Stock Exchange Reforms in India Prepared By: Vikram B. Thadeshvar Pune. [email_address]

Stock market and how it works Stock means ownership. As an owner, you have a claim on the assets and earnings of a company as well as voting rights with your shares. Stock is equity , bonds are debt . Bondholders are guaranteed a return on their investment and have a higher claim than shareholders. SEBI (Security and Exchange Board of India) having a control over all stock exchanges all over India. This is generally why stocks are considered riskier investments and require a higher rate of return. Stock prices change according to supply and demand. There are many factors influencing prices, the most important of which is earnings . The two main types of stock are common and preferred . It is also possible for a company to create different classes of stock. [email_address]

Stock means ownership. As an owner, you have a claim on the assets and earnings of a company as well as voting rights with your shares.

Stock is equity , bonds are debt . Bondholders are guaranteed a return on their investment and have a higher claim than shareholders.

SEBI (Security and Exchange Board of India) having a control over all stock exchanges all over India.

This is generally why stocks are considered riskier investments and require a higher rate of return.

Stock prices change according to supply and demand. There are many factors influencing prices, the most important of which is earnings .

The two main types of stock are common and preferred . It is also possible for a company to create different classes of stock.

(Bombay Stock Exchange) Established as "The Native Share & Stock Brokers' Association" in 1875. Index of 30 stocks representing 12 major sectors. World's number 1 exchange in terms of the number of listed companies. World's 5th in transaction numbers. The market capitalization as on December 31, 2007 stood at USD 1.79 trillion . More than 4,700 listed companies. Classified into A, B, S, T and Z groups. [email_address]

Established as "The Native Share & Stock Brokers'

Association" in 1875.

Index of 30 stocks representing 12 major sectors.

World's number 1 exchange in terms of the number

of listed companies.

World's 5th in transaction numbers.

The market capitalization as on December 31, 2007 stood at USD 1.79 trillion .

More than 4,700 listed companies.

Classified into A, B, S, T and Z groups.

Bunch of 50 Stocks NSE is a complete capital market prime mover. Its wholly-owned subsidiaries, National Securities Clearing Corporation Ltd. (NSCCL) provides clearing and settlement of securities, India Index Services and Products Ltd. (IISL) provides indices and index services with a consulting and licensing agreement with Standard & Poor's (S&P), And NSE.IT Ltd. forms the technology strength that NSE works on. ( National Stock Exchange) [email_address]

Bunch of 50 Stocks

NSE is a complete capital market

prime mover.

Its wholly-owned subsidiaries,

National Securities Clearing

Corporation Ltd. (NSCCL) provides

clearing and settlement of securities,

India Index Services and Products Ltd. (IISL) provides indices and index services with a consulting and licensing agreement with Standard & Poor's (S&P),

And NSE.IT Ltd. forms the technology strength that NSE works on.

Reforms From its 30 stocks, Cipla replaced with Tata Power on 28 July and Cement major Ambuja Cements replaced by Sterlite. In Nov 2007 Dr. Reddy’ Lab was replaced with DLF. Only pharma stock left in the Sensex is Ranbaxy. Sensitive to market sentiments and market realities. Offers 21 indices, including 12 sector indices. [email_address]

From its 30 stocks, Cipla replaced with Tata Power on 28 July and Cement major Ambuja Cements replaced by Sterlite.

In Nov 2007 Dr. Reddy’ Lab was replaced with DLF.

Only pharma stock left in the Sensex is Ranbaxy.

Sensitive to market sentiments and market realities.

Offers 21 indices, including 12 sector indices.

Reforms Stock market liberalization is the decision by a government to allow foreign investors to purchase shares in the local stock market and domestic investors to purchase shares abroad. International asset pricing models predict that the integration with world financial markets should lead to a reduction in the cost of capital. A number of papers assess the impact of stock market liberalization on the cost of equity capital, finding evidence of an increase in share prices around the liberalization date and a reduction in the cost of capital afterwards. As part of the capital market reform programs, governments approved new laws and regulations aimed at creating the proper legal and regulatory framework for capital markets to flourish. Many countries tried to improve corporate governance practices, by introducing new standards in a number of different areas, including voting ratings, tender procedures, and the structure of the board of directors. [email_address]

Stock market liberalization is the decision by a government to allow foreign investors to purchase shares in the local stock market and domestic investors to purchase shares abroad.

International asset pricing models predict that the integration with world financial markets should lead to a reduction in the cost of capital.

A number of papers assess the impact of stock market liberalization on the cost of equity capital, finding evidence of an increase in share prices around the liberalization date and a reduction in the cost of capital afterwards.

As part of the capital market reform programs, governments approved new laws and regulations aimed at creating the proper legal and regulatory framework for capital markets to flourish.

Many countries tried to improve corporate governance practices, by introducing new standards in a number of different areas, including voting ratings, tender procedures, and the structure of the board of directors.

Reforms These reforms were expected to improve market performance, by increasing liquidity, enhancing efficiency, and reducing trading costs. Focus on analysis on the replacement of traditional trading floors, on which brokers manually match orders using an open outcry system, by fully automated electronic trading systems. Electronic trading systems may increase liquidity and improve efficiency by reducing transaction costs and increasing information availability. These trading systems may also attract new pools of liquidity, by providing affordable remote access to investors. Some countries also enacted new insider trading regulations and improved accounting and disclosure standards. To account for improvements in the legal framework for investors, focus on the enforcement of insider trading regulations. [email_address]

These reforms were expected to improve market performance, by increasing liquidity, enhancing efficiency, and reducing trading costs.

Focus on analysis on the replacement of traditional trading floors, on which brokers manually match orders using an open outcry system, by fully automated electronic trading systems.

Electronic trading systems may increase liquidity and improve efficiency by reducing transaction costs and increasing information availability.

These trading systems may also attract new pools of liquidity, by providing affordable remote access to investors.

Some countries also enacted new insider trading regulations and improved accounting and disclosure standards.

To account for improvements in the legal framework for investors, focus on the enforcement of insider trading regulations.

Reforms Increases the pool of capital available to local firms and broadens the investor base. This is likely to lead to increased liquidity and larger amounts of research. Improving the basic environment for capital market operations, including new policies related to securities clearance and settlement systems, trading platforms, and custody arrangements. These reforms were expected to improve market performance, by increasing liquidity, enhancing efficiency, and reducing trading costs. [email_address]

Increases the pool of capital available to local firms and broadens the investor base. This is likely to lead to increased liquidity and larger amounts of research.

Improving the basic environment for capital market operations, including new policies related to securities clearance and settlement systems, trading platforms, and custody arrangements.

These reforms were expected to improve market performance, by increasing liquidity, enhancing efficiency, and reducing trading costs.

Impact in current market scenario Realistic shares have lost 60-70% because of inflation. RBI increased the Rapo Rate and CRR. Metal shares are up because high cost of production. There was heavy selling across the board by domestic and foreign investors. According to brokers, the trigger for the big fall today was early selling by hedge funds. This was followed by short-sellers who took advantage of the uncertainty to pull down the stock prices. [email_address]

Realistic shares have lost 60-70% because of inflation.

RBI increased the Rapo Rate and CRR.

Metal shares are up because high cost of production.

There was heavy selling across the board by domestic and foreign investors.

According to brokers, the trigger for the big fall today was early selling by hedge funds.

This was followed by short-sellers who took advantage of the uncertainty to pull down the stock prices.

Impact in current market scenario The brave face put up by the financial markets wilted away as major stock indices plummeted to historic lows. Brokers said over Rs 1,00,000 crore of market capitalization was wiped out on May 14, probably the highest ever in a single day. Weak trend in the various international markets, particularly in the emerging ones, also dampened the local sentiment. As per Brokers, FIIs were major sellers in most of the index counters and in mid-cap stocks where they had taken exposures in the last few months. The unexpected crash in stock prices has prompted most stockbrokers to have a second look at their investment strategy. [email_address]

The brave face put up by the financial markets wilted away as major stock indices plummeted to historic lows.

Brokers said over Rs 1,00,000 crore of market capitalization was wiped out on May 14, probably the highest ever in a single day.

Weak trend in the various international markets, particularly in the emerging ones, also dampened the local sentiment.

As per Brokers, FIIs were major sellers in most of the index counters and in mid-cap stocks where they had taken exposures in the last few months.

The unexpected crash in stock prices has prompted most stockbrokers to have a second look at their investment strategy.

Thank You [email_address]