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Stock exchange Stock exchange Presentation Transcript

  • “ any body of individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities Markets 9/13/2013prakash misal 1
  •  : The securities regulation act of 1956 defined stock exchange as “an association , organization , or aindividual which is established for for the purpose of assisting ,regulating , and controlling business in buying ,selling and dealingin securities.” Meaning : This comes under treasury sector ,which providesservice to stock brokers & traders to trade stocks ,bonds andsecurities. 9/13/2013prakash misal 2
  •  Stock exchanges helps the companies to raise their fund.Therefore the companies needs to list themselves in the StockExchange and the shares will be issued which is known as equity ora ordinary share and these shareholders are the real owners of thecompany the Board Of Directors of the Company are elected out of these Equity Shareholders only. 9/13/2013prakash misal 3
  •  It is an organized market  It is a securities market  It is an important constituent of capital market i.e., market for long- term finance  It is a voluntary association of persons desirous of dealing in securities 9/13/2013prakash misal 4
  •  Stock exchange is a voluntary association, its membership is not open to everybodyIn a stock exchange, only the members can deal in i.e., buy & sell securities  The members of a stock exchange can buy and sell securities either as brokers for & on behalf of their client  The dealings in a stock exchange are under certain accepted code of conduct i.e., rules and regulations 9/13/2013prakash misal 5
  •  Provide central and convenient meeting places for sellers and buyer of securities Increase the marketability and liquidity of securities  Contribute to stability of prices of securities  Equalization of price of securities  Smoothen price movement 9/13/2013prakash misal 6
  •  Help the investors to know the worth of their holdings  Promote the habit of saving and investment  Help capital formation  Help companies and government to raise funds from the investors  Provide forecasting service 9/13/2013prakash misal 7
  •  Stock markets are highly correlated in the era of globalisation. The world has became a small global village. 9/13/2013prakash misal 8
  •  A stock market or equity market is a market for the trading of company stock (shares) and derivatives at an agreed price. 9/13/2013prakash misal 9
  •  Shares represent a fraction of ownership in a business. The common feature of all these is equity participation. Different classes of shares have different voting rights. Ownership of shares is documented by a legal document that specifies the amount of shares owned by the shareholder, and other specifics of the shares, such as the par value or the class of the shares (if any).These days these stock certificates have been dematerialized.(No physical document!) 9/13/2013prakash misal 10
  •  A shareholder (or stockholder) is an individual or company (including a corporation) that legally owns one or more shares of a company. Shareholders are granted privileges depending on the class of stock, including the right to vote on matters such as elections to the board of directors, the right to share in distributions of the company's income, the right to purchase new shares issued by the company, and the right to a company's assets during a liquidation of the company.Shareholders vary from individual stock investors to large hedge fund traders. 9/13/2013prakash misal 11
  •  A company may want additional capital to invest in new projects. The promoters may simply wish to reduce their holding, freeing up capital for their own private use.Once a company is listed, it will be able to issue further shares via a rights issue, thereby again providing itself with capital for expansion without incurring any debt.Financing a company through the sale of stock in a company is known as equity financing. 9/13/2013prakash misal 12
  •  Government of India set up the Securities And Exchange Board of India(SEBI) on April 12, 1988 on the basis of the recommendation committee on Stockexchange reforms headed by G.S. patel. 9/13/2013prakash misal 13
  •  The members of the Board of Management of the SEBI Comprises those drawn from Professional brokers, Financial Consultant, Merchant Bankers, Investors, Stock exchanges Authorities and Finance ministry 9/13/2013prakash misal 14
  •  The securities market has two interdependent and inseparable segments, The new issues (primary) market and Secondary market. (stock market) The primary market provides the channel for creation and sale of new securities, The securities issued in the primary market are issued by public limited companies or by government agencies. 9/13/2013prakash misal 15
  •  The resources in this kind of market are mobilized either through the public issue or through private placement route. It is a public issue if anybody and everybody can subscribe for whereas if the issue is made available to a selected group of persons it is termed as private placement. There are two major types of issuers of securities, the corporate entities who issue mainly Debt and Equity instruments and the government (central as well as state) who issue debt securities (dated securities and treasury bills). 9/13/2013prakash misal 16
  •  While the secondary market deals in securities previously issued. The secondary market enables participants who hold securities to adjust their holdings in response to changes in their assessment of risks and returns. 9/13/2013prakash misal 17
  •  Once the new securities are issued in the primary market they are traded in the stock (secondary) market. The secondary market operates through two mediums, namely, the over-the-counter (OTC) market and the exchange-traded market. OTC markets are informal markets where trades are negotiated. Most of the trades in the government securities are in the OTC market. 9/13/2013prakash misal 18
  • The Bombay Stock Exchange -oldest exchange in Asia. Bombay Stock Exchange (BSE), (Bombay Śhare Bāzaār) is a stock exchange located on Dalal Street, Mumbai, Maharashtra, India. Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd) BSE’s popular equity index - the SENSEX 9/13/2013prakash misal 19
  •  Better corporate profitability  India’s equity capital markets are more developed than China’s  Greater exposure to the private sector  India’s driver of economic growth is consumption instead of volatile exports. 9/13/2013prakash misal 20
  •  All the spot trades where securities are traded for immediate delivery and payment take place in the OTC market. The other option is to trade using the infrastructure provided by the stock exchanges. The exchanges in India follow a systematic settlement period. All the trades taking place over a trading cycle (day=T) are settled together after a certain time (T+2 day). The trades executed on exchanges are cleared and settled In Case of BSE “ trading system known as BOLT” 9/13/2013prakash misal 21
  •  A variant of the secondary market is the forward market, where securities are traded for future delivery and payment. A variant of the forward market is Futures and Options market. Presently only two exchanges viz., National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange (BSE) provides trading in the Futures & Options. 9/13/2013prakash misal 22
  •  Key strengths of the Indian securities markets The key strengths of the Indian capital market include A fully automated trading system on all stock exchanges, a wide range of products, an integrated platform for trading in both cash and derivatives, and a nationwide network of trading through over 4,000 corporate brokers. The securities markets in India have made enormous progress in developing sophisticated instruments and modern market mechanisms. The real strength of the Indian securities market lies in the quality of regulation. The market regulator, Securities and Exchange Board of India (SEBI) is an independent and effective regulator. 9/13/2013prakash misal 23
  •  Exchange Board of India (SEBI) Is an independent and effective regulator. :  Exchange Board of India (SEBI) Is an independent and effective regulator. It has put in place sound regulations in respect of Intermediaries, trading mechanism, Settlement cycles, Risk management, Derivative trading and takeover of companies. There is a well designed disclosure based regulatory system. Information technology is extensively used in the securities market. 9/13/2013prakash misal 24
  •  The NSE and BSE have most advanced and scientific risk management systems. The growing number of market participants, The growth in volume of securities transactions, The reduction in transaction costs, The significant improvements in efficiency, transparency and safety, and the level of compliance with international standards have earned for the Indian securities market a new respect in the world.  Market Participants :  Market Participants In every economic system, some units, individuals or institutions, are surplus-generating, who are called savers, while others are deficit- generating, called spenders. Households are surplus-generators and Corporate and Government are deficit generators. Through the platform of securities markets, The savings units place their surplus funds in financial claims or securities in turn get benefits like interest, dividend, capital appreciation, bonus etc. These investors and issuers of financial securities constitute two important elements of the securities markets. The third critical element of markets are the intermediaries who act as conduits between the investors and issuers. 9/13/2013prakash misal 25
  •  Bombay Stock Exchange• The oldest stock exchange in Asia• Established as “The Native Share &Stock Broker Association” in 1875• Over the past 138 years, BSE has facilitated the growth of the Indian Corporate Sector by providing it with an efficient capital raising platform• The equity market capitalization of the companies listed on the BSE was US $ 1.63 trillion as of Dec. 2010• BSE has the largest number of listed companies in the world 9/13/2013prakash misal 26
  •  National Stock Exchange (NSE)• NSE was set up by leading institutions to provide a modern, fully automated screen based trading system.• Promoted by leading financial institutions at the behest of the Government of India.• Incorporated in Nov. 1992 as a tax paying company.• Today NSE, network stretches to more than 1500 locations in the country and support more than 2,30,000 terminals.• Market Capitalization went up to Rs. 6,009,173 crore at the end of march. 9/13/2013prakash misal 27
  •  Over The Counter Exchange Of India (OTCEI)• Incorporated in 1990, setup to aid enterprising promoters in raising finance for new projects.• To provide investors with a transparent efficient mode of trading.• OTCEI introduced a screen based nation wide trading.• OTCEI net profit is 17.81 lacs• Its increases total turnover is Rs.1627 crore to 1678 crore 9/13/2013prakash misal 28
  •  Market Participants Regulatory bodies, which regulate the functioning of the securities markets, constitute another signifycant element of securities markets. The process of mobilization of resources is carried out under the supervision and overview of the regulators. The regulators develop fair market practices and regulate the conduct of issuers of securities and the intermediaries. They are also in charge of protecting the interests of the investors. The regulator ensures a high service standard from the intermediaries and supply of quality securities and non-manipulated demand for them in the market. Thus, the four important elements of securities markets are the Investors, the Issuers, the Intermediaries and Regulators. “IIIR”  9/13/2013prakash misal 29
  •  STOCK MARKET WORKING REGULATORY FRAMEWORK WHY DO PEOPLE BUY SHARES? WHY STOCK MARKET IS SO VOLATILE? HOW TO MAKE MONEY IN STOCK MARKET? ROLE OF STOCK MARKET IN ECONOMY  Regulatory Framework :  Regulatory Framework At present, the Six main Acts governing the securities markets are (a) The SEBI Act, 1992; (b) The Companies Act, 1956, which sets out the code of conduct for the corporate sector in relation to issuance, allotment and transfer of securities, and disclosures to be made in public issues; (c) The Securities Contracts (Regulation) Act, 1956, which provides for regulation of transactions in securities through control over stock exchanges (d) The Depositories Act, 1996 which provides for electronic maintenance and transfer of ownership of demat shares (NSDL) (e) Prevention of Money Laundering Act, 2002. (f) Capital Issues (Control) Act, 1947  SEBI Act, 1992 : 9/13/2013prakash misal 30
  •  SEBI Act, 1992 The SEBI Act, 1992 was enacted to empower SEBI with statutory powers for (a) Protecting the interests of investors insecurities, (b) Promoting the development of the securities market, (c) Regulating the securities market. (d) It can conduct enquiries, audits and inspection of all concerned and adjudicate offences under the Act. (e) It has power to register and regulate all market intermediaries and also to penalize them in case of violations of the provisions of the Act, SEBI has full autonomy and authority to regulate and develop an orderly securities market.  Securities Contracts (Regulation) Act, 1956 :  Securities Contracts (Regulation) Act, 1956 It provides for direct and indirect control of virtually all aspects of securities trading and the running of stock exchanges and aims to prevent undesirable transactions in securities. It gives Central Government regulatory jurisdiction over stock exchanges through a process of recognition and continued supervision (b) Contracts in securities, and (c) Listing of securities on stock exchanges. As a condition of recognition, a stock exchange complies with conditions prescribed by Central Government. Organized trading activity in securities takes place on a specified recognized stock exchange.  Depositories Act, 1996 : 9/13/2013prakash misal 31
  •  Depositories Act, 1996 The Depositories Act, 1996 provides for the establishment of depositories in securities with the objective of ensuring Free transferability of securities with speed, accuracy and security by making securities of public limited companies freely transferable subject to certain exceptions; (b) Dematerializing the securities in the depository mode; and (c) Providing for maintenance of ownership records in a book entry form. (d) In order to streamline the settlement process, the Act envisages transfer of ownership of securities electronically by book entry without making the securities move from person to person.  Companies Act, 1956 :  Companies Act, 1956 It deals with issue, allotment and transfer of securities and various aspects relating to company mgt. It provides for standard of disclosure in public issues of capital, particularly in the fields of company management and projects, information about other listed companies under the same management, and management perception of risk factors. It also regulates underwriting, the use of premium and discounts on issues, rights and bonus issues, payment of interest and dividends, supply of annual report and other information.  Prevention of Money Laundering Act, 2002 :  Prevention of Money Laundering Act, 2002  Index Services : 9/13/2013prakash misal 32
  •  Index Services A stock index consists of a set of stocks that are representative of either the whole market, or a specified sector. It helps to measure the change in overall behavior of the markets or sector over a period of time The are maintained professionally to ensure that it continues to be a consistent benchmark of the equity markets, which involves inclusion and exclusion of stocks in the index, day-to-day tracking and giving effect to corporate actions on individual stocks  S&P CNX NIFTY (NIFTY 50) National Index of Fifty Shares :  S&P CNX NIFTY (NIFTY 50) National Index of Fifty Shares Blue chip index of NSE Most popular and widely used stock market indicator in the country. Diversified 50 stocks index accounting for 22 sectors of the economy Top 50 liquid stocks in India Accounts for 58.64 % of total market capitalization of CM For reflecting the stock market behavior accurately and also for modern applications such as index funds and index Derivatives. Base capital of Rs.2.06 trillion.  CNX Nifty Junior :  CNX Nifty Junior The next rung of liquid securities after Nifty 50 The maintenance of the Nifty 50 and the CNX Nifty Junior are synchronized so that the two indices will always be disjoint sets Accounts for 9.60 % of the market capitalization of CM segment of NSE as at end March 2008. Introduced on January 1, 1997, with a base capital of Rs.0.43 trillion. (Approx 1 Laks Crore Market Cap)  9/13/2013prakash misal 33
  •  CNX 100 :  CNX 100 A diversified 100 stock index accounting for 35 sector of the economy A combination of the Nifty 50 and CNX Nifty Junior  S&P CNX 500 :  S&P CNX 500 India’s first broad-based benchmark of the Indian capital market for comparing portfolio returns vis-a-vis market returns. Represents about 84.24 % of total market capitalization and about 78.00% of the total turnover on the NSE as on March 30 2008. The S&P CNX 500 companies are disaggregated into 72 industry indices viz. S&P CNX Industry Indices Industry weight ages in the index reflect the industry weight ages in the market. For e.g. if the banking sector has a 5% weight age in the universe of stocks traded on NSE, banking stocks in the index would also have an approximate representation of 5% in the index.  SENSEX :  SENSEX Blue chip index of the Bombay Stock Exchange (BSE). first compiled in 1986 and was calculated on a “Market Capitalization-Weighted”Methodology of 30 component stocks representing a sample of large, well-established and financially sound companies. Consist of A basket of 30 constituent stocks representing a sample of large, liquid and representative companies Base index value is 100.  9/13/2013prakash misal 34
  •  BSE-100 INDEX :  BSE-100 INDEX Comprises of 100 stocks listed at five major stock exchanges in India at Mumbai, Calcutta , Delhi, Ahmadabad and Madras. Criteria for selection had been market activity, due representation to various industry groups and representation of trading activity on major stock exchanges. BSE also calculates a dollar- linked version of BSE-100 Index. Base index value is 100.  BSE-500 INDEX • :  BSE-500 INDEX • Consists of 500 scripts in its basket The changing pattern of the economy and that of the market have been kept in mind while constructing this index. BSE-500 index . It represents nearly 93% of the total market capitalization on Bombay Stock Exchange Limited. Means BSE-500 index ideally represents total market. Represents all 20 major industries of the economy. Base index value is 1000.  Movement of Nifty, Sensex and NASDAQ, 2007-08 :  Movement of Nifty, Sensex and NASDAQ, 2007-08  Derivatives Market :  Derivatives Market A futures contract is a forward contract, which is traded on an Exchange. NSE commenced trading in index futures on June 12, 2000. NSE defines the characteristics of the futures contract such as the Underlying index, Market lot, and The maturity date of the contract. The futures contracts are available for trading from introduction to the expiry date. Trading cycle S&P CNX Nifty futures contracts have a maximum of 3-month trading cycle - the near month (one), the next month (two) and the far month (three). A new contract is introduced on the trading day following the expiry of the near month contract.  9/13/2013prakash misal 35
  •  Nifty Options :  Nifty Options An option gives a person the right but not the obligation to buy or sell something. An option is a contract between two parties wherein the buyer receives a privilege for which he pays a fee (premium) and the seller accepts an obligation for which he receives a fee. The premium is the price negotiated and set when the option is bought or sold. A person who buys an option is said to be long in the option. A person who sells an option is said to be short in the option.  Slide 34:  First step to Investing in Stock market!!!!  JARGON OF EQUITY MARKET: :  JARGON OF EQUITY MARKET: SECURITY BOND STOCK 1)COMMON STOCKS 2)PREFERRED STOCKS SHARE MUTUAL FUNDS. PAR VALUE vs. MARKET VALUE BULLISH vs. BEARISH  How does the stock market function? :  How does the stock market function? Stock exchanges Brokers Registrars Depositories and their participants Securities and Exchange Board of India (SEBI)  Slide 37: 9/13/2013prakash misal 36