project on national stock exchange by habeeb

7/26/2019 project on National Stock Exchange by Habeeb

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A

PROJECT REPORT

ON

WORKING ON NATIONAL STOCK EXCHANGE

AT

COOMPANY NAME

SubmittedBy

Mr. / MsROLL No. / Hall Ticket No. 1234567

Submitted in partial fulfillment of the requirement for the

award of degree of

BACHELOR OF BUSINESS ADMINISTRATION

DEPARTMENT OF BUSINESS ADMINISTRATION

COLLEGE

(Affiliated to OSMANIA UNIVERSITY)HYDERABAD


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ABSTRACT

In this study Investment in the share market has been analyzed, and for

which I surveyed the market and interviewed registered broker, sub- broker

and investors through which I analyze the working of NSE. The study is all

about how NSE works.

The capital market is the market for securities, and NSE helps

investors a platform where companies and governments can raise and trade

on long term funds. It is a market in which money is lent for periods longer

than a year. The NSE includes the stock market and the derivative market.

Financial regulators, such as the Securities and Exchange Board of India

(SEBI), oversee the capital markets in their designated countries to ensure

that investors are protected against fraud.

The project finds, that of the three major components of cost of trading

in NSE viz. user charges (brokerage fees, exchange transaction charges and

DP chargers), impact cost and statutory levies (STT, service tax on

brokerage, stamp duty etc.), the user charges and the impact cost have been

falling over the years due to rising competition and technology. This has led

to a decline in Indias cost of trading in NSE, though it remains high relative

to other emerging economies such as Brazil and Russia primarily due to high

STT levels.


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TABLE OF CONTENTS

CHAPTER NO. CHAPTER NAME PAGE NO.

I INTRODUCTION 1-13

II LITERATURE REVIEW 14-79

III COMPUTER PROFILE 80-91

IV

DATA ANALYSIS AND

INTERPRETATIONS

92-99

V FINDINGS AND SUGGESTIONS 100-106

VI BIBLOGRAPHY 107-108


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INTRODUCTION

The Indian capital market is more than a century old. Its history goesback to 1875, when 22 brokers formed the Bombay Stock Exchange (BSE).

Over the period, the Indian securities market has evolved continuously to

become one of the most dynamic, modern, and efficient securities markets in

Asia. Today,

Indian market confirms to best international practices and standards

both in terms of structure and in terms of operating efficiency .Indian

securities markets are mainly governed by a) The Companys Act1956, b) the

Securities Contracts (Regulation) Act 1956 (SCRA Act), and c) the Securities

and Exchange Board of India (SEBI) Act, 1992. A brief background of these

above regulations are given below

a) The Companies Act 1956 deals with issue, allotment and transfer ofsecurities and various aspects relating to company management. It provides

norms for disclosures in the public issues, regulations for underwriting, and

the issues pertaining to use of premium and discount on various issues.

b) SCRA provides regulations for direct and indirect control of stock

exchanges with an aim to prevent undesirable transactions in securities. It

provides regulatory jurisdiction to Central Government over stock exchanges,

contracts in securities and listing of securities on stock exchanges.

c) The SEBI Act empowers SEBI to protect the interest of investors in

the securities market, to promote the development of securities market and to

regulate the security market.


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The Indian securities market consists of primary (new issues) as well

as secondary (stock) market in both equity and debt. The primary market

provides the channel for sale of new securities, while the secondary marketdeals in trading of securities previously issued. The issuers of securities issue

(create and sell) new securities in the primary market to raise funds for

investment. They do so either through public issues or private placement.

There are two major types of issuers who issue securities.

OTHER LEADING CITIES IN STOCK MARKET

OPERATIONS

Ahmedabad gained importance next to Bombay with respect to cotton textile

industry. After 1880, many mills originated from Ahmedabad and rapidly

forged ahead. As new mills were floated, the need for a Stock Exchange at

Ahmedabad was realized and in 1894 the brokers formed "The Ahmedabad

Share and Stock Brokers' Association".

What the cotton textile industry was to Bombay and Ahmedabad, the jute

industry was to Calcutta. Also tea and coal industries were the other major

industrial groups in Calcutta. After the Share Mania in 1861-65, in the 1870's

there was a sharp boom in jute shares, which was followed by a boom in tea

shares in the 1880's and 1890's; and a coal boom between 1904 and 1908. On

June 1908, some leading brokers formed "The Calcutta Stock ExchangeAssociation".

In the beginning of the twentieth century, the industrial revolution was on the

way in India with the Swadeshi Movement; and with the inauguration of the

Tata Iron and Steel Company Limited in 1907, an important stage in

industrial advancement under Indian enterprise was reached.


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INDIAN STOCK EXCHANGES - AN UMBRELLA GROWTH

The Second World War broke out in 1939. It gave a sharp boom which wasfollowed by a slump. But, in 1943, the situation changed radically, when

India was fully mobilized as a supply base.

On account of the restrictive controls on cotton, bullion, seeds and other

commodities, those dealing in them found in the stock market as the only

outlet for their activities. They were anxious to join the trade and their

number was swelled by numerous others. Many new associations were

constituted for the purpose and Stock Exchanges in all parts of the country

were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange

Limited (1940) and Hyderabad Stock Exchange Limited (1944) were

incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association

Limited and the Delhi Stocks and Shares Exchange Limited - were floated

and later in June 1947, amalgamated into the Delhi Stock Exchange

Association Limited.

There are two major indicators of Indian capital market- SENSEX & NIFTY:


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WHAT ARE THE SENSEX & THE NIFTY

The Sensex is an "index". What is an index? An index is basically an

indicator. It gives you a general idea about whether most of the stocks have

gone up or most of the stocks have gone down. The Sensex is an indicator of

all the major companies of the BSE. The Nifty is an indicator of all the major

companies of the NSE. If the Sensex goes up, it means that the prices of the

stocks of most of the major companies on the BSE have gone up. If the

Sensex goes down, this tells you that the stock price of most of the major

stocks on the BSE have gone down. Just like the Sensex represents the top

stocks of the BSE, the Nifty represents the top stocks of the NSE. Just in case

you are confused, the BSE, is the Bombay Stock Exchange and the NSE is

the National Stock Exchange. The BSE is situated at Bombay and the NSE is

situated at Delhi. These are the major stock exchanges in the country. There

are other stock exchanges like the Calcutta Stock Exchange etc. but they are

not as popular as the BSE and the NSE. Most of the stock trading in the

country is done though the BSE & the NSE . Besides Sensex and the Nifty

there are many other indexes. There is an index that gives you an idea about

whether the mid-cap stocks go up and down. This is called the BSE Mid-cap

Index.


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TYPES OF TRADERS/INVESTORS IN THE STOCK

MARKET

INVESTORS: Those who expect minimum 30-40% appreciation and are

willing to hold between two months to a few years. They enter only long

positions and usually select scrip based on fundamental analysis. Medium-

long term investors can utilize technical analysis to time their entry and profit

booking better.

DAY TRADERS: Day traders enter long/short traders to square up the same

day. They usually base decisions on technical, information or at times, gut

feel.

SHORT-TERM TRADERS

Short-term traders expect 5-20% returns within 2 days to 3 weeks. They

enter long as well as short positions. These include: Position trading, where

one either buys a stock and holds for the required appreciation, or sells from

an existing long (or borrowed) position to cover at a lower level.


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THE POPULARITY OF SHORT-TERM TRADING IS ON

THE RISE DUE TO THE FOLLOWING REASONS:

It provides an opportunity to make substantial profits in a short period

and ensures continuousrotation of capital.

As against long-term investment, short-term trading has limited

downside because of strict stop losses.

One can leverage on margin in case of short-term trading in futures.

Short-term trading in options requires smaller investment and has

limited risk.


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NEED AND SCOPE FOR THE STUDY

The unique nature of capital market instruments forces the investors to

depend strongly on the Fundamental or Technical analysis to guide

them in their investment decisions.

The technical analysis is aimed at examining the price & volume

movements of each stock.

It is essential that no investor can buy or sell shares on a whim. It

requires a serious research as lot of funds are involved in the

investment.

The investors can be guided with regard to investment decisions of

specific stocks to buy or sell.

As more People are investing money in stock market, this study will be

very useful to me in my future too.

I will be able to recommend the buy calls or sell calls to

investors/traders on any sectors by using all the technical indicators

carefully.


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SIGNIFICANCE OF THE STUDY

This is a limited study which takes into consideration the responses of

30-40 people. This data can be explored to take in the trends across the

industry. The significance for the industry lies in studying these trends that

emerge from the study. It is a rapidly changing and evolving sector. People

are only beginning to wake up to its vast possibilities. A study like this can

attempt to guide the future of the industry based on current trends.

SIGNIFICANE FOR THE RESEARCHER:

To facilitate and provide all the useful information of the study, which

can be helpful to make decision for investing money in right shares which is

profitable to investors as well as brokers.


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OBJECTIVES

To study the movement and behavior of the NSE market.

To study the movement of individual NSE scrip price.

To study in general about technical analysis in NSE stock market.

To study about the trends (forward /reversal) in NSE stock market.

To identify when to buy or sell the shares in NSE.

To identifying gauge the overbought and oversold positions in a in

NSE scrip.


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RESEARCH METHODOLOGY

RESEARCH PROBLEM

In this research work, the main purpose is to analyze the Indian stock price

movement and behavior using technical analysis of NSE.

SOURCES OF DATA:

The study was done using the secondary data. The secondary data was

collected from Securities and Exchange Board of India (SEBI) and National

Stock Exchange (NSE). The data for stock price and volume are published by

SEBI and NSE.

RESEARCH DESIGN:

The framework within which the study is based is Analytical in nature.

Type of study : Analytical Research

Data Collection: Open, close, high and low price of each company for three

months Downloaded from the websitewww.nseindia.com.

TOOLS & TECHNIQUES

1. Moving Averages

2. Exponential Simple Moving Average

3. Rate of Change (ROC)

4. Relative Strength Index (RSI)

5. Moving Average Convergence and Divergence (MACD)

6.

Stochastics
http://www.nseindia.com/http://www.nseindia.com/http://www.nseindia.com/http://www.nseindia.com/


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LIMITATIONS OF THE STUDY

Biased answers are unavoidable.

All the companies listed in NSE was not studied due to time constraint,

the study was restricted to overall study of the NSE sector.

As the share price movements changes from time to time, the prediction

of trend will also change.

The research is confined to to the study of NSE

Some respondents i.e. management of ATS Pvt Ltd were reluctant to

divulge personal information which can affect the validity of all

responses.

In a rapidly changing industry, analysis on one day or in one segment can

change very quickly. The environmental changes are vital to be

considered in order to assimilate the findings.


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INTRODUCTIONNATIONAL STOCK EXCHANGE (NSE)

The National Stock Exchange (NSE), located in Bombay, is India's first debt

market. It was set up in 1993 to encourage stock exchange reform through

system modernization and competition. It opened for trading in mid-1994. It

was recently accorded recognition as a stock exchange by the Department of

Company Affairs. The instruments traded are, treasury bills, government

security and bonds issued by public sector companies.

The Organization

The National Stock Exchange of India Limited has genesis in the report of

the High Powered Study Group on Establishment of New Stock Exchanges,

which recommended promotion of a National Stock Exchange by financial

institutions (FIs) to provide access to investors from all across the country on

an equal footing. Based on the recommendations, NSE was promoted by

leading Financial Institutions at the behest of the Government of India and

was incorporated in November 1992 as a tax-paying company unlike other

stock exchanges in the country. On its recognition as a stock exchange under

the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE

commenced operations in the Wholesale Debt Market (WDM) segment in

June 1994. The Capital Market (Equities) segment commenced operations in

November 1994 and operations in Derivatives segment commenced in June

2000.


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NSE Group

NSCCL NCCL NSETECH

IISL NSE NSE.IT

DotExIntl. Ltd.

NSDL
http://www.nseindia.com/content/us/us_nsdl.htmhttp://www.nseindia.com/content/us/us_dotex.htmhttp://www.nseindia.com/content/us/us_nseit.htmhttp://www.nseindia.com/content/us/us_organisation.htmhttp://www.nseindia.com/content/us/us_iisl.htmhttp://www.nseindia.com/content/us/us_nsetech.htmhttp://www.nseindia.com/content/us/us_nccl.htmhttp://www.nseindia.com/content/us/us_nsccl.htmhttp://www.nseindia.com/content/us/us_nsdl.htmhttp://www.nseindia.com/content/us/us_dotex.htmhttp://www.nseindia.com/content/us/us_nseit.htmhttp://www.nseindia.com/content/us/us_organisation.htmhttp://www.nseindia.com/content/us/us_iisl.htmhttp://www.nseindia.com/content/us/us_nsetech.htmhttp://www.nseindia.com/content/us/us_nccl.htmhttp://www.nseindia.com/content/us/us_nsccl.htmhttp://www.nseindia.com/content/us/us_nsdl.htmhttp://www.nseindia.com/content/us/us_dotex.htmhttp://www.nseindia.com/content/us/us_nseit.htmhttp://www.nseindia.com/content/us/us_organisation.htmhttp://www.nseindia.com/content/us/us_iisl.htmhttp://www.nseindia.com/content/us/us_nsetech.htmhttp://www.nseindia.com/content/us/us_nccl.htmhttp://www.nseindia.com/content/us/us_nsccl.htmhttp://www.nseindia.com/content/us/us_nsdl.htmhttp://www.nseindia.com/content/us/us_dotex.htmhttp://www.nseindia.com/content/us/us_nseit.htmhttp://www.nseindia.com/content/us/us_organisation.htmhttp://www.nseindia.com/content/us/us_iisl.htmhttp://www.nseindia.com/content/us/us_nsetech.htmhttp://www.nseindia.com/content/us/us_nccl.htmhttp://www.nseindia.com/content/us/us_nsccl.htmhttp://www.nseindia.com/content/us/us_nsdl.htmhttp://www.nseindia.com/content/us/us_dotex.htmhttp://www.nseindia.com/content/us/us_nseit.htmhttp://www.nseindia.com/content/us/us_organisation.htmhttp://www.nseindia.com/content/us/us_iisl.htmhttp://www.nseindia.com/content/us/us_nsetech.htmhttp://www.nseindia.com/content/us/us_nccl.htmhttp://www.nseindia.com/content/us/us_nsccl.htmhttp://www.nseindia.com/content/us/us_nsdl.htmhttp://www.nseindia.com/content/us/us_dotex.htmhttp://www.nseindia.com/content/us/us_nseit.htmhttp://www.nseindia.com/content/us/us_organisation.htmhttp://www.nseindia.com/content/us/us_iisl.htmhttp://www.nseindia.com/content/us/us_nsetech.htmhttp://www.nseindia.com/content/us/us_nccl.htmhttp://www.nseindia.com/content/us/us_nsccl.htmhttp://www.nseindia.com/content/us/us_nsdl.htmhttp://www.nseindia.com/content/us/us_dotex.htmhttp://www.nseindia.com/content/us/us_nseit.htmhttp://www.nseindia.com/content/us/us_organisation.htmhttp://www.nseindia.com/content/us/us_iisl.htmhttp://www.nseindia.com/content/us/us_nsetech.htmhttp://www.nseindia.com/content/us/us_nccl.htmhttp://www.nseindia.com/content/us/us_nsccl.htmhttp://www.nseindia.com/content/us/us_nsdl.htmhttp://www.nseindia.com/content/us/us_dotex.htmhttp://www.nseindia.com/content/us/us_nseit.htmhttp://www.nseindia.com/content/us/us_organisation.htmhttp://www.nseindia.com/content/us/us_iisl.htmhttp://www.nseindia.com/content/us/us_nsetech.htmhttp://www.nseindia.com/content/us/us_nccl.htmhttp://www.nseindia.com/content/us/us_nsccl.htm


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Listing

NSE plays an important role in helping an Indian companys access equity

capital, by providing a liquid and well-regulated market. NSE has about 1319

companies listed representing the length, breadth and diversity of the Indian

economy which includes from hi-tech to heavy industry, software, refinery,

public sector units, infrastructure, and financial services. Listing on NSE

raises a companys profile among investors in India and abroad. Trade data is

distributed worldwide through various news-vending agencies. More

importantly, each and every NSE listed company is required to satisfy

stringent financial, public distribution and management requirements. High

listing standards foster investor confidence and also bring credibility into the

markets.

BENEFITS AT NSE

1. A premier market place

2. Visibility

3.

Largest exchange

4. Unprecedented reach

5. Modern infrastructure

6. Transaction speed

7. Short settlement cycles

8. Broadcast of corporate announcements


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NOMINAL LISTING FEES

A premiermarketplace

Visibility

Largestexchange

Unprecedented reach

Moderninfrastruct

ure

Transaction speed

Shortsettlement

cycles

Broadcastof

corporateannounce

ments

Tradestatisticsfor listed

companies

Investorservicecenters

Nominallisting fees


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Introduction of SENSEX

SENSEX, first compiled in 1986, was calculated on a "Market Capitalization-

Weighted" methodology of 30 component stocks representing large, well-

established and financially sound companies across key sectors. The base

year of SENSEX was taken as 1978-79. SENSEX today is widely reported in

both domestic and international markets through print as well as electronic

media. It is scientifically designed and is based on globally accepted

construction and review methodology. Since September 1, 2003, SENSEX is

being calculated on a free-float market capitalization methodology.

The "free-float market capitalization-weighted" methodology is a widely

followed index construction methodology on which majority of global equity

indices are based; all major index providers like MSCI, FTSE, STOXX, S&P

and Dow Jones use the free-float methodology.

The growth of the equity market in India has been phenomenal in the present

decade. Right from early nineties, the stock market witnessed heightened

activity in terms of various bull and bear runs. In the late nineties, the Indian

market witnessed a huge frenzy in the 'TMT' sectors. More recently, real

estate caught the fancy of the investors. SENSEX has captured all these

happenings in the most judicious manner. One can identify the booms and

busts of the Indian equity market through SENSEX. As the oldest index in


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the country, it provides the time series data over a fairly long period of time

(from 1979 onwards). Small wonder, the SENSEX has become one of the

most prominent brands in the country.

SENSEX Calculation Methodology

SENSEX is calculated using the "Free-float Market Capitalization"

methodology, wherein, the level of index at any point of time reflects thefree-float market value of 30 component stocks relative to a base period. The

market capitalization of a company is determined by multiplying the price of

its stock by the number of shares issued by the company. This market

capitalization is further multiplied by the free-float factor to determine the

free-float market capitalization.

The base period of SENSEX is 1978-79 and the base value is 100 index

points. This is often indicated by the notation 1978-79=100. The calculation

of SENSEX involves dividing the free-float market capitalization of 30

companies in the Index by a number called the Index Divisor. The Divisor is

the only link to the original base period value of the SENSEX. It keeps the

Index comparable over time and is the adjustment point for all Index

adjustments arising out of corporate actions, replacement of scrips etc.


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During market hours, prices of the index scrips, at which latest trades are

executed, are used by the trading system to calculate SENSEX every 15

seconds. The value of SENSEX is disseminated in real time.

Concept of FREE FLOAT

Free-float methodology refers to an index construction methodology that

takes into consideration only the free-float market capitalization of a

company for the purpose of index calculation and assigning weight to stocks

in the index. Free-float market capitalization takes into consideration only

those shares issued by the company that are readily available for trading in

the market. It generally excludes promoters' holding, government holding,

strategic holding and other locked-in shares that will not come to the market

for trading in the normal course. In other words, the market capitalization of

each company in a free-float index is reduced to the extent of its readily

available shares in the market.

SAMPLE SIZE

Data for analysis I have chosen analysis National Stock Exchange (NSE)

performance over the years and also compared it to BSE. I have chosen the

data analysis on the basis of volume of trade.


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Definition of Free-float

Shareholding of investors that would not, in the normal course come

into the open market for trading are treated as 'Controlling/ Strategic

Holdings' and hence not included in free-float. Specifically, the

following categories of holding are generally excluded from the

definition of Free-float:

Shares held by founders/directors/ acquirers which has control

element

Shares held by persons/ bodies with "Controlling Interest"

Shares held by Government as promoter/acquirer

Holdings through the FDI Route

Strategic stakes by private corporate bodies/ individuals

Equity held by associate/group companies (cross-holdings)

Equity held by Employee Welfare Trusts

Locked-in shares and shares which would not be sold in the open

market in normal course.


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Maintenance of SENSEX

One of the important aspects of maintaining continuity with the past is to

update the base year average. The base year value adjustment ensures that

replacement of stocks in Index, additional issue of capital and other corporate

announcements like 'rights issue' etc. do not destroy the historical value of the

index. The beauty of maintenance lies in the fact that adjustments for

corporate actions in the Index should not per se affect the index values.

The BSE Index Cell does the day-to-day maintenance of the index within the

broad index policy framework set by the BSE Index Committee. The BSE

Index Cell ensures that SENSEX and all the other BSE indices maintain their

benchmark properties by striking a delicate balance between frequent

replacements in index and maintaining its historical continuity. The BSE

Index Committee comprises of capital market expert, fund managers, market

participants and members of the BSE Governing Board.

Function and purpose of stock market

The stock market is one of the most important sources for companies to

raise money. This allows businesses to be publicly traded, or raise additional

capital for expansion by selling shares of ownership of the company in a

public market. The liquidity that an exchange provides affords investors the


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ability to quickly and easily sell securities. This is an attractive feature of

investing in stocks, compared to other less liquid investments such as real

estate.

History has shown that the price of shares and other assets is an important

part of the dynamics of economic activity, and can influence or be an

indicator of social mood. An economy where the stock market is on the rise is

considered to be an up and coming economy. In fact, the stock market is

often considered the primary indicator of a country's economic strength and

development. Rising share prices, for instance, tend to be associated with

increased business investment and vice versa. Share prices also affect the

wealth of households and their consumption. Therefore, central banks tend to

keep an eye on the control and behavior of the stock market and, in general,

on the smooth operation of financial system functions. Financial stability is

the raison d'tre of central banks. Exchanges also act as the clearinghouse for

each transaction, meaning that they collect and deliver the shares, and

guarantee payment to the seller of a security. This eliminates the risk to an

individual buyer or seller that the counterparty could default on the

transaction. The smooth functioning of all these activities facilitates

economic growth in that lower costs and enterprise risks promote the

production of goods and services as well as employment. In this way the

financial system contributes to increased prosperity.


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Depository

What is a Depository?

A depository holds shares and other securities of investors in electronic form.

Through Depository Participants (DPs), it also provides services related to

transactions in securities. Its structure and functioning are similar to the

Bank. Presently in India, there are two depository viz. National Securities

Depository Limited (NSDL) and Central Depository Services (I) Limited

(CDSL). Both of them are registered with SEBI.

What is a DP?

DP is a member of a Depository who offers its services to hold securities of

Investors (Beneficial Owners) in dematerialized form. DP is like a Bank

branch. It is an agent of the depository. DP works as an interface between

Depository and Investors. DPs are required to be registered with SEBI. If an

investor wants to avail the services offered by Depository, he has to open a

Demat account with DP similar to opening of a bank account with a branch

of the bank.

Depository is responsible for keeping stocks of investors in electronics form.

There are two depositories in India, NSDL (National Securities Depository

Ltd) and CDSL (Central Depository Services Ltd).


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CDSL (Central Depository Services Ltd.)

CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with

leading banks such as State Bank of India, Bank of India, Bank of Baroda,

HDFC Bank, Standard Chartered Bank, Union Bank of India and Centurion

Bank.

CDSL was set up with the objective of providing convenient, dependable andsecure depository services at affordable cost to all market participants. Some

of the important milestones of CDSL system are:

CDSL received the certificate of commencement of business from SEBI in

February, 1999.

Honourable Union Finance Minister, Shri Yashwant Sinha flagged off the

operations of CDSL on July 15, 1999.

Settlement of trades in the demat mode through BOI Shareholding Limited,

the clearing house of BSE, started in July 1999.

All leading stock exchanges like the National Stock Exchange, Calcutta

Stock Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad,

etc have established connectivity with CDSL.


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As at the end of Dec 2007, over 5000 issuers have admitted their securities

(equities, bonds, debentures, commercial papers), units of mutual funds,

certificate of deposits etc. into the CDSL system.

About NSDL

Although India had a vibrant capital market which is more than a century old,

the paper-based settlement of trades caused substantial problems like bad

delivery and delayed transfer of title till recently. The enactment of

Depositories Act in August 1996 paved the way for establishment of

National Securities Depository Limited (NSDL), the first depository in

India. This depository promoted by institutions of national stature responsible

for economic development of the country has since established a national

infrastructure of international standards that handles most of the securities

held and settled in dematerialised form in the Indian capital market.

Using innovative and flexible technology systems, NSDL works to support

the investors and brokers in the capital market of the country. NSDL aims at

ensuring the safety and soundness of Indian marketplaces by developing

settlement solutions that increase efficiency, minimise risk and reduce costs.

At NSDL, we play a quiet but central role in developing products and

services that will continue to nurture the growing needs of the financial

services industry.


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In the depository system, securities are held in depository accounts, which is

more or less similar to holding funds in bank accounts. Transfer of ownership

of securities is done through simple account transfers. This method does

away with all the risks and hassles normally associated with paperwork.

Consequently, the cost of transacting in a depository environment is

considerably lower as compared to transacting in certificates Promoters /

Shareholders

NSDL is promoted by Industrial Development Bank of India Limited (IDBI)

- the largest development bank of India, Unit Trust of India (UTI) - the

largest mutual fund in India and National Stock Exchange of India Limited

(NSE) - the largest stock exchange in India. Some of the prominent banks in

the country have taken a stake in NSDL.

NSDL Facts & Figures

As on December 31, 2008

Number of certificates eliminated (Approx.) : 550 Crore Number of companies in which more than 75% shares are dematted :

2282

Average number of accounts opened per day since November 1996 :

3636

Presence of demat account holders in the country : 78% of all pincodes

in the country.


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Central Securities Depository (CSD)

A Central Securities Depository (CSD) is an organization holding

securities either in certificated or uncertificated (dematerialized) form, to

enable book entry transfer of securities. In some cases these organizations

also carry out centralized comparison, and transaction processing such as

clearing and settlement of securities. The physical securities may be

immobilised by the depository, or securities may be dematerialised (so that

they exist only as electronic records).

International Central Securities Depository (ICSD)is a central securities

depository that settles trades in international securities and in various

domestic securities, usually through direct or indirect (through local agents)

links to local CSDs. ClearStream International (earlier Cedel), Euro clear and

SIX SIS are considered ICSDs. While some view The Depository Trust

Company (DTC) as a national CSD rather than an ICSD, in fact DTC -- the

largest depository in the world -- holds over $2 trillion in non-US securities

and in American Depository Receipts from over 100 nations.


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Functions

Safekeeping Securities may be in dematerialized form, book-entry

only form (with one or more "global" certificates), or in physical form

immobilized within the CSD.

Deposit and Withdrawal Supporting deposits and withdrawals

involves the relationship between the transfer agent and/or issuers and

the CSD. It also covers the CSD's role within the underwriting process

or listing of new issues in a market.

Dividend, interest, and principal processing, as well as corporate

actions including proxy votingPaying and transfer agents, as well as

issuers are involved in these processes, depending on the level of

services provided by the CSD and its relationship with these entities.

Other services CSDs offer additional services aside from those

considered core services. These services include Securities Lending

and Borrowing, Matching, and Repo Settlement

Pledge- Central depositories provide pledging of share and securities.

Every country require to provide legal framework to protect the

interest of the pledgor and pledgee.


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However, there are risks and responsibilities regarding these services that

must be taken into consideration in analyzing and evaluating each market on

a case-by-case basis.

FII (Foreign Institutional Investors) in Indian Stock Market

Foreign Institutional Investor (FII)is used to denote an investor - mostly

of the form of an institution or entity, which invests money in the financialmarkets of a country different from the one where in the institution or entity

was originally incorporated.

FII investment is frequently referred to as hot money for the reason that it can

leave the country at the same speed at which it comes in.

In countries like India, statutory agencies like SEBI have prescribed norms to

register FIIs and also to regulate such investments flowing in through FIIs. In

2008, FIIs represented the largest institution investment category, with an

estimated US$ 751.14 billion.

Since 1990-91, the Government of India embarked on liberalisation and

economic reforms with a view of bringing about rapid and substantial

economic growth and move towards globalisation of the economy. As a part

of the reforms process, the Government under its New Industrial Policy,

revamped its foreign investment policy recognising the growing importance


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of foreign direct investment as an instrument of technology transfer,

augmentation of foreign exchange reserves and globalisation of the Indian

economy. Simultaneously, the Government, for the first time, permitted

portfolio investments from abroad by foreign institutional investors in the

Indian capital market. The entry of FIIs seems to be a follow up of the

recommendation of the Narsimhan Committee Report on Financial System.

While recommending their entry, the Committee, however did not elaborate

on the objectives of the suggested policy. The committee only suggested that

the capital market should be gradually opened up to foreign portfolio

investments.

From September 14, 1992 with suitable restrictions, FIIs were permitted to

invest in all the securities traded on the primary and secondary markets,

including shares, debentures and warrants issued by companies which were

listed or were to be listed on the Stock Exchanges in India.

While presenting the Budget for 1992-93, the then Finance Minister Dr.

Manmohan Singh had announced a proposal to allow reputed foreign

investors, such as Pension Funds etc., to invest in Indian capital market. To

operationalise this policy announcement, it had become necessary to evolve

guidelines for such investments by Foreign Institutional Investors (FIIs). The

policy framework for permitting FII investment was provided under the


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Government of India guidelines vide Press Note date September 14, 1992.

The guidelines formulated in this regard were as follows:

1. Foreign Institutional Investors (FIIs) including institutions such as

Pension Funds, Mutual Funds, Investment Trusts, Asset Management

Companies, Nominee Companies and Incorporated/Institutional Portfolio

Managers or their power of attorney holders (providing discretionary and

non-discretionary portfolio management services) would be welcome to

make investments under these guidelines.

2. FIIs would be welcome to invest in all the securities traded on the Primary

and Secondary markets, including the equity and other

securities/instruments of companies which are listed/to be listed on the

Stock Exchanges in India including the OTC Exchange of India. These

would include shares, debentures, warrants, and the schemes floated by

domestic Mutual Funds. Government would even like to add further

categories of securities later from time to time.

3. FIIs would be required to obtain an initial registration with Securities and

Exchange Board of India (SEBI), the nodal regulatory agency for

securities markets, before any investment is made by them in the

Securities of companies listed on the Stock Exchanges in India, in


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accordance with these guidelines. Nominee companies, affiliates and

subsidiary companies of a FII would be treated as separate FIIs for

registration, and may seek separate registration with SEBI.

4. Since there were foreign exchange controls in force, for various

permissions under exchange control, along with their application for

initial registration, FIIs were also supposed to file with SEBI another

application addressed to RBI for seeking various permissions under

FERA, in a format that would be specified by RBI for the purpose. RBI's

general permission would be obtained by SEBI before granting initial

registration and RBI's FERA permission together by SEBI, under a single

window approach.

5. For granting registration to the FII, SEBI should take into account the

track record of the FII, its professional competence, financial soundness,

experience and such other criteria that may be considered by SEBI to be

relevant. Besides, FII seeking initial registration with SEBI were be

required to hold a registration from the Securities Commission, or the

regulatory organisation for the stock market in the country of

domicile/incorporation of the FII.


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6. SEBI's initial registration would be valid for five years. RBI's general

permission under FERA to the FII would also hold good for five years.

Both would be renewable for similar five year periods later on.

7. RBI's general permission under FERA would enable the registered FII to

buy, sell and realize capital gains on investments made through initial

corpus remitted to India, subscribe/renounce rights offerings of shares,

invest on all recognized stock exchanges through a designated bank

branch, and to appoint a domestic Custodian for custody of investments

held.

8. This General Permission from RBI would also enable the FII to:

Open foreign currency denominated accounts in a designated bank.

(There could even be more than one account in the same bank branch

each designated in different foreign currencies, if it is so required by

FII for its operational purposes);

Open a special non-resident rupee account to which could be credited

all receipts from the capital inflows, sale proceeds of shares, dividends

and interests;

Transfer sums from the foreign currency accounts to the rupee account

and vice versa, at the market rate of exchange;


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Make investments in the securities in India out of the balances in the

rupee account;

Transfer repatriable (after tax) proceeds from the rupee account to the

foreign currency account(s);

Repatriate the capital, capital gains, dividends, incomes received by

way of interest, etc. and any compensation received towards

sale/renouncement of rights offerings of shares subject to the

designated branch of a bank/the custodian being authorized to deduct

with holding tax on capital gains and arranging to pay such tax and

remitting the net proceeds at market rates of exchange;

Register FII's holdings without any further clearance under FERA.


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What Does Foreign Institutional Investor - FII Mean?

An investor or investment fund that is from or registered in a country outside

of the one in which it is currently investing. Institutional investors include

hedge funds, insurance companies, pension funds and mutual funds.

Regulation imposed by SEBI on FII

(a) "Act" means the Securities and Exchange Board of India Act, 1992 (15 of

1992);

(b) "certificate" means a certificate of registration granted by the Board under

these regulations;

(c) "designated bank" means any bank in India, which has been authorised by

the Reserve Bank of India to act as a banker to Foreign Institutional

Investors;

(d) "domestic custodian" includes any person carrying on the activity of

providing custodial services in respect of securities;

(e) "Enquiry officer" means any officer of the Board, or any other person

appointed by the Board under Chapter V of these regulations;


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(f) "Foreign Institutional Investor" means an institution established or

incorporated outside India which proposes to make investment in India in

securities;

(g) "Form" means a form specified in the First Schedule to these regulations;

(h) "Government of India Guidelines" means the guidelines dated September

14, 1992 issued by the Government of India for Foreign Institutional

Investors, as amended from time to time;

(i) "institution" includes every artificial juridical person;

(j) "schedule" means a schedule to these regulations;

(k) "sub-account" includes those institutions, established or incorporated

outside India and those funds, or portfolios, established outside India,

whether incorporated or not, on whose behalf investments are proposed to be

made in India by a Foreign Institutional Investor.

Participatory notes (P- Notes)

Participatory notes(PNs / P-Notes) are instruments used by investors

or hedge funds that are not registered with the SEBI (Securities & Exchange

Board of India) to invest in Indian securities. Participatory notesare


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instruments that derive their value from an underlying financial instrument

such as an equity share and, hence, the word, 'derivative instruments'. SEBI

permitted FIIs to register and participate in the Indian stock market in 1992.

Indian based brokerages buy Indian-based securities and then issue PNs to

foreign investors.

Any dividends or capital gains collected from the underlying securities go

back to the investors.

Participatory notes are instruments used for making investments in the stock

markets. However, they are not used within the country. They are used

outside India for making investments in shares listed in that country. That is

why they are also called offshore derivative instruments.

In the Indian context, foreign institutional investors (FIIs) and their sub-

accounts mostly use these instruments for facilitating the participation of

their overseas clients, who are not interested in participating directly in the

Indian stock market. For example, Indian-based brokerages buy India-based

securities and then issue participatory notes to foreign investors. Any

dividends or capital gains collected from the underlying securities go back to

the investors. According to an expert group constituted by the finance

ministry in India, in August 2004, participatory notes constituted about 46 per

cent of the cumulative net investments in equities by FIIs.


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Any entity investing in participatory notes is not required to register with

SEBI (Securities and Exchange Board of India), whereas all FIIs have to

compulsorily get registered. Trading through participatory notes is easy

because participatory notes are like contract notes transferable by

endorsement and delivery. Secondly, some of the entities route their

investment through participatory notes to take advantage of the tax laws of

certain preferred countries. Thirdly, participatory notes are popular because

they provide a high degree of anonymity, which enables large hedge funds to

carry out their operations without disclosing their identity.

Participatory notes in brief is as follows :

What are participatory notes or PNs? Participatory notes are instruments used

by foreign funds which are not registered to trade in domestic Indian Capital

Markets. PNs are derivative instruments issued against an underlying security

permitting holders to get a share in the income from the security.

How does it work? Investors who buy PNs deposit their funds in US or

European operations of Foreign Institutional Investors (FII) operating in India

. The FII uses its proprietary account to buy stocks.

Why do investors use PNs? Reason for using PNs is to keep investor name

anonymous, some investors have used them to save transaction and overhead

costs.


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Tax officials fear that PNs are becoming a favourite with a host of Indian

money launderers who use them to first take funds out of country through

hawala and then get it back using PNs.

Participatory Notes Crisis of 2007

On the 16th of October, 2007, SEBI (Securities & Exchange Board of India)

proposed curbs on participatory notes which accounted for roughly 50% of

FII investment in 2007. SEBI was not happy with P-Notes because it is not

possible to know who owns the underlying securities and hedge funds acting

through PNs might therefore cause volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk

crash when the markets opened on the following day (October 17, 2007).

Within a minute of opening trade, the Sensex crashed by 1744 points or about

9% of its value - the biggest intra-day fall in Indian stock-markets in absolute

terms. This led to automatic suspension of trade for 1 hour. Finance Minister

P.Chidambaram issued clarifications, in the meantime, that the government

was not against FIIs and was not immediately banning PNs. After the markets

opened at 10:55 am, they staged a remarkable comeback and ended the day at

18715.82, down just 336.04 from Tuesdays close after tumbling to a days

low of 17307.90.


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This was, however not the end of the volatility. The next day (October 18,

2007), the Sensex tumbled by 717.43 points 3.83 per centto 17998.39,

its second biggest fall. The slide continued the next day when the Sensex fell

438.41 points to settle at 17559.98 at the end of the week, after touching the

lowest level of that week at 17226.18 during the day.

The SEBI chief, M.Damodaran held an hour long conference on the 22nd of

October to clear the air on the proposals to curb PNs where he announced

that funds investing through PNs were most welcome to register as FIIs,

whose registration process would be made faster and more streamlined. The

markets welcomed the clarifications with an 879-point gain its biggest

single-day surge on October23, thus signaling the end of the PN crisis.

SEBI issued the fresh rules regarding PNs on the 25th of October, 2007

which said that FIIs cannot issue fresh P-Notes and existing exposures were

to be wound up within 18 months.


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SEBIINTRODUCTION

In 1988 the Securities and Exchange Board of India (SEBI) was established

by the Government of India through an executive resolution, and was

subsequently upgraded as a fully autonomous body (a statutory Board) in the

year 1992 with the passing of the Securities and Exchange Board of India Act

(SEBI Act) on 30th January 1992. In place of Government Control, a

statutory and autonomous regulatory board with defined responsibilities, to

cover both development & regulation of the market, and independent powers

have been set up. Paradoxically this is a positive outcome of the Securities

Scam of 1990-91.

THE BASIC OBJECTIVES OF THE BOARD WERE IDENTIFIED

AS:

to protect the interests of investors in securities;

to promote the development of Securities Market;

to regulate the securities market and

for matters connected therewith or incidental thereto.

Since its inception SEBI has been working targetting the securities and is

attending to the fulfillment of its objectives with commendable zeal and

dexterity. The improvements in the securities markets like capitalization

requirements, margining, establishment of clearing corporations etc. reduced

the risk of credit and also reduced the market.


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SEBI has introduced the comprehensive regulatory measures, prescribed

registration norms, the eligibility criteria, the code of obligations and the code

of conduct for different intermediaries like, bankers to issue, merchant

bankers, brokers and sub-brokers, registrars, portfolio managers, credit rating

agencies, underwriters and others. It has framed bye-laws, risk identification

and risk management systems for Clearing houses of stock exchanges,

surveillance system etc. which has made dealing in securities both safe and

transparent to the end investor.

Another significant event is the approval of trading in stock indices (like S&P

CNX Nifty & Sensex) in 2000. A market Index is a convenient and effective

product because of the following reasons:

It acts as a barometer for market behavior;

It is used to benchmark portfolio performance;

It is used in derivative instruments like index futures and index options;

It can be used for passive fund management as in case of Index Funds.

Two broad approaches of SEBI is to integrate the securities market at the

national level, and also to diversify the trading products, so that there is an

increase in number of traders including banks, financial

institutions,insurance companies, mutual funds, primary dealers etc. to

transact through the Exchanges. In this context the introduction of derivatives


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trading through Indian Stock Exchanges permitted by SEBI in 2000 AD is a

real landmark.

SEBI appointed the L. C. Gupta Committee in 1998 to recommend the

regulatory framework for derivatives trading and suggest bye-laws for

Regulation and Control of Trading and Settlement of Derivatives Contracts.

The Board of SEBI in its meeting held on May 11, 1998 accepted the

recommendations of the committee and approved the phased introduction of

derivatives trading in India beginning with Stock Index Futures. The Board

also approved the "Suggestive Bye-laws" as recommended by the Dr LC

Gupta Committee for Regulation and Control of Trading and Settlement of

Derivatives Contracts.

SEBI then appointed the J. R. Verma Committeeto recommend Risk

Containment Measures (RCM) in the Indian Stock Index Futures Market. The

report was submitted in November 1998.

However the Securities Contracts (Regulation) Act, 1956 (SCRA) requiredamendment to include "derivatives" in the definition of securities to enable

SEBI to introduce trading in derivatives. The necessary amendment was then

carried out by the Government in 1999. The Securities Laws (Amendment)

Bill, 1999 was introduced. In December 1999 the new framework was

approved.


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Derivatives have been accorded the status of `Securities'. The ban imposed on

trading in derivatives in 1969 under a notification issued by the Central

Government was revoked. Thereafter SEBI formulated the necessary

regulations/bye-laws and intimated the Stock Exchanges in the year 2000.

The derivative trading started in India at NSE in 2000 and BSE started

trading in the year 2001.

SEBI is the Regulator for the Securities Market in India. Originally set up by

the Government of India in 1988, it acquired statutory form in 1992

with SEBI Act 1992 being passed by the Indian Parliament.Chaired by C B

Bhave, SEBI is headquartered in the popular business district of Bandra-

Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western

regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.

ORGANISATION STRUCTURE

Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market

Regulator. Prior to taking charge as Chairman SEBI, he had been the

chairman of NSDL (National Securities Depository Limited) ushering in

paperless securities. Prior to his stint at NSDL, he had served SEBI as a

Senior Executive Director. He is a former Indian Administrative Service

officer of the 1975 batch.


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THE BOARD COMPRISES

Name Designation As per

Mr CB Bhave Chairman SEBICHAIRMAN (S.4(1)(a)

of the SEBI Act, 1992)

Mr KP Krishnan Joint Secretary,Ministry of Finance

Member (S.4(1)(b) of theSEBI Act, 1992)

Mr Anurag GoelSecretary, Ministry of

Corporate Affairs

Member (S.4(1)(b) of the

SEBI Act, 1992)

Dr G Mohan Gopal

Director, National

Judicial Academy,

Hyderabad

Member (S.4(1)(d) of the

SEBI Act, 1992)

Mr MS SahooWhole Time Member,

SEBI


SEBI Act, 1992)

Dr KM AbrahamWhole Time Member,

SEBI


SEBI Act, 1992)

Mr Mohandas Pai Director, InfosysMember (S.4(1)(d) of the

SEBI Act, 1992)


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FUNCTIONS AND RESPONSIBILITIES

SEBI has to be responsive to the needs of three groups, which constitute the

market:

the issuers of securities

the investors

the market intermediaries.

SEBI has three functions rolled into one body quasi-legislative, quasi-judicial

and quasi-executive. It drafts regulations in its legislative capacity, it

conducts investigation and enforcement action in its executive function and it

passes rulings and orders in its judicial capacity. Though this makes it very

powerful, there is an appeals process to create accountability. There is a

Securities Appellate Tribunal which is a three member tribunal and is

presently headed by a former Chief Justice of a High court - Mr. Justice NK

Sodhi. A second appeal lies directly to the Supreme Court.

SEBI has enjoyed success as a regulator by pushing systemic reforms

aggressively and successively (e.g. the quick movement towards making the

markets electronic and paperless rolling settlement on T+2 basis). SEBI has

been active in setting up the regulations as required under law. It is regulating

body.


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HISTORICAL PERSPECTIVE

The history of Indian stock market is about 200 years old. Prior to this the

hundis and bills of exchange were in use, especially in the medieval period,

which can be considered as a form of virtual stock trading but it was certainly

not an organized stock trading. The recorded stock trading can be traced only

after the arrival of East India Company. The first organized stock market that

was governed by the rules and regulations came into the existence in the form

of The Native Share and Stock Brokers' Association in 1875. After gone

through numerous changes this association is today better as Bombay Stock

Exchange, which remains the premier stock exchange since its inception.

During this period several other exchanges were launched and some of which

were closed also. Presently, there are 19 recognized stock exchanges out of

which four are national level exchanges and the remaining are regional

exchanges. National Stock Exchange, established in 1992, was the last

exchange. Although the regional level exchanges are in existence the volume

of trading in these exchanges is negligible. National Stock Exchange and

Bombay Stock Exchange are the leaders of Indian Securities Market in terms

of listing, trading and volumes. The last 15 years of the Indian securities

market can be considered as the most important part of the history where the

market gone through the post liberalization era of Indian economy and

witnessed the formation of Securities and Exchange Board of India (SEBI)


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which brought substantial transparency in share market practices and thus

managed to bring in trust of not only domestic investors but also the

international ones.

THE BIG PICTURE OF SHARE MARKET

As investors, most of us tend to forget about all of the good years and only

focus on the bad. The broad markets have been heading up for about four

years, so the thoughts of what happened in 1999-2002 are well behind us. But

now that the markets are volatile, there is a lot of talk about the subprime

mortgage industry, a weak dollar, and everyone begins to completely forget

about how well the past four years have been and only focus on the last few

months or weeks complaining how bad it is. Things can certainly continue to

get worse, but you have to look at things in context.

Remember, what goes up, must come down. Not only does the stock market

cycle, but there is a business cycle as well. We will always have various

times that are great, and those that arent as great, but you cant lose sight of

the big picture.

For even more similarities, scroll back up and look at the first chart from

1990-2002. Now, scroll down and look at the 2003-2012 Present stage.

Notice how similar they are? The markets went up for completely different


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reasons, yet are behaving almost the same. All you have to do is look at the

following few years to see what might be in store for us over the coming year

or two. Will history repeat itself? There is no way to tell, and anything could

happen to make all of this information worthless, but you do have to at least

consider the past trends and understand that there is a chance the market will

behave similarly and well enter a period of significant decline.

KEEP DOING WHAT YOURE DOING

Sure, the market may be a bit unstable right now, and we may certainly be

headed for a time where the market falls further, but that shouldnt be of

much concern to you if youre investing for the next 10, 20, 30 or more years.

If you want to try and time the market or predict what the next hot sector is,

thats fine, but the best thing most people can do is to just continuously invest

in a diversified portfolio. If you keep buying even as the market falls, youre

just adding more shares at a lower price.

Could you make more money if you only invested at the low points and sold

at the high points compared to dollar cost averaging? Sure, but the likelihood

of succeeding on a regular basis is low. For most people, the best thing to do

is to just continue investing bi-weekly, monthly, or quarterly into the same

diversified portfolio regardless of market conditions. When markets are

choppy or headed down, youre just buying stocks or funds on sale.


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KEY MILESTONES

Following is the timeline on the rise and rise of the Sensex through Indian

stock market history.

1830'sBusiness on corporate stocks and shares in Bank and Cotton presses

started in Bombay.

1860-1865Cotton 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

1900s

1978-79Base 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.

SINCE 1990

1000, July 25, 1990On 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.


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July 1991Rupee devalued by 18-19 %

2000, January 15, 1992On 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.

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

3000 mark in the wake of the market-friendly Budget announced by the thenFinance Minister, Dr Manmohan Singh.

4000, March 30, 1992On 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, 1999On October 8, 1999, the Sensex crossed the 5,000-

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

election.

6000, February 11, 2000On 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, 2000Tops. Index declines until Sept 2001 and loses half the

value. Coincides with dot-com bubble burst.


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2595, Sept 21, 2001Bottoms.

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

the Ambani brothers boosted investor sentiments and the scrips 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 StockExchange's benchmark 30-share index -- the Sensex -- crossed the 8000 level

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

9000, November 28, 2005The 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.

10,000, February 6, 2006The Sensex on February 6, 2006 touched 10,003

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

February 7, 2006.

11,000, March 21, 2006The Sensex on March 21, 2006 crossed the magical

figure of 11,000 and touched a life-time peak of 11,001 points during mid-


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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.

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

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

13,000, 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 or0.9%. 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.

14,000, December 5, 2006 The Sensex on December 5, 2006 crossed the

14,000-mark to touch 14,028 points. It took 36 days for the Sensex to move

from 13,000 to the 14,000 mark.

15,000, July 6, 2007The 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.

16,000, September 19, 2007The 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


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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.

17,000, September 26, 2007 The Sensex scaled yet another height during

early morning trade on September 26, 2007. Within minutes after tradingbegan, 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.

18,000, October 09, 2007 The BSE Sensex crossed the 18,000-mark on

October 09, 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.

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

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


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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

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

to close at 5,670.

20,000, October 29, 2007The 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 19,977.67, 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.

21,000, January 8, 2008The 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, 2008The sensex closed below 15,200 mark, Indian market

suffer with major downfall from January 21,2008


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14,220, June 25, 2008The 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.

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

2nd, 2008. This is the lowest that it has ever been in the past year. Six months

ago, on January 10th, 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, 2008The sensex closed at 11801.70 hitting the lowest in

the past 2 years.

10527, Oct 10, 2008The 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.


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21000, September, 2010 the Sensex averaged 5249.6 reaching an all time

high of 21005.0 in November of 2010

20500, February, 2011the Sensex fall down by 500 points after reaching an

alltime high in September of 2011

19000, March, 2012the Sensex came down to 19000 by falling down by

more 1500 points in March of 2012

17000, June, 2012the Sensex came down to 17000 by falling down by more

2000 points in June of 2012


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MYTHS OF STOCK MARKET

1. You can tell if a Stock is cheap or expensive by the Price to Earnings

Ratio.

False: PE ratios are easy to calculate, that is why they are listed in

newspapers etc. But you cannot compare PEs on companies from different

industries, as the variables those companies and industries have are different.Even comparing within an industry, PEs dont tell you about many financial

fundamentals and nothing about a stocks value.

2. To make Money in theStock Market,you must assume High Risks.

False: Tips to Lower your Risk:

Do not put more than 10% of your money into any one stock

Do not own more than 2-3 stocks in any industry

Buy your stocks over time, not all at once

Buy stocks with consistent and predictable earnings growth

Buy stocks with growth rates greater than the total of inflation and

interest rates

Use stop-loss orders to limit your risk


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3.Buy Stocks on the Way Down and Sell on the Way Up.

False: People believe that a falling stock is cheap and a rising stock is too

expensive. But on the way down, you have no idea how much further it may

fall. If a stock is rising, especially if it has broken previous highs, there are no

unhappy owners who want to dump it. If the stock is fairly valued, it should

continue to rise.

4.You can Hedge Inflation with Stocks.

False: When interest rates rise, people start to pull money out of the market

and into bonds, so that pushes prices down. Plus the cost of business goes up,

so corporate earnings go down, along with the stock prices.

5.Young People can afford to take High Risk.

False: The only thing true about this is that young people have time on their

side if they lose all their money. But young people have little disposable

income to risk losing. If they follow the tips above, they can make money

over many years. Young people have the time to be patient.

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


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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 early

19th century in the United States , United Kingdom and western Europe as

the governments of those countries started allowing anyone to create

corporations.

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.


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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.

IPOINITIAL PUBLIC OFFERING

Public issues can be classified into Initial Public offerings and further publicofferings. In a public offering, the issuer makes an offer for new investors to

enter its shareholding family. The issuer company makes detailed disclosures

as per the DIP guidelines in its offer document and offers it for subscription.

Initial Public Offering (IPO) is when an unlisted company makes either a

fresh issue of securities or an offer for sale of its existing securities or both

for the first time to the public. This paves way for listing and trading of the

issuers securities.

IPO is New sharesOffered to the public in the Primary Market .The first

time the company is traded on thestock exchange.A prospectus is issued to

read about its risk before investing. IPOis a company's first sale of stock to

the public. Securities offered in an IPO are often, but not always, those of

young, small companies seeking outside equity capital and a public market

for their stock. Investors purchasing stock in IPOs generally must be prepared

to accept very large risks for the possibility of large gains. Sometimes, Just
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before the IPOis launched, Existing share Holders get a very liberal bonus

issues as a reward for their faith in risking money when the project was new

HOW TO APPLY TO A PUBLIC ISSUE?

When a company floats a public issue or IPO, it prints forms for application

to be filled by the investors. Public issues are open for a few days only. As

perlaw,any public issue should be kept open for a minimum of 3days and amaximum of 21 days. For issues, which are underwritten by financial

institutions, the offer should be kept open for a minimum of 3 days and a

maximum of 21 days. For issues, which are underwritten by all India

financial institutions, the offer should be kept open for a maximum of 10

days. Generally, issues are kept open for only 3 to 4 days. The duly complete

application from, accompanied by cash, cheque, DD or stock invest should be

deposited before the closing date as per the instruction on the from. IPO's by

investment companies(closed end funds) usually contain underwriting fees

which represent a load to buyers.
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Before applying for any IPO, analyze the following factors:

1. Who are the Promoters ? What is their credibility and track record ?

2. What is the company manufacturing or providing services - Product, its

potential

3. Does the Company have any Technology tie-up ? if yes , What is the

reputation of the collaborators

4. What has been the past performance of the Company offering the IPO?

5. What is the Project cost, What are the means of financing and profitability

projections?

6. What are the Risk factors involved ?

7. Who has appraised the Project ? In India Projects apprised by IDBI and

ICICI have more credibility than small Merchant Bankers

HOW TO MAKE PAYMENTS FOR IPOS:

The payment terms of any IPO or Public issue is fixed by the company

keeping in view its fund requirements and the statutory regulations. In

general, companies stipulate that either the entire money should be paid along

with the application or 50 percent of the entire amount be paid along with the


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application and rest on allotment. However, if the funds requirements is

staggered, the company may ask for the money in calls, that is, the company

demands for the money after allotment as and when the cash flow demands.

As per the statutory requirements, for public issue large than Rs. 250 crore,

the money is to be collected as under:

25 per cent on application

25 per cent on allotment

50 per cent in two or more calls

THE ROLE OF SEBI IN THE PROCESS OF IPO

SEBI regulates the IPO process and issued detailed Guidelines under section

11 of the SEBI Act, 1992 in the name of SEBI (Disclosure and Investors

Protection) Guidelines, 2002 generally known as DIP Guidelines. It is also

noted that under the provisions sections 55 of the Companies Act, 1956. the

matters pertaining to issue and transfer of securities and non payment of

dividend in case of listed companies, the companies intend to get listed are

being administered by SEBI.


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DEMAT ACCOUNT

Dematrefers to a dematerialised account.

Though the company is under obligation to offer the securities in both

physical and demat mode, you have the choice to receive the securities in

either mode.

If you wish to have securities in demat mode, you need to indicate the

depository and also of the depository participant with whom you have

depository account in your application.

It is, however desirablethat you hold securities in demat formas physical

securities carry the risk of being fake, forged or stolen.

Just as you have to open an account with a bank if you want to save your

money, make cheque payments etc, Nowadays, you need to open a demat

account if you want to buy or sell stocks .

So it is just like a bank account where actual money is replaced by shares.

You have to approach the DPs(remember, they are like bank branches), to

open your demat account. Let's say your portfolio of shares looks like

this: 150 of Infosys, 50 of Wipro, 200 of HLL and 100 of ACC. All these will

show in your demat account. So you don't have to possess any physical


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certificates showing that you own these shares. They are all held

electronically in your account. As you buy and sell the shares, they are

adjusted in your account. Just like a bank passbook or statement, the DP

will provide you with periodic statements of holdings and transactions.

The most important thing required to trade in share market is Demat account.

Demat or Dematerialized account is to store stocks in electronics form. It is

just like opening a bank account to store your money. Now nobody is

interested to keep shares in physical forms and going for electronic based

filing of shares. This has changed the style of operation in main Indian stock

markets like BSE Sensex ( Bombay Stock Exchange Sensitive Index) and

Nifty (National Stock Exchange of India) and its brokers.

HOW TO OPEN A DEMAT ACCOUNT

It is like opening a bank account. You have to approach a depository

participants to open an online trading or demat account. Most of the banks

are DPs too.

DOCUMENTS REQUIRED

You will have to submit few documents with the application form to open a

demat account. As per latest Govt of India rule PAN (Personal Account


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Number) card is must for opening a demat account. These are the documents

required to open a demat account

1. Photo Copy of PAN Card (Mandatory)

2. Two Passport size photos

3. Address Proof Ration Card/Passport/Driving License/Voters ID

Card/BSNL Telephone/LIC Policy

4. Latest Bank Statement and photocopy of Bank Passbook.

NSE TRADING TECHNOLOGY

National Stock Exchange of India is one of the leading exchanges in the

world on several key parameters. Number of contracts traded relate directly

to the technology and liquidity of the exchange. NSE ranks* in top 3 globally

for Stock Futures and Index Futures and Options. Technology at the

exchange remains backstage to fulfill the demand for capacity, reliability and

performance ensuring the competitive edge of NSE as Indias number one

exchange platform.

CORE TRADING SYSTEM

NSEs trading system, called National Exchange for Automated Trading

(NEAT), is a state of-the-art client server based application. It has uptime


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record of over 99%

project on national stock exchange by habeeb

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