Stock Market In India :

Stock Market In India

Covering in Lesson :
Covering in Lesson Various Markets & Its
Features Development of securities market in
India Regulation of securities Market Primary
market Secondary market Trading and
settlement Clearing and settlement procedures
Essential Features of a Market :
Essential Features of a Market Existence of
buyers and sellers Existence of price for every
asset Allocation of resources Existence of
regulatory mechanism
Properties of efficient market :
Properties of efficient market Breadth Depth
Information arbitrage efficiency Fundamental
valuation efficiency Full insurance efficiency
Operational efficiency Allocational efficiency
Classification of markets :
Classification of markets Securities market
Equity Market Debt Market Government
securities Market (gilt securities) Corporate
Securities Money Market Derivative Market
Options Market Futures Market Foreign
exchange market

Functions of the market :

Functions of the market Primary Market: it
deals in the issuance of new securities and
bring the savers and users of capital together.
Secondary Market: it is the financial market
where previously issued securities and
financial instruments such as stock, bonds,
options, and futures are bought and sold. It
provide liquidity to the investors. It helps the
players to keep transaction cost very low.
Milestones in development of Indian
Stock Market :
Milestones in development of Indian Stock
Market 1875 BSE established as 'the native
Share and Stock Brokers Association
1956 BSE became the first stock exchange to
be recognized under the Securities Contract
Act. 1993 NSE recognized as a stock
exchange. 2000 Commencement of Internet
trading at NSE. 2000 NSE commences
derivatives trading (Index futures) 2001 BSE
commences derivatives trading 29 August
2008 NSE started trading in currency
derivatives
Securities and exchange board of
India :

Securities and exchange board of India

Objectives: To protect the interest of the
investors in securities To promote the
development of securities market in India To
regulate the securities market
Slide 9:
Important Functions of SEBI Regulating the
business in stock exchanges and any other
securities markets Recognition and regulation
of the stock exchanges Registering and
regulating the working of the depositories
[participants], custodians of securities, foreign
institutional investors, credit rating agencies
Registration of FII Registering and regulating
the working of venture capital funds and
collective investment schemes, including
mutual funds Promotion and regulation of Self
regulatory organization. Prohibiting fraudulent
and unfair trade practices relating to securities
markets Conducting research relating to
securities market.
Slide 10:
Departments of SEBI 1)MARKET
INTERMEDIARIES REGULATION AND
SUPERVISION DEPARTMENT (MIRSD)
2) MARKET REGULATION DEPARTMENT
(MRD) 3) DERIVATIVES AND NEW

PRODUCTS DEPARTMENT (DNPD) 4)

CORPORATION FINANCE DEPARTMENT
(CFD) 5) INVESTMENT MANAGEMENT
DEPARTMENT (IMD) 6) INTEGRATED
SURVEILLANCE DEPARTMENT (ISD) 7)
INVESTIGATIONS DEPARTMENT (IVD) 8)
ENFORCEMENT DEPARTMENT (EFD)
9) LEGAL AFFAIRS DEPARTMENT (LAD)
10 ) ENQUIRIES AND ADJUDICATION
DEPARTMENT (EAD) 11) OFFICE OF
INVESTOR ASSISTANCE AND EDUCATION
(OIAE). 12 ) GENERAL SERVICES
DEPARTMENT (GSD) 13)RESEARCH AND
TRAINING DEPARTMENT (RTD). 14)
OFFICE OF THE CHAIRMAN (OCH) 15) THE
REGIONAL OFFICES (ROs)
Slide 11:
PRIMARY EQUITY MARKET PUBLIC ISSUE
RIGHTS ISSUE PRIVATE PLACEMENT
PREFERENTIAL ALLOTMENT
Slide 13:
Reverse Book Building The reverse book
building is an efficient price discovery
mechanism of de-listing of securities, which is
provided for capturing the sell orders on online
basis from the shareholders through respective
BRLM.

Secondary Market :
Secondary Market Secondary Market refers to
a market where securities are traded after
being initially offered to the public in the
primary market and/or listed on the Stock
Exchange. SEBIs role in Secondary Markets
NSCCL Listing of Securities
Objectives of the listing :
Objectives of the listing Provide liquidity to
securities; Mobilize savings for economic
development; Protect interest of investors by
ensuring full disclosures
Types of the Listing :
Types of the Listing Initial listingFirst time
listing Listing of public issue - Listing of
additional shares or debentures of already
listed entity. Listing of rights issue of shares
and debentures Listing of Bonus issue of
shares Listing of shares issued on
amalgamation, mergers etc.
Trading and settlement :
Trading and settlement Screen based system
started by NSE which is followed by BSE and
other regional stock exchanges NSE has an
order driven system OTCEI is a quote BOLT

(BSE Online trading) is a mix of order driven

and quote driven system
Trading and settlement :
Trading and settlement Market timings Trading
Process Locating a broker Placement of an
order Order sent to stock exchange Order is
executed.
Depository system :
Depository system
Functions of Depository :
Functions of Depository Dematerialization
Account transfer and recognition Corporate
actions Pledge and hypothecation Linkages
with clearing system
Depository participants (DP) :
Depository participants (DP) A depository
participants is an agent of the depository and
intermediaries between the depository and the
investors. A DP has to register with SEBI to
offer depository related services.
Process of dematerialization :
Process of dematerialization Investor approach
DP to open an account. Then he has to submit
the shares in physical form to DP for
dematerialization. DP will intimate the NSDL

about the investors intention and then submit

the share certificates to the registrar and
transfer agent. On confirming the genuineness
of certificates the registrar destroys them and
sends the confirmation of dematerialization of
shares to NSDL.
Advantage of the depository
system :
Advantage of the depository system Filling up
transfer deeds and lodging the same with the
company for transfer is not necessary. There
would not be any bad deliveries. Exemptions
from paying stamp duty on transfer of shares.
Shares purchased in electronic form will be
transferred to the investors name within a day
of completion of settlement. Faster payment on
sale of shares No scope for forgery of share
certificates
Category of shares at BSE :
Category of shares at BSE A group B1 Group
(medium Sized, Inconsistent profit, less
liquidity) B2 Group (Small companies, very low
trading, poor in profit generation) Z Group (non
compliance, poor companies) F Group (debt
Market)
Slide 25:

LIMIT ORDER BOOK Buyside Sellside Limit

Price Shares 500 501 502 503 504 505 506
507 508 509 510 511 512
Slide 26:
TYPES OF ORDERS Limit Order Those who
place limit order supply liquidity Market Order
Those who place market order demand
liquidity
Slide 27:
SETTLEMENT Security transactions are
settled through electronic delivery facilitated by
depositories Presently, the settlement of all
trades is a rolling settlement on a T+2 basis
Slide 28:
In case of sale:- BO will give delivery
instruction through Delivery Instruction Slip
(DIS) to DP to debit his account and credit the
brokers account. Such instruction should
reach the DPs office at least 24 hours before
the pay-in, failing which, DP will accept the
instruction only at the BOs risk. ETF An ETF is
a basket of securities that is traded on the
stock exchange, akin to a stock. So, unlike
conventional mutual funds, ETFs are listed on
a recognised stock exchange. Their units can

be bought and sold directly on the exchange,

through a stockbroker during the trading hours.
Slide 29:
Circuit Breakers In case of a 10% movement of
either of these indices, there would be a 1-hour
market halt if the movement takes place before
1 p.m. In case the movement takes place at or
after 1 p.m. but before 2.30 p.m. there will be a
trading halt for hour. In case the movement
takes place at or after 2.30 p.m. there will be
no trading halt at the 10% level and the market
will continue trading. In case of a 15%
movement of either index, there will be a 2hour market halt if the movement takes place
before 1 p.m. If the 15% trigger is reached on
or after 1 p.m. but before 2 p.m., there will be a
1 hour halt. If the 15% trigger is reached on or
after 2 p.m. the trading will halt for the
remainder of the day. In case of a 20%
movement of the index, the trading will be
halted for the remainder of the day.
Slide 30:
Circuit filters On individual stocks When
applied to individual stocks, circuit filters are
known as price bands or price filters. There are
no circuits on the 30 stocks included in the
Sensex or the 50 included in the Nifty. The filter

bands are in the range of 2%, 5%, 10% and

20%.
Slide 31:
Buy back of shares Buyback is the reverse of
issue of shares by a company. In buy back,
company offers to take back its shares owned
by the investors at a specified price; this offer
can be binding or optional to the investors.