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trend analysis of Indian stock exchange

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  • 1. 1 CHAPTER-1 INTRODUCTION BACKGROUND OF STUDY: STOCK MARKET:- Stock market refers to a market place where investors can buy and sell stocks. The price at which each buying & selling transaction takes is determined by the market force (that is demand & supply for a particular stock). A Stock market is a public market for the trading of company stock & derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $62.8 trillion USD at the end of November 2013. The stock market is one of the most important sources for companies to raise money. This allows business to be publicity traded or raise additional capital for expansion by selling shares if ownership of the company in a public market. Infact, the stock market is often considered the primary indicator of a country’s economic strength & development. Rising share prices, for instance tend to be associated with increased business investment and vice versa. STOCK EXCHANGE :- A stock exchange is an entity which provides "trading" facilities for stock brokers and traders, t o trade stocks and other securities. Stock Exchanges are an organized market place, either corporation or Mutual organization, where members of t he organization gather to trade company stocks or other securities. Stock exchanges also provide facilities for the issue and redemption of Securities as well as other financial instruments and capital events including the PAYMENT OF INCOMES & DIVIDENDS:- The securities traded on a stock exchange include shares issued by Companies, unit trusts, derivatives, pooled investment products and bonds . To be able to trade a security on a certain stock exchange, it has to be listed there.
  • 2. 2 Usually there is a central location at l east f or record keeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives those advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets is driven by various factors which, as in all free markets, affect t he price of stocks. There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that derivatives and bonds are traded. I ncreasingly, stock exchange .There is usually no compulsion to issue stock via t he stock exchange s are part of a global market. Market Trend Analysis of a Company: Analysis in terms of finance helps to find out the basic and critical factors affecting the economy of company, market and nation. It can be practiced at major through two methods: Fundamental and Technical. 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
  • 3. 3 investment. 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 OBJECTIVE OF THE STUDY:- Every study is conducted within for some specific purpose or to solve some problem. When any research is conducted it has some primary objective that helps to solved main problem whereas secondary objective helps to solve peripheral problem. The primary objective & secondary objective of there are:- PRIMARY DATA:- investing in equity market in various sectors SECONDARY DATA:-  To find out in which investment option people invest most.  To find out how investor are motivated for investing in equity market.  To study the general investment criteria of people.  To know the people time horizon for investing in equity market & to know the rate of return expected by them.  To study the interest of people for future investment in equity market.  To assess the customer satisfaction level for investing in equity market.  To classify the different sector on the basis of investors behavior regarding
  • 4. 4 investing in equity market. RESEARCH METHODOLOGY:- Ii is a way to systematically process in which necessary data & information are collected. After the decision about the purpose & type of report to be prepared the source for collection of data are dedicated. “Research is careful inquiry or examination to discover new information & relationship & to expand & to vary existing knowledge.” Research always starts with question or any problem & finds answer of problem by using scientific method; It gives complete knowledge about any problem or question. For this project the data has been collected both the source. That is:-  PRIMARY DATA  SECONDARY DATA PRIMARY DATA:- Primary data are the data which are collected from primary source of Organization where the data is generated. Primary data is collected for first time by investigator agencies which have not been used or collected previously. Under these sources I have collected data’s through questioner’s method. Questionnaire method:-  Interviews method  Observation method SECONDARY METHOD:- Secondary data on the other hand are collected from secondary source. That is from a data of Ventura securities Ltd. This has been collected previously and use previously. The data may be a published or unpublished source. Under this method information has been collected from the following ways:-  Magazines  Websites I have also used the secondary data for the study like some company resources like brochure, websites etc. LIMITATION OF THE STUDY:-
  • 5. 5 Following limitations were encountered while preparing this project: 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 inaccessibility and confidentiality of documents of company. 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. This is certainly not helpful to make this project report accurate in terms of various comaprisions and growth analysis. 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 projects are available which make the situation contra dictionary and limits the scope. Type of data used: - This project is completely based on secondary data collected from various sources like internet, magazines, newspapers, and books etc.
  • 6. 6 CHAPTER-2 COMPANY PROFILE Ventura Securities Ltd. (Ventura) commenced operations in 1994 as a stock broking house. On its journey from then to now, Ventura has seen the capital markets mature and investors' requirements become more diverse. It has kept up with the times and today, it offers a whole range of investment products and services. Ventura operating at a 25,000 sq ft head office at Vikhroli, Mumbai which houses its corporate office and all operations Ventura registration office is strategically situated in the Central Business District of Mumbai Ventura have set up branches in select metros and have business partners across the length and breadth of the country We have been appointed as a national level distributor for all mutual funds We have been enlisted as a corporate agency for life insurance COMPANY NAME VENTURA SECURITIES LTD. ESTABLISHMENT YEAR 1994 DIRECTORS OF THE COMPANY SAJID MALIK,HEMANT MAJETHIA, JUZER GABAJIWALA COPORATE OFFICE KAILASH INDUSTRIAL COMPLEX, PARK SITE,OFF LBS MARG,VIKHROLI WEST, MUMBAI-400079 REGISTERED OFFICE DHANNUR “E”, 15- SIR P.M. ROAD, MUMBAI-400 001 TELEPHONE NO 022 6754 7042 WEBSITE WWW.VENTURA1.COM EMAIL mfcustomercare@ventura 1.com OFFICES (NETWORK) ALLAHABAD, AHMEDABAD, BANGLORE, BHUBANESWAR, CHANDIGARH, CHENNAI,INDORE ,NAGPUR, PUNE, ETC
  • 7. 7 We are a corporate member of both the BSE and the NSE. This enables us to trade in equities, derivatives, currency products and offer depository services Ventura Commodities Pvt. Ltd., an associate company, is a trading member of MCX and NCDEX
  • 8. 8 We have in-house, customized and ready to use software to enable seamless processes and flawless execution We adhere to a well-defined risk management system and settlement mechanism thereby enabling fully compliant operations DIRECTORS:- Sajid Malik, Director is a member of the Institute of Chartered Accountants of India. He has more than fifteen years of varied experience in corporate advisory structured finance and private equity transaction. He has an international exposure to developed markets in Europe, US and the Far East and has been personally involved in international equity offerings and cross border acquisitions. He is the CEO of Genesys International Limited, a company focused on outsourcing of GIS and engineering design services. He is a non-executive director of Ventura Securities Limited. Hemant Majethia, Director is a member of the Institute of Chartered Accountants of India. He has more than fifteen years of experience in capital markets intermediation, equity research. Mr. Majethia is the CEO of Ventura Securities Limited and is responsible for the day to day operations and is responsible for creating an all India network of sub-brokers and creating the distribution strength of Ventura Securities Limited. He has been instrumental in establishing broking centres and branches for Ventura Securities Limited across the country. It was his vision to create an all India network of brokers’ relationship and build the distribution strength of Ventura. Juzer Gabajiwala, Director is a member of the Institute of Chartered Accountants of India and The Institute of Company Secretaries of India. He has more than fifteen years experience in the field of finance and investment, having exposure to the industrial segment prior to entering the capital markets. Mr. Gabajiwala is responsible for setting up the entire Mutual Fund distribution business at Ventura and a network for PAN India operation. Mr. Gabajiwala is also responsible for setting up the wealth management business and the NRI desk.
  • 9. 9 Value Added Services:- Online platforms: - is online equity trading engine. Trade at lightning speed, enjoy a unique investing experience. Mutual Funds - Invest across various investment plans and also get a detailed online analysis. Commodities - Browser and exe-based online trading software for clients as well as network partners to facilitate seamless execution on MCX and NCDEX. www.ventura1.com: A comprehensive website providing a plethora of information for a cross section of investors; providing product / market information and tools to access data in a user friendly manner. Customer web access: Through a common login, clients have access to a host of services such as portfolio details; digital contracts; transaction statement; tax report etc. Newsletters: Daily / weekly / monthly newsletters covering equities / mutual funds / commodities. These are also available on the web. Ventura Philosophy:-  Building and valuing true partnerships:- When it comes to our business partners, we see our success reflected in their progress. We have facilitated them all the way with technology and marketing strategies and in turn have been rewarded with their performance and loyalty.  Think and it's there' approach:- We envisage all our clients' diverse needs - ranging from financial planning to wealth management - well in advance and provide them with resources, tools and solutions to fulfil them.  Constant innovation:- Change for the better has become a way of life at Ventura. Innovations have always been customer centric which has been amply reflected in the up gradation of systems to facilitate our network partners.  Team Ventura:- Our dedicated and well trained people represent the pillar of strength and success at Ventura. Each of our members has internalized our mission and is constantly striving to build on it.
  • 10. 10  SMS updates: Regular updates on market happenings and trading / investments calls, trade confirmations.  Research reports: Detailed fundamental analysis on companies / industries at periodic intervals.  Baatein bazaar ke Ventura se: An interactive chat room available to our network partners during trading hours for instant access to news on a real time basis.  In-house training / seminars: Product training / investor conferences covering diverse topics like technical analysis / industry overview / overall financial markets. Ventura Mission:- To build relationship & strive towards customer delight, through constant innovation on a strong foundation of dedicated and trained resources.
  • 11. 11 CHAPTER-3 HISTORICAL & INFORMATIVE DATA The Stock Market “A stock market is a public market for trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.” The size of the world stock market was estimated at about $36.6 trillion US at beginning of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally 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 a comparable derivative ‘bet’ on the event not occurring.). Many such relatively illiquid securities 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 corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The stock market in the United States is NYSE while in Canada; it is the Toronto Stock Exchange. Major European examples of stock exchanges include the London Stock Exchange, Paris Bourse, 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 hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order. Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock
  • 12. 12 exchanges and commodity exchanges where traders may enter “verbal” bids and offer simultaneously. The other type pf stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders. Actual traders are based on an auction market model where a potential buyer bids a specific 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 the stock, 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 between buyers and sellers, thus providing a marketplace (virtual or real). The exchange provides real-time trading information on the listed securities, facilitating price discovery. History of Stock Markets Historian Fernand Braudel suggests that in Cairo in the 11th century Muslim and Jewish merchants had already set up ever form of trade association and had knowledge of every method of credit and payment, disproving the belief that these were invented later by Italians. In the 12th century in France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. In the late 13th century Bruges commodity traders gathered inside the house of a man called van der beruse, and in 1309 they became the “Brugse Beruse”, institutionalizing what had been, until then an informal meeting. The idea quickly spread around Flanders and neighboring countries and “Beurzen” soon opened in Ghent and Amsterdam. In the middle of the 13th century Venetian bankers began to trading government securities. In1351, the Venetian government outlawed spreading rumors intended to lower the price of government funds, bankers in Pisa, Verona, Genoa, and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. The Dutch later started joint stock companies, which let
  • 13. 13 shareholders invest in business ventures and get a share of their profits – or losses. In 1602, the Dutch East India Company issued shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. Stock Market in India The first organized stock market in India was started in Bombay when the Native Share Stock Brokers’ Association known as Bombay Stock Exchange (BSE) was formed 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 textile mills there. The Calcultta Stock Exchange was started in 1908 to provide a market for shares of plantations and jute mills. The Second World War saw great speculative activity in the country and the number of stock exchange rose from 7 in 1939 to 21 in 1945. Besides, these organized exchanges, there were a number of unorganized and unrecognized exchanges known as Kerb markets which functioned under a set of usages and conventions and did not have any set of rules which could enforced in courts of law. There were also illegal “Dabba” markets in which stocks and shares were also bought and sold. Under the Securities Contracts (Regulation) Act of 1956, the Government of India has so far recognized 23 stock exchanges. Bombay is the premier exchange in the country. With the setting up of National Stock Exchange, all regional stock exchanges have lost relevance.Importance of Stock Market The 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 expansion by selling shares of ownership of the company in a public market. The liquidity that an 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 liquid investments such as real estate. History has shown that the price of shares and other assets is an important part of the dynamics 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 coming
  • 14. 14 economy. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transactions. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity. An important aspect of modern financial markets, however, including the stock markets, is absolute discretion. Business Transaction in Stock Market A 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 who alone is entitled to transact business in a stock exchange either to buy or to sell the shares of a company at fixed prices or at best market prices. Execution of the order: The broker or his authorized clerk will execute the order and the same will appear in the Stock Exchange Daily Official List which will include the number and price of shares which exchanged hands. Reporting the deal to the client: As soon as the deal is transacted, the brokers send a contract note to the client giving details of the security bought or sold, the price, the broker’s commission, etc. Settlement of transaction: there are two methods of settlement of transactions. In the case of ready delivery (or cash) transactions, payment has to be made immediately on the transfer of the securities for within a period of one to seven days. In the case of
  • 15. 15 forward delivery, there is a system of carry-over i.e. post-ponement of delivery or payment involving a payment by one to another. This system of carry-over provides great scope for speculation in the forward market.
  • 16. 16 CHAPTER-4 OVERVIEW OF CAPITAL MARKET IN INDIA Capital market is the market for long-term funds, just as the money market is the market for short-term funds. It refers to all facilities and the institutional arrangements for borrowing and lending term funds (medium-term and long-term funds).The supply of funds for the capital market comes largely from individual savers, corporate savings, banks, insurance companies, specialized financing agencies and the government. The Indian Capital Market is broadly divided into the Gilt-edged Market and the Industrial Securities Market. The Gilt-edged market refers to the market for government and semi-government securities, backed by Reserve Bank of India. The Industrial Securities Market refers to the market for shares and debentures of old and new companies. Two other segments : DFIs (Development Financial Institutions) and FIs (Financial Intermediaries) also compose the capital market of India. Further categorization is pictured here below: Capital Markets of India –Stock Exchanges in India “In terms of the legal structure, the stock exchange which are recognized under the securities contracts (regulation) Act in India, could be separated into two broad groups- 20 stock exchanges which are set up as companies, either limited by guarantees or by shares, and 2 stock exchanges which are functioning as Associations CAPITAL MARKET IN INDIA Government Securities (Gill-edged market) Industrial Securities Market Development Financial Institutions (DFIs) Financial Intermediaries Merchant Banks Others Venture Capital Companies Leasing Companies Mutual Funds IIBISFCs New Issue Market Old Issues Market [Stock Exchange] IFCI ICICI UTIIDBI
  • 17. 17 of persons (AOP) viz. BSE & NSE. The 20 stock exchange which are available in India are as follows: Banglore, Bhubhaneshwar, Kolkata, Cochin, Delhi, Hyderabad, Coimbatore, Uttar Pradesh, 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 were given permanent recognition by central government of India at the time of setting up these stock exchanges. Apart from the NSE, all stock exchanges whether established as 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 the remaining three with All India jurisdiction are NSE and BSE . Separate modules are covered with regards to the structure and functioning and systems/procedure followed in NSE and BSE. Security and Exchange Board of India (SEBI) It is a board (autonomous body) created by the government of India in 1988 and given statutory form in 1992 with SEBI acts 1992. Its head office is in Mumbai, and other offices in Chennai, Kolkata and Delhi. SEBI is the regulator of securities markets in India. In 1998, the Securities and Exchange Board of India (SEBI) was established by the government of India thought an executive resolution, and subsequently upgraded as a fully autonomous body (a statutory board) in the year 1992 with the passing of the Securities and Exchange Board of India act (SEBI Act) on 30th January 1992. In place of government control, a statutory and autonomous regulatory board with defined responsibilities, to cover both development and regulation of market, independent powers has been set up. Paradoxically this is a positive outcome of the securities scam of 1990-91.
  • 18. 18 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 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 CNX Nifty & SENSEX) in 2000 a market index is a convenient and effective product because 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.
  • 19. 19 Over the Counter Exchange of India (OCTEI) OTCEI was incorporated in October 1990 as a section 25 company under the companies Act 1956 and is recognized as a stock exchange under section 4 of the securities contracts regulation act,1956. The object of the OCTEI is “ To provide an alternate 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 Services Ltd. The exchange was set up with a multi-tier securities exchange model to aid enterprising promoters in raising finance for new project in cost effective manner to provide investors with a transparent and efficient mode of trading. OTCEI is intended to provide easy marketability and better liquidity of securities to an investor. Besides, it also facilitate transfer of shares listed here. Modeled along the lines of NASDAQ market, OTCEI introduces many novel concepts to the Indian Capital Market such as screen based nation wide trading, sponsorship of companies, markets making and scrip less trading. As a measure of success of these efforts , the exchange today has 115 listings and has assisted in providing capital for enterprises that has gone to build successful brand for themselves 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 as BSE, 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 from the government of India under the securities contracts (regulation) act, 1956. the exchanges pivotal and pre-eminent role in the development of Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an association of persons (AOP), the exchange is now a demutualized and corporatized entity incorporated under the provisions of the companies act, 1956, pursuant to BSE
  • 20. 20 (corporatization and demutualization) scheme, 2005notified by Securities and Exchange Board of India, SEBI. Bombay stock exchange limited received its Certificate of Incorporation on 8th August, 2005 and Certificate of Commencement on 12th August, 2005. The “DUE DATE” for taking over the business and operations of the BSE was fixed for 19th August, 2005, under the scheme. The exchange has succeeded the business and operations of BSE ongoing concern basis and its recognition as an exchange has been continued by SEBI. The exchange has a nation-wide reach with the presence of 417 cities and town of India. The systems and processes of the exchange are designed to safeguard the market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the exchange showed robust growth. Regional Stock Exchanges With the automation of all stock exchanges and the expansion of trading terminals of BSE and NSE across the country, investors have an easy access to the securities market. The nationwide reach of two stock exchange has affected the market structure in two ways: First, the business of other stock exchanges has declines significantly, as investors have preferred to trade in BSE and NSE as they provide deeper marketsa. Secondly, with the declining of trading volumes in other stock exchanges, the issuers feel that hardly any purpose is served by remaining listed in the regional stock exchange, which was introduced in the days of manual trading and open octroi system to encourage mobilization of resources and development of equity cult across the country, has thus lost its relevance in the days of automated trading. It is therefore widely felt that the concept of regional stock exchange needs to be abolished, similar recommendations have been made the committee on delisting of shares and the committee 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 14
  • 21. 21 regional stock exchanges to provide cost-effective trading linkage/connectivity to all members of the participating exchanges, with the objective of widening the market for the securities listed on these exchanges, inter-connectivity of stock exchanges is a mechanism to enable a trader or dealer (trading member directly enrolled by ICSE) to deal with another trader or dealer through his own local trader work station located in his office. ICSE is a national-level stock exchange and provides trading, clearing, settlement, risk management and surveillance support to its traders and dealers. ICSE aims to address the needs of small companies and retail investors with the guiding principle of optimizing the existing infrastructure and harnessing the potential of regional markets, so as to transform these into a liquid and vibrant market through the use of state-of-the-art technology and networking. The mission of ICSE is to Endeavor to consolidate the small, fragmented and less liquid markets into a national-level, liquid market by using the state-of-the-art infrastructure and support systems. Their objective is to create a single trading national level solution with access to multiple markets for providing high cost- effective service to millions of investors across the country. To create a liquid and vibrant national market for all listed companies in general and small capital companies in particular. Optimally utilize the existing infrastructure and other resources of participating stock exchanges, which are under-utilized now. Provide a level playing field to small traders and dealers by offering an opportunity to participate in a national market having investment-oriented business. Reduce transaction cost; provide clearing and settlement facilities to the traders and dealers across the country at their doorstep in a decentralized mode. Spreads demat trading across the country. # Thus, the above was the review of other capital markets in INDIA.
  • 22. 22 CHAPTER-5 NATIONAL STOCK EXCHANGE OF INDIA The National Stock Exchange of India Limited (NSE) is a Mumbai-based stock exchange. It is largest stock exchange in India in terms of daily turnover and number of trades, both for equities and derivatives trading. NSE has a market capitalization of around Rs. 47.01.923 crore(7 August 2009) and is expected to become the biggest stock exchange in India in terms of market capitalization by 2009 end. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India and between them are responsible for the vast 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, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE 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 NSE was 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. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%. Origins The National Stock Exchange of India was promoted by leading financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax=paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in
  • 23. 23 the Derivatives segment commenced in June 2000. Innovations NSE has remained in the forefront of modernization of India’s capital and financial markets, 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. It is the one of the most important stock exchanges in the world. Markets Currently, NSE has the following major segments of the capital market:  Equity  Futures and Options  Retail Debt Market
  • 24. 24  Wholesale Debt Market 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. 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. Retail Debt Market: With the view to encourage wider participation of all classes of investors across the country (including retail investors) in 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. 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
  • 25. 25 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 as recommended by SEBI-RBI committee, on 31st August 2009. a future contract based on 7% 10 year GOI bond (NOTIONAL) was launched with quarterly maturities. The Organisation The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges. It recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company 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 Derivatives segments including equities, equities based derivatives, Currency futures and options, equity based ETFs, Gold ETF and Retail Government Securities. Today NSE network stretches to more than 1,500 locations in the country and supports more than 2, 30,000 terminals. With more than 10 asset classes in offering, NSE has taken many initiatives to strengthen the securities industry and provides several new products like Mini Nifty, Long Dated Options and Mutual Fund Service System. Responding to market needs, NSE has introduced services like DMA, FIX capabilities, co-location facility and mobile trading to cater to the evolving need of the market and various categories of market participants. NSE has made its global presence felt with cross-listing arrangements, including license agreements covering benchmark indexes for U.S. and Indian equities with CME Group and has also signed a Memorandum of Understanding (MOU) with Singapore Exchange (SGX) to cooperate in the development of a market for India- linked products and services to be listed on SGX. The two exchanges also will look
  • 26. 26 into a bilateral securities trading link to enable investors in one country to seamlessly trade on the other country’s exchange. NSE is committed to operate a market ecosystem which is transparent and at the same time offers high levels of safety, integrity and corporate governance, providing ever growing trading & investment opportunities for investors. Indices NSE has also set up an index services firm known as India index services and products limited (IISL) and has launched several stock indices including the following: An Index is used to give information about the price movements of products in the financial, commodities or any other markets. Financial indexes are constructed to measure 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. A stock market index is created by selecting a group of stocks that are representative of the whole market or a specified sector or segment of the market. An Index is calculated 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 management
  • 27. 27 Major Indices of NSE  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 50 CNX midcap introduced on 18 July 2005 replacing CNX midcap 200. S&P CNX NIFTY S&P CNX Nifty is a well diversified 50 stock index accounting for 23 sectors of the economy. 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 Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product. IISL has Marketing and licensing agreement with Standard & Poor's (S&P), who are world leaders in index 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 trading
  • 28. 28 CNX NIFTY JUNIOR The next rung of liquid securities after S&P CNX Nifty is the CNX Nifty Junior. It may be useful to think of the S&P CNX Nifty and the CNX Nifty Junior as making up the 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. The maintenance of the S&P CNX Nifty and the CNX Nifty Junior are synchronized so that the two indices will always be disjoint sets; i.e. a stock will never appear in both indices at the same time. Hence it is always meaningful to pool the S&P CNX Nifty and 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 100 CNX 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 specialized company focused upon the index as a core products. IISL has a licensing & marketing agreement 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 500
  • 29. 29 The S&P CNX 500 is India’s first broad based benchmark of the Indian capital market. The S&P CNX 500 represents about 90% of the Free Float Market Capitalization 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&P CNX Industry Indices. Industry weightages in the index reflect the industry weightages in the market. For e.g. if the banking sector has a 5% weightage in the universe of stocks traded on NSE, banking stocks in the index would also have an approx. representation of 5% in the index. S&P CNX DEFTY Almost every institutional investor and off-shore fund enterprise with an equity exposure in India would like to have an instrument for measuring returns on their equity 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&P CNX 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. Calculation of S&P CNX Defty Computations are done using the S&P CNX Nifty index calculated on the NEAT trading system of NSE and INR-USD exchange rate that is based on the real time polled data feed.
  • 30. 30 ttimeatrateExchange datebaseonasrateExchange*ttimeatNiftyCNXP&S DeftyCNXP&S  Calculation of closing value of S&P CNX Defty Closing value of S&P CNX Defty is computed by considering average of INR-USD polled data values (exchange rate) of last 30 minutes of the market. DeftyCNXP&SofvalueClosing markettheofminutes30lastofrateexchangeofAverage datebaseonasrateExchange*NiftyCNXP&SofvalueClosing  Specifications of S&P CNX Defty Base date: 03 November 1995 Base S&P CNX Defty Index Value: 1000 S&P CNX Nifty Value as on Base date: 1000 Exchange rate as on base date: 34.65 Adjustment factor as on Base date:1.00 CNX MIDCAP The medium capitalised segment of the stock market is being increasingly perceived as an attractive investment segment with high growth potential. The primary objective of the CNX Midcap Index is to capture the movement and be a benchmark of the midcap segment of the market. Method of Computation CNX Midcap is computed using free float market capitalization* weighted method w.e.f. February 26, 2010, wherein the level of the index reflects the free float market value of all the stocks in the index relative to a particular base period. The method also takes into account constituent changes in the index and importantly corporate
  • 31. 31 actions such as stock splits, rights, etc without affecting the index value. Base Date and Value The CNX Midcap Index has a base date of Jan 1, 2003 and a base value of 1000 Criteria for Selection of Constituent Stocks The 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 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
  • 32. 32 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 50 The medium capitalized segment of the stock market is being increasingly perceived as an attractive investment segment with high growth potential. The primary objective of the Nifty Midcap 50 Index is to capture the movement of the midcap segment of the market. It can also be used for index-based derivatives trading. Method of computation Nifty 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 the index relative to a particular base period. The method also takes into account constituent changes in the index and importantly corporate actions such as stock splits, rights, etc without affecting the index value. Base Date and Value The Nifty Midcap 50 Index has a base date of Jan 1, 2004 and a base value of 1000. Criteria for Selection of Constituent Stocks The constituents and the criteria for the selection judge the effectiveness of the index. Selection 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.
  • 33. 33 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 method from the launch date till February 25, 2010 Other 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
  • 34. 34 Listing Listing means admission of securities of an issuer to trading privileges on a stock exchange through a formal agreement. The prime objective of admission to dealings on the exchange is to provide liquidity and marketability to securities, as also to provide 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 highest visibility, the fairest pricing and investor benefits. NSE trading terminals are now situated in various cities and towns across the length and breadth of India. Securities listed on the exchanges are required to fulfill the eligibility criteria for listing. Various types of securities of a company are traded under a unique symbol and different series. NSE plays an important role in helping an Indian economy’s access equity capital, by providing a liquid and well-regulated market. NSE had about 1319 companies listed presenting the length, breadth and diversity of the Indian economy which includes from hi-tech to heavy industry, software, refinery, public sector units, infrastructure, and financial services. Listing on NSE raises a company’s profile among investors in India and abroad. Trade data is distributed worldwide through various news-vending agencies. More importantly, each and every NSE listed company is required to satisfy stringent financial, public distribution and management requirements. High listing standards foster investor confidence and also bring credibility into the markets. NSE lists securities in its capital market (equities) segment and its wholesale debt market segment. Listing Criteria The exchange has laid down criteria for listing of new issues by companies. IPO’s by knowledge based issuers, companies listed on other exchanges, and companies formed by amalgamation/ restructuring, etc. in conformity with the securities contracts(regulation) rules, 1957 and directions of the central government and the
  • 35. 35 securities 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 Documentation An issuer has to take various steps prior to making an application for listing its securities on the NSE. These steps are essential to ensure the compliance of certain requirements by the issuer before listing its securities on the NSE. The various steps to be taken include:  Initial discussions  Approval of Memorandum and Articles of Association  Approval of draft prospectus  Submission of application  Fulfilling listing conditions and requirements In case the company fulfills the criteria, the following information and documentations are required for further processing: 1. A brief note on the promoters and management 2. Company profile
  • 36. 36 3. Copies of annual report for last 3 years 4. Copies of the draft offer document 5. Memorandum & Articles of Association The main entry norms for companies making a public issue (IPO or FPO) are summarized 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 the above 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. Entry 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
  • 37. 37 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 NSE The 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.
  • 38. 38 CHAPTER-6 FINDINGS & ANALYSIS NSE MILESTONES NSE 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
  • 39. 39 December 1996 Launch of CNX NiftyJunior February 1997 Regional clearing facilitygoes 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 NSE's Web-site: www.nse.co.in July 1998 Launch of NSE's 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' November 2000 Launch of Broker Plaza by Dotex International, a joint venture between NSE.IT Ltd. and i-flex SolutionsLtd. 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
  • 40. 40 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 listedcompanies 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 derivativeson NiftyJunior & CNX 100 October 2007 NSE launches derivativeson NiftyMidcap 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 listingagreement 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
  • 41. 41 July 19, 2010 Real Time disseminationof 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 Market Trend and Analysis Business Growth in Capital Market Segment Month/ Year No. of Co. Listed No. of trading days No. of Securities traded No. of trades (lakhs) Turnover (crores) Average Daily Turnover (crores) Market Capitalisation (crores) 2012-13 1666 250 1683 13,605 27,08,279 10,833 62,39,035 2011-12 1646 249 1807 14,377 28,10,893 11,289 60,96,518 2010-11 1574 255 1607 15,507 35,77,412 14,048 67,02,616 2009-10 1,470 244 1,968 16,816 4,138,024 16,959 6,009,173 2008-09 1,432 243 1,327 13,651 2,752,023 11,325 2,896,194 2007-08 1,381 251 1,264 11,727 3,551,038 14,148 4,858,122 2006-07 1,228 249 1,191 7,846 1,945,285 7,812 3,367,350 NUMBER OF LISTED COMPANY TREND
  • 42. 42 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 2012-2013 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 2012-13.  Market Capitalization: The amount of market capitalization has doubled in FY 2009-10 as compared to that of FY 2006-2007. 0 200 400 600 800 1000 1200 1400 1600 1800 Series1
  • 43. 43 Business Growth in Derivatives Segment Month/Yea r Index Futures Turnover (crores) Stock Futures Turnover (crores) Index Options Turnover (crores) Stock Options Turnover (crores) Total Turnover (crores) Average Daily Turnove r (crores) 2014-2015 781940.72 1789643.67 5696734.03 666655.38 8934973.76 175195.5 6 2013-2014 3085296.45 4949281.72 27767341.2 3 2409488.6 4 38211408.04 152236.6 9 2012-2013 2527130.76 4223872.02 22781574.1 4 2000427.2 9 31533003.96 126638.5 7 2011-2012 3577998.41 4074670.73 22720031.6 4 977031.13 31349731.74 125902.5 4 2010-2011 4356754.53 5495756.70 18365365.7 6 1030344.2 1 29248221.09 115150.4 8 2009-2010 3934388.67 5195246.6 4 8027964.2 0 506065.1 8 17663664.5 7 72392.0 7 2008-2009 3570111.4 0 3479642.1 2 3731501.8 4 229226.8 1 11010482.2 0 45310.6 3 2007-2008 3820667.2 7 7548563.2 3 1362110.8 8 359136.5 5 13090477.7 5 52153.3 0 2006-2007 2539574 3830967 791906 193795 7356242 29543 TREND OF AVERAGE DAILY TURNOVER 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 Series1
  • 44. 44 Analysis  Index Future Turnover: The amount in crores on the Index Future Options of Derivative segment of NSE has shown significant growth from FY 2006-07 to that of FY 2014-15.  Stock Futures Turnover: Whereas, the Stock Future Turnover has shown growth of 1.23 times from FY 2006-07 to that of FY 2014-15.  Index Options Turnover: The Index Options Turnover has shown 17.89 times growth from FY 2006-07 to FY 2014-15.  Stock Options Turnover: Whereas, Stock Options Turnover ahs shown growth of 4.56 times from FY 2006-07 to FY 2014-15.  Total Turnover: The growth rate when evaluated from FY 2006-07 to FY 2014-15 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 2014-15. TREND OF S&P BSE SENSEX Period : Year 2008 to Year 2014 Year Open High Low Close 2008 20,325.27 21,206.77 7,697.39 9,647.31 2009 9,720.55 17,530.94 8,047.17 17,464.81 2010 17,473.45 21,108.64 15,651.99 20,509.09 2011 20,621.61 20,664.80 15,135.86 15,454.92 2012 15,534.67 19,612.18 15,358.02 19,426.71 2013 19,513.45 21,483.74 17,448.71 21,170.68 2014 21,222.19 25,725.12 19,963.12 25,413.78
  • 45. 45 TREND OF SENSEX Analysis In 2008, sensex was 20325.27 but it reduced to 9720.55 in 2009 than after it was 17473.45, 20621.61, 15534.67, 19513.45, & 21222.19 in 2010, 2011, 2012, 2013, & 2014, it is seen that, it was increasing way.. 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 0 5000 10000 15000 20000 25000 1 2 3 4 5 6 7 Series2 Series1
  • 46. 46 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. Business Growth in Wholesale Debt Segment Month/Year Market Capitalisation (crores) Trading days No. of Trades Net Traded Value (crores) Average Daily Value (crores) Average Trade Size (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
  • 47. 47 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. PROMOTERS NSE has been promoted by leading financial instituitions, baks, insurance companies and 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
  • 48. 48  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
  • 49. 49 CONCLUSION The National Stock Exchange (NSE) is India’s leading stock exchange covering various cities and towns across the country. NSE provides a modern, fully automated screen-based trading system with national reach. The exchange has bought about un- parallel transparency, speed and efficiency, safety and market integrity. NSE’s trading volumes in the equity segment have grown rapidly with the average daily turnover increasing 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 the equities segment. NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of- the-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, and had witnessed several innovations in products and services via demutualization of stock exchange governance; screen based trading, compression of settlement cycles, dematerialization and electronic transfer of securities, lending and borrowing securities, professionalizing of trading members fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market debt and derivative instruments and intensive use of information technology. In Conclusion, NSE successfully utilized technology as a tool for obtaining complete transformation of India’s security industry. As of today, around a decade after inception, every aspect of the equity spot and derivatives market India is now up to
  • 50. 50 ‘International Standards’ or ahead of them. NSE has completed 16 years of its operations on 30 June 2010. The exchange is credited with technology innovation, speeding up of the process for dematerialization, introduction of effective risk containment measures and the introduction of derivatives trading. It is a dominant stock exchange accounting for 66 per cent of the traded volume in the cash segment and 99 per cent of the traded volume in the derivatives segment. The NSE has emerged as a technology-driven stock exchange. It has rightly positioned itself as “the exchange with difference”. In order to maintain its leading position among exchanges, it increases the number of users by trying to meet their growing and ever-changing needs through innovative efforts. Its aim is to continuously upgrade technology systems and trading practices. Major Defects in Trading in Indian Stock Exchanges:-There are certain serious defects while working of our stock exchanges, particularly the 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
  • 51. 51 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 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.
  • 52. 52 Bibliography Data is gathered from  http://www.nseindia.com/  http://www.google.com/  http://en.wikipedia.org Magazines, 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]
  • 53. 53 QUESTIONNAIRE SUMMER INTERNSHIP PROJECT Dear Sir/Madam I am …………………………………………….., pursuing Post Graduate Diploma In Management in Regional College OfManagement. I am doing summer internship project on “RESEARCH ON INDIANSTOCK MARKET”. Therefore I have prepared a questionnaire as follows. Soliciting your opinion on the following aspects. Your help is highly needed Name: ……………………………………………………………………………….. Age: …………………….. Please provide your e-mail Id : …………………………………………………………. Please provide your contact number (if possible): ……………………………………... Occupation A- Service B- Business C- Student D- Other 1. Have you undergone any training in equity from NSE, BSE or Broking Firms before starting trading in equity? A-Yes B-No 2. Are you investing in Equity market? A-Yes B- No (If “Yes” then where ……………………………………. 3. Which type of trading you prefer? A-Online B-Offline 4. What percentage of your investment is invested in equity market from your total investment? A-Less than 25% B-25-50% C-51-75% D-More than 75% 5. From how long you are investing in equity market?
  • 54. 54 A-Less than 1 year B-1 to 2 year C-2 to 3 years D-More than 3 years 6. Why do you invest in equity market? A- For quick short term gain B- For high long term gain 7. What attracts you towards equity market? A- High return B- Speculation C- Dividend D- Liquidity of invested fund 8. How much is your total investment annually? A-< 5000 B-5000 – 10000 C-10000 – 25000 D-25000 – 50000 9. Generally you are prefer for Intraday or Delivery? A- Intraday B- Delivery 10. In which sector you invest most? A- Insurance B-Share C- Banking D- Others 11. Which broker do you prefer for equity ? A-ICICI securities B-Share khan C-Ventura securities D-Kotak securities E-Other………………….. 12. What differentiates your company form other? A-Brokerage B-Research report C-Extra facilities D-Account opening charges E-Other 13. How do you rate these equity trading companies? A…………… B…………… C………….. D…………. E……………… A- ICICI securities B- Share khan C- Ventura securities D- Kotak securities E- Other……………… (Please specify)
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