Sushant Final 100 Mks

8/3/2019 Sushant Final 100 Mks

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Introduction

Of all the modern service institutions, stock exchanges are perhaps the most

crucial agents and facilitators of entrepreneurial progress. After the

industrial revolution, as the size of business enterprises grew, it was no

longer possible for proprietors or partnerships to raise colossal amount of

money required for undertaking large entrepreneurial ventures. Such huge

requirement of capital could only be met by the participation of a very large

number of investors; their numbers running into hundreds, thousands and

even millions, depending on the size of business venture.

In general, small time proprietors, or partners of a proprietary or partnership

firm, are likely to find it rather difficult to get out of their business should

they for some reason wish to do so. This is so because it is not always

possible to find buyers for an entire business or a part of business, just when

one wishes to sell it. Similarly, it is not easy for someone with savings,

especially with a small amount of savings, to readily find an appropriate

business opportunity, or a part thereof, for investment. These problems will

be even more magnified in large proprietorships and partnerships. Nobody

would like to invest in such partnerships in the first place, since once

invested, their savings would be very difficult to convert into cash. And

most people have lots of reasons, such as better investment opportunity,

marriage, education, death, health and so on for wanting to convert their

savings into cash. Clearly then, big enterprises will be able to raise capital

from the public at large only if there were some mechanism by which the

investors could purchase or sell their share of business as ands they wished


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to do so. This implies that ownership in business has to be broken up into

a lager number of small units, such that each unit may be independently &

easily bought and sold without hampering the business activity as such.

Also, such breaking of business ownership would help mobilize small

savings in the economy into entrepreneurial ventures.

This end is achieved in a modern business through the mechanism of shares.


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What is a share?

A share represents the smallest recognized fraction of ownership in a

publicly held business. Each such fraction of ownership is represented in the

form of a certificate known as a share certificate. The breaking up of total

ownership of a business into small fragments, each fragment represented by

a share certificate, enables them to be easily bought and sold.

What is a stock exchange?

The institution where this buying and selling of shares essentially takes

place is theStock Exchange.

In the absence of stock exchanges, i.e. Institutions where small chunks of

businesses could be traded, there would be no modern business in the form

of publicly held companies. Today, owing to the stock exchanges, one can

be part owners of one company today and another company tomorrow; one

can be part owners in several companies at the same time; one can be part

owner in a company hundreds or thousands of miles away; one can be all of

these things. Thus by enabling the convertibility of ownership in the product

market into financial assets, namely shares, stock exchanges bring together

buyers and sellers (or their representatives) of fractional ownerships of

companies. And for that very reason, activities relating to stock exchanges

are also appropriately enough, known as stock market or security market.

Also a stock exchange is distinguished by a specific locality and

characteristics of its own; mostly a stock exchange is also distinguished by a


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physical location and characteristics of its own. In fact, according to

H.T.Parekh, the earliest location of the Bombay Stock Exchange, which for

a long period was known as the native share and stock brokers

association, was probably under a tree around 1870!

The stock exchanges are the exclusive centers for the trading of securities.

The regulatory framework encourages this by virtually banning trading of

securities outside exchanges. Until recently, the area of operation/

jurisdiction of exchange were specified at the time of its recognition, which

in effect precluded competition among the exchanges. These are called

regional exchanges. In order to provide an opportunity to investors to invest/

trade in the securities of local companies, it is mandatory foe the companies,

wishing to list their securities, to list on the regional stock exchange nearest

to their registered office.


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Characteristics of Stock Exchanges in India

Traditionally, a stock exchange has been an association of individual

members called member brokers (or simply members or brokers),

formed for the express purpose of regulating and facilitating buying

and selling of securities by the public and institution at large.

A stock exchange in India operates with due recognition from the

government under the Securities and Contracts (Regulations) Act,

1956. The member brokers are essentially the middlemen who carry

out the desired transactions in securities on behalf of the public (for a

commission) or on their own behalf. New membership to a Stock

Exchange is through election by the governing board of that stock

exchange.

At present, there are 23 stock exchanges in India, the largest among

them being the Bombay Stock Exchange. BSE alone accounts for over

80% of the total volume of transactions in shares.

Typically, a stock exchange is governed by a board consisting of

directors largely elected by the member brokers, and a few nominated

by the government. Government nominee include representatives of

the ministry of finance, as well as some public representatives, who

are expected to safeguard the public interest in the functioning of the

exchanges. A president, who is an elected member, usually nominated

by the government from among the elected members, heads the board.


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The executive director, who is usually appointed by the by the stock

exchange with the government approval is the operational chief of the

stock exchange. His duty is to ensure that the day to day operations

the Stock Exchange are carried out in accordance with the various

rules and regulations governing its functioning.

The overall development and regulation of the securities market has

been entrusted to the Securities and Exchange Board of India (SEBI)

by an act of parliament in 1992.

All companies wishing to raise capital from the public are required to

list their securities on at least one stock exchange. Thus, all ordinary

shares, preference shares and debentures of the publicly held

companies are listed in the stock exchange.


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Exchange management

Made some attempts in this direction, but this did not materially alter the

situation. In view of the less than satisfactory quality, of administration of

broker-managed exchanges, the finance minister in March, 2001 proposed

demutualization of exchanges by which ownership, management and trading

membership would be segregated from each other. The regulators are

working towards implementing this. Of the 23 stock exchanges in India, two

stock exchanges viz., OTCEI and NSE are already dematerialized. Board of

directors, which do not include trading members, manages these. Theses are

purest form of dematerialized exchanges, where ownership, management

and trading are in the hands of three sets of people. The concept of

dematerialization completely eliminates any conflict of interest and helps the

exchange to pursue market efficiency and investors interest aggressively.


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Role of SEBI

The SEBI, that is, the Securities and the Exchange Board of India, is the

national regulatory body for the securities market, set up under the securities

and Exchange Board of India act, 1992, to protect the interest of investors

in securities and to promote the development of, and to regulate the

securities market and for matters connected therewith and incidental too.

SEBI has its head office in Mumbai and it has now set up regional offices in

the metropolitan cities of Kolkata, Delhi, and Chennai. The Board of SEBI

comprises a Chairman, two members from the central government

representing the ministries of finance and law, one member from the

Reserve Bank of India and two other members appointed by the central

government.

As per the SEBI act, 1992, the power and functions of the Board encompass

the regulation of Stock Exchanges and other securities markets; registration

and regulation of the working stock brokers, sub-brokers, bankers to an issue

(a public offer of capital), trustees of trust deeds, registrars to an issues,

merchant bankers, under writers, portfolio managers, investment advisors

and such other intermediaries who may be associated with the stock market

in any way; registration and regulations of mutual funds; promotion and

regulation of self- regulatory organizations; prohibiting Fraudulent and

unfair trade practices and insider trading in securities markets; regulating

substantial acquisition of shares and takeover of companies; calling for


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information from, undertaking inspection, conducting inquiries and audits of

stock exchanges, intermediaries and self- regulatory organizations of the

securities market; performing such functions and exercising such powers as

contained in the provisions of the Capital Issues (Control) Act,1947 and the

Securities Contracts (Regulation) Act, 1956, levying various fees and other

charges, conducting necessary research for above purposes and performing

such other functions as may be prescribes from time to time.

SEBI as the watchdog of the industry has an important and crucial role in the

market as ensuring the market participants perform their duties in

accordance with the regulatory norms.


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Membership

The trading platform of a stock exchange is accessible only to brokers. The

broker enters into trades in exchanges either on his own account or on behalf

of clients. The clients may place their order with them directly or a sub-

broker indirectly. A broker is admitted to the membership of an exchange in

terms of the provisions of the SCRA, the SEBI act 1992, the rules, circulars,

notifications, guidelines, etc. prescribed there under and the byelaws, rules

and regulations of the concerned exchange. No stockbroker or sub-broker is

allowed to buy, sell or deal in securities, unless he or she holds a certificate

of registration granted by SEBI. A broker/sub-broker compiles with the code

of conduct prescribed by SEBI.

The stock exchanges are free to stipulate stricter requirements for its

members than those stipulated by SEBI. The minimum standards stipulated

by NSE for membership are in excess of the minimum norms laid down by

SEBI. The standards for admission of members lay down by NSE stress on

factors, such as, corporate structure, capital adequacy, track record,

education, experience, etc. and reflect the conscious endeavors to ensure

quality broking services.


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Listing

Listing means formal admission of a security to the trading platform of a

stock exchange, invariably evidenced by a listing agreement between the

issuer of the security and the stock exchange. ; Listing of securities on

Indian Stock Exchanges is essentially governed by the provisions in the

companies act, 1956, SCRA, SCRR, rules, bye-laws and regulations of the

concerned stock exchange, the listing agreement entered into by the issuer

and the stock exchange and the circulars/ guidelines issued by central

government and SEBI.

Index services

Stock index uses a set of stocks that are representative of the whole market,

or a specified sector to measure the change in overall behavior of the

markets or sector over a period of time. India Index Services & Products

Limited (IISL), promoted by NSE and CRISIL, is the only specialized

organization in the country to provide stock index services.


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Trading Mechanism

All stock exchanges in India follow screen-based trading system. NSE was

the first stock exchange in the country to provide nation-wide order-driven,

screen-based trading system. NSE model was gradually emulated by all

other stock exchanges in the country. The trading system at NSE known as

the National Exchange for Automated Trading (NEAT) system is an

anonymous order-driven system and operates on a strict price/time priority.

It enables members from across the countries to trade simultaneously with

enormous ease and efficiency. NEAT has lent considerable depth in the

market by enabling large number of members all over the country to trade

simultaneously and consequently narrowed the spreads significantly. A

single consolidated order book for each stock displays, on a real time basis,

buy and sell orders originating from all over the country. The bookstores

only limit orders, which are orders to buy or sell shares at a stated quantity

and stated price. The limit order is executed only if the price quantity

conditions match. Thus, the NEAT system provides an open electronic

consolidated limit order book (OECLOB). The trading system provides

tremendous flexibility to the users in terms of kinds of orders that can be

placed on the system.

Internet trading is available on NSE and BSE, as of now. SEBI has approved

the use of Internet as an order routing system, for communicating clients

orders to the exchanges through brokers. SEBI- registered brokers can


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introduce internet-based trading after obtaining permission from the

respective Stock Exchanges. SEBI has stipulated the minimum conditions to

be fulfilled by trading members to start internet-based trading and services.

NSE was the first exchange in the country to provide web-based access to

investors to trade directly on the exchange. It launched Internet trading in

February 2000. It was followed by the launch of Internet trading by BSE in

March 2001. SEBI approved trading through wireless medium or WAP

platform. NSE is the only exchange to provide access to its order book

through the hand held devices, which use WAP technology. This serves

primarily retail investors who are mobile and want to trade from any place

when the market prices for st0ocks of their choice are attractive.


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INTRODUCTION
http://en.wikipedia.org/wiki/File:BSE_logo.jpg


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The Stock Exchange, Mumbai, popularly known as "BSE" The

Bombay/Mumbai Stock Exchange Limited (formerly, The Stock

Exchange, Mumbai; popularly called The Bombay/Mumbai Stock Exchange,

orBSE) is the oldest stock exchange in Asia and has the greatest number of

listed companies in the world, with 4700 listed as of August 2007.It is

located at Dalal Street, Mumbai, India. On 31 December 2007, the equity

market capitalization of the companies listed on the BSE was US$ 1.79

trillion, making it the largest stock exchange in South Asia and the 12th

largest in the world.

With over 4700 Indian companies list on the stock exchange. And it has a

significant trading volume. The BSE SENSEX (SENSitive indEX), also

called the "BSE 30", is a widely used market index in India and Asia.

Though many other exchanges exist, BSE and the National Stock Exchange

of India account for most of the trading in shares in India.

Mumbai Stock Exchange Limited was established in 1875 as "The Native

Share and Stock Brokers Association", as a voluntary non-profit making

association. It has evolved over the years into its present status as the

premier Stock Exchange in the country. It may be noted that the Stock

Exchanges is the oldest one in Asia, even older than the Tokyo Stock

Exchange, which was founded in 1878.

The Exchange, while providing an efficient and transparent market for

trading in securities, upholds the interests of the investors and ensures

redressal of their grievances, whether against the companies or its own

member-brokers. It also strives to educate and enlighten the investors by


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making available necessary informative inputs and conducting investor

education programmes.

A Governing Board comprising of 9 elected directors (one third of them

retire every year by rotation), two SEBI nominees, a Reserve Bank of India

nominee, six public representatives and an Executive Director is the apex

body, which decides the policies and regulates the affairs of the Exchange.

The Executive Director as the Chief Executive Officer is responsible for the

day-to-day administration of the Exchange.

The average daily turnover of the Exchange during the year 2000-2001

(April-March) was Rs.3984.19 crores and average number of daily trades

was 5.69 lakhs. However, the average daily turnover of the Exchange during

the year 2001- 2002 has declined to Rs. 1244.10 crores and number of

average daily trades during the period to 5.17 lakhs. The ban on all deferral

products like BLESS and ALBM in the Indian capital Markets by SEBI

w.e.f. July 2, 2001, abolition of account period settlements, introduction of

Compulsory Rolling Settlements in all scripts traded on the Exchanges w.e.f.

December 31, 2001, etc. have adversely impacted the liquidity and

consequently there is a considerable decline in the daily turnover at the

Exchange.


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Bombay Stock Exchange history

1830's Business on corporate stocks and shares in Bank and Cotton presses

started in Bombay.

1860-1865 Cotton price bubble as a result of the American Civil War.

1870 - 90's Sharp increase in share prices of jute industries followed by a

boom in tea stocks and coal.

1978-79 Base year of Sensex, defined to be 100.

1986 Sensex first compiled using a market Capitalization-Weighted

methodology for 30 component stocks representing well-established

companies across key sectors.

The Bombay Stock Exchange is known as the oldest exchange in Asia. It

traces its history to the 1850s, when stockbrokers would gather under

banyan trees in front of Mumbai's Town Hall. The location of these

meetings changed many times, as the number of brokers constantly


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increased. The group eventually moved to Dalal Street in 1874 and in 1875

became an official organization known as 'The Native Share & Stock

Brokers Association'. In 1956, the BSE became the first stock exchange to

be recognized by the Indian Government under the Securities Contracts

Regulation Act. The Bombay Stock Exchange developed the BSE Sensex in

1986, giving the BSE a means to measure overall performance of the

exchange. In 2000 the BSE used this index to open its derivatives market,

trading Sensex futures contracts. The development of Sensex options along

with equity derivatives followed in 2001 and 2002, expanding the BSE's

trading platform.

Historically an open-cry floor trading exchange, the Bombay Stock

Exchange switched to an electronic trading system in 1995. It took the

exchange only fifty days to make this transition.

Since 1990

1000, July 25, 1990 On July 25, 1990, the Sensex touched the magical four-

digit figure for the first time and closed at 1,001 in the wake of a good

monsoon season and excellent corporate results.

July 1991 Rupee devalued by 18-19 %

2000, January 15, 1992 On January 15, 1992, the Sensex crossed the 2,000-

mark and closed at 2,020 followed by the liberal economic policy initiatives

undertaken by the then prime minister P.V.Narasimha Rao.


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3000, February 29, 1992 On February 29, 1992, the Sensex surged past the

3000 mark in the wake of the market-friendly Budget announced by the then

Finance Minister, Dr Manmohan Singh.

4000, March 30, 1992 On March 30, 1992, the Sensex crossed the 4,000-

mark and closed at 4,091 on the expectations of a liberal export-import

policy. It was then that the Harshad Mehta scam hit the markets and Sensex

witnessed unabated selling.

5000, October 8, 1999 On October 8, 1999, the Sensex crossed the 5,000-

mark as the BJP-led coalition won the majority in the 13th Lok Sabhaelection.

6000, February 11, 2000 On February 11, 2000, the InfoTech boom helped

the Sensex to cross the 6,000-mark and hit and all time high of 6,006.

6151, Feb 14, 2000 Tops. Index declines until Sept 2001 and loses half the

value. Coincides with dot-com bubble burst.

2595, Sept 21, 2001 Bottoms.

7000, June 20, 2005 On June 20, 2005, the news of the settlement between

the Ambani brothers boosted investor sentiments and the scripts of RIL,

Reliance Energy, Reliance Capital, and IPCL made huge gains. This helped

the Sensex crossed 7,000 points for the first time.

8000, September 8, 2005 On September 8, 2005, the Bombay Stock

Exchange's benchmark 30-share indexthe Sensex crossed the 8000 level

following brisk buying by foreign and domestic funds in early trading.


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9000, November 28, 2005 The Sensex on November 28, 2005 crossed the

magical figure of 9000 to touch 9000.32 points during mid-session at the

Bombay Stock Exchange on the back of frantic buying spree by foreign

institutional investors and well supported by local operators as well as retail

investors.

10000, February 6, 2006 The Sensex on February 6, 2006 touched 10,003

points during mid-session. The Sensex finally closed above the 10K-mark

on February 7, 2006.

11000, March 21, 2006 The Sensex on March 21, 2006 crossed the magicalfigure of 11,000 and touched a life-time peak of 11,001 points during mid-

session at the Bombay Stock Exchange for the first time. However, it was on

March 27, 2006 that the Sensex first closed at over 11,000 points.

12000, April 20, 2006 The Sensex on April 20, 2006 crossed the 12,000-

mark and closed at a peak of 12,040 points for the first time.

13000, October 30, 2006 The Sensex on October 30, 2006 crossed the

magical figure of 13,000 and closed at 13,024.26 points, up 117.45 points or

0.9%. It took 135 days for the Sensex to move from 12,000 to 13,000 and

123 days to move from 12,500 to 13,000.

14000, December 5, 2006 The Sensex on December 5, 2006 crossed the

14000-mark to touch 14,028 points. It took 36 days for the Sensex to move

from 13,000 to the 14,000 mark.

15000, July 6, 2007 The Sensex on July 6, 2007 crossed the magical figure

of 15,000 to touch 15,005 points in afternoon trade. It took seven months for

the Sensex to move from 14,000 to 15,000 points.


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16000, September 19, 2007 The Sensex scaled yet another milestone during

early morning trade on September 19, 2007. Within minutes after trading

began, the Sensex crossed 16,000, rising by 450 points from the previous

close. The 30-share Bombay Stock Exchange's sensitive index took 53 days

to reach 16,000 from 15,000. Nifty also touched a new high at 4659, up 113

points.

The Sensex finally ended with a gain of 654 points at 16,323. The NSE

Nifty gained 186 points to close at 4,732.

17000, September 26, 2007 The Sensex scaled yet another height duringearly morning trade on September 26, 2007. Within minutes after trading

began, the Sensex crossed the 17,000-mark. Some profit taking towards the

end, saw the index slip into red to 16,887 - down 187 points from the day's

high. The Sensex ended with a gain of 22 points at 16,921.

18000, October 9, 2007 The BSE Sensex crossed the 18,000-mark on

October 9, 2007. It took just 8 days to cross 18,000 points from the 17,000

mark. The index zoomed to a new all-time intra-day high of 18,327. It

finally gained 789 points to close at an all-time high of 18,280. The market

set several new records including the biggest single day gain of 789 points at

close, as well as the largest intra-day gains of 993 points in absolute term

backed by frenzied buying after the news of the UPA and Left meeting on

October 22 put an end to the worries of an impending election.

19000, October 15, 2007 The Sensex crossed the 19,000-mark backed by

revival of funds-based buying in blue chip stocks in metal, capital goods and

refinery sectors. The index gained the last 1,000 points in just four trading

days. The index touched a fresh all-time intra-day high of 19,096, and finally


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ended with a smart gain of 640 points at 19,059.The Nifty gained 242 points

to close at 5,670.

20000, October 29, 2007 The Sensex crossed the 20,000 mark on the back

of aggressive buying by funds ahead of the US Federal Reserve meeting.

The index took only 10 trading days to gain 1,000 points after the index

crossed the 19,000-mark on October 15. The major drivers of today's rally

were index heavyweights Larsen and Toubro, Reliance Industries, ICICI

Bank, HDFC Bank and SBI among others. The 30-share index spurted in the

last five minutes of trade to fly-past the crucial level and scaled a new intra-

day peak at 20,024.87 points before ending at its fresh closing high of

19977.67, a gain of 734.50 points. The NSE Nifty rose to a record high

5,922.50 points before ending at 5,905.90, showing a hefty gain of 203.60

points.

21000, January 8, 2008 The Sensex peaks. It crossed the 21,000 mark in

intra-day trading after 49 trading sessions. This was backed by high market

confidence of increased FII investment and strong corporate results for the

third quarter. However, it later fell back due to profit booking.

15,200, June 13, 2008 The Sensex closed below 15,200 mark, Indian market

suffer with major downfall from January 212008.

14,220, June 25, 2008 The Sensex touched an intra day low of 13,731

during the early trades, then pulled back and ended up at 14,220 amidst a

negative sentiment generated on the Reserve Bank of India hiking CRR by

50 bps. FII outflow continued in this week.


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12,822, July 2, 2008 The Sensex hit an intra day low of 12,822.70 on July 2,

2008. This is the lowest that it has ever been in the past year. Six months

ago, on January 10, 2008, the market had hit an all time high of 21206.70.

This is a bad time for the Indian markets, although Reliance and Infosys

continue to lead the way with mostly positive results. Bloomberg lists them

as the top two gainers for the Sensex, closely followed by ICICI Bank and

ITC Ltd.

11801.70, Oct 6, 2008 The Sensex closed at 11801.70 hitting the lowest in

the past 2 years.

10527, Oct 10, 2008 The Sensex today closed at 10527,800.51 points down

from the previous day having seen an intraday fall of as large as 1063 points.

Thus, this week turned out to be the week with largest percentage fall in the

Sensex.

14284.21, May 18, 2009 After the result of 15th Indian general election

Sensex gained 2110.79 points from the previous close of 12173.42 these

creates a new history in Indian Market. In the Opening Trade itself Sensex

gain 15% from the previous day close this leads to the suspension of 2 hours

trade. After 2 hours Sensex again surged this leads to the suspension of full

day trading.


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Hours of operation

Beginning of the Day Session :- 8:00 - 9:00

Login Session :- 9:00 - 9:30

Trading Session :- 9:55 - 15:30

Position Transfer Session :- 15:30 - 15:50

Closing Session :- 15:50 - 16:05

Option Exercise Session :- 16:05 - 16:35

Margin Session :- 16:35 - 16:50

Query Session :- 16:50 - 17:35

End of Day Session :- 17:35

The hours of operation for the BSE quoted above are stated in terms of the

local time in Mumbai, India (also known as Bombay). This translates into a

standard time zone UTC/GMT +5:30.


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BSE's normal trading sessions are on all days of the week except Saturdays,

Sundays and holidays declared by the Exchange in advance.

BSE STATISTICS

As the number of companies that are listed at this exchange is quite huge, it

is obvious that the trading volume at this exchange would also be

significant. It is important to note there that in the month of May 2007; the

total equity market capitalization of the various companies listed at the

exchange was about $999 billion. The BSE Sensex, short form of BSE

Sensitive Index, is the commonly used market index in the country and is

also called as BSE 30. This is because it comprises 30 major listed

companies that tend to change with time depending upon market

capitalization etc. Even in other countries in Asia, BSE is commonly used

for making references. The Bombay Stock Exchange is a value weighted

index and thus, it is composed of 30 major scripts pertaining to the 30 major

listed companies. As far as the base year is concerned, it is taken as April

1978=100. The 30 companies that make up the Index are not frequently

changing as in the past 20 years; only some of the companies have been

changed. Thus, there is good consistency as far as the composition of BSE

30 is considered. It is also important to note here that these 30 listed


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companies account for about one-fifth of the total market capitalization of

Bombay Stock Exchange. There are also many other indexes apart from BSE

and these include BSE500, BSE 100, BSE 200, BSE Tech, BSE Auto, BSE

Pharma etc. Let us now discuss about the various other aspects related to

Bombay Stock Exchange.

VARIOUS ASPECTS RELATED TO BOMBAY

STOCK EXCHANGE

There are many other aspects related toBombay Stock Exchange that need to

be discussed in order to have the complete understanding of the topic. The

first one is the BSE Broadcast. This is a large ticker on the wall of BSE and

it displays continuously the latest share prices and prices of other stocks.

Thus, a person can easily get this quote and stocks can be bought or sold in

order to gain advantage. Bombay Stock Exchange has played a very

important role in the development of capital market in India. As far as the

organization structure is concerned, it consists of Board of Directors and the

Board formulates almost all the policy issues regarding the exercise and

control of various activities performed at BSE. There are many committees

that are constituted by the board and these committees take care of different

aspects of BSE. The daily operations at the stock exchange are looked after

by the Managing Director and CEO. There is also a management team


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comprising various professionals that help MD & CEO in performing

various tasks.

The reach of BSE is nationwide and it has its presence in about 417 cities

and towns in nation that are located across the nation. The Bombay Stock

Exchange provides a transparent and efficient market for the trading of

different types of securities like shares, bonds etc. Apart from this, the debt

instruments and derivatives are also traded at the exchange. There has been a

greater emphasis that has been given to the technology that is used at the

Bombay Stock Exchange in order to strengthen the performance and the

functioning of the exchange. The hardware, software and the networking

systems of the Bombay Stock Exchange are continuously upgraded by the

Operations and Trading Department. This enables the exchange to provide

quality services to its various members. It is important to note here that the

BOLT capacity of the exchange has been enhanced to 40 lacks orders per

day. This has been made possible by upgrading the hardware.


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HOW STOCK MARKET WORKS?

In order to understand what stocks are and how stock markets work, we

need to dive into history--specifically, the history of what has come to be

known as the corporation, or sometimes the limited liability company

(LLC). Corporations in one form or another have been around ever since one

guy convinced a few others to pool their resources for mutual benefit.

The first corporate charters were created in Britain as early as the sixteenth

century, but these were generally what we might think of today as a public

corporation owned by the government, like the postal service.

Privately owned corporations came into being gradually during the early19th century in the United States, United Kingdom and Western Europe as

the governments of those countries started allowing anyone to create

corporations.


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In order for a corporation to do business, it needs to get money from

somewhere. Typically, one or more people contribute an initial investment

to get the company off the ground. These entrepreneurs may commit some

of their own money, but if they don't have enough, they will need to

persuade other people, such as venture capital investors or banks, to invest in

their business.

They can do this in two ways: by issuing bonds, which are basically a way

of selling debt (or taking out a loan, depending on your perspective), or by

issuing stock, that is, shares in the ownership of the company.

Long ago stock owners realized that it would be convenient if there were a

central place they could go to trade stock with one another, and the public

stock exchange was born. Eventually, today's stock markets grew out of

these public places.
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What is Trade Stock Market System

The stock market system is an avenue of how to trade stock for listed

corporations. As a corporation is formed, its initial shareholders are able to

acquire shares of stockfrom the point of subscription when a company is

created. When a company starts to be traded to the public, the primary

market comes in where those who subscribe to the initial public offering

(IPO) takes on the shares of stock sold from point of IPO. When those who

bought into a company at IPO point of view decides to sell their shares of

stock to other people, they can do so by going to the stock market.

The stock market is a secondary market for securities trading wherein

original or secondary holders of a companys shares of stock can sell their

stocks to other individuals within the frame work of the stock market

system.


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The stock market has buyers of stocks or those who wants to own a part of

the company but wasnt able to do so during the initial public offerings

made by the company to the public when it has decided to list itself as a

publicly listed company. As the stock market has developed and progressed

over the years, the ways of how to trade stock from one individual to another

has become more complicated and more challenging to be regulated.

Technology has aided in providing more efficient ways of transactions.

Front and backend solutions are put into place that helps direct the exchange

of shares of stock in timely and secure manner.

What is Technical Analysis?

How is it different from Fundamental Analysis?

Technical Analysis is a method of evaluating future security prices and

market directions based on statistical analysis of variables such as trading

volume, price changes, etc., to identify patterns.

A stock market term - The attempt to look for numerical trends in a random

function. The stock market used to be filled with technical analysts

deciding what to buy and sell, until it was decided that their success rate isno better than chance. Now technical stock analysis is virtually non-existent.

Technical analysts study trading histories to identify price trends in

particular stocks, mutual funds, commodities, or options in specific

market sectors or in the overall financial markets. They use their findings


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to predict probable, often short-term, trading patterns in the investments that

they study. The speed (and advocates would say the accuracy) with which

the analysts do their work depends on the development of increasingly

sophisticated computer programs.

Technical Analysis is a tool to detect if a trend (and thus the investor's

behavior) will persist or break. It gives some results but can be deceptive as

it relies mostly on graphic signals that are often intertwined, unclear or

belated. It might become a source of representiveness heuristic (spotting

patterns where there are none).

Fundamental analysis looks at a shares market price in light of the

companys underlying business proposition and financial situation. It

involves making both quantitative and qualitative judgments about a

company. Fundamental analysis can be contrasted with 'technical analysis,

which seeks to make judgments about the performance of a share based

solely on its historic price behavior and without reference to the underlying

business, the sector it's in, or the economy as a whole. This is done by

tracking and charting the companies stock price, volume of shares traded

day to day, both on the company itself and also on its competitors. In this

way investors hope to build up a picture of future price movements.


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PRIMARY & SECONDARY MARKET

There are two ways for investors to get shares from the primary and

secondary markets. In primary markets, securities are bought by way of

public issue directly from the company. In Secondary market share are

traded between two investors.

PRIMARY MARKET

Market for new issues of securities, as distinguished from the Secondary

Market, where previously issued securities are bought and sold.


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A market is primary if the proceeds of sales go to the issuer of the

securities sold.

This is part of the financial market where enterprises issue their new shares

and bonds. It is characterized by being the only moment when the enterprise

receives money in exchange for selling its financial assets.

SECONDARY MARKET

The market where securities are traded after they are initially offered in the

primary market. Most trading is done in the secondary market.

To explain further, it is trading in previously issued financial instruments.

An organized market for used securities. Examples are the New York Stock

Exchange (NYSE), Bombay Stock Exchange (BSE), National Stock

Exchange NSE, bond markets, over-the-counter markets, residential

mortgage loans, governmental guaranteed loans etc.


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Investment Basics

What is a Bull Market

There are two classic market types used to characterize the general direction

of the market. Bull markets are when the market is generally rising, typically

the result of a strong economy. A bull market is typified by generally rising

stock prices, high economic growth, and strong investor confidence in the


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economy. Bear markets are the opposite. A bear market is typified by

falling stock prices, bad economic news, and low investor confidence in the

economy.

A bull market is a financial market where prices of instruments (e.g.,

stocks) are, on average, trending higher. The bull market tends to be

associated with rising investor confidence and expectations of further

capital gains.

A market in which prices are rising. A market participant who believes

prices will move higher is called a "bull". A news item is consideredbullish if it is expected to result in higher prices. An advancing trend in

stock prices that usually occurs for a time period of months or years. Bull

markets are generally characterized by high trading volume.

Simply put, bull markets are movements in the stock market in which

prices are rising and the consensus is that prices will continue moving

upward. During this time, economic production is high, jobs are plentiful

and inflation is low. Bear markets are the opposite--stock prices are falling,

and the view is that they will continue falling. The economy will slow down,

coupled with a rise in unemployment and inflation. A key to successful

investing during a bull market is to take advantage of the rising prices. For

most, this means buying securities early, watching them rise in value and

then selling them when they reach a high. However, as simple as it sounds,this practice involves timing the market. Since no one knows exactly when

the market will begin its climb or reach its peak, virtually no one can time

the market perfectly. Investors often attempt to buy securities as they


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demonstrate a strong and steady rise and sell them as the market begins a

strong move downward.

Portfolios with larger percentages of stocks can work well when the market

is moving upward. Investors who believe in watching the market will buy

and sell accordingly to change their portfolios. Speculators and risk-takers

can fare relatively well in bull markets. They believe they can make profits

from rising prices, so they buy stocks, options, futures and currencies they

believe will gain value. Growth is what most bull investors seek.

What is a Bear Market?

The opposite of a bull market is a bear market when prices are falling in a

financial market for a prolonged period of time. A bear market tends to be

accompanied by widespread pessimism. A bear market is slang for when


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stock prices have decreased for an extended period of time. If an investor is

"bearish" they are referred to as a bear because they believe a particular

company, industry, sector, or market in general is going to go down.

Famous Stock Market Quotes & Sayings - Bulls make money.

Bears make money. Pigs get slaughtered.

Stocks and Futures - What is the Difference?

Are you new to trading? Perhaps you wonder what the difference is between

trading Stocks and trading Futures. Often when I meet someone new who

inquires as to what I do, I get a response of "that's like trading stocks, isn't

it?"

In some ways they are similar, but only minutely so. So let's consider some

of the major differences between the two.

Most individuals have likely traded stocks at one time or another. Usually, it

is to buy in order to 'own' a percentage of a particular company or to

liquidate such partial ownership. They pick up a phone to call a broker or goonline to purchase or sell. The order is facilitated through an 'exchange',

such as the New York Stock Exchange for example.

Buying and selling Futures is similar in this respect. You can call a broker

or go online to buy or sell Futures contracts. The order is then facilitated
http://www.sharemarketbasics.com/STOCKQUOTES/stock-quote-collection.htmhttp://www.sharemarketbasics.com/STOCKQUOTES/stock-quote-collection.htm


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through commodity exchange, such as the Chicago Mercantile Exchange for

example. Yet while buying a stock gives you part ownership in a company

or portfolio of companies (as in a fund), buying a Futures contract does not

give you ownership of a commodity or product. Rather, you are simply

entering into a contract to purchase the underlying commodity at a certain

price at a future time, noted by the contract. For example, buying one May

Wheat at 3.00 simply creates a contract between you and the seller (whom

you need not know as this is taken care of via the exchange) that come May

you will take delivery of 5000 bushels of Wheat at $3 per bushel, regardless

of what the price of Wheat at market happens to be come May. As a

speculator simply trading to make a profit from trading itself and with no

interest in actually taking delivery of product, you will simply sell your

contract prior to delivery at the going market price and the difference

between your buy price and sell price is either your profit or loss.

When you buy a stock, you are part owner of a company . When you buy

a Futures contract, you simply are entering a contract. With stocks, you

will pay for the stock at the time of your purchase plus broker commissions.

When buying a futures contract, you are simply entering the buy side of a

contract and no monies are paid other than commissions to your broker.

Stock exchanges and commodity exchanges are both membership

organizations established to act as middlemen between the buys and sells of

all types of traders, from business entities to the individual small trader. The

stock exchange act to bring capital from investors to the businesses that need

that capital. They facilitate the transfer of property rights (ownership in the

various companies offering stock).The commodity exchange act to bring

people willing to assume risk for the opportunity to make a substantial


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amount of money for taking such risk. This helps transfer the price risk

associated with ownership of various commodities, such as Soybeans, or a

service, like interest rates, from producers.

To buy stocks, you only need enough money in your account to purchase the

stock outright plus commissions. Once you make the purchase, the money is

removed immediately to make the purchase. With trading futures, since you

are not actually purchasing anything but simply entering a contract to do so

at a later time (which you will exit prior to avoid delivery), the broker will

require a certain amount of margin (good faith deposit to cover any possible

losses) in what is called a 'margin account'. Each commodity has a different

minimum margin requirement depending on several factors. Your broker

may use the exchange calculated margin or require a different margin of

their own. If the value of the commodity were to decrease and you are on the

buy side of the contract, then your contract has lost value and your broker

will notify you if your unrealized losses exceeds have gone beyond your

minimum margin requirement. This is called a 'margin call'. Naturally you

would want to have more capital than simply the margin amount when

trading futures to avoid these broker calls. The broker has the right (and

likely will) liquidate your position if you are getting too close to not having

enough to cover the losses in order to protect themselves.

With buying stocks outright, there is no potential for a margin call. You

simply own the stock outright. So perhaps you may be wondering why

anyone would bother buying futures contracts rather than stocks.

The major answer is: LEVERAGE.


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Leverage gives the trader the ability to control a large amount of money (or

commodity worth a lot of money) with very little money. For example, if

Live Cattle futures requires a minimum margin of $800 to trade a single

contract, and a single contract represents 40,000 lbs at the current market

price of say 75, you would be controlling $30,000 worth for a leverage of

over 35:1. This is appealing to many traders and justifies the risk. What is

that risk? Just as leverage can work in your favor, it can work against you at

the very same ratio. Known as a 'two-edged sword'.

You can increase the leverage of trading stocks if you trade with a margin

account. This usually allows you to purchase stocks on margin at the usual

rate of 50%. So for every dollar you have you can purchase $2 worth of

stock. The leverage is 2:1. How this works is that the broker is actually

'lending' you the other 50%. Of course by purchasing stock with margin you

can lose more than you have due to the leverage. And in this case you can

end up getting a 'margin call' from your broker if your stock losses too much

value. When you look at these two trading vehicles, the bottom line comes

to MARGIN and LEVERAGE.


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Understanding The Stock Market

Many people look to the stock market to enhance their hard-earned money

more and more each year. Some people are not even aware of their

investments, because they can come in the form of pensions with their place

of employment. The company invests this money in efforts to increase your

retirement funds. In order to fully understand what is happening with your

money, you should understand how the investments work.

The stock market is an avenue for investors who want to sell or buy stocks,

shares or other things like government bonds. Within the United Kingdom,the major stock market in this area is LSE (London Stock Exchange. Every

day a list is produced that includes indexes or companies and how they are

performing on the market. An index will be compromised of a special list of

certain companies, for example, within the UK; the FTSE 100 is the most

popular index. The Financial Times Stock Exchange dictates the average

overall performance of 100 of the largest companies with in the UK that are

listed on the stock market.

A share is a small portion of a PIC (public limited company), owning one of

these shares will give you many rights. For example, you will gain a portion

of the profits and growth that the company experiences, additionally you


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will obtain occasional accounts and reports from the chosen company.

Another exciting feature of owning a share of a company is the fact that you

are given the right to vote in various aspects of what happens with the

company.

Once you purchase a share of a company you will receive something called a

share certificate, this will be your proof of ownership. This certificate will

contain the total value of the share, this will likely not be the price that is

listed upon the exchange and is specifically for reasons of a legal matter.

This will not affect the current value the share currently holds on the market.

Typically, as a shareholder, you will receive your profit in the form of a

dividend; these are paid on a twice per year basis. The way this works is if

the company makes a profit, you will as well and on the opposite end of this

spectrum if they do not make a profit, neither will you. If a company does

extremely well their value increases, which means the value of the share you

own will as well. If you should decide to sell your share, you will only

benefit from it, if the company has experienced growth.


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Basics of Stock Market

Financial markets provide their participants with the most favorable

conditions for purchase/sale of financial instruments they have inside. Their

major functions are: guaranteeing liquidity, forming assets prices within

establishing proposition and demand and decreasing of operational

expenses, incurred by the participants of the market.

Financial market comprises variety of instruments, hence its functioning

totally depends on instruments held. Usually it can be classified according to

the type of financial instruments and according to the terms of instruments

paying-off.

From the point of different types of instruments held the market can be

divided into the one of promissory notes and the one of securities (stock

market). The first one contains promissory instruments with the right for itsowners to get some fixed amount of money in future and is called the market

of promissory notes, while the latter binds the issuer to pay a certain amount

of money according to the return received after paying-off all the promissory

notes and is called stock market. There are also types of securities referring

to both categories as, e.g., preference shares and converted bonds. They

are also called the instruments with fixed return.

Another classification is due to paying-off terms of instruments. These are:

market of assets with high liquidity (money market) and market of capital.

The first one refers to the market of short-term promissory notes with assets

age up to 12 months. The second one refers to the market of long-term


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promissory notes with instruments age surpasses 12 months. This

classification can be referred to the bond market only as its instruments

have fixed expiry date, while the stock markets not.

Now we are turning to the stock market. As it was mentioned before,

ordinary shares purchasers typically invest their funds into the company-

issuer and become its owners. Their weight in the process of making

decisions in the company depends on the number of shares he/she possesses.

Due to the financial experience of the company, its part in the market and

future potential shares can be divided into several groups.

1. Blue Chips Shares of large companies with a long record of profit

growth, annual return over $4 billion, large capitalization and constancy in

paying-off dividends are referred to as blue chips.

2. Growth Stocks Shares of such company grow faster; its managers

typically pursue the policy of reinvestment of revenue into further

development and modernization of the company. These companies rarely

pay dividends and in case they do the dividends are minimal as compared

with other companies.

3. Income Stocks Income stocks are the stocks of companies with high and

stable earnings that pay high dividends to the shareholders. The shares of

such companies usually use mutual funds in the plans for middle-aged and

elderly people.

4. Defensive Stocks These are the stocks whose prices stay stable when the

market declines, do well during recessions and are able to minimize risks.


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They perform perfect when the market turns sour and are in requisition

during economic boom.

These categories are widely spread in mutual funds, thus for better

understanding investment process it is useful to keep in mind this division.

Shares can be issued both within the country and abroad. In case a company

wants to issue its shares abroad it can use American Depositary Receipts

(ADRs). ADRs are usually issued by the American banks and point at

shareholders right to possess the shares of a foreign company under the

asset management of a bank. Each ADR signals of one or more sharespossession.

When operating with shares, aside ofpurchase/sale ratio profits, you can

also quarterly receive dividends. They depend on: type of share, financial

state of the company, shares category etc.

Ordinary shares do not guarantee paying-off dividends. Dividends of a

company depend on its profitability and spare cash. Dividends differ from

each other as they are to be paid in a different period of time, with the

possibility of being higher as well as lower. There are periods when

companies do not pay dividends at all, mostly when a company is in a

financial distress or in case executives decide to reinvest income into the

development of the business. While calculating acceptable share price,

dividends are the key factor.

Price of ordinary share is determined by three main factors: annual dividends

rate, dividends growth rate and discount rate. The latter is also called a

required income rate. The company with the high risks level is expected to


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have high required income rate. The higher cash flow the higher share prices

and versus. This interdependence determines assets value. Below we will

touch upon the division of share prices estimating in three possible cases

with regard to dividends.

While purchasing shares, aside of risks and dividends analysis, it is

absolutely important to examine company carefully as for its profit/loss

accounting, balance, cash flows, distribution of profits between its

shareholders, managers and executives wages etc. Only when you are sure

of all the ins and outs of a company, you can easily buy or sell shares. If you

are not confident of the information, it is more advisable not to hold shares

for a long time (especially before financial accounting published).


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12 Basic Stock Investing Rules Every Successful Investor

Should Follow

There are many important things you need to know to trade and invest

successfully in the stock market or any other market. 12 of the most

important things that I can share with you based on many years of trading

experience are enumerated below.

1. Buy low-sell high. As simple as this concept appears to be, the vast

majority of investors do the exact opposite. Your ability to consistently buy

low and sell high, will determine the success, or failure, of your investments.

Your rate of return is determined 100% by when you enter the stock market.

2. The stock market is always right and price is the only reality in trading.

If you want to make money in any market, you need to mirror what the

market is doing. If the market is going down and you are long, the market is

right and you are wrong. If the stock market is going up and you are short,

the market is right and you are wrong.

Other things being equal, the longer you stay right with the stock market, the

more money you will make. The longer you stay wrong with the stock

market, the more money you will lose.

3. Every market or stock that goes up will go down and most markets or

stocks that have gone down will go up. The more extreme the move up or

down, the more extreme the movement in the opposite direction once the

trend changes. This is also known as "the trend always changes rule."


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4. If you are looking for "reasons" that stocks or markets make large

directional moves, you will probably never know for certain. Since we are

dealing with perception of markets-not necessarily reality, you are wasting

your time looking for the many reasons markets move.

A huge mistake most investors make is assuming that stock markets are

rational or that they are capable of ascertaining why markets do anything. To

make a profit trading, it is only necessary to know that markets are moving -

not why they are moving. Stock market winners only care about direction

and duration, while market losers are obsessed with the whys.

5. Stock markets generally move in advance of news or supportive

fundamentals - sometimes months in advance. If you wait to invest until it

is totally clear to you why a stock or a market is moving, you have to

assume that others have done the same thing and you may be too late.

You need to get positioned before the largest directional trend move takes

place. The market reaction to good or bad news in a bull market will be

positive more often than not. The market reaction to good or bad news in a

bear market will be negative more often than not.

6. The trend is your friend. Since the trend is the basis of all profit, we need

long term trends to make sizeable money. The key is to know when to get

aboard a trend and stick with it for a long period of time to maximize profits.

Contrary to the short term perspective of most investors today, all the big

money is made by catching large market moves - not by day trading or short

term stock investing.


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7. You must let your profits run and cut your losses quickly if you are to

have any chance of being successful. Trading discipline is not a sufficient

condition to make money in the markets, but it is a necessary condition. If

you do not practice highly disciplined trading, you will not make money

over the long term. This is a stock trading system in itself.

8. The Efficient Market Hypothesis is fallacious and is actually a derivative

of the perfect competition model of capitalism. The Efficient Market

Hypothesis at root shares many of the same false premises as the perfect

competition paradigm as described by a well known economist.

The perfect competition model is not based on anything that exists on this

earth. Consistently profitable professional traders simply have better

information - and they act on it. Most non-professionals trade strictly on

emotion, and lose much more money than they earn.

The combination of superior information for some investors and the usual

panic as losses mount caused by buying high and selling low for others,

creates inefficient markets.

9. Traditional technical and fundamental analysis alone may not enable you

to consistently make money in the markets. Successful market timing is

possible but not with the tools of analysis that most people employ.

If you eliminate optimization, data mining, subjectivism, and other such

statistical tricks and data manipulation, most trading ideas are losers.

10. Never trust the advice and/or ideas of trading software vendors,

stock trading system sellers, market commentators, financial analysts,


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brokers, newsletter publishers, trading authors, etc., unless they trade their

own money and have traded successfully for years.

Note those that have traded successfully over very long periods of time are

very few in number. Keep in mind that Wall Street and other financial firms

make money by selling you something - not instilling wisdom in you. You

should make your own trading decisions based on a rational analysis of all

the facts.

11. The worst thing an investor can do is take a large loss on their

position or portfolio. Market timing can help avert this much too commonexperience.

You can avoid making that huge mistake by avoiding buying things when

they are high. It should be obvious that you should only buy when stocks are

low and only sell when stocks are high.

12. The most successful investing methods should take most individuals no

more than four or five hours per weekand, for the majority of us, only one

or two hours per week with little to no stress involved.


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Stock Trading Psychology

Many of today's highly successful traders will tell you that the general key to

success in trading is to be able to comfortably take a loss. It is generalknowledge among experts in the trading psychology field and among

traders that the market is not predictable and it is safe to say that it never will

be. In the world of trading, it is expected to take a loss; even those who are

highly skilled traders know that it is inevitable. With that said, let us have a

look at things you as a trader should be aware of, how you can take a loss

effectively and use it towards the greater good of your trading world.

Trading psychology tells us that when a trader loses he begins to become

somewhat of a perfectionist in his dealing. Many traders think that in

trading, a good day will always be one that is profitable. Trading psychology

experts tells us this is not true. A trader should define a good day as one

where they have extensively researched and planned with discipline and

focus, and have followed through to the entire extent of the plan. Yes, whena trader has mastered the art of accepting losses and working through them

with a well thought out plan then good days will become profitable in time.

Because the art of trading in an unpredictable market fluctuates so greatly

from one day to the next, experts in trading psychology believe that it is

important that you concentrate on what you can control, instead of things

that are beyond your control. Looking into the short-term you cannot expect

to be able to control the profits of your trading. With that said, look at what

you do you have ability to control.


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You do have the ability to control the difference between good and bad days.

You are able to control this factor by extensively researching the strategies

you implement within your trading experiences. By learning to research your

chosen strategies, thus controlling the amount of good and bad trading days

you experience, you will, in the long-term begin to generate profits, which is

the ultimate goal of every trader.

Trading psychology experts tell us that it is important to become realistic in

trading instead of becoming a perfectionist. Perfectionist traders, relate a

loss with failure, and will become obsessed with the failure, focusing only

upon it. Realistic traders understand the unpredictability of the market and

taking a loss is simply part of the art. The main key you must remember in

trading psychology to be able to effectively limit your losses, instead of

becoming obsessed with them. A common thing seen within the trading

psychology world is that traders who are obsessed with their losses often

have a hard time bouncing back from them, thus losing in the end.

Experts in trading psychology have organized three basic strategies you can

use to effectively stop losses. These strategies are:

* Price Based * Time Based * Indicator Based

Stops that are priced based are generally used when the other two have not

functioned. To make this work you will need to make hypothesis's about the

trade and identify a low point in that particular market. Then you will set

your trade entries near your points, thus making sure that losses will not be

overly excessive if the hypothesis fails.


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Time Based stops constitutes making use of your time. Designate a holding

period you allow to capture a certain number of points. If you have no

achieved your desired profit within that time limit, you should stop the trade.

If effectively used you should stop even if the price stop limit has not been

achieved.

The Indicator based stop makes use of market indicators. As a trader, you

should be aware of these indicators and utilize them extensively within your

trading experiences. Look at indicators such as, volume, advances, declines,

and new highs and lows.

Experts in trading psychology say that setting stops and rehearsing them

mentally is a good psychological tool to use and will help ensure that you

follow through.

CAPITAL LISTED AND MARKET CAPITALIZATION.


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The Stock Exchange, Bombay (BSE) is the premier Stock Exchange in

India. The BSE accounted for 46 per cent of listed companies on an all India

basis as on 31st March 1994. It ranked first in terms of the number of listed

companies and stock issues listed. The capital listed in the BSE as on 31st

March 1994 accounted for 50% of the overall capital listed on all the stock

exchanges. Its share of the market capitalization was around 74% as on the

same date. The paid-up capital of equity, debentures/bonds and preference

were 73%, 31%, 44% respectively of the overall capital listed on all the

Stock Exchanges as on the same date.

On the BSE, the Steel Authority of India had the largest market

capitalization of Rs.19, 908 crores as on the 31st March, 1994 followed by

the State Bank of India with the market capitalization of Rs.16, 702 crores

and Mahanagar Telephone Nigam Limited with the market capitalization of

Rs.11, 700 crores.

BSE SENSEX


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The BSE SENSEX, short form of Sensitive Index, first compiled in 1986 is

a market Capitalization-Weighted index of 30 component stocks

representing a sample of large, well-established and financially sound

companies. The index is widely reported in both, the domestic international,

print electronic media and is widely used to measure the used to measure the

performance of the Indian stock markets.

The BSE SENSEX is the benchmark index of the Indian capital market and

one, which has the longest social memory. In fact the SENSEX is

considered to be the pulse of the Indian stock markets. It is the oldest index

in India and has acquired a unique place in collective consciousness of the

investors. Further, as the oldest index of the Indian Stock Market, it provides

time series data over a fairly long period of time. Small wonder that the

SENSEX has over the years has become one of the most prominent brands

of the Country.

Objectives of SENSEX

The BSE SENSEX is the benchmark index with wide acceptance among

individual investors, institutional investors, foreign investors, foreigninvestors and fund managers. The objectives of the index are:


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To measure market movements

Given its long history and its wide acceptance, no other index matches the

BSE SENESX in the reflecting market movements and sentiments.

SENSEX is widely used to describe the mood in the Indian stock markets.

Benchmark for funds performance

The inclusion of blue chip companies and the wide and balanced industry

Representation in the SENSEX makes it the ideal benchmark for fund

managers to compare the performance of their funds.

For index based derivatives products

Institutional investors, money managers and small investors, all refer to the

BSE SENSEX for their specific purposes. The BSE SENSEX is in effect

the proxy for the Indian stock markets. Since SENSEX comprises of the

leading companies in all the significant sectors in the economy, we believe

that it will be the most liquid contract in the Indian market and will garner a

predominant market share.

Companies represented in the SENSEX


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Company name

(As on 15.06.01)

Sector

Hindustan lever FMCG

Reliance limited Chemicals and petrochemicals

Infosys technologies Information technology

Reliance petroleum Oil and gas

ITC FMCG

State bank of India Finance

MTNL Telecom

Satyam computers Information technology

Zee telefilms Media

Ranbaxy labs Healthcare

ICICI Finance

Larsen & toubro Diversified

Cipla Healthcare

Hindalco Metals and miningHPCL Metal and mining

TISCO Metal and mining

Nestle FMCG

Trading System IN SENSEX

Till Now, buyers and sellers used to negotiate face-to-face on the tradingfloor over a security until agreement was reached and a deal was struck in

the open outcry system of trading, that used to take place in the trading ring.

The transaction details of the account period (called settlement period) were

submitted for settlement by members after each trading session.


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The computerized settlement system initiated the netting and clearing

process by providing on daily basis statements for each member, showing

matched and unmatched transactions. Settlement processing involves

computation of each member's net position in each security, after taking into

account all transactions for the member during the settlement period, which

is 10 working days for group 'A' securities and 5 working days for group 'B'

securities.

Trading is done by members and their authorized assistants from their

Trader Work Stations (TWS) in their offices, through the BSE On-Line

Trading (BOLT) system. BOLT system has replaced the open outcry system

of trading. BOLT system accepts two-way quotations from jobbers, market

and limits orders from client-brokers and matches them according to the

matching logic specified in the Business Requirement Specifications (BRS)

document for this system.

The matching logic for the Carry-Forward System as in the case of the

regular trading system is quote driven with the order book functioning as an

"auxiliary jobber".

TRADING

The Exchange, which had an open outcry trading system, had switched over

to a fully automated computerized mode of trading known as BOLT (BSE

on Line Trading) System. Through the BOLT system the members now

enter orders from Trader Work Stations (TWSs) installed in their offices

instead of assembling in the trading ring. This system, which was initially


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both order and quote driven, was commissioned on March 14, 1995.

However, the facility of placing of quotes has been removed w.e.f., August

13, 2001 in view of lack of market interest and to improve system-matching

efficiency. The system, which is now only order driven, facilitates more

efficient processing, automatic order matching and faster execution of orders

in a transparent manner.

Earlier, the members of the Exchange were permitted to open trading

terminals only in Mumbai. However, in October 1996, the Exchange

obtained permission from SEBI for expansion of its BOLT network to

locations outside Mumbai. In terms of the permission granted by SEBI and

certain modifications announced later, the members of the Exchange are

now free to install their trading terminals at any place in the country. Shri P.

Chidambaram inaugurated the expansion of BOLT network the then Finance

Minister, Government of India on August 31, 1997.

In order to expand the reach of BOLT network to centers outside Mumbai

and support the smaller Regional Stock Exchanges, the Exchange has, as on

March 31, 2002, admitted subsidiary companies formed by 13 Regional

Stock Exchanges as its members. The members of these Regional Stock

Exchanges work as sub-brokers of the member-brokers of the Exchange.

The objectives of granting membership to the subsidiary companies formed

by the Regional Stock Exchanges were to reach out to investors in these

centers via the members of these Regional Exchanges and provide the

investors in these areas access to the trading facilities in all scripts listed on

the Exchange.


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Trading on the BOLT System is conducted from Monday to Friday between

9:55 a.m. and 3:30 p.m. The scripts traded on the Exchange have been

classified into 'A', 'B1', 'B2', 'F' and 'Z' groups. The number of scripts listed

on the Exchange under 'A', 'B1 ', 'B2' and 'Z' groups, which represent the

equity segment, as on March 31, 2002 was 173, 560,1930 and 3044

respectively. The 'F' group represents the debt market (fixed income

securities) segment wherein 748 securities were listed as on March 31, 2002.

The 'Z' group was introduced by the Exchange in July 1999 and covers the

companies which have failed to comply with listing requirements and/or

failed to resolve investor complaints or have not made the required

arrangements with both the Depositories, viz., Central Depository Services

(I) Ltd. (CDSL) and National Security Depository Ltd. (NSDL) for

dematerialization of their securities by the specified date, i.e., September 30,

2001. Companies in "Z" group numbered 3044 as on March 31, 2002. Of

these, 1429 companies were in "Z" group for not complying with the

provisions of the Listing Agreement and/or pending investor complaints and

the balance 1615 companies were on account of not making arrangements

for dematerialization of their securities with both the Depositories. 1615

companies have been put in "Z" group as a temporary measure till they make

arrangements for dematerialization of their securities. Once they finalize the

arrangements for dematerialization of their securities, trading and settlement

in their scripts would be shifted to their respective erstwhile groups.

The Exchange has also the facility to trade in "C" group which covers the

odd lot securities in 'A', 'B1', 'B2' and 'Z' groups and Rights renunciations in

all the groups of scripts in the equity segment. The Exchange, thus, provides


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a facility to market participants of on-line trading in odd lots of securities

and Rights renunciations. The facility of trading in odd lots of securities not

only offers an exit route to investors to dispose of their odd lots of securities

but also provides them an opportunity to consolidate their securities into

market lots.

The 'C' group can also be used by investors for selling upto 500 shares in

physical form in respect of scripts of companies where trades are to be

compulsorily settled by all investors in demat mode. This scheme of selling

physical shares in compulsory demat scripts is called as Exit Route Scheme.

With effect from December 31, 2001, trading in all securities listed in equity

segment of the Exchange takes place in one market segment, viz.,

Compulsory Rolling Settlement Segment.

Permitted Securities

The Exchange has since decided to permit trading in the securities of the

companies listed on other Stock Exchanges under " Permitted Securities"

category which meet the relevant norms specified by the Exchange.

Accordingly, to begin with the Exchange has permitted trading in scripts of

five companies listed on other Stock Exchanges w.e.f. April 22, 2002/

Computation of closing price of scripts in the Cash Segment:

The closing prices of scripts are computed on the basis of weighted average

price of all trades in the last 15 minutes of the continuous trading session.


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However, if there is no trade during the last 15 minutes, then the last traded

price in the continuous trading session is taken as the official closing price.

Auto D.O. facility:

Instead of issuing Delivery Out instructions for their delivery obligations in

a settlement /auction, a facility has been made available to the members of

automatically generating Delivery-Out (D.O.) instructions on their behalf

from their CM Pool A/cs by the Clearing House w.e.f., August 10, 2000.

This Auto D.O. facility is available for CRS (Normal & Auction) and for

trade-to-trade settlements. This facility is, however, not available for

delivery of non-pari passu shares and shares having multiple ISINs. The

members wishing to avail of this facility have to submit an authority letter to

the Clearing House. This Auto D.O facility is currently available only for

Clearing Member (CM) Pool accounts/Principal Accounts maintained by the

members with National Securities Depository Ltd. (NSDL) and Central

Depositories Services Ltd. (CDSL)

Self Auction

As has been discussed in the earlier paragraphs, the Delivery and Receive

Orders are issued to the members after netting off their purchase and sale

transactions in scripts where netting of purchase and sale positions is

permitted. It is likely in some circumstances that a selling client of a member

has failed to deliver the shares to him. However, this did not result in a

member's failure to deliver the shares to the Clearing House as there was a

purchase transaction of some other buying client of the member in the same

script and the same was netted off for the purpose of settlement. However, in

such a case, the member would require shares so that he can deliver the same


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to his buying client, which otherwise would have taken place from the

delivery of shares by the seller. To provide shares to the members, so that

they are in a position to deliver them to their buying clients in case of

internal shortages, the members have been given an option to submit

floppies for conducting self-auction (i.e., as if they have defaulted in

delivery of shares to the Clearing House). Such floppies are to be given to

the Clearing House on the pay-in day. The internal shortages reported by the

members are clubbed with the normal shortages in a settlement and the

Clearing House for the combined shortages conducts the auction. A member

after getting delivery of shares from the Clearing House in self-auction

credits the shares to the Beneficiary account of his client or hand over the

same to him in case securities received are in physical form and debits his

seller client with the amount of difference, if any, between the auction price

and original sale price.

BASKET TRADING SYSTEM

The Exchange has commenced trading in the Derivatives Segment with

effect from June 9, 2000 to, enable the investors to hedge their risks.

Initially, the facility of trading in the Derivatives Segment has been confined

to Index Futures. Subsequently, the Exchange has since introduced the index

options and options & futures in select individual stocks. The investors in


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cash market had felt a need to limit their risk exposure in the market to

movement in Sensex .

With a view to provide investors with this facility of creating Sensex linked

portfolios and also to create a linkage of market prices of the underlying

securities of Sensex in the Cash Segment and Futures on Sensex , the

Exchange has provided the facility of Basket Trading System on BOLT. In

Basket Trading System, the investors are able to buy/ sell all 30 scripts of

Sensex in the proportion of their respective weights in the Sensex , in one

go. The investors need not calculate the quantity of Sensex scripts to be

bought or sold for creating Sensex linked portfolios and this function is

performed by the system. The investors are also allowed to create their own

baskets by deleting certain scripts from the Sensex basket of 30 scripts.

Further, the Basket Trading System provides the arbitrageurs an opportunity

to take advantage of price differences in the underlying securities of Sensex

and Futures on the Sensex by simultaneous buying and selling of baskets

covering the Sensex scripts and Sensex Futures. This is expected to have

balancing impact on the prices in both cash and futures markets.

The Basket Trading System would, thus, meet the needs of investors and

also boost the volumes and depth in cash and futures markets.

The Basket Trading System has been implemented by the Exchange w.e.f.

Monday, the 14th August 2000. The trades executed under the Basket

Trading System are subject to intra-day trading/gross exposure limits and

daily margins as are applicable to normal trades.. To participate in this


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system the member indicates number of Sensex basket(s) to be bought or

sold, where the value of one Sensex basket is arrived at by the system by

multiplying Rs.50 to prevailing Sensex .

SETTLEMENT SYSTEM

Securities traded on BSE are classified into three groups, namely, specifiedshares or 'A' group and non-specified securities that are sub-divided into 'B1'

and 'B2' groups.

Presently, equity shares of thirty-two companies are classified as specified

shares. These companies typically have a large capital base with widespread

shareholding, a steady dividend, good growth record and a large volume of

business in the

Documents

Sushant Final 100 Mks