final CBE presentation stock exchanges

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STOCK EXCHANGES ININDIA

By:

Raiza Siddique(81)Mozzam Rangwala(82)

Sonam Sharma(95)Souvik Mitra(103)



Topics to be covered

Reforms in equity marketBombay stock exchange (BSE)

National stock exchange (NSE)



Reforms in equity market

Introduction to Indian equity marketsA look into past

Paradigm shift



The Indian equity market

Indian equity market -3 rd biggest in world after China and Hongkong .Having a market capitalization of nearly 600billion .Equity market in India does business with twotypes of fund-Pvt equity fund and VenturecapitalDeals in transactions based on the two major indices ± Bombay Stock Exchange (BSE) andNational Stock Exchange of India Ltd. (NSE).



A look into the past

Before independence : Not a wellorganized market

After independence :New issues were supervisedTiming ,floatation costs, pricing, interest ratescontrolled by Controller of Capital issues .

Companies were demoralized and notmotivated from going public due to therigid rules




1950¶s : Period of uncontrollable speculation:Satta Bazar .Securities Contracts (Regulation) Act 1956came into existence1960¶s market was bearish due to massive war ,drought

Badla was bannedThe first mutual fund of India UTI formedInvestment by LIC,GIC:Market sentimentsrevived to an extent




70¶s: trading of Badla resumedDividend Restriction Ordinance : Overnight

drop in market capitalization by 20 %Multinationals pulled out of the market80¶s saw growth in indian equity market

because of the liberalized policiesResulted inIncreased no : of stock exchanges

Increased paid up capital



The paradigm shift

The increasing influence of liberalization andglobalizationMinistry of Finance generated much of the impetusfor reform due to ± Awareness about the inadequacy of public

sector resources to meet the developing needs ± Increasingly aware of the global best practices in

the wake of technologyLegal Infrastructure that regulated Indian equitymarket provided them tremendous authority

Capital market scams



The paradigm shift

Reforms:Capital issue Act 1947 was abolished .SEBI wasgiven the full authority and power over the stock

marketStock market liberalization-entry of foreigninvestors ±reduction of cost of capitalGovt approved new laws and regulation creatingproper legal and regulatory framework for capitalmarket to flourishEnforcement of insider trading regulationsEntry of new 2 stock exchanges NSE and OTCE



The paradigm shift

NSCCand National Securities DepositoryLimited (NSDL) were set up in April 1995and November 1996 respectively formimproved clearing and settlement anddematerialized trading.The Securities Contracts (Regulation) Act,1956 was amended in 1995-96 for introduction of options trading.



Open outcry system replaced by screenbased electronic order system

June 2000: Futures trading startedJuly 2001 :Badla gave way to rapidlydeveloping derivative market



STOCK EXCHNAGESBombay Stock Exchange



Bombay Stock Exchange

BSE overview and historyListing companies at BSE

Functions of BSETrading and settlement/ InvestmentBSE Sensex: History and components

Role of SEBI



BSE :An overview

Oldest Stock Exchange in AsiaLocation: Dalal Street, Mumbai, India

Established in 1875 as ³The Native Share &Stock Brokers´.First Stock Exchange in the country to obtain

permanent recognition in 1956 from TheGovernment of India under The SecuritiesContracts (Regulation) Act 1956



BSE :An overview

No of listing: 4996Market Capitalization: US$1.78 trillion (Oct

2010Index: BSE SensexWebsite: www.bseindia.com

World's number 1 exchange in the worldin terms of the number of listed companies



BSE :An overview

world's 5th most active in terms of number of transactions handled through its electronictrading system.

AWARDS:The Annual Reports and Accounts of BSE for the year ended March 31, 2006 and March 31,

2007 : awarded the ICAI awards for excellencein financial reporting.



BSE :An overview

AWARDS:The Human Resource Management at BSE haswon the Asia - Pacific HRM awards for its effortsin employer branding through talentmanagement at work, health management atwork and excellence in HR through technology



Listing of companies on BSE

List ing requ ireme n ts of n ew c ompa ni es o nBSE :

1) New company can be listed on BSE only whenthe issued and subscribed equity capital after IPOis Rs.10 crores. Also the company should havepost-issue net worth of Rs.20 crores

2) As per SCRR act 1957, the company indentingto be listed in BSE should compulsorily offer atleast 25% of the securities of each class or kindfor public subscription.



Listing of companies on BSE

3) In case of unlisted companies of IT andentertainment sector, at least 10% of thesecurities to be offered to public subjectto minimum of 20 lacs (in number) andthe offer size is minimum Rs.50 cr.



Functions of BSE

1. Measure of Safety and Fair Dealing.2. Act of Magic.

3. Flow of Capital in the Most ProfitableChannels.4. Inducement to Companies to Raise their

Standard of Performance.



Trading and settlementThere are two ways of organizing the trading activity:

1. Open Outcry System

2. Screen Based System

Settlement

Arbitrage Trading



Common trading mistakes

1. Lack of Knowledge and No Plan2. Unrealistic Expectations

3. Listening to Others4. Getting in the Way5. Poor Money Management

6. Only Trading Market in One Direction7. Overtrading



Investment

Short Term InvestmentDay Trading

Swing TradingPosition Trading

Long Term Investment



Why Companies get Listed with StockExchange?

Securities are freely transferable.Easy liquidity of securities.

Easy availability of prices of securities.Reputation, Image, Goodwill.Public awareness.More transparency.Helps in obtaining loans fromBanks/Institutions.Helps in marketing its Products



BSE Sensex: History and

ComponentsBSE SENSEX (BSE 30):

A ³market Capitalization-Weighted´ indexof 30 component stocks representing asample of large, well-established andfinancially sound companies.

First compiled in 1986.



BSE Sensex: History andComponents

Objectives of BSE Sensex:

1. To measure market movements2. Benchmark for funds performance

3. For index based derivative products




Criteria for selection and review of Scrips:

QuantitativeQualitative




Quantitative criteria:

1. Market capitalization:-Top 100 companies by market capitalization2. Liquidity:

-Trading frequency-Number of trades-Value of shares traded




Quantitative criteria:

3. Industry representation:4. Listed history

Qualitative criteria:

1. Track record:



Role of SEBI

The Securities and Exchange Board of India (SEBI) Regulation Act 1992 :mechanism for inspection of member brokers.every stock exchange has to inspect thebooks of accounts and other documents of at least 20% of its member brokers andsub brokers every year.



Role of SEBI

For surveillance purpose a separatedepartment called the ³Department for surveillance and supervision (DOSS) hasbeen set up.



NATIONAL STOCK EXCHANGE



INTRODUCTIONThe National Stock Exchange of India was incorporated in

November 1992 as a tax paying company.

In April 1993,it was recognized as a stock exchange under thesecurities contract(Regulation) Act, 1956.NSE commencedoperation in the WDM in June 1994

The capital market segment of the NSE commenced operation in November 1994 ,while operation in the derivatives segment in

June 2000

Market capitalization of around 7,262,507 crores(October 2010)



There are at least 2 foreign investors NYSE Euronext andGoldman Sachs who have taken a stake in the NSE.

NSE is the third largest Stock Exchange in the world in termsof the number of trades in equities.

It is the second fastest growing stock exchange in the world.



P UR P OSE

Establishing a nationwide trading facility for all type of securities.Ensuring equal access to investor all over the country through

an appropriate communication network. P roviding for a Fair, efficient and transparent securities marketusing electronic Trading system.Enabling shorter Settlement cycles.

Meeting up with international benchmark and standard.



WORKING HOURS

NSE's normal trading sessions were conducted from 9:15 amIndia(till 3¶JAN 2010) Time to 3:30 pm India Time on all daysof the week except Saturdays, Sundays and Official Holidaysdeclared by the Exchange (or by the Government of India) inadvance.

NSE new market timing from 4 Jan 2010 is 9:00 am till 3:30 pm India Time.



TRADING SYSTEM &

MARKETS NSE operates on the 'National Exchange for Automated Trading' (NEAT) system.

There are four markets under the NEATsystem:a)Normal Market,

b)Odd Lot Market,c)Spot Market,d)Auction Market .



TIME ORDER CONDITIONS

DAY- A Day order is an order which is valid for the dayon which it is entered.GTC- A Good Till Cancelled (GTC) order is an order thatremains in the system until the Trading Member cancelsit.GTD - A Good Till Days/Date (GTD) order allows theTrading Member to specify the days/date up to which theorder should stay in the system

IOC - An Immediate or Cancel (IOC) order allows aTrading Member to buy or sell a security as soon as theorder is released into the marke t



INNOVATIONSetting up the first clearing corporation "National SecuritiesClearing Corporation Ltd." in India. NSCCL was a landmark in providing innovation on all spot equity market (and later,derivatives market) trades in India.

Co-promoting and setting up of National SecuritiesDepository Limited, first depository in India.

Setting up of S& P CNX Nifty.

NSE pioneered commencement of Internet Trading inFebruary 2000, which led to the wide popularization of the

NSE in the broker community.



B eing the first and the only exchange to trade GOLD ETFs(exchange traded funds) in India

NSE has also launched the NSE-CN B C-TV18 media centre inassociation with CN B C-TV18.

NSE.IT Limited, setup in 1999 , is a 100% subsidiary of the

National Stock Exchange of India. A Vertical SpecialistEnterprise, NSE.IT offers end-to-end Information Technology(IT) products, solutions and services.





October 1999 Setting up of NSE

February 2000 Commencement of InternetTradingJune 2000 Commencement of DerivativesTrading (Index Futures)June 2001 Commencement of trading in IndexOptionsJanuary 2002 Launch of Exchange Traded

Funds (ETFs)June 2003 Launch of Interest Rate Futures



June 2005 Launch of Futures & options in B ANK Nifty Index

January 2007 Launch of NSE ± CN B C TV 18 mediacentreJune 2007 NSE launches derivatives on Nifty Junior & CNX 100.

August 2008 Launch of Currency Derivatives November 2009 Launch of Mutual Fund ServiceSystemFebruary 2010 Launch of Currency Futures onadditional currency pairsOctober 2010 Launch of 5-minute special pre-opentrading session, a mechanism under which investorscan bid for stocks before the market opens.



SMART PEOPLEINVEST SMARTLYKNOWLEDGABLE PEOPLE

INVEST

FOOLISHLY

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final CBE presentation stock exchanges