SEBI " The Regulator " by Abhishek Pande

Orange School of Business 1

ROLE OF SEBI(THE REGULATOR) AND CRITICAL EVALUATION FOR SMALL INVESTORS IN INDIAN STOCK MARKET

Presented by Abhishek Pande

Mentor

Orange School of Business.Nagpur

Finance track

01/01/2012


ROLE OF SEBI(THE REGULATOR) AND CRITICAL EVALUATION FOR SMALL INVESTORS IN INDIAN STOCK MARKET

01/01/2012


EXECUTIVE SUMMARY

• The Regulator needs to adopt strong measures to protect the interest of small investors, it would be fair to say that progress that we have made in this period is due largely to effects of stringent measures adopted by SEBI.

• The dynamics of economics also plays a pivotal role in the growth story of industry and commerce.

• The stock market is important from both the industry’s point of view as well as the investor’s point of view.

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INTRODUCTION

• In 1988 , the securities and Exchange Board of India (SEBI) was established by the Government of India through an executive resolution and was 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 on 30th January 1992.

• The task of regulating stock exchange is handled by SEBI.

• At present, there are 23 stock exchanges in India which are recognized by SEBI.

• SEBI have power to inspect books of stock exchange without prior notice.

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OBJECTIVES OF THE STUDY

To highlight the working of regulator with respect to stock markets.

To promote investors awareness about stock markets.

To educate small investors and students about the economic downturn of stock markets.

To promote overall economic development for sustainable growth.

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SCOPE OF THE STUDY

• The role of SEBI as a watchdog and as a single authority to manage stocks and securities in Indian market.

• To analyze the investor’s preference and protect his interest before the interest of the companies trading in Indian stock market.

• To analyze the data researcher used simple analytical techniques and tools such as pie charts.

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DATA SOURCE

• Primary Source : To study the SEBI guidelines for small investors pattern of purchasing shares of listed companies in stock market, data collected through primary sources i.e. Interviews, discussions and Questionnaires.

• Secondary Source : The Secondary data have been collected through the books, magazines, broachers, Journal’s and annual general report, socio-economic profile and websites.

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QUESTIONNAIRE

• To collect the primary data questionnaire is prepared. This questionnaire consists of close ended questions. The questionnaire is a siphon off information i.e. company preferences, choices, determinants etc.

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ROLE OF SEBI

• To provide license to dealers and brokers.

• To stop fraud in stock market.

• To control the mergers, acquisitions and takeover of the companies.

• To audit the performance of stock market.

• To make new rules on carry forward transactions.

• Introduction of derivative contracts on volatility index.

• To get reports on portfolio management activities.

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ECONOMIC INDICATORS

• Liquidity situation in a system.

• Inflation rate in the economy.

• Technological development.

• National income growth rate for the current year.

• GDP estimates for the upcoming year.

• Increase or decrease in foreign investments.

• Increase or decrease in exports.

• Trade liberalization, capital mobility and exchange rate policy.

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IMPORTANT LESSONS

• Financial analysts at major banks promote stocks they know to be worthless, misleading small investors who rely on their advice.

• Rating agencies give AAA ratings on debt they know to be in order to gain goodwill of the issuers who happen to pay fee’s of agencies, violating rating agency’s duty to provide the marketplace with honest evaluations.

• Some executives receive outsized and high compensation packages, the result of false misleading recommendations of stocks to gain the goodwill of CEO’s and independent directors, thus violating duty to the shareholders of companies for whom they are working.

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FUND MANAGEMENT

• This is what happens when AMFI certifications are not made compulsory for selling mutual funds.

• Some fund managers charge exorbitant fees that investors have to absorb fees that dramatically reduce possibility of outperforming market and they are set by captive boards of captive management companies.

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• The small investors still doesn't have a fair shot. While there have been case-specific remedies, the aggregate effect of all the scandal's still hold's the market forces responsible.

• "High-frequency trading" produces not only reality of a two-tiered market but also probability of front-running—that is, illegally trading of information not yet widely known—that eat's possible profit's of small investors being served by these market players, violating the norms set by SEBI for best available price discovery.

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CONCLUSION

• SEBI the regulator has three functions rolled into one body: quasi-legislative, quasi- judicial and quasi-executive.

• It passes rulings and orders in its judicial capacity to create accountability for small investors and also returns in stock market depends on conditions of economy.

• A good economy would help in improving living standards of individuals who could encash higher returns from stock market, business as a whole see’s increased in sales and profit which ultimately drives share prices for small investors.

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Orange School of Business 1501/01/2012