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THE STOCK EXCHANGE REVIEWINVITES ARTICLES ON CAPITAL MARKETS

AND FINANCIAL MARKETS

The Stock Exchange Review invites articles on capital markets and financial markets coveringmajor market segments such as securities industry, banking, money markets, debt, derivatives,mutual funds, insurance and infrastructure finance. Articles should be original and in the realmof relevant areas such as conceptual framework, regulation and practice. Articles based on researchare particularly encouraged and those which are crisp and concise merit faster consideration.Articles accepted for publication will be paid honorarium and authors will be provided five copiesof the Review. The size of the article could be around 2000 words and focus more on operationalaspects rather than lengthy introductions and narrations. It would be preferable if the articlesare submitted through email (review@bseindia.com) but manuscripts sent by post will also beaccepted for consideration. Each article should be accompanied by a certificate from the authorstating that it is original and not sent for any other publication considered. For any information/assistance in this regard, please send your request to the above referred email.Articles may be sent to the following address:

The Stock Exchange Review2nd Floor, P.J. Tower, Dalal StreetMumbai: 400 001, IndiaTel: 9122 2272 1233-34 (Ext.8045/8570)Fax: 9122 2272 3250 Email:review@bseindia.com

ReviewTSEBI has allowed member-brokers of the exchanges to provide margin-tradingfacility to their clients, in the cash segment. Four years after the automaticborrowing and lending mechanism (ALBM) and its variants were scrapped, amuch more secure version of margin trading has come. Margin trading is thestate-of-the art solution, as it provides far greater transparency, in that client-wise, scrip-wise positions to be reported to the bourses. Moreover, margintrading is a quantum leap ahead of the old badla and ALBM systems as it hasbetter risk management built in. With higher margining provisions, it is a saferproduct in the markets, and brokers are secured since they are given the rightto sell shares in the case of non-payment of incremental margins. The market’slukewarm reaction to margin trading comes as a surprise. May be the initialresponse had been less than expected because most members are not yet clearon the finer details of the working of the scheme. At the same time, marginfinancing is an important need of the markets and regulator has done well tomake the process more accessible. However, some of these issues need to beironed out to achieve the objective of developing our markets in line withinternational best practices. With such an attempt to make things moretransparent, this issue has featured two sides of the scheme, one from theexchange perspective and the other from the banking perspective. Focus hasalso been given to the problems and prospects of the scheme from a marketparticipant’s view through the interview.

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Domestic Economy 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 (proj.)Gross Domestic Product (% change yoy) 6.5 6.1 4.4 5.6 4.3 8.7Value added in Agriculture (% change yoy) 6.2 0.3 -0.4 5.7 -5.2 12.6Industry 3.7 4.8 6.6 3.3 6.4 6.5Services 8.3 10.1 5.6 6.8 7.1 8.3Exports $ mn 33211 36760 44147 43708 52370 58900Imports $mn 42379 49799 50056 51261 61445 75000Money supply (M3) % change yoy 19.4 14.6 16.8 14.2 15.0 15.8WPI (% change yoy) 5.9 3.3 7.1 3.7 3.4 5.4Capital Issues (Rs. bn) 437 663 492 458 408.1 496.2Equity (Rs. bn) 117 249 142 62 73.9 201.2Debt (Rs. bn) 320 410 348 395 334 295.0GDRs/ADRs $mn 70 822 480 495 131 125FDI $mn 2480 2167 4029 6131 4660 -Portfolio flows $mn -68 3024 2760 2020 979 -NRI deposits $mn 960 1540 2317 2754 2808 -ECB $mn 4367 333 3737 -1576 -1698 -Total Foreign Capital Flows $mn (net) 8042 10184 9992 10573 12638 -Aggregate deposits (SCBs) (% change yoy) 19.3 19.3 16.2 11.5 16.1 17.3Non-food credit (% change yoy) 13.0 21.9 14.1 13.3 26.9 17.6Gross Fiscal Deficit (% of GDP) 6.5 5.4 5.6 6.1 5.9 4.8

Apr03 May03 June03 July03 Aug03 Sep03 Oct03 Nov03 Dec03 Jan04 Feb04 Mar04 Apr04Govt. borrowings (Rs. bn) 84.9 154.4 300.2 154.4 261.4 -310 60 45.1 2.5 153.2 90.0 -115.1 -34.6Agg. deposits (% change yoy) 16.22 11.48 12.17 11.82 11.51 11.81 11.78 11.60 12.63 13.73 15.54 16.87 17.38Bank credit (% change yoy) 22.62 13.32 12.95 11.70 11.49 10.70 12.91 12.14 12.76 13.87 14.14 14.56 19.02Public Issues (Rs. cr) 0.00 0.00 993.34 388.00 394.16 531.99 665.50 192.0 537.7 834.44 3782.01 11970 3210Rights Issues (Rs. cr) 1.96 0.00 0.00 0.00 0.00 164.86 80.89 7.71 98.02 110.86 34.43 280 0.0Private Placements (Rs. cr) 586.53 1232.29 2008.07 3770.9 2845 2253.2 1037.79 421.3 1066.3 3593.10 4203.69 4410 1250Overseas Floatations (Rs. cr) 0.00 0.00 75.00 0.00 0.00 0.00 1426.6 362.3 27.31 61.33 0.0 1728 3128Assets under management MFs. (Rs. cr) 89238 98124 104762 112841 121040 121778 126726 132366 140093 145372 145657 139616 154024Corporate Debt Floatations (Rs.cr) 565 1225 1933 3664 3063 2147 1415 415 1328 4063 4216 6131 650

Monthly IndicatorsParticulars Mar03 Apr03 May03 Jun03 Jul03 Aug03 Sep03 Oct03 Nov03 Dec03 Jan04 Feb04 Mar04IIP 5.8 4.3 6.0 5.7 5.9 5.2 7.1 5.4 7.4 6.2 7.4 7.9 6.7Exports (% change yoy) 14.6 8.1 12.8 10.9 5.7 4.1 16.0 5.0 13.8 42.7 8.7 34.9 20.1Imports (% change yoy) 24.5 38.7 7.9 38.6 17.0 15.4 16.3 23.4 26.5 45.0 18.1 47.3 21.0Forex reserves $bn 71.1 74.3 77.9 78.2 81.2 82.6 85.6 88.7 92.1 96.5 100.8 106.4 113Non-food credit 26.2 26.3 16.4 16.2 15.5 15.2 14.1 16.9 16.0 16.2 16.6 17.7 21.0WPI 6.0 6.6 6.5 5.3 4.6 3.9 4.6 5.1 5.4 5.6 6.2 6.0 4.4Trade Balance $mn -776 -1527 -1106 -1613 -1016 -1055 -932 -2025 -1924 -1722 -1464 -1223 -1744

Rates, Ratios, ReturnsMar 04 Apr 04 Mar 04 Apr 04 Mar 04 Apr 04

Bank Rate 6.0 6.0 CRR 4.50 4.50 PE Ratio : SENSEX 18.55 19.31Savings bank rate 3.5 3.5 SLR 25 25 Price to Book Value 3.50 3.64Term deposit rate 5.00-6.00 5.00-6.00 Credit Deposit Ratio 55.62 55.80 Dividend Yield 1.81 1.74PLR 10.50-11.00 10.50-11.00 Re/US$ 44.93 45.09Call Money rate 4.50 4.50 Re/Euro 55.09 54.20 PE Ratio : NIFTY 20.78 19.9291 day T-Bills 4.37 4.41 Re/Yen 0.4130 0.4020 Price to Book Value 3.54 3.64CDs 3.59-5.75 4.64-6.00 Premium on Forward Markets(3mUS$) 1.24 -1.36 Dividend Yield 1.62 1.86CPs 4.70-6.50 4.50-6.50 Avg. Yield on Govt. securities (10 yrs) 5.19 5.19

Sources: Center for Monitoring Indian Economy, The Stock Exchange, Mumbai, Reserve Bank of India, Financial Times, The Asian Wall Street Journal, The Economist, London. 1. Closing rates; 2. Last auction ratesof 91 TBs.; 3. Forecasts of GDP Growth by The Economist; 4. Short term interest rates; 5. Stock market indices ; Australia: All Ordinaries; Brazil: Bovespa; China: Shanghai B: France: CAC40; Germany: XETRA Dax;Italy: Mibtel General; Japan: Nikkie 225; Britain: FTSE.100; United States: Dow Jones Industrials; Malaysia: KLSE Comp; Mexico: IPC; Russia: RTS; South Africa: JSE All Share; South Korea: KoreaCmpEx; Taiwan:WeightedPr. Latest data available for the month; 6. Year 2003.

Particulars

Particulars

Domestic Economy

Austrl UK France Germany Italy Japan US Euro China Malay Korea Taiwan Mexico Brazil S.Africa Russia

G D P 4.0 2.7 0.6 0.2 0.1 3.4 4.3 0.6 9.8 7.6 5.3 6.3 3.7 2.7 1.9 8.0Interest Rates 5.55 4.31 0.03 1.07 2.05 2.85 2.95 3.89 1.10 6.57 15.78 8.20 14.00Consumer Prices 2.0 1.2 2.1 2.1 2.3 -0.4 2.3 2.5 3.8 1.0 3.3 0.9 4.2 5.3 0.2 10.3Forex reserves ($bn) - - - - - - - - 439.8 53.4 163.6 228 61.6 51.6 8.6 78.9Currency Units/$ 1.43 0.54 0.81 0.81 0.81 110 - 0.81 8.28 3.80 1165 33.4 11.4 3.13 6.46 29.0Year ago 1.50 0.61 0.86 0.86 0.86 119 - 0.86 8.28 3.80 1200 34.6 10.4 2.91 8.20 30.7Stock Index current 3407.7 4489.7 3674.3 3985.2 21010.0 11761.8 10225.6 1075.4 3759.5 838.2 862.8 6117.8 9948.1 19607.2 10385.8 631.1A month ago 3416.4 4385.7 3625.2 3856.7 20352.0 11715.4 10357.7 1068.9 4202.0 901.9 880.5 6522.2 10517.5 22142.3 10692.6 752.66Year high 3462.9 4575.7 3811.4 4151.83 21350.0 12163.9 10737.7 1129.4 4273.4 908.9 936.0 7034.1 10844.0 24349.8 11178.5 781.5Year Low 3274.9 4309.4 3518.5 3726.0 19778.0 10365.4 10048.2 1036.3 3710.6 787.3 821.7 6041.6 8818.2 20763.2 10394.4 586.08PE ratio 18 15.7 17 12.3 16.4 40.9 21 - 10.1 15.5 16.9 16.0 14.2 8.7 12.6 9.5

International Economy April

Markets

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CURRENT NEWS

BSE NEWS

COMMENT

PORTFOLIOBANK’S EXPOSURE TO CAPITAL MARKET (Rs.Cr.)

Dr. Manoj Vaish, Executive Director & CEO, BSE meeting with Mr. Peter Nag, V. P. Global PMO, Mr. Steven Silberstain,M.D. Global Equities, Technology & Mr. Andy Corcoran, Executive Director, Operations from Lehman Brothers, U.S.A. at BSE onJune 4, 2004.

According to RBI norms, bank’sexposure to capital market is capped to5% of the previous year’s totaloutstanding advances. Within thisoverall ceiling of 5 %, the totalinvestment in shares, convertible bondsand debentures and units of equity-oriented mutual funds by a bank shouldnot exceed 20 per cent of its net worth.There is an increasing trend ininvestments by commercial banks inequities of private corporate sector forthe last five years. It is largely executedvia loans against shares, brokerfinancing, IPO funding and investmentsin equity linked mutual funds.

The RBI barred entity other than bank and other authorised dealers from accepting depositsfrom NRIs, received through fresh remittance from overseas.

SEBI has made it mandatory for stockbrokers to transfer securities from their pool account tothe respective beneficiary account of their clients within one day after the payout day.

SEBI has asked foreign institution investors and their sub-accounts to get unique client codes(UCC) when trading in the Indian securities market. Whenever an entity is granted registrationas an FII / sub-account, the fund is required to obtain the UCC from the BSE or the NSE.

It is not to the advantage of foreigncentral banks to accumulate verylarge amounts of foreign currencyafter a certain point, because it createsdomestic problems of monetarystability

Alan Greenspan,Chairman, U.S. Federal Reserve

8000

7000

6000

5000

4000

3000

2000

1000

0

1999

2000

2001

2002

2003

2004Rs Cr

PSU SharesPvt. Corporate Shares

Source : RBI Bulletin

867

3033

876

3908

1342

4348

1587

4327

1430

7589

1278

7378

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Capital Market Training. Information. Publications.Forums. Skill Tests

� Any Student or a group of minimum 20 persons shall attract a discount of 25%. � Corporates nominating 5 participants for the programme can nominate the 6th person free of cost. � FINTECHANALYSIS ADVANTAGE – Registration for both Fundamental and Technical Analysis at the same time will attract a discount of ’ Rs. 450/-. � DERIVATIVE ADVANTAGE – Registration for bothBasic & Advance Derivatives same time will attract a discount of Rs. 750/-. � The course fees are inclusive of study materials (Lunch, Tea/Coffee for full day’s courses only) � DD/broker member’s chequemay please be made in the name of “The Stock Exchange, Mumbai”, the same should be payable at Mumbai.

Capital Market Training from BSE.BSE Training Institute21st Floor, P.J. Tower, Dalal Street, Mumbai.Tel:2272 1126-27, 2272 1233-34, Fax:2272 3250,Email:training@bseindia.com

FOR CERTIFICATION IN

Stock MarketsDebtDerivativesDemat & Depositories

On-line examination conducted inabout 50 centers in India.

e-LEARNINGPLATFORMFOR A WIDE RANGEOFCOURSES ONCAPITALMARKETS

http://bsetraininginstitute.bseindia.com

RECENT RELEASE FORTHCOMING

Addresses of Companies(revised)Working of the Stock Exchange(Gujarati).

FORTHCOMING CD ROMS

Addresses of CompaniesDirectory of BSE Members.

For a complete list of BSE Books, please call 2272 1046/2272 1233-34 (Ext. 8051) Fax:2272 1334 email:books@bseindia.com

ON SALE

CD ROMON

DERIVATIVES

CERTIFICATE PROGRAMME ON CAPITAL MARKETSA 3- month part-time programme conducted jointly with Jamnalal Bajaj Institute of Management Studies,

under which successful participants are awarded certificates from The University of MumbaiNext Batch Commencing in July 2004. Course Fee: Rs.10,500/-.CPCM

BSEnowledgeK

enterCCALENDER FOR JULY AND AUGUST 2004

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Programme Dates FeesBOLT Operations July 3 Rs. 1,250

Debt Markets July 9 & 10 Rs. 4,000

Derivatives in Gujarathi July 10 Rs. 500

BSE’s Certificate Course on July 12 to 15 Rs. 4,000Stock Markets (BCCSM)

IPO,s July 16 & 17 Rs. 7,500

Compliance Requirements for July 17 Rs. 500BSE Member Brokers

Mergers & Acquisitions July 21 & 22 Rs. 5,000

Basic Programme on July 23 & 24 Rs. 2,750Derivatives

Programme Dates FeesForeign Exchange August 6 & 7 Rs. 5,000Risk ManagementBSE’s Certificate Course on August 9 to 12 Rs. 4,000Stock Markets (BCCSM)Mutual Funds August 13 & 14 Rs. 3,000Debt Markets August 13 & 14 Rs. 4,000BOLT Operations August 14 Rs. 1,250Foreign Investment in August 18 Rs. 2,500India & AbroadBasic Programme on Derivatives August 20 & 21 Rs. 2,750Commodity Trading August 25 Rs. 2,500Finance & Accounts for August 27 & 28 Rs. 3,000Non-finance Executives

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Australian Stock Exchange adopts new integrated trading system

The Australian Stock Exchange (ASX) will adopt a new fullyintegrated system for the trading of all its listed securities (equities,interest rate securities, warrants, options, index options, indexfutures and commodity futures). In consequence, the Exchangewill move away from its trading platform SEATS, currently usedfor trading equities, interest rate securities and warrants. Tradingall the Exchange’s products on a single, integrated platform willoffer ASX and its customers considerable financial, functional andstrategic benefits. The adoption of a single trading system is also inline with the ASX’s strategy of providing the full range of investmentservices across the trading, clearing, settlement and registry services.

Copenhagen Stock Exchange and ATP enter strategiccooperation

The Copenhagen Stock Exchange and ATP, a Danish pensionfund provider, have initiated a strategic cooperation in connectionwith the liberalization of the Special Pension Savings Scheme. ATPwill establish the “Folkebørsen”, an electronic trading platform forinvestment certificates for pension clients.

Euronext introduces incentive scheme for Dutch securities

Euronext introduced an incentive scheme to further enhanceliquidity in its growing Dutch cash market segment, which willpotentially make the trading of Dutch securities up to 30% cheaperfor its members, depending on their trading activity.

Helsinki Exchanges introduces liquidity providers

Helsinki Exchanges introduces a new market-making model, theLiquidity Providing. The aim of the Liquidity Providing model isto increase the liquidity in trading and to improve the efficiency ofthe market as well as to decrease investors’ costs.

CBOT and Dow Jones Indexes launch Treasury index

The Chicago Board of Trade (CBOT) and Dow Jones Indexeslaunched the Dow Jones CBOT Treasury Index, the first real-timebenchmark that tracks the US Treasury market. Created to measurethe performance of long dated US Treasuries, the Dow JonesCBOT Treasury Index is composed of CBOT US Treasury Bond,10-Year Note, and Five-Year Note futures contracts. Eachcomponent makes an equal contribution to the index, as it is aduration-weighted average. Because the index is composed of real-time prices, it will produce a high, low and closing price each day,instead of a single valuation calculated at the end of the tradingsession.

South Asia’s GDP to grow 7.2% in 2004, says World Bank

India’s rapidly growing IT exports, efforts for peace with Pakistan,good monsoon in India, coupled with South Asia’s growth andprospects the swelling foreign exchange reserves of the two countrieshave been identified by the World Bank as key factors that willhelp South Asia’s GDP grow at a healthy rate of 7.2% during2004. Globally, net private capital flows to developing countriesas a whole rebounded to $200 billion in 2003 up from $155billion in 2002.

SEBI tightens lock-in for preferential allotments

SEBI has decided to tighten the guidelines pertaining topreferential allotments issuance’s. SEBI said that when the sharesor any other financial instruments convertible into or exchangedwith equity shares at a later date are issued on preferential basis,the entire pre-preferential allotment shareholding of such alloteeswill come under lock-in from the relevant date up to a period ofsix months for the date of preferential allotment.

No delisting after buyback

SEBI has proposed to prohibit companies that have concluded abuyback of securities or made a preferential allotment from delistingtheir shares. Further, no company can delist its shares within threeyears of listing its shares on any stock exchange, or when it has anyconvertible instruments still outstanding. SEBI’s proposedamendments say that when the promoters do not accept the“discovered price” in the reverse book building route for delisting,it will be presumed that they have aborted the delisting process.

SEBI amends norms on venture capital funds

The SEBI has made changes to its existing regulations on venturecapital funds and foreign venture capital investors, includingalternations to the minimum investment limit norms and allowingsuch funds to invest in financially weak companies or listed sickindustrial companies. Besides changing the minimum investmentlimit norms, the capital market regulator has also permittedinvestment in a host of activities that were hitherto prohibited.SEBI-registered venture capital funds/foreign venture capitalinvestors have now been permitted to invest in real estate.

RBI caps rates on NRE deposits

The RBI capped the ceiling on interest offered on non-residentexternal term deposits at a rate not exceeding the Libor/Swap ratesfor the dollar of corresponding maturity. Also, with a view toaligning the interest rates on various categories of NRE deposits, itwas decided to link the interest rate on savings deposits also toLibor/Swap rates.

RBI sets bank’s dividend payout norms

The RBI tightened banks dividend payout norms and said onlybank with a capital to risk weighted asset ratio (CRAR) of at least11% in the last three fiscal & net non performing assets (NPA)below 3% would be eligible to dish out dividend to shareholders.If bank meets these conditions, they need not have to take priorapproval from RBI before the dividend payout. The dividendpayout ratio has also been capped at 33.33% of net profit. Theproposed dividend should be payable out of the current fiscal’sprofit.

Government may allow banks MF’s to run pension fund managers

Domestic mutual fund with assets under management aggregatingRs.45 billion & domestic or foreign bank or financial institutionwith a minimum investment portfolio of Rs.45 billion would beeligible to sponsor a new pension fund management company. Apension fund manager will also be allowed to merge or buy outother PFMs, a process that will be overseen by the pension fundregulatory & development authority. SER

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MARGIN TRADINGEXCHANGE’S PERSPECTIVE CovereatureFNIRAJ KARWA

Manager- Clearing and SettlementThe Stock Exchange, Mumbai

Prior to July 2001, our secondary markets had Account Periodsettlements and deferral products like ALBM (Automated Lendingand Borrowing Mechanism) and BLESS (Borrowing and Lendingof Securities Scheme). The players could take buy or sell positionsin scrips in an Account Period Settlement for five trading days.The positions could be liquidated anytime during these five tradingdays thereby avoiding settlement obligations. Deferral productslike ALBM and BLESS allowed players to take a leveraged positionin the cash segment.

With effect from July 2001, Rolling Settlements replaced Accountperiod Settlements. Also, from the same point of time facility ofALBM and BLESS was withdrawn. Predictably, this immediatelythereafter resulted in a sharp drop in trading volumes and liquidity,as the span for keeping the positions open was reduced to one dayand facility of leverage had been taken away.

To ensure higher liquidity in the secondary markets, which hasdirect linkage with price discovery and overall market quality,Securities and Exchange Board of India (SEBI) initiated a detaileddialogue on introduction of Margin Trading. SEBI placed adiscussion paper on four possible models of implementing MarginTrading in Indian markets on its web-site for the public comments.This led to a reasonable amount of debate on the issue, which Ifeel was strongly required given the critical nature of a properimplementation for a leverage product with proper RiskManagement and overall market safety measures.

Finally, considering various aspects of the issue, we have adoptedthe US model of Margin Trading, where the brokers finance theinvestors for purchasing shares. Primary sources of funds for thebrokers for on-ward financing to the clients are banks and thecredits lying in other client accounts in the US markets.

The salient highlights of the recent Margin Trading modelimplemented as per SEBI guidelines in India are as under:

• Eligible Scrips: Highly liquid shares classified in Group I forcalculation of VaR margins rates. These scrips have traded formore than 80% of trading days during last 18 months andhave mean cost impact less than 1%.

• Eligible Members: Only corporate brokers with minimum Net-worth of Rs. 3 crores.

• Brokers’ Source of funds for providing Margin Trading;• Brokers’ own funds• Borrowing from scheduled commercial banks and/or• NBFCs registered with RBI

One distinctive feature of the model implemented in our marketis that the brokers cannot use clients’ funds even if the concernedclients may have consented for the same. This, I believe, is to avoidchances of misuse of the clients’ funds as the credit appraisal doneby the banks and NBFCs is likely to be more elaborate and stringentthan what could be done by an individual client.

• Risk Management features:• Maximum borrowing by broker for Margin Trading: 5 times

of net worth.

• Total lending by the broker: Funds borrowed for margintrading plus 50% out of the concerned broker’s net- worth.

• Concentration: lending to single client not to exceed 10% ofborrowed funds plus 50% of member’s net-worth

• Margin Requirements :• Initial Margin: 50% in cash.• Maintenance Margin: Minimum 40%.• Margin Call: Brokers are required to make a margin call to the

client when the client’s contribution to his margin accountfalls below maintenance margin.

Subsequent to issuance of SEBI guidelines on Margin Trading,BSE became the first Exchange to permit its members to providefacility of Margin Trading to their clients. This was made effectivefrom April 2, 2004. BSE has also implemented a Margin TradeReporting and Disclosure system. The brokers are required to takeprior permission from the Exchange so that the Exchange hasrecord of the members doing Margin Trading from the perspectiveof compliance and risk management.

SEBI guidelines stipulate that the brokers should report the MarginTrading details to the Exchange on a daily basis and the Exchangesshould disclose consolidated Margin Trading positions to the marketon a daily basis. The objective of the disclosure to the market is toindicate the level of Margin Trading activity at any point of time,which may have some bearing on the investment decisions made byinvestors. Also, the disclosure is done at scrip level, which I believe,is a step ahead of the disclosure done by some of the leadingExchanges where this is done at consolidated day –wise.

The Exchange for future reference maintains the complete detailsof the Margin Trades reported. The Reporting System providedby BSE also performs certain basic validations designed based onthe broad features of the Margin Trading guidelines from SEBI.The objective of applying validations avoid wrong reporting bymembers and consequent erroneous disclosure by the Exchange.Brokers providing Margin Trading to their clients need to submitNet- worth certificates and certificate of compliance on a half -yearly basis. The Exchanges can prescribe higher level of Initial/Maintenance margins looking at the market situations. Also, themembers have discretion to fix higher Initial/ Maintenance marginfor their clients as per their risk perception etc. The exchanges canalso ask the member to discontinue this facility on account ofsurveillance and investors claims etc.

SEBI guidelines on margin trading are fairly elaborate and havebeen designed looking at various aspects connected to the issueand the structure of the local market. However, even after twomonths from introduction of the facility, the response from themarket has been lukewarm. Currently, only Rs. 10- 12 crores ofpositions reported on BSE. These positions are cumulative positionsand the trades financed through Margin Trading would be evensmaller.

The possible reasons for the low Margin Trading volumes couldbe absence of readily available software for monitoring the riskmanagement parameters, which are fairly complex, brokers’ overallpreparedness etc. Availability of other alternative avenues for theclients for raising funds for share purchases at competitive termscould also be possible reason for lower Margin Trading volumes.

Considering that there is a growing preference for leverage productsin the capital markets world- wide, it would fair to say that theproduct recently introduce in our market would see a higherinterest. SER

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Margin trading is in the news of Capital Markets since severalyears, but nothing tangible has taken place in implementing thescheme. Regulators feel that they have done their job of framingthe scheme and it is upto the bankers to implement it. This leadsus to think as to what are the reasons/obstacles in the scheme inimplementation and why it is not taking up?

RBI has informed that they have advised all the banks to extendfinance to stock brokers for margin trading within the overallceiling of 5% prescribed for exposure of banks to capital marketsin the year 2001. The RBI has also directed the Boards of eachBank to formulate detailed guidelines for lending under margintrading. Banks virtually followed the guidelines of RBI suo motoand formulated scheme for margin trading that never took off.RBI on their part had issued directions to Banks and the Boards ofthe Bank in turn to the branches. SEBI in March 2004 haspermitted the member brokers to provide margin trading facilityto their clients in the Cash Segment. The scheme remained on thepaper and it never took off. If we have a look at the scheme, nobank would be in a position to extend finance to the scheme. Thereasons for failure in take off of the scheme in my view are asunder:

1. The product is not customer oriented. The regulators framedthe scheme and in turn by the banks without taking intoconsideration the operational aspects. The regulators/banksshould prepare a scheme, which is acceptable to the clients inthe market.

2. Lack of practical experience by the bankers regarding intricaciesof capital market operations.

3. Harshad Mehta scam of 1992 and the Ketan V. Parekh scamin March, 2001, has scarced the banking personnel in takingdecisions; though the NPA levels on account of Capital Marketoperations, except for the above two, are low compared toother sectors.

4. Officials do not want to take a decision and face “accountability”and vigilance enquiry by Central Vigilance Commission in theevent of failure, even in a single account; irrespective of the sizeof amount of default.

5. The frequency of changes in the Capital Market operations arefast. SEBI being the regulator of capital market, implementspolicies through Exchanges at a rapid pace. Whereas in bankingsector, it takes a long time to get a policy changed/modified, asthe scheme has to go through different tiers of administration,viz., branch, Regional Office, Zonal Office, Head Office andthen to the Board.

6. SEBI, after getting response from various organisations, hasformulated the margin trading scheme by combining fourmodels, followed by a seminar on 1.4.2004 at BSE ConferenceHall. Still no bank has come forward, because lack of confidencein extending finance for Margin Trading through brokers(Brokers Model).

7. The bankers are not comfortable in lending through thebrokers in spite of incorporation of several risk management

measures in the scheme by SEBI due to deterrent fear ofaccountability.

8. In normal banking transactions, an account being slipped fromstandard category to NPA category a period of 90 days isconsidered as per RBI prudential norms, whereas in capitalmarket operations, under present shorter settlement mechanismof T + 2, the account may becomes NPA, at shorter period,leaving the Bank, no chance in taking remedial measures inarresting slippage. Though, the possibilities of an accountbecoming an NPA under margin trading is rare, due to severalrisk management measures and stiff regulatory and compliancemeasures, but when it occurs, it becomes immediate with ashock to the bankers.

Though, in the Western countries the scheme is operated throughbrokers, I do not find it feasible /practicable under Indianconditions. We have to adopt a hybrid system suitable to ourenvironment of regulators and market operators. Taking intoconsideration all the factors of margin trading, presented anddiscussed so far, I suggest the following bankable scheme.

I do not advocate for Broker Model of margin trade finance. Thescheme can be successful, if it is implemented by the Banksparticipating in the clearing operations of Stock Exchanges becauseof their experience with the broker clients.

1. Eligible securities : The margin trading can be restricted toGroup-1 shares.

2. Eligible members : All individuals, brokers (proprietary/partnership/corporate members). Preference may be given tocorporate brokers. As per present guidelines, all share brokersare required to have settlement account statutorily as per theirchoice with any one of the Clearing Banks. Since the brokershave established relationships with their bankers, the brokerscan recommend their clients, who had obtained UniqueIdentification Number (UNI) under the SEBI (Central database of market participants) Regulations, 2003, allotted bySEBI, to their clearing bank for margin finance. By this way,the bankers’ apprehension of identity of clients and financethrough brokers is eliminated. The banker can assess the client,individually, as per banking norms based on their –

a) Experience and knowledge of the capital markets ;

b) Their past financial commitments in meeting funds andsecurity pay-in obligations;

c) No. of defaults in the past, conduct of accounts, withExchanges and Banks ;

d) Net worth, paid up capital, trend of gross profit/Netprofit etc.

3. Limits :

The Bank, after assessment as per individual bank’s norms canfix a limit to each individual client broker, subject to a maximumof Rs.5 crore, or 10 times of their net worth, whichever islower, valid for a year.

MARGAIN TRADINGBANKING ASPECTSR. CHAKRAPANI

Deputy General ManagerBank of India

10

SER

4. Operations

Bank to open a separate account for margin trading with aprefix M.T. A/C No.________. Whenever the client wishesto purchase shares, he will give a simple letter to the bank ( acommon standard letter to be drafted) requesting to releasethe margin funds. The clients to deposit the margin moneyin the M.T. A/C______, specially opened for this purpose.The banker with 50% of margin funds and 50% loanablefunds, shall release the funds on settlement day to the ClearingHouse or CC, along with fund settlement mechanism underT + 2 system. The client has to furnish their DP A/C No. tothe broker whenever they place orders for purchase transaction,so that the client’s DP A/C is credited with the shares directlyby the CC or CH. DP A/C is required to be maintained withthe bank that has financed for margin trading, thereby enablingthe bank to mark pledge over the shares.

5. Margin

50%. Banks to raise margin calls as and when the margin falls.Mark to market, value of shares to be maintained, tillrepayment.

6. Interest

Presently, bankers are charging interest ranging from 9% to11% p.a. for funding against shares. The same may be adoptedfor margin trading or at simple PLR rate. Penal interest of 2%may be charged, when the client defaults in payment of theprincipal amount borrowed.

7. Release of securities

Whenever the client repays the margin money along withinterest for the outstanding period, the shares can be releasedto the full extent or partially, depending on the amount repaidby the client..

8. Review

The limit shall be valid for 1 year. The account to be reviewedevery year with same limit/or enhanced limits or reduced limits,depending upon conduct and operations in the account.

9. Repayment

a) The maximum period that can be allowed for margintrading shall be 1 year from the date of finance.

b) When margin calls are raised, the client to repay within 3days from the date of margin call, failing which, the bankto liquidate the shares and adjust the proceeds to loanamount (undertaking to be obtained to this effect).

10. Risk Management

a) An individual client cannot be financed more than Rs.5crore of fund based limits inclusive of all other facilitiesfor capital market operations.

b) Finance to a single scrip cannot exceed 20% of the limitto avoid concentration in single scrip.

11. Security Documents

a) Application Form (to be drafted by individual financingbank).

b) Promissory Note

c) Letter of pledge

d) Letter of authority for sale of shares, in the event of non-payment, when margin calls are raised.

e) Declaration from the client that he has not availed anymargin trading facility from any other broker or withanother Exchange.

f) Other declarations/documents as per individual bankrequirement.

12. Insurance

No need to obtain insurance .

13. Advantages

a) The bank is comfortable when a client is introduced bythe broker who has established relationship with the bankand the bank deals with the client directly.

a) The bank assess the client directly, thereby eliminatingfinancing through brokers.

b) Pledge of shares directly with the bank’s DP, therebydirect monitoring by the bank.

c) Beneficial to Bank, as its client base shall be enlarged andin turn Bank can benefit by way of deposits of familymembers or in meeting total retail banking requirementsof the clients’ and their group.

e) Comfort of the client with the bank, as he can operatethe account with credit limit for one year with restorationof limits as and when it used and repaid

14. Compliance

a) Stock Exchanges to disclose scrip-wise gross outstandingin margin accounts to the market.

b) Stock Exchanges to monitor client-wise and scrip-wiseinformation and source of funds of clients for margintrading on daily as well as on cumulative basis.

BSEP r e s e n t s

JAITHIRTH RAOChairman, NASSCOMChairman, NASSCOM

A Lecture onFINANCE and TECHNOLOGYEmerging Trends and Opportunities

12th July, 2004

11

1. As a participant, what do you feel is the significance of themargin trading in the capital market?

Margin Finance is essentially a process of accessing leverage inthe equity markets. It facilities the investors to take largerpositions in the equity markets, even though the investor maybe able to fully fund the positions. The balance funding isarranged by the broker through whom the investor takes theposition. In the past, the investor did not face any problem intaking such positions due to the account period settlementswhich prevailed in the Indian markets. Further, there wereproducts such as badla and ALBM which further enhancedthe ability of the investor to take leveraged positions. However,all these opportunities disappeared with the introduction ofrolling settlements, where each day represents a settlementperiod and products such as futures and options. All thismeant that the sources of liquidity dried up in the market,increasing volatility. Margin trading is a mechanism to bringback liquidity into the equity markets. Margin tradingenhances liquidity substantially as also facilitating the processof price discovery in the markets. For these reasons, it is verynecessary to have a margin trading product in the equitymarkets.

2. How the margin trading model differ from that existing inthe US?

A brief perusal of the US model shows that margin tradingseems to be used both for buying and selling shares. In thecase of purchase of shares, the broker funds the cash componentwhile in the case of sale of shares, the broker arranges for theshares, which have to be delivered against the sale position. Inthe Indian markets, the concept of share lending andborrowing has not quite picked up. Hence the margin tradingproduct is mainly used by investors for share purchases andnot for sales. Further, in the US model, most of the riskparameters are left to the discretion of the broker. The onlyexception is the initial margin. In the Indian model, SEBI hasdefined various risk parameters such as initial margin,maintenance margin, nature of margin, capital requirementsof brokers to carry out margin trading, where broker canborrow to fund transactions etc. Hence the broker does nothave much discretion in terms of the product offering.

3. How do you assess the present status of margin trading inIndian market? What, in your opinion, could be the measuresto further improve the interest of margin trading among theparticipants?

Prior to March 2004, there were no formal guidelines formargin trading. Hence margin trading used to be conductedon an informal basis by many brokers. Though the activitywas significant, each broker would have his own risk paradigmfor the product.

The formal guidelines for margin trading were announced inMarch 2004 by SEBI. Since the product is new, volumeshave yet to pick up substantially.

In order to make the product more appealing to participants,the rules possibly need to be made more flexible. Some of thechanges suggested by various industry associations in theregulations are:1) Allow brokers to accept shares as margin from clients.2) Allow brokers to borrow from Mutual Funds, Insurance

Companies and other entities for financing margintrading transactions.

3) Lower the capital adequacy norms for brokers to offer thisproduct.

4) Lessen the reporting requirements.5) Lower the initial margin requirement from the present

level of 50%.6) Allow flexibility to the broker to determine the

maintenance margin.7) Allow shares purchased through margin trading to be

pledged with banks for funding.

Should these changes be brought about by SEBI, it is very likelythat interest in the product will be enhanced substantially.

4. Considering the requirement of stringent risk managementin the client level, how do you think, the technology shouldbe deployed?

Use of appropriate technology is required in various areasrelating to margin trading. The most important area is that oftracking client positions and client margins during markethours. If the broker is unable to do this effectively, then hisrisk management will be weak. The system doing theseactivities has to have a mark-to-market ability to give an online,real time risk management ability to the broker.

Another important area is to allow the client to see his positionsand margins so that he can take effective decisions to close outhis positions. This might require the setting up of a site wherethe client can access his positions during trading hours.

Margin calls to be made by the broker need to be automated,since large number of margin calls might have to be made involatile markets. This would again require harnessingtechnology to the fullest.

Finally, reporting to the regulator and the exchanges too needsto be automated so those mistakes are minimized.

5. What is the status of bank financing to brokers for margintrading?

Bank financing for margin trading is still at a nascent stage,given the newness of the product. Many banks have alreadyreached their capital market exposure limit of 5% of totaladvances to capital market and find it difficult to lend freshfunds for margin trading.

Margin trading also competes with the “Advance againstShares” product offered by most banks, where the banksdirectly manage the client risk and therefore feel comfortablewith. Further banks may not be comfortable taking creditexposure on some of the brokers directly.Having said all this, we are of the view that bank funding formargin trading will go up substantially with increased interestshown by investors in margin trading.

INTERVIEWMOHAN NATARAJANSenior Vice PresidentKotak Securities Ltd.

Mr. Mohan Natarajan, Senior VicePresident and Head - InformationTechnology of Kotak Securities Ltd.Some of his previous assignments werewith ICICI Limited, Hongkong Bank,IIT Investrust Limited, HDFCSecurities Limited.

Mr. Mohan Natarajan

SER

12

REPLACEMENT IN SENSEX

The Stock Exchange, Mumbai had decided to include Maruti Udyog Ltd. (Scrip Code 532500) in place of Larsen & Toubro Ltd.(Scrip Code 500510) in SENSEX w.e.f. May 19, 2004. This replacement is being made due to the demerger of the cement businessof Larsen & Toubro Ltd. into a new company UltraTech Cemco Ltd. and the capital restructuring being undertaken by the Larsen &Toubro Ltd. subsequent to the demerger. The free-float adjustment factor for Maruti Udyog Ltd. would be 0.30.

DELISTING OF COMPANIES

BSE has delisted 637 companies as trading in these companies has been under suspension for a period of 3 years or more for non-compliance of the Listing Agreement.

I. Notice is hereby once again to 445 companies mentioned in section I to show-cause as to why the Exchange should not proceedwith delisting of the said companies from the Exchange Records, within twenty one days.

II. Further, 192 companies mentioned in section II have either failed to reply to the show-cause notice or have given unsatisfactoryreplies.

The person aggrieved by the aforesaid proposal to delist the aforesaid Companies under Section I and Section II may make representations,if any, to the Delisting Committee of the Exchange with valid case specific proof / reasons thereof against the proposed delisting inwriting within 21 days.

SUSPENSION OF COMPANIES

Members of the investing public were informed that trading in the securities of 101 companies will be suspended w.e.f. 19th May,2004 until further notice on account of non-payment of annual listing fees by the companies for the financial year 2003-04 in termsof Clause 38 of the Listing Agreement despite having sent reminders and show-cause notices.

BSE TO ADMIT DEPOSIT BASED MEMBERSHIPS IN THE “CASH & DEBT SEGMENT”

BSE (The Stock Exchange, Mumbai) has invited membership from all over the country in “Cash Segment (Equities & Debt)”against a deposit of Rs.75,00,000/- (Rupees Seventy Five lakhs). The number is restricted to 100 membership.

Deposit based membership will be issued on a first-come-first-serve basis. The membership has exclusive trading rights and noownership rights of BSE. Individuals and corporates, are eligible to become a member of BSE in accordance with the rules & regulationsof the BSE. The deposit of the members will be subject to a lock in period of three years. Any member desiring to withdraw hismembership after such lock in period of three years or at any point thereafter will have to give a one-year notice to that effect to theExchange.

In addition to the amount of 75 Lakhs (Interest free deposit) the member has to pay the following amounts :

• Base minimum Capital - Rs.10,00,000/-• Trade Guarantee fund - Rs.10,00,000/-• Admission Fees (Non refundable) - Rs. 2,50,000/-• Broker Contingency Fund (Non refundable) - Rs. 2,50,000/-

The specimen of the application form as well as the other material including the terms and conditions and salient features of the depositbased membership are available with the Publications Department of the Exchange or can be down loaded from the website of theExchange www.bseindia.com/dbm.asp

������������������

May-2004

Monthly Newsletter on BSE Financial and Capital Market Training

13

Beta, R2,Volatility and Returns of SENSEX scrips for one year period (May 2003 - April 2004 )

Name BetaValues

Code Returns(1 year)

(%)

Co-efficient ofdetermination

(R2)

BSEIDaily

Volatility(%)

Weights ason 31/03/2004 (%)

Free Float Adj.Factor

500410 A.C.C. 1.39 0.54 2.57 113.87 1.35 0.90500490 BAJAJ AUTO 0.68 0.19 2.11 90.62 2.04 0.70532454 BHARTI TELE 0.77 0.09 3.46 402.37 1.96 0.20500103 BHEL 1.17 0.38 2.56 155.32 1.57 0.35500087 CIPLA LTD. 0.50 0.10 2.12 116.71 1.54 0.60500124 DR.REDDY’S 0.52 0.08 2.57 -0.46 1.56 0.75500300 GRASIM IND. 1.12 0.36 2.52 242.66 2.83 0.80500425 GUJ.AMB.CEM 1.10 0.41 2.34 99.82 1.18 0.70500010 HDFC 0.44 0.07 2.26 74.38 3.65 0.80500180 HDFC BANK 0.50 0.13 1.89 52.59 2.67 0.80500182 HERO HONDA 1.11 0.33 2.61 137.25 1.50 0.50500696 HIND.LEVER 0.82 0.33 1.95 -2.18 4.85 0.50500104 HIND.PETRO 0.88 0.23 2.51 65.18 2.44 0.50500440 HINDALCO 0.91 0.30 2.26 80.58 2.57 0.80532174 ICICI BANK 0.90 0.21 2.65 159.64 6.06 1.00500209 INFOSYS TECH 1.13 0.35 2.59 84.44 8.01 0.75500875 ITC LTD. 0.67 0.28 1.72 57.68 5.82 0.70500510 LARSEN & TOU 1.12 0.40 2.41 182.83 3.96 0.90500108 MAHA.TELE 0.90 0.23 2.57 62.11 1.31 0.45500312 ONGC CORPN 1.17 0.32 2.81 136.92 5.61 0.15500359 RANBAXY LAB. 0.71 0.32 1.71 57.41 4.31 0.70500325 RELIANCE 1.17 0.68 1.94 91.49 12.62 0.55500390 RELIANCE ENERGY 1.23 0.36 2.77 225.17 1.73 0.50500376 SATYAM COM 1.57 0.46 3.15 110.53 2.85 0.90500112 STATE BANK 1.19 0.53 2.21 130.69 4.75 0.45500570 TATA MOTORS 1.47 0.55 2.70 213.42 3.33 0.65500400 TATA POWER 1.33 0.46 2.67 217.33 1.69 0.70500470 TATA STEEL 1.46 0.55 2.68 170.65 3.09 0.75507685 WIPRO LTD. 1.39 0.46 2.76 78.13 2.24 0.20505537 ZEE TELE 1.27 0.23 3.58 65.97 0.90 0.55

Beta = Co-variance(SENSEX, Stock)/ Variance(SENSEX)R2 = (Correlation)2

Avg. Daily Volatility = One standard deviation of daily returns of individual stock price for last one yearReturns = % variation in the stock price over last one year

Sectoral Weights in SENSEX as on April 30, 2004Transport

Equipments7%

CapitalGoods2% Diversified

7%

Finance17%

FMCG11%

Healthcare7%

HousingRelated 3%

I.T13%

Media &Publishing

1%

Metal Products& Mining

6%

Oil & Gas20%

Telecom3%

Power3%

Correlation of SENSEX withINDEX 1 Month 3 Months 6 Months 1 Year

(Apr 04) (Feb 04-Apr 04) (Nov 03-Apr 04) (May 03-Apr 04)

BSE-100 0.955 0.874 0.982 0.998

BSE-TECk 0.728 0.865 0.904 0.904

MSCI INDIA INDEX 0.999 0.987 0.989 0.999

NIFTY 0.993 0.995 0.995 1.000

NASDAQ 0.515 0.766 0.774 0.963

DOW JONES 0.451 0.745 0.927 0.978

S&P 500 0.500 0.772 0.895 0.965

FTSE 100 0.271 0.476 0.716 0.950

NIKKEI 0.401 -0.115 0.521 0.850

14

SHAREHOLDINGPATTERN

500325 RELIANCE A 46.67 31.40 21.93 Mar-04500209 INFOSYS TECHNOLOGIES LTD-ORDI A 26.52 48.59 24.9 Mar-04500875 I T C LTD A 0 49.69 50.31 Mar-04532174 ICICI BANK L A 0 62.28 37.72 Mar-04500312 ONG CORP LTD A 74.15 8.68 17.16 Mar-04500696 HINDUSTAN LEVER LTD A 51.55 27.04 21.41 Mar-04500112 STATE BANKOF INDIA A 59.73 23.09 17.18 Mar-04500359 RANBAXY LABORATORIES LTD A 32.04 37.85 30.11 Mar-04500510 LARSEN & TOUBRO LTD A 0 54.59 45.41 Mar-04500010 HOUSING DEVELOPMENT FINANCE CO A 0 68.28 31.72 Mar-04500570 TATA MOTORS A 33.35 36.35 30.29 Mar-04500470 TATA IRON AND STEEL CO.LTD A 26.29 37.9 35.81 Mar-04500440 HINDALCO IN A 24.37 39.17 36.46 Mar-04500376 SATYAM COMP A 17.35 62.99 19.66 Mar-04500180 HDFC BANK LT A 24.18 34.56 41.26 Mar-04500104 HINDUSTAN PETROLEUM CORP.LTD A 51.01 40.19 8.81 Mar-04500300 GRASIMINDUSTRIES LTD A 21.94 42.72 35.34 Mar-04507685 WIPRO LTD A 83.74 6.07 10.19 Mar-04500490 BAJAJ AUTO A 29.19 24.1 46.72 Mar-04532454 BHARTI TELE A 46.6 11.93 41.47 Mar-04500390 RELIANCE ENR A 48.11 36.42 15.47 Mar-04500400 TATA POWER A 32.5 36.94 30.56 Mar-04500103 BHEL A 67.72 30.48 1.8 Mar-04500124 DR.REDDY’SLABORATRIES LTD A 25.76 31.24 43.01 Mar-04500182 HEROHONDA M A 54.96 32.22 12.82 Mar-04500087 CIPLA LTD A 40.96 27.91 31.12 Mar-04500108 MAHANAG TELE A 56.25 33.44 10.31 Mar-04500410 ASSOCIATED CEMENT COMPANIES LT A 0 56.22 43.78 Mar-04500425 GUJARAT AMBUJA CEMENTS LTD. A 25.55 42.92 31.35 Mar-04505537 ZEE TELEF LT A 47.64 43.82 8.54 Mar-04

Shareholding PatternScripCode

Scrip NameScrip

Group

Promoters Non-Promoters Quarterending

Others

According to Clause 35 of Listing Agreement, the companies agree to file with the Exchange the shareholding pattern on a quarterlybasis within 15 days of end of the quarter in the following form:

Category No. of Percentage ofshares held shareholding

Promoter’s holding Promoters* - Indian Promoters- Foreign PromotersPersons acting in concert #

Category No. of shares Percentageofheld shareholding

Non-Promoters HoldingInstitutional InvestorsMutual Funds and UTIBanks, Financial Institutions,Insurance Companies(Central/State Govt. Institutions/Non-governmentInstitutions)FIIsCategory No. of Percentage of

shares held shareholdingOthersPrivate Corporate BodiesIndian PublicNRIs/OCBsAny other (please specify)

* as defined in Regulation 2(h) of SEBI (Substantial Acquisitionof Shares and Takeovers) Regulations, 1997. The promoters’holding shall include all entities in the promoters’ group - individualor body corporates.# as defined in Regulation 2(e) of SEBI (Substantial Acquisitionof Shares and Takeovers) Regulations, 1997.

15

of The Stock Exchange, MumbaiParticulars Jan-04 Feb-04 Mar-04 Apr-04 Apr-03 Apr-02

(I) BUSINESS TRANSACTED AT BSE1 Turnover (Rs. in Cr.)i) A Group 57937.14 47752.22 47877.21 37808.31 18949.02 21917.16ii) B1 Group 6810.49 3317.68 2586.86 6829.27 1812.38 6627.22iii) B2 Group 576.41 271.00 204.22 171.65 54.97 322.47iv) T Group 238.77 99.14 80.74 19.16 0.00 0.00v) Z- Group 30.63 13.90 21.23 17.99 0.87 1.98

Total Equity Turnover 65593.44 51453.94 50770.26 44846.38 20817.24 28868.83vi) F - Group (Debt) 26.91 9.57 15.36 17.15 5.08 5.67vii) G - Group (G Sec.) 0.02 0.01 0.01 0.01 0.26 0.00

Total Other Turnover 26.93 9.58 15.37 17.16 5.34 5.672 Total Turnover (i to vii) (Rs. in Cr.) 65620.37 51463.52 50785.63 44863.54 20822.58 28874.50

(Rs. in Bn.) 656.20 514.64 507.86 448.64 208.23 288.75(USD in Bn.) 14.44 11.37 11.28 10.21 4.39 5.90

Cumulative from April (Rs. in Cr.) 400369.26 451832.78 502618.41 44863.54 20822.58 28874.50(Rs. in Bn.) 4003.69 4518.33 5026.18 448.64 208.23 288.75(USD in Bn.) 88.08 99.81 111.65 10.21 4.39 5.90

3 Average Daily Turnover (Rs. in Cr.)i) A Group 2758.91 2513.27 2176.24 1890.42 947.45 996.23ii) B1 Group 324.31 174.61 117.58 341.46 90.62 301.24iii) B2 Group 27.45 14.26 9.28 8.58 2.75 14.66iv) T- Group 11.37 5.22 3.67 0.96 0.00 0.00v) Z- Group 1.46 0.73 0.97 0.90 0.04 0.09

Total Equity Turnover 3123.50 2708.10 2307.74 2242.32 1040.86 1312.22vi) F - Group (Debt) 1.28 0.50 0.70 0.86 0.25 0.26vii) G - Group (G Sec.) 0.00 0.00 0.00 0.00 0.01 0.00

Total Other Turnover 1.28 0.50 0.70 0.86 0.27 0.264 Total Average Daily Turnover (i to vii) (Rs. in Cr.) 3124.78 2708.61 2308.44 2243.18 1041.13 1312.48

(Rs. in Bn.) 31.25 27.09 23.08 22.43 10.41 13.12(USD in Bn.) 0.69 0.60 0.51 0.51 0.22 0.27

Cumulative from April (Rs. in Cr.) 18738.63 21447.24 23755.67 2243.18 1041.13 1312.485 Turnover for the month (Rs. in Cr.)

High 4134.61 3176.52 2845.55 2856.86 1691.56 1766.61Low 2124.46 2265.70 1702.38 **978.38 762.03 1011.40

6 V-SAT Turnover (incl. in item no 2) (Rs. in Cr.) 25610.12 22907.56 21762.47 19192.90 8041.81 17476.007 No. of Shares Traded (Volume) (in Cr.)i) A Group 221.26 160.94 164.44 140.58 103.64 108.74ii) B1 Group 149.09 59.72 57.89 99.17 31.48 48.37iii) B2 Group 36.05 14.57 18.46 14.24 6.21 26.03iv) T- Group 17.51 5.10 3.39 0.31 0.00 0.00v) Z- Group 6.80 3.06 3.27 2.29 0.09 0.14

Total Shares Traded (i to v) 430.71 243.39 247.45 256.59 141.42 183.28vi) F - Group (Debt) 2.73 0.08 0.09 0.11 0.01 0.12vii) G - Group (G Sec.) 0.00 0.00 0.00 0.00 0.00 0.008 No. of Trades (in ‘000s) 22346.00 15793.00 16121.00 15630.78 9620.86 13500.50

Cumulative from April (in ‘000s) 170881.58 186674.58 202795.58 15630.78 9620.86 13500.509 No. of Scrips Traded * 2106 1995 1926 1907 2094 153110 Deliveriesa) No. of Shares (in Cr.)i) A Group 54.18 33.44 42.14 35.61 24.01 29.69ii) B1 Group 62.74 27.40 37.32 35.69 17.87 19.44iii) B2 Group 24.59 10.44 16.22 11.27 4.81 17.44iv) T Group 19.24 5.39 0.32 0.20 0.00 0.00v) Z Group 7.47 3.17 3.74 2.24 0.00 0.00

Total No. of Shares 168.22 79.84 99.74 85.01 46.69 66.57Cumulative from April 1265.72 1345.56 1445.30 85.01 46.69 66.57

b) Value (Rs. in Cr.)i) A Group 13934.84 9493.35 10958.07 9294.53 3823.13 5265.43ii) B1 Group 2730.86 1325.65 1406.86 2000.68 510.07 1347.30iii) B2 Group 364.68 176.40 151.79 123.83 31.47 195.29iv) T Group 258.33 110.00 16.34 19.32 0.00 0.00

KeytatisticsS

16

Particulars Jan-04 Feb-04 Mar-04 Apr-04 Apr-03 Apr-02v) Z Group 36.45 15.09 23.90 18.19 0.00 0.00

Total Value 17325.16 11120.49 12556.96 11456.55 4364.67 6808.02Cumulative from April 105633.10 116753.59 129310.55 11456.55 4364.67 6808.02

11 Market Capitalisation (Equity) (Rs. in Cr.)i) A Group 1029362 1024621 1053867 1085070 475153 444290ii) B1 Group 125974 123087 110898 132080 68727 146433iii) B2 Group 18742 17648 16691 18499 12756 17415iv) T Group 10796 10625 674 821 0 0v) Z Group 21980 20240 19077 18878 15889 17449

Total Market Cap. (i to v) (Rs. in Cr.) 1206854 1196221 1201207 1255347 572526 625587(Rs. in Bn.) 12068.54 11962.21 12012.07 12553.47 5725.26 6255.87(USD in Bn.) 265.50 264.24 266.83 285.75 120.84 127.88

12 No. of Trading Days 21 19 22 20 20 22Cumulative from April 213 232 254 20 20 22

13 Derivativesa) Turnover (Rs. in Cr.)i) Index Futures 2213.19 555.06 314.38 76.01 64.77 0.79ii) Stock Futures 1498.44 78.65 103.25 8.78 20.77 19.50iii) Index Options - Call 0.00 0.00 0.00 0.00 0.00 0.00iv) Index Options - Put 0.00 0.00 0.00 0.00 0.00 0.00v) Stock Options - Call 36.91 49.43 52.73 0.00 1.70 0.44vi) Stock Options - Put 38.41 46.76 34.60 0.00 0.11 0.05b) Total Derivatives Turnover (i to vii) (Rs. in Cr.) 3786.95 729.90 504.96 84.79 87.35 20.78

(Rs. in Bn.) 378.70 72.99 50.50 8.48 8.74 2.08(USD in Bn.) 8.33 1.61 1.12 0.19 0.18 0.04

Cumulative from April (Rs. in Cr.) 10839.48 11569.38 12074.34 84.79 87.35 20.78(Rs. in Bn.) 1083.95 1156.94 1207.43 8.48 8.74 2.08(USD in Bn.) 23.78 25.39 26.52 0.19 0.18 0.04

c) No. of Contractsi) Index Futures 73551 19086 11140 2633 4221 46ii) Stock Futures 28374 1647 3416 259 979 849iii) Index Options - Call 0 0 0 0 0 0iv) Index Options - Put 0 0 0 0 0 0v) Stock Options - Call 903 865 1698 0 73 31vi) Stock Options - Put 745 614 1185 0 7 3

Total No. of Contracts 103573 22212 17439 2892 5280 929d) Open Interest at the end of the month

Notional Value (Rs. in Cr.) 19.26 5.29 1.06 0.26 2.46 2.79No. of Contracts 606 106 35 8 141 100

(II) LISTING AND CAPITAL RAISED14 No. of Companies Listed

Newly Listed 2 11 7 5 2 4Delisted 93 43 0 241 5 2Total (Excluding Permitted Companies) 5553 5521 5528 5292 5647 5784

15 No. of Scrips Listed * 7305 7185 7264 7098 7338 739416 Newly listed securities of existing companies 65 73 117 108 37 35

Cumulative from April 403 476 593 108 37 3517 Capital Listed During the Month (Rs. in Cr.)

- Existing Companies 1770.53 51166.36 8680.46 6555.66 1766.95 217.27- Newly Listed Companies 39.47 134.97 1682.64 694.95 10.50 81.44Total (Rs. in Cr.) 1810.00 51301.33 10363.10 7250.61 1777.45 298.71

(Rs. in Bn.) 18.10 513.01 103.63 72.51 17.77 2.99(USD in Bn.) 0.40 11.33 2.30 1.65 0.38 0.06

18 Amount offered thro’ equity (IPO)a) Total No. of Issues 2 7 5 3 0 0b) Par Amount (Rs. in Cr.) 4.85 275.72 470.51 17.50 0.00 0.00c) No. of Issues (premium) 1 7 5 3 0 0d) Premium Amount (Rs. in Cr.) 426.91 3618.49 11087.58 217.04 0.00 0.00e) Total amount (b+d) (Rs. in Cr.) 431.76 3894.21 11558.09 234.54 0.00 0.0019 Amount offered thro’ other instruments (IPO)f) Total No. of Issues 0 0 1 0 0 0g) Amount (Rs. in Cr.) 0.00 0.00 1000.00 0.00 0.00 0.0020 Total amount offered thro’ prospectus(IPO)

Total No. of Issues (a+f) 2 7 6 3 0 0Amount (e+g) (Rs. in Cr.) 431.76 3894.21 12558.09 234.54 0.00 0.00

21 Amount offered thro’ equity by existinglisted companies (Rights Issue)

a) Total No. of Issues 0 1 2 1 1 0

17

Particulars Jan-04 Feb-04 Mar-04 Apr-04 Apr-03 Apr-02b) Par amount (Rs. in Cr.) 0.00 27.54 212.42 1250.00 1.51 0.00c) No. of Issues (premium) 0 1 1 1 1 0d) Premium Amount (Rs. in Cr.) 0.00 6.89 56.92 33750.00 0.45 0.00e) Total amount (b+d) (Rs. in Cr.) 0.00 34.43 269.35 35000.00 1.96 0.0022 Amount offered thro’ other instruments

by existing listed companiesf) Total No. of Issues 1 0 0 0 0 0g) Amount (Rs. in Cr.) 400.00 0.00 0.00 0.00 0.00 0.0023 Total amt offered by existing listed companies

Total No. of Issues (a+f) 1 1 2 1 1 0Amount (e+g) (Rs. in Cr.) 400.00 34.43 269.35 35000.00 1.96 0.00

24 Total amount offered thro’ all offerdocuments (19+22)Total No. of Issues 3 8 8 4 1 0Cumulative from April 24 32 40 4 1 0Amount (Rs. in Cr.) 831.76 3928.64 12827.44 35234.54 1.96 0.00Cumulative from April (Rs. in Cr.) 4487.28 8415.92 21243.36 35234.54 1.96 0.00

(Rs. in Bn.) 44.87 84.16 212.43 352.35 0.02 0.00(USD in Bn.) 0.99 1.86 4.72 8.02 0.00 0.00

25 Capital raised through FCCB/Euro IssuesNo. of Issues 1 0 1 5 0 0Cumulative from April 5 5 6 5 0 0Amount Raised (Rs. in Cr.) 61.33 0.00 451.90 3074.00 0.00 0.00Cumulative from April (Rs. in Cr.) 1877.56 1877.56 2329.46 3074.00 0 0

(Rs. in Bn.) 18.78 18.78 23.29 30.74 0.00 0.00(Source - CMIE) (USD in Bn.) 0.41 0.41 0.52 0.70 0.00 0.00

(III) INDEX AND RATIOS26 BSE Sensitive Index (30 Scrips) (1978-79=100)

High 6194.11 6035.80 5935.19 5925.58 3215.24 3512.55Low 5593.74 5567.12 5365.40 5655.09 2924.03 3301.21Average 5954.15 5826.74 5612.92 5809.01 3036.66 3435.13Closing (Month End) 5695.67 5667.51 5590.60 5655.09 2959.79 3338.16

27 BSE TECK Index (2nd April 2001=1000)High 1416.11 1301.17 1252.61 1299.87 817.29 1010.96Low 1193.32 1150.29 1128.49 1163.45 597.48 932.66Average 1301.23 1234.03 1184.18 1239.81 686.53 969.45Closing (Month End) 1219.06 1198.72 1157.95 1218.58 616.97 955.36

28 BSE 100 Index (1983-84=100)High 3297.19 3128.32 3124.95 3181.59 1590.10 1752.97Low 2878.90 2855.71 2831.32 3025.14 1452.40 1651.01Average 3142.23 3003.89 2956.07 3101.76 1504.62 1715.11Closing (Month End) 2946.14 2923.99 2966.31 3025.14 1470.31 1671.63

29 BSE 200 Index (1989-90 = 100)High 818.17 775.10 772.59 794.79 380.04 411.77Low 714.62 707.23 699.27 749.90 350.98 389.90Average 780.30 744.32 730.80 771.53 361.48 402.97Closing (Month End) 731.05 725.66 733.53 754.44 355.07 396.69

30 Dollex-200 (1989-90 = 100)High 299.11 284.93 284.26 300.03 133.52 140.14Low 262.06 259.93 257.86 283.09 123.41 132.53Average 285.78 273.72 270.55 292.58 126.99 137.15Closing (Month End) 268.62 266.94 281.46 283.09 124.85 134.87

31 BSE 500 Index (1989-90=100)High 2517.28 2379.96 2366.34 2446.02 1137.38 1222.54Low 2191.35 2167.36 2128.10 2295.85 1055.03 1161.96Average 2400.75 2283.64 2235.05 2367.49 1084.11 1196.04Closing (Month End) 2246.83 2228.41 2243.60 2321.25 1068.03 1182.01

32 P/E Ratio (Month Averages)BSE SENSEX based scrips (30) 19.39 18.71 18.55 19.31 13.21 16.83BSE 100 Index based scrips (100) 16.90 16.19 16.02 16.92 11.40 14.69

33 Price to Book Value (Month Averages)BSE SENSEX based scrips (30) 3.65 3.52 3.50 3.64 2.06 2.47BSE 100 Index based scrips (100) 3.27 3.13 3.08 3.24 1.70 1.77

34 Dividend Yield % (Month Averages)BSE SENSEX based scrips (30) 1.73 1.79 1.81 1.74 2.37 1.93BSE 100 Index based scrips (100) 2.14 2.25 2.28 2.13 3.18 2.33

(IV) BUSINESS TRANSACTED BY FIIs35 No. of Registered FIIs + * 527 534 540 541 507 491

Particulars Jan-04 Feb-04 Mar-04 Apr-04 Apr-03 Apr-0236 FIIs Purchases in

Secondary market in BSE (Rs. in Cr.) 4216 3640 3752 3470 1317 1910Cumulative from April (Rs. in Cr.) 25490 29130 32882 3470 1317 1910

(Rs. in Bn.) 254.90 291.30 328.82 34.70 13.17 19.10(USD in Bn.) 5.61 6.43 7.30 0.79 0.28 0.39

37 FIIs Sales in Secondary market in BSE (Rs. in Cr.) 3784 2926 2950 2836 1311 1949Cumulative from April (Rs. in Cr.) 18320 21246 24196 2836 1311 1949

(Rs. in Bn.) 183.20 212.46 241.96 28.36 13.11 19.49(USD in Bn.) 4.03 4.69 5.37 0.65 0.28 0.40

38 Net FIIs Investments inSecondary market in BSE (Rs. in Cr.) 432 714 802 634 6 -39Cumulative from April (Rs. in Cr.) 7170 7884 8686 634 6 -39

(Rs. in Bn.) 71.70 78.84 86.86 6.34 0.06 -0.39(USD in Bn.) 1.58 1.74 1.93 0.14 0.00 -0.01

39 FIIs Purchases in Secondary market (Equity) (All-India) + (Rs. in Cr.) 16830 14952 17238 19692 5043 4491Cumulative from April (Rs. in Cr.) 99571 114524 131762 19692 5043 4491

(Rs. in Bn.) 995.71 1145.24 1317.62 196.92 50.43 44.91(USD in Bn.) 21.91 25.30 29.27 4.48 1.06 0.92

40 FIIs Sales in Secondary market (Equity)(All-India)+ (Rs. in Cr.) 13654 12555 11634 12053 4613 4479Cumulative from April (Rs. in Cr.) 67615 80170 91804 12053 4613 4479

(Rs. in Bn.) 676.15 801.70 918.04 120.53 46.13 44.79(USD in Bn.) 14.87 17.71 20.39 2.74 0.97 0.92

41 Net FIIs Investments in SecondaryMarket (Equity) (All-India)+ (Rs. in Cr.) 3177 2397 5604 7638 430 12Cumulative from April (Rs. in Cr.) 31956 34353 39958 7638 430 12

(Rs. in Bn.) 319.56 343.53 399.58 76.38 4.30 0.12(USD in Bn.) 7.03 7.59 8.88 1.74 0.09 0.00

42 FIIs Purchases in Secondarymarket (Debt) (All-India)+ (Rs. in Cr.) 822 1010 1986 0 835 618Cumulative from April (Rs. in Cr.) 10099 11109 13095 0 835 618

(Rs. in Bn.) 100.99 111.09 130.95 0.00 8.35 6.18(USD in Bn.) 2.22 2.45 2.91 0.00 0.18 0.13

43 FIIs Sales in Secondary market (Debt)(All-India)+ (Rs. in Cr.) 129 734 1146 919 273 743Cumulative from April (Rs. in Cr.) 5264 5998 7144 919 273 743

(Rs. in Bn.) 52.64 59.98 71.44 9.19 2.73 7.43(USD in Bn.) 1.16 1.32 1.59 0.21 0.06 0.15

44 Net FIIs Investments in Secondarymarket (Debt) (All-India)+ (Rs. in Cr.) 693 276 840 -919 562 -125Cumulative from April (Rs. in Cr.) 4835 5111 5951 -919 562 -125

(Rs. in Bn.) 48.35 51.11 59.51 -9.19 5.62 -1.25(USD in Bn.) 1.06 1.13 1.32 -0.21 0.12 -0.03

(V) MEMBERSHIP AND TWS45 Members * 715 720 721 723 712 711

Individuals 207 206 206 207 212 215Corporate (Unlimited Liability)Clause (4) A 0 0 0 0 0 0of Securities Contracts (Regulation) Rules, 1957Indian Companies 488 494 495 496 480 474Foreign Institutional Investors 20 20 20 20 20 22Financial Corporations 0 0 0 0 0 0

46 No. of Trader Work Station (TWS) * 8450 8391 8449 8502 7187 737047 No .of Cities * 401 401 409 415 374 N. A.(VI) DOLLAR EXCHANGE RATE48 Dollar Rate (1 USD - Rs.) * (in Rs.) 45.4557 45.2700 45.0179 43.9311 47.3800 48.9200

18

Conversion Table1Billion = 100 Crore • 1 Crore = 10 Million • 1 Million = 10 Lakh • 1 Lakh = 100 Thousand

+ FII data except those pertaining to BSE sourced from SEBI* At the end of the month** SATURDAY TRADINGN. A. = Not Available