital Market SegmentMonth/ No. of No. of No. of No. of Turnover Average Market Year Co. trading Securities trades (crores) Daily Capitalisation Listed days traded (lakhs Turnover (crores) ) (crores)2009-10 1,470 244 1,968 16,816 4,138,024 16,959 6,009,1732008-09 1,432 243 1,327 13,651 2,752,023 11,325 2,896,1942007-08 1,381 251 1,264 11,727 3,551,038 14,148 4,858,1222006-07 1,228 249 1,191 7,846 1,945,285 7,812 3,367,350 Analysis• Companies Listed: As compared to previous years, there is significant growth in number of companies listed in the capital market segment of NSE.• No. of Securities Traded: With the increase, in companies listed, despite other factors influencing the market transactions, number of securities traded in also have increased with the time.• No. of Trades: From the financial year 2006-2007 to that of 2009-2010 number of trades have increased the double in amount signaling a positive growth.• Total Turnover: Total turnover have increased four times from FY 2006-07 to FY 2009-10.• Market Capitalization: The amount of market capitalization has doubled in FY 2009-10 as compared to that of FY 2006-2007. ...43...
  44. 44. ___________________________________________________________Findings & Analysis Business Growth in Derivatives SegmentMonth/Yea Index Stock Index Stock Total Average r Futures Futures Options Options Turnover Daily Turnover Turnover Turnover Turnover (crores) Turnover (crores) (crores) (crores) (crores) (crores) 2010-2011 3554400.0 4731045.5 14272415.1 883165.6 23441026.3 110570.8 3 0 4 8 2 8 2009-2010 3934388.6 5195246.6 8027964.20 506065.1 17663664.5 72392.07 7 4 8 7 2008-2009 3570111.4 3479642.1 3731501.84 229226.8 11010482.2 45310.63 0 2 1 0 2007-2008 3820667.2 7548563.2 1362110.88 359136.5 13090477.7 52153.30 7 3 5 5 2006-2007 2539574 3830967 791906 193795 7356242 29543 Analysis• Index Future Turnover: The amount in crores on the Index Future Options of Derivative segment of NSE has shown significant growth of 1.39 times from FY 2006-07 to that of FY 2010-11.• Stock Futures Turnover: Whereas, the Stock Future Turnover has shown growth of 1.23 times from FY 2006-07 to that of FY 2010-11.• Index Options Turnover: The Index Options Turnover has shown 17.89 times growth from FY 2006-07 to FY 2010-11.• Stock Options Turnover: Whereas, Stock Options Turnover ahs shown growth of 4.56 times from FY 2006-07 to FY 2010-11.• Total Turnover: The growth rate when evaluated from FY 2006-07 to FY 2010-11 shows a positive growth of 3.18 times.• Average Daily Turnover: The Average Daily Turnover on Derivative Segment of NSE has shown growth of 3.75 times from FY 2006-07 to 2010- 11. ...44...
  45. 45. ___________________________________________________________Findings & Analysis Business Growth in Retail Debt Segment Month/Year No. of Trades Traded Quantity Traded Value (Lakhs) 2010-2011 2 20 0.02 2009-2010 5 50 0.06 2008-2009 0 0 0.00 2007-2008 0 0 0.00 2006-2007 4 12,120 13.69 Analysis• No. of Trades: Retail Debt Segment of NSE has seen many ups and down in its history. By analyzing the available record, we can clearly see that FY 2006- 07 has been proven best trading year. However, apart from this data, FY 2003- 04 involved greatest number of trades i.e. 912. Whereas, in FY 2007-08 and FY 2008-09 there is not even a single trade shown. In FY 2009-10 it has again recovered its position and maintained to perform 5 no. of trades.• Traded Quantity: Again, FY 2006-2007 involves higher amount of traded quantity. While FY 2010-11 again show some declination in trade number and quantity as well.• Traded Value: In FY 2003-04 the Traded Value was 464.41 lakhs which was highest amount till date. In FY 2005-06, FY 2007-08 and FY 2008-08 Retail Debt Segment has seen no trade and hence zero traded value. However, In FY 2006-07, it has recovered its position by 13.69 lakhs. In FY 2009-2010, it again seem to recover back from zero to 0.06 lakhs but showed declination in FY 2010-2011 by showing only two trades and 0.02 lakhs traded value. ...45...
  46. 46. ___________________________________________________________Findings & Analysis Business Growth in Wholesale Debt Segment Month/Year Market Trading No. of Net Traded Average Average Capitalisation days Trades Value Daily Trade (crores) (crores) Value Size (crores) (crores) 2010-2011 3543592 207 17625 480186.55 2319.74 27.24 2009-2010 3165929 239 24069 563815.95 2359.06 23.42 2008-2009 2848315 238 16129 335951.52 1411.56 20.83 2007-2008 2123346 248 16179 282317.02 1138.38 17.45 2006-2007 1784801 244 19575 219106.47 897.98 11.19 Analysis• No. of Trades: Wholesale Debt segment has seen declination in number of trades from FY 2006-07 to that of FY 2010-2011. However, it had regained its amount in FY 2009-2010 by 4,494 new entries as compared to 3,446 declination in FY 2008-09.• Net Traded Value: In FY 2009-2010, Whole Debt Segment of NSE has shown highest Net Traded value with significant increase in number of trades.• Average Daily Value: Despite declination in number of trades from FY 2006- 07 to FY 2008-09, the Average Daily Value has increased on opposite for positive factor. And is highest in FY 2009-2010.• Average Trade Size: Average Trade Size has increased with consistent rate from FY 2006-07 to that of FY 2010-11.• Market Capitalization: Despite less number of trades and lesser Net Traded value from FY 2009-10, the FY 2010-11 has shown highest Market capitalization over the period. ...46...
  47. 47. ___________________________________________________________Findings & AnalysisPROMOTERSNSE has been promoted by leading financial instituitions, baks, insurance companiesand other financial intermediaries as follows:• 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• Infrastructure Development Finance Company Limited ...47...
  48. 48. __________________________________________________________________Conclusion CONCLUSIONThe National Stock Exchange (NSE) is India’s leading stock exchange coveringvarious cities and towns across the country. NSE provides a modern, fully automatedscreen-based trading system with national reach. The exchange has bought about un-parallel transparency, speed and efficiency, safety and market integrity. NSE’s tradingvolumes in the equity segment have grown rapidly with the average daily turnoverincreasing from Rs. 17 crores during 1994-1995 to Rs. 6,523 crores during 2005-06.During the year 2005-06, NSE reported a turnover of Rs. 1,569,556 crores in theequities segment.NSE has played a catalytic role in reforming the Indian securities market in terms ofmicrostructure, market practices and trading volumes. The market today uses state-of-the-art information technology to provide an efficient and transparent trading, clearingand settlement mechanism, and had witnessed several innovations in products andservices via demutualization of stock exchange governance; screen based trading,compression of settlement cycles, dematerialization and electronic transfer ofsecurities, lending and borrowing securities, professionalizing of trading membersfine-tuned risk management systems, emergence of clearing corporations to assumecounterparty risks, market debt and derivative instruments and intensive use ofinformation technology.In Conclusion, NSE successfully utilized technology as a tool for obtaining completetransformation of India’s security industry. As of today, around a decade afterinception, every aspect of the equity spot and derivatives market India is now up to‘International Standards’ or ahead of them. ...48...
  49. 49. __________________________________________________________________ConclusionNSE has completed 16 years of its operations on 30 June 2010. The exchange iscredited with technology innovation, speeding up of the process for dematerialization,introduction of effective risk containment measures and the introduction ofderivatives trading. It is a dominant stock exchange accounting for 66 per cent of thetraded volume in the cash segment and 99 per cent of the traded volume in thederivatives segment. The NSE has emerged as a technology-driven stock exchange. Ithas rightly positioned itself as “the exchange with difference”. In order to maintain itsleading position among exchanges, it increases the number of users by trying to meettheir growing and ever-changing needs through innovative efforts. Its aim is tocontinuously upgrade technology systems and trading practices. ...49...
  50. 50. __________________________________________________________________ConclusionMajor Defects in Trading in Indian Stock ExchangesThere are certain serious defects while working of our stock exchanges, particularlythe major exchanges such as Bombay Stock Exchange (BSE):1. Lack of Integration: There are a large number of stock exchanges in the country, though BSE dominates them with over 70 per cent of all transactions in the country. There is nothing wrong in this, because in other countries too there are small exchanges, with one dominating (New York SE in USA and London SE in England). But the real problem in India is that there is no proper integration between all the stock exchanges with too much variation in prices of shares in different markets.2. Specified and Non-specified shares: Indian stock exchanges follow the peculiar practice of classifying listed shares into ‘specified’ group and ‘unspecified’ group. The shares in the specified group are provided certain special facilities like settlement period, carry forward and clearing to promote speculation. At present, market liquidity is limited to thee speculative shares only, whereas investors would prefer liquidity for all shares, across a broad front. The only advantage of this artificial classification is that it is highly profitable to the stock exchange brokers through brokerage fees on the high volume of speculative business generated in these shares.3. Margins: The margins levied by Indian SEs on speculative transactions are wholly of discretionary character, varying from share to share and from day to day, ranging from zero to 40 per cent. Despite a whole array of daily, carry forward and ad hoc margins, numerous defaults take place in several SEss whenever the market crashed. In other words, the imposition of margins has failed to curb excessive speculation in SEs.4. The system of settlement and carry forward: It is responsible for high price fluctuations and high risk exposure to market participants. It is often responsible for excessive speculation. The carry forward system is unjustifiable and unhealthy. It is exclusively aimed at helping the spurious speculators. The liquidity provided by ...50...
  51. 51. __________________________________________________________________Conclusion speculators who are not interested in paying or taking delivery on the settlement day cannot be genuine liquidity. Above all, the carry forward system is a powerful factor behind absurdly high levels of speculation in our stock exchanges and is of no help to genuine investors who are always interested in the earliest possible settlement of transactions.5. Investors’ interest: The trading activity in our exchanges has been designed and evolved to benefit only the brokers and the intersects of the genuine investors are generally ignored. The investors’ confidence in the market machinery is weak, as most of them have a suspicion that they are always cheated on price by the brokers.6. Weakness of SE management: The management organization and structure of Indian SEs, in general, is weak and deficient. The Government Body of a stock exchange does not have either the concern or the will to introduce necessary reforms in trading. ...51...
  52. 52. __________________________________________________________________Suggestions SUGGESTIONSMerging OTCEI and ICSECreating an effective trading platformBoth the inter-connected stock exchange and the OTCEI with their vast network canmerge into a single platform for trading in the securities of SME’s (Small andMedium Enterprises) as also in the tradable securities of RSE’s and the BSE.It is interesting to note that the Securities and Exchange Board of India (SEBI) hasinvited for expressions of interest for the creation of a separate platform for trading inthe securities of small and medium enterprises (SME’s).Most of the advanced markets of the world set up trading platform for SME’s in theearly 1980’s. In fact, in NASDAQ, which has emerged as the second biggest stockmarket of the US, was established in 1971. At present, more than 50 alternatemarkets, stock exchanges, boards of trade and lower tier exchanges are thriving acrossthe world for SME’s.For India, it is all the more necessary to set up a trading platform, as bank finance isnot easily available for SME’s, despite exhortations by the government and thereserve bank of India to augment the credit flow to this sector.Development of SME’s is important, particularly because liberalization andglobalization have, within a short period of a decade-and-a-half, resulted intremendous concentration of wealth in the hands of MNC’s, both foreign and homegrown. ...52...
  53. 53. __________________________________________________________________SuggestionsIndonext; a pet project of finance minister P. Chidambaram, which was inauguratedby him in January 2005, has not lived up to the expectations, of the 535 securitieslisted on the BSE as well; only the remaining 25 are listed exclusively on RSE’s. Andthe turnover on Indonext, at about Rs. crore has not been significant.Limited TradingDespite the tremendous progress Indian stock exchanges have made in the last 12years, major problem that still needs to be tackled is ill-liquidity of several listedscripts in which there is no trading happening at all. There are about 4,000 exclusivelylisted companies on RSE’s, only scripts of 500 companies, fully comply by all theamadatory requirements and are tradable.Even on the BSE, of the 7,753 listed scripts only about 2,700 are traded. Investors inall these scripts have no exit route, because of which they can not even book losses:under the Income-tax Act, losses can be booked only if there is a transfer.The OCTEI exchange of India which was set up in 1992 exclusively for small capcompanies could not succeed because of the introduction of rolling settlementsscreen-based trading, and so on without adequate technology support.Ready-made PlatformThere is no need whatsoever for setting up a separate trading platform. There isalready a ready platform created by the 13 RSE’s, providing for trading in all thesecurities listed on the RSE’s as also in the securities listed on the NSE and the BSEas permitted.This platform has not been successful thus far mainly because of the lack ofexclusivity of trading and as the major RSE operators were un-willing to shift evenapart of their trading volumes to the ICSE trading platform.Moreover, although the ICSE was declared as regional stock exchange for the state ofMaharastra by SEBI, it could not succeed in getting listing of any worthwhilecompanies due to the lack of regulatory support. ...53...
  54. 54. __________________________________________________________________SuggestionsAs a result, the ICSE has been reduced to the position of an RSE, trading thoughsubsidiary on the NSE and the BSE with a network of 801 traders and dealers spreadacross 146 centers in 18 states and two union territories. Both the ICSE and theOTCEI with their vast network can merge into a single platform for trading in thesecurities of SME’s as also in the tradable securities of RSE’s and the BSE. Besidesabout350 active members of the RSE can also operate on this platform. Hundreds ofcrores of rupees spent by the ICSE, OTCEI and their members, which otherwisewould get wasted, can be utilized fruitfully.Market MakersMere creation of a trading platform will not solve the problem. Incentives must beoffered to traders on this platform. Atleast two market makers should be appointed foreach script and the responsibility for the appointment should rest to the issuers.The issuers should supply each of the market makers with atleast 2% of the issuedcapital at the same price at which it is offered to the public. Market must also be givenadequate credit facilities from banks, preferably at a concession rate. Fiscalconcessions must also be offered to market makers in respect of the profit arising outof the market making functions.Above all, the spreads between bids and offers that would be given by the marketmakers should not be subjected to any limits.Competition among market makers will ensure that the spreads narrow down toreasonable levels.Appointment of market makers has therefore failed, basically because of theregulatory restrictions on the spreads between bids and offers.But market making alone will not generate liquidity in all the tradable securities. Thisneeds to be supplemented by the call auction system. Under this system, all investorsand brokers have the facility to upload their buy and sell orders.At the closing time of a trading session, bids and offers which match will be executed. ...54...
  55. 55. __________________________________________________________________SuggestionsA few of the developed markets of the world have already introduced the call auctionsystem in respect of thinly traded securities.Abolish the system of carry forward:The system of carry forward has been the most important factor for over-speculationin India and it has to be done away with. In fact, with one week settlement and withthe adoption of system of marking to the market, the rationale of the carry forwardsystem disappears automatically. If the stock exchanges were to accept only the twosuggestions of one week settlement and the abolition of the carry forward system,many of the problems of stock exchanges would be over.Management Information SystemIt is essential that information should be available for each stock exchange abouttrading volume and prices, about trading concentration in individual securities, tradingconcentration by stock exchange members etc. In other words, every stock exchangeshould introduce a well-designed management information system (MIS) capable ofproducing relevant information which could be used by the stock exchange authoritiesfor restricting and regulating market on proper lines.Government Body and Management of Stock ExchangesTwo other changes should be immediately adopted. First, the Executive Director of astock exchange should be appointed by the Government or by SEBI on the advice of apanel of independent experts, so as to make him independent o the control of stockbrokers.The composition of GB of stock exchanges should be changed to 50 : 50, betweenbroker-directors and non-broker independent brokers. This is necessary to make thegoverning body to be objective and direct and control the stock exchange trading fromthe point of the country as a whole and not exclusively for the benefit of member-brokers. ...55...
  56. 56. _________________________________________________________________Bibliography BIBLIOGraphyData is gathered from• http://www.nseindia.com/• http://www.google.com/• http://en.wikipedia.orgMagazines, Newspapers and Other Secondary data resources.Books referred• Indian Economy: S. Chand Publications [Ruddar Datt & K.P.M. Sundharam]• The Indian Financial System: Pearson education [Bharti V. Pathak]• Financial Management: McGraw Hill Companies [M.Y. Khan & P.K. Jain]• Investment Analysis and Portfolio Management: Pearson education [M. Rangnathan and R. Madhumathi] ...56...

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