Lect. Gourav Tandon
MBA 1st year
Financial market Env. In India
Governed by RBI
Governed by SEBI
New securities issued
Issued securities Trade
Growth and Evaluation of Stock market
Process of liberalization and de-regulation that begin
in late 1980‟s has directly effected the process of
capital market of the country.
No. of steps were taken by the Govt. in order
to bring along economy back to rails. The extent of
growth can be gauged from the fact that amount
realised by the primary market which has lower‟s in
70‟s and during the next up coming year‟s. it went up
high India has the highest no. of listed company‟s in
the world and this no. as on the date more then 10,000
An Overview about Stock Market
What are Markets?
What are shares?
What is a stock exchange?
Who is a broker?
What is a Demat A/c?
Buying and selling of dematerialised securities
How to receive income from shares?
How much should you invest?
How to make investment decisions?
How to track your investments?
1.What are Markets?
• A stock market is a market for the trading of company stock/
shares, and derivatives. This includes securities listed on a
stock exchange as well as those only traded privately. Market
is a place where buyers and sellers of securities can enter into
transactions to purchase and sell shares, bonds, debentures etc.
• 1.1 Primary markets: The primary market is that part of
the capital markets that deals with the issuance of new
• 1.2 Secondary markets: The secondary market is the financial
market for trading of securities that have already been issued
in an initial private or public offering. In the secondary
market, securities are sold by and transferred from one
investor or speculator to another.
2. What are shares?
• A share is a interest of shareholder in a definite per
portion of a capital it express the proportionately
relationship b/w the company and the shareholder”.
Types of shares
• Preferences share
• Equity share
• Deferred share
3. What is a stock exchange?
Securities contracts act of 1956 defines,
“an association, organization or body
of individuals, incorporation, established for the
purpose of assisting, regulating and
controlling business in buying, selling and dealing in
Stock exchange is a place where buyers and
sellers are come together for undertaking
transactions involving sale of securities.
Function of Stock Exchange
• It provide ready market for securities
• It helps in price discovery of securities.
• It insure low cost of raising finance issue of new market
instruments in the market
• Helps in capital generation process.
• Encourages capital formation
• Provides proper direction to invest capital
• Promotion of investment.
• Help capital formation.
• Give mobility to capital.
• Exercise control over the working of companies.
• Marketing of new issues.
In India overview
• India's oldest and first stock exchange: Mumbai (Bombay)
Stock Exchange. Established in 1875. More than 6,000 stocks
• Total number of stock exchanges in India: 22
• They are in: Ahmadabad, Bangalore, Calcutta, Chennai, Delhi
• There is also a National Stock Exchange (NSE) which is
located in Mumbai.
• There is also an Over The Counter Exchange of India (OTCEI)
which allows listing of small and medium sized companies.
• The regulatory agency which oversees the functioning of stock
markets is the Securities and Exchange Board of India
(SEBI), which is also located in Bombay
Any company intending to get its securities at an
exchange has to fulfill certain condition , listing of
securities means permission to quote share and
debentures officially on the trading floor of the stock
exchange. Every securities issued by companies cannot
be traded a stock exchange. The stock exchanges fix
certain standard which the company must fulfill before
getting the securities listed.
Guidelines of listing
Guidelines will help companies to expedite the
fulfillment of the various formalities and disclosure
requirements that are required at various stages of
•Initial Public Offering
•Further Public Offering
Requirements for listing
Some of the requirements are as under :
• Memorandum and articles of association
• Copies of all prospectus or statements in lieu of prospectus.
• Copies of balance sheets, audited
accounts, agreements, promotes, underwriters, brokers etc.
• Letter of consent from controller of capital issue.
• Detail of share and debentures issued and shares forfeited
• Detail of issue of bonuses and dividends disclosed.
• History of the company in brief.
• Agreement with managing director etc.
• An undertaking regarding compliance with provisions of the
companies act,1956 as well as rules made them.
The objectives of listing are mainly to :
•provide liquidity to securities;
•mobilize savings for economic development;
•protect interest of investors by ensuring full
Hours of operation
Beginning of the Day Session
pre-open trading session
Position Transfer Session
Option Exercise Session
End of Day Session
8:00 - 9:00
9:00 - 9:15
9:15 - 15:30
15:30 - 15:50
15:50 - 16:05
16:05 - 16:35
16:35 - 16:50
16:50 - 17:35
Indian Stock Exchange work through a sophisticated screen based
system called SBTS. Trading system at NSE is termed as National
Exchange for automated trading . It is called NEAT and for BSE
, BSE online trading system . It is called BOLT.
Placing an order by the client
Punching the order of client in the trading system
Execution of trading
Preparation and issue of contact notes.
Clearing of trades and determination of obligations of the client to
• Releasing of shares/ funds to the client.
• Order Matching – The trading system sorts pending
orders in price-time priority for order matching purposes by
matching the best buy order and best sell order. Best buy order
is the one with the highest price and the best sell order is the
one with the lowest price (the system sorts buy orders from the
seller point of view and vice versa). Orders may match with
more than one order resulting in multiple trades for an order.
• Member broker can place market orders (which will be
matched with the best available order) or limit orders (wherein
member can specify the price for the order) which will remain
a part of order books until matching.
• The orders are processed for potential match. Pending orders
are stored in different „books‟ based on price-time priority in
the following sequence:
• All orders received on the system are sorted with the best price
order getting the 1st priority for matching the best buy order
match with the best sell order.
• Similarly price order are sorted on time priority the one that
came in early gets priority over the later one orders are
matched automatically by the computer keeping the system
transparent, objective and fair.
• Where orders does not find a match it remains in the system
and it displayed to the whole market till a fresh order comes in
or earlier order is canceled or modified.
Settlement Cycle and Trading Hours
Equity spot markets follow a T+2 rolling settlement. This
means that any trade taking place on Monday, gets settled
by Wednesday. All trading on stock exchanges takes place
between 9:55 am and 3:30 pm, Indian Standard Time (+ 5.5
hours GMT), Monday through Friday. Delivery of shares
must be made in dematerialized form, and each exchange
has its own clearing house, which assumes all settlement
risk, by serving as a central counterparty.
The two prominent Indian market indexes are Sensex and
Nifty. Sensex is the oldest market index for equities; it
includes shares of 30 firms listed on the BSE, which
represent about 45% of the index's free-float market
capitalization. It was created in 1986 and provides time
series data from April 1979, onward.
Another index is the S&P CNX Nifty it includes 50 shares
listed on the NSE, which represent about 62% of its freefloat market capitalization. It was created in 1996 and
provides time series data from July 1990, onward.
The overall responsibility of development, regulation
and supervision of the stock market rests with
the Securities & Exchange Board of India (SEBI),
which was formed in 1992 as an independent authority.
Since then, SEBI has consistently tried to lay down
market rules in line with the best market practices. It
enjoys vast powers of imposing penalties on market
participants, in case of a breach.
How the market sets prices
• The price is set by the buyer willing to pay the
• The market price will be set by the
buyer who can take best advantage of the asset
• Superior information about an asset can increase its
value by reducing its risk
4. Who is a broker?
A stockbroker is member of recognized stock
exchange who is permitted to do trade on the screen
based trading system on the different stock exchanges
. He is enrolled as a member with the concerned
exchanges and is registered with SEBI.
5. What is a Demat A/c?
• Investors who wish to trade in the market need to
have a dematerialized, or demat, account.
• In India, the government has mandated two entities –
• National Securities Depository( NSDL)
• Central Depository Services (India)(CDSL) – to be
the custodian of dematerialized securities.
6. Buying and selling of dematerialised
• The procedure for selling dematerialized securities is very simple. After you
have sold the securities, you would instruct your DP to debit your account with
the number of securities sold by you and credit your broker's clearing account.
This delivery instruction has to be given to your DP using the delivery
instruction slips given to you by your DP at the time of opening the account.
• For receiving demat securities you may give a one-time standing instruction to
your DP. This standing instruction can be given at the time of account opening
or later. Alternatively, you may choose to give separate receipt instruction
every time some securities are to be received.
7. How to receive income from shares?
We invest in shares to make money – either through a
share‟s capital growth, i.e. the amount by which the
share price increases in value over time, or through
the dividends it pays to its shareholders. Dividends
are payments made by companies to shareholders
from their profits.
8. How much should you invest?
Asset allocator and other tools… Benefits of Investing
Early Power of compounding Magic of compounding
Risk vs. Returns The Need To Diversify Financial
Investment Options Financial Investment Options
9. How to make investment decisions?
The stock market has, perhaps, the most exciting investment
opportunities for the investor community. At the same time, it
could be unnerving and scary. In fact, equity investment has
always remained a big challenge, not only for retail but
institutional investors, too. In short, investing in equities can
be a difficult proposition for retail investors. However, equity
must form a part of every investor‟s portfolio. The proportion
could vary, depending on the investor‟s age, monetary
requirements, risk appetite, etc.
To cope with volatility, it is important to have a disciplined and
systematic approach to equity investment. Set your own rules
and more importantly, follow them religiously. Indeed, the
mantra for successful equity investment is a well thought-out,
disciplined investment strategy. A long-term monetary
commitment, adherence to discipline in investment and
decisions based on company fundamentals are essential
ingredients for successful equity investment.
10. How to track your investments?
The Portfolio Manager tracks and monitors all your
investments, cash flow and assets, through live price updates.
Investments like equity, mutual funds, assets, cash flows,
borrowing and more can all be tracked. Displayed in real time,
it is the most up-to-date and precise indicator of your net
worth! With the Portfolio Manager, you can not only view
your investments at each stage, but can use this record of your
holdings to base any future investments decisions.
The Portfolio Manager comes along with some
useful tools to gain useful insight of volatile
markets. These tools help you to track the
trends of your current investments as well as
some stocks that have caught your eye.
Features of Stock Market
•Stock Market is an organized market, where securities of govt. and semi govt.
bodies and corporate enterprises or bought and sold.
•Stock Market deals in second hand or existing securities.
•Individuals alone can buy and sell securities.
•The Stock Market does not provide this facility to corporation and partnership
•In the Stock Market only those securities which are listed in the Stock Market or
•Unlisted Securities or not permitted to be dealt in the market.
•The Stock Exchange to regulate its day-to-day operations.