Index

CONTENTS PAGE NO.

CHAPTER 1 INTRODUCTION

CHAPTER 2 RESEARCH METHODOLOGY

CHAPTER 3 INDUSTRY PROFILE

CHAPTER 4 COMPANY PROFILE

CHAPTER 5 THEORETICAL FRAME WORK

CHAPTER 6 DATA ANALYSIS & INTERPRETATION

CHAPTER 7 FINDINGS & SUGGESTIONS

CHAPTER 8 CONCLUSION & BIBLIOGRAPHY

ANNEXURE QUESTIONNAIRE
 CHAPTER -1
INTRODUCTION
INTRODUCTION TO NATIONAL STOCK EXCHANGE

NATIONAL STOCK EXCHANGE:

The NSE was incorporated in November 1992 with an equity capital of Rs.25 crores , the
International Securities Consultancy (ISC) of Hong Kong has helped in setting up NSE . ISC
has prepared the detailed business plans and installation of hardware and software system .
The promotion for NSE were financial institutions, insurance companies ,banks and SEBI capital
market Ltd., infrastructure leasing and financial services and stock holding corporation ltd. It
has been set up to strengthen the move towards professionalisation of the capital market as well
as provide nation wide securities trading facilities to investors .

NSE is not an exchange in the traditional sense where brokers own and manage the
exchange. A two tier administrative set up involving a company board and a governing aboard
of the exchange is envisaged.

NSE is a national market for shares PSU bonds, debentures and government securities
since infrastructure and trading facilities are provided .

NSE-NIFTY:

The NSE on April 22,1996 launched a new equity Index. The NSE-50. The new index,
which replaced the existing NSE-100 index is expected to serve as an appropriate Index
foe the new segment of futures and options. “Nifty means National Index for Fifty Stocks.

The NSE—50 comprises 50 companies that represent 20 broad Industry groups with
an aggregate market capitalization of around Rs 1,70,000 crs. All companies includes in
the Index have a market capitalizations in excess of Rs. 400 crs each and should have traded
for 85% of trading days at an impact cost of less than 1.5%
The base period for the index is the close of prices on Nov 3, 1995 , which makes one year
of completions of operations of NSE’s capitals markets segments . The base values of
the Index has been set at 1000.
 NSE--MIDCAP INDEX:

The NSE madcap Index or the Junior Nifty comprises 50 stocks that

represent 21 abroad Industry groups and will provide proper representation of the

madcap segments of the Indian capitals Market. All stocks in the index should have

market capitalizations of greater than Rs. 200 corers and should have traded 85% of

the trading days at an impact cost of less 2.5%.

The base period for the index is Nov 4 , 1996, which signifies two years for

completion of operations of the capitals market segment of the operations. The

base values of the Index has been set at 1000. Average daily turn over of the present

scenario 258212 (lakhs) and number of averages daily trades 2160(lakhs).

The National Stock Exchange (NSE) is India's leading stock exchange covering around 400
cities and towns all over India. NSE introduced for the first time in India, fully automated screen
based trading. It provides a modern, fully computerized trading system designed to offer
investors across the length and breadth of the country a safe and easy way to invest or liquidate
investments in securities.

Sponsored by the industrial development bank of India, the NSE has been co-sponsored by other
development/ public finance institutions, LIC, GIC, banks and other financial institutions such as
SBI Capital Market, Stockholding corporation, Infrastructure leasing and finance and so on.
India has had a history of stock exchanges limited in their operating jurisdiction to the cities in
which they were set up.
The NSE represented an attempt to overcome the fragmentation of regional markets by providing
a screen-based system, which transcends geographical barriers. Having operationalised both the
debt and equity markets, the NSE is planning for a derivative market, which will provide futures
and options in equity. Its main objectives has been to set up comprehensive facilities for the
entire range of securities under a single umbrella, namely,

 To set up a nationwide trading facility for equities, debt instruments and

hybrids;

 To ensure equal access to investors across the country through an appropriate

Communication network;

 To provide a fair, efficient and transparent securities market to investors using

the electronic trading system;
 To ensure shorter settlement cycles and book entry settlement systems; and
 To meet the current international standards prevalent in the securities Industry/markets.
 NEED FOR THE STUDY:

Stock exchange are the integral part of the capital market . It is the most
perfect type of market for securities whether of govt. semi govt. bodies or other public
bodies as for shares and shares and debentures issued by the joint stock enterprise.

Stock exchange provides liquidity to the listed companies they give quotations to
the listed companies and help in trading raising funds from the market stock. Exchange
provides ready Marketability and unequal facility for the transfer of ownership of stock shares
and securities.

Stock market in India is more than century old and has functioning
effectively through the medium of recognized stock exchanges the stock market which is
the integral part of the capital has a major impact on the functioning of the economy in
turn the monsoon and agriculture industrial growth and performance of the
corporate sector in particular reflection the fundamental in the economy would influenced
the some of capital stock market and since the capital market in playing a major role
in the Indian economy from the past several years there is an essential need to study
the tone of the capital market in India.

OBJECTIVES OF THE PROJECT

 To know about the latest and future development in the stock exchange
Trading system . Clearly defining each and every term of the stock exchange
trading procedure .

 To know the on-line screen based trading system adopted by NSE and about
it’s communication facilities. The appropriate configuration to set the network
which would link the NSE to individual/members.

 The primary objective is to analyze the changes in trading after the Exchange
Shifted from outcry to online trading system

 To understand StockExchanges market in India.

 To know different types of StockExchanges in India.

 To study investors reasons to trade online where investors have control over their account
can make their own decision for their actions, and are independent.
 SCOPE OF THE STUDY

The project is an attempt to working of stock exchanges in detail. It provides thorough

knowledge of different aspects of trading in stock exchanges. The focus is basically with Indian
context. The first dealing with the theory, ie, introduction of securities market, concept of stock
exchanges, their role in economy, their characteristics, role of SEBI etc

The scope of the study analyse us to know the how the online trading activities
are carried out in NSE.
 CHAPTER- 2

RESEARCH METHODOLOGY
 Research Methodology

Classification of Data:

To fulfill the objective of the study, I have taken into consider Primary & Secondary Data.

 Primary Data.

To collect following data I have made use of following source.

a) Questionnaire survey & interaction with clients in india to know investors awareness
towards stock exchanges in india.

b) Interaction with the business associate of Capital market services india

 Secondary Data
a) The first step in data collection approach is to look for secondary data. Usually it is the
data developed for some purpose other than for helping to solve the problem at hand.
Secondary data are collected through their trading details from the stock broker. The
secondary data is collected from internet, study material of NCFM (derivatives market
dealers module work book), research report of expert.

Sampling & Sampling Techniques:

 Sampling Population: The people of the Hyderabad city.

 Sampling Frame: The investors at Shriram Insight.
 Extent: This study was limited only to the Hyderabad investors.
 Duration: This study was conducted only for a period of two months from 15th June to
15th august (only 60 days).
 Sample Size: The sample size contained of 50 investors in stock market.
  Sampling Method: The sampling method used was on the basis of non probability
convenient sampling method.
 Elements: Individual.
 Instrument of data collection: Questionnaire.
 Analytical tool: Graphs like pie charts, & tables have been used to analyze & interpret
the data.
 Software Applications Used: Ms-Word, Ms-Excel, and SPSS.

LIMITATIONS OF THE STUDY:

The study is confined to online trading procedure only .Exhaustive analysis, problem of
listing , management of trade , SEBI guidelines relating to are not covered due to limited
time to keep the study in manageable limits
 CHAPTER 3

INDUSTRY PROFILE
 INDUSTRY PROFILE

HISTORY OF STOCK EXCHANGE

The only stock exchanges operating in the 19th century were those of Bombay set up in
1875 and Ahmedabad set up in 1894. These were organized as voluntary non profit-making
association of brokers to regulate and protect their interests. Before the control on securities
trading became central subject under the constitution in 1950, it was a state subject and the
Bombay securities contracts (control) Act of 1925 used to regulate trading in securities. Under
this act, the Bombay stock exchange was recognized in 1927 and Ahmedbad in 1937.

During the war boom, a number of stock exchanges were organized in Bombay,
Ahmedbad and other centers, but they were not recognized. Soon after it became a central
subject, central legislation was proposed and a committee headed by A.D. Gorwala went into the
bill for securities regulation. On the basis of the committee’s recommendations and public
discussion, the securities contracts (regulation) Act became law in 1956.

DEFINITION OF STOCK EXCHANGE

“Stock exchange means any body or individuals whether incorporated or not, constituted
for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in
securities”.

It is an association of member brokers for the purpose of self-regulation and protecting

the interests of its members.

It can operate only if it is recognized by the Government under the securities contracts
(regulation) Act, 1956. The recognition is granted under section 3 of the Act by the central
government, Ministry of Finance.

BYLAWS

Besides the above act, the securities contracts (regulation) rules were also made in 1975
to regulative certain matters of trading on the stock exchanges. There are also bylaws of the
exchanges, which are concerned with the following subjects.
 Opening / closing of the stock exchanges, timing of trading, regulation of blank transfers,
regulation of Badla or carryover business, control of the settlement and other activities of the
stock exchange, fixating of margin, fixation of market prices or making up prices, regulation of
taravani business (jobbing), etc., regulation of brokers trading, brokerage chargers, trading rules
on the exchange, arbitrage and settlement of disputes, settlement and clearing of the trading etc.

REGULATION OF STOCK EXCHANGES

The securities contracts (regulation) act is the basis for operations of the stock exchanges
in India. No exchange can operate legally without the government permission or recognition.
Stock exchanges are given monopoly in certain areas under section 19 of the above Act to ensure
that the control and regulation are facilitated. Recognition can be granted to a stock exchange
provided certain conditions are satisfied and the necessary information is supplied to the
government. Recognition can also be withdrawn, if necessary. Where there are no stock
exchanges, the government licenses some of the brokers to perform the functions of a stock
exchange in its absence.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI).

SEBI was set up as an autonomous regulatory authority by the government of India in 1988 “to
protect the interests of investors in securities and to promote the development of, and to regulate
the securities market and for matter connected therewith or incidental thereto”. It is empowered
by two acts namely the SEBI Act, 1992 and the securities contract (regulation) Act, 1956 to
perform the function of protecting investor’s rights and regulating the capital markets.

BOMBAY STOCK EXCHANGE

This stock exchange, Mumbai, popularly known as “BSE” was established in 1875
as “The Native share and stock brokers association”, as a voluntary non-profit making
association. It has an evolved over the years into its present status as the premiere stock
exchange in the country. It may be noted that the stock exchanges 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 redressed of their grievances,
whether against the companies or its own member brokers. It also strives to educate and
enlighten the investors by making available necessary informative inputs and conducting
investor education programs.

A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public

representatives and an executive director is the apex body, which decides is the apex body,
which decides the policies and regulates the affairs of the exchange.

The Exchange director as the chief executive offices is responsible for the daily today
administration of the exchange.

BSE INDICES :

In order to enable the market participants, analysts etc., to track the various ups and
downs in the Indian stock market, the Exchange has introduced in 1986 an equity stock index
called BSE-SENSEX that subsequently became the barometer of the moments of the share prices
in the Indian stock market. It is a “Market capitalization weighted” index of 30 component stocks
representing a sample of large, well-established and leading companies. The base year of sensex
1978-79. The Sensex is widely reported in both domestic and international markets through print
as well as electronic media.

Sensex is calculated using a market capitalization weighted method. As per this

methodology the level of the index reflects the total market value of all 30-component stocks
from different industries related to particular base period. The total market value of a company is
determined by multiplying the price of its stock by the nu7mber of shared outstanding.
Statisticians call index of a set of combined variables (such as price and number of shares) a
composite Index. An indexed number is used to represent the results of this calcution in order to
make the value easier to go work with and track over a time. It is much easier to graph a chart
based on Indexed values than on based on actual valued world over majority of the well-known
Indices are constructed using “Market capitalization weighted method”.
 In practice, the daily calculation of SENSEX is done by dividing the aggregate market
value of the 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. The Devisor keeps the Index
comparable over a period value of time and if the references point for the entire Index
maintenance adjustments. SENSEX is widely used to describe the mood in the Indian stock
markets. Base year average is changed as per the formula new base year average = old base year
average*(new market value / old market value).

NATIONAL STOCK EXCHANGE

The NSE was incorporated in Nov, 1992 with an equity capital of Rs.25 crs. The
international securities consultancy (ISC) of Hong Kong has helped in setting up NSE. ISC has
prepared the detailed business plans and initialization of hardware and software systems. The
promotions for NSE were financial institutions, insurances, companies, banks and SEBI capital
market ltd, Infrastructure leasing and financial services ltd and stock holding corporations ltd.

It has been set up to strengthen the move towards professionalisation of the capital market as
well as provide nation wide securities trading facilities to investors.

NSE is not an exchange in the traditional sense where brokers own and manage the
exchange. A two tier administrative set up involving a company board and a governing aboard of
the exchange is envisaged.

NSE is a national market for shares PSU bonds, debentures and government securities
since infrastructure and trading facilities are provided.

NSE-NIFTY:

The NSE on Apr22, 1996 launched a new equity Index. The NSE-50. The new Index
which replaces the existing NSE-100 Index is expected to serve as an appropriate Index for the
new segment of future and option.
“NIFTY” mean National Index for fifty stocks. The NSE-50 comprises fifty companies that
represent 20 board industry groups with an aggregate market capitalization of around Rs 1,
70,000 crs. All companies included in the Index have a market capitalization in excess of Rs. 500
crs each and should have trade for 85% of trading days at an impact cost of less than 1.5%.

The base period for the index is the close of price on Nov 3 1995, which makes one year
of completion of operation of NSE’s capital market segment. The base value of the index has
been set at 1000.

NSE-MIDCAP INDEX

The NSE madcap index or the junior nifty comprises 50 stocks that represent 21st board
industry groups and will provide proper representation of the midcap segment of the Indian
capital market. All stocks in the Index should have market capitalization of grate than Rs.200 crs
and should have traded 85% of the trading days at an impact cost of less than 2.5%.

The base period for the index is Nov 4 1996, which signifies 2 years for completion of
operations of the capital market segment of the operations. The base value of the Index has been
set at 1000.

Average daily turn over of the present scenario 258212 (Laces) and number of average
daily trades 2160(Laces).

At present there are 24 stock exchanges recognized under the securities contract
(regulation Act, 1956. They are

Ahmedbad Stock Exchange

Bangalore Stock Exchange

Bhubaneswar Stock Exchange

Calcutta Stock Exchange

Cochin Stock Exchange

Coimbatore Stock Exchange

Delhi Stock Exchange

Guwahati Stock Exchange

Hyderabad Stock Exchange

Indore Stock Exchange

Jaipur Stock Exchange

Kanpur Stock Exchange

Ludhiana Sock Exchange

Madras Stock Exchange

Magadh Stock Exchange

Mangalore Stock Exchange

Pune Stock Exchange

Uttar Pradesh Exchange Assoc ltd

Saurashtra Sock Exchange

Vadodhara Stock Exchange

NSE

OTCEI

Inter connected Stock Exchange

 CHAPTER 4

COMPANY PROFILE
Established in 1992, as one of the first corporate brokerages in India, The Doha Brokerage &
Financial Services Ltd (formerly Select Securities Ltd), is the flagship company of the DBFS
group. 

Doha Brokerage & Financial Services Ltd is focused on creating utmost value for its customers,
consistently by drawing on our collective expertise, resources and global exposure. 

To serve our customers better, the company has gone beyond the traditional brokerage business,
and offers a wide range of services, which include total wealth management and investment
solutions.

With a pan Indian presence, which comprises over 180 branches across major cities, as well as in
Dubai and Doha in the Middle East, DBFS is always closer to its customers. 

The Team
Mr. R Seetharaman, Chairman (Nominee- Doha Bank)

Mr. K V Samuel, Vice Chairman (Nominee- Doha Bank)

Mr. Prince George, Managing Director & CEO 

Mr. Binny C. Thomas, Whole-time Director (Dubai)

Mr. Sekhar M, Whole-time Director 

Mr. Suresh Yezhuvath, Whole-time Director

Core Strengths
Research and Advisory Capabilities
The competent, professional research team of DBFS is always committed to building and
managing the financial assets of its customers. By providing security information and trading
calls on a real time basis through trading terminals, DBFS is always committed to remain a step
ahead of other brokerage firms.

Technology innovations

The brokerage industry, today, is driven by sophisticated technology. The IT and telecom
revolution has brought in a brave new world in knowledge sharing and customer service. DBFS
is always committed to bring the best of these conveniences to its customers. The group has
acquired the latest cutting-edge technology for front end trading and back office processing. This
enhances quality and speed of services. This also enables centralized monitoring and risk
management up to client level, online back office support at the branch level and real time
customer support through internet.

Qualified, trained and motivated manpower

DBFS employs a large number of qualified professionals who are motivated and adequately
trained to service the customers efficiently and competently.

Distribution network

DBFS has a network of over 180 branches. Thus, the company is poised to reach out to more
customers, offer the most competitive brokerage and terms to its customers. As the company has
already invested in a technology platform which is scalable to any new location without
additional investment, the group is gearing up to increase the branch network exponentially.

Corporate Vision
Vision

We want to remain as the leading, trusted total financial services provider, wherever we operate,
by maintaining superior technological and service standards, and by keeping trust and
transparency as our core values.

 
Mission

We are committed to create and enhance wealth for corporate and retail customers, by delivering
cutting-edge financial solutions which suit their specific needs.

Future Plans
The promise of a better future

DBFS is always keen in stretching its horizons to explore into newer areas of services and
solutions. Because, in a fast paced world, customer expectations and requirements are growing,
at an equal pace. To take on the challenging needs, DBFS is rolling out a host of new products
and services. The company is gearing up to widen its presence, both in India and overseas, with
the support of its strategic partner.

Services
Internet Trading

DBFS has a state-or-the-art internet trading platform with cutting-edge technological excellence.
TRADEeasy, the internet trading platform of the group has almost all the features of a Broker’s
terminal.

Commodities & Forex Trading

As a trading member of DGCX, Dubai, Select Commodities DMCC offers trading in

commodities and forex for its customers.

The group has membership in all premier commodity exchanges in India, namely NCDEX,
NMCE and MCX. The company facilitates futures trading for various agricultural commodities
and other commodities including gold, silver, rubber, cardamom, pepper etc. which are actively
traded.

Custodial - Depository Services

Select Stock Brokers Ltd. is a Depository Participant with Central Depository Services Ltd.
(CDSL). CDSL is one of only two depositories in India for electronic holding of securities. The
Company extends depository services to its trading clients as well as non-trading clients. The
custodial services include electronic holding of securities, Demat, Remat, pledge, unpledge etc.
and market and off-market transfers, transmission, transposition etc.

Mutual Funds & Insurance Products

DBFS, being a total solutions provider for the varied investment needs of the retail investors,
distributes Mutual Fund products of almost all major AMCs. Application Forms of NFOs are
available with the branches.

Portfolio Management

DBFL Ltd. is a SEBI registered Portfolio Manager with an excellent track record of
performance. The group has a highly professional, experienced and result-oriented research team
which analyzes the markets and manages the customers’ funds accordingly in order to ensure
optimum results. DBFS Portfolio Managers have been able to consistently out-perform the
bench-mark indices.

Trading in Equities & Derivatives

DBFS has membership in both NSE and BSE. The group has been permitted to operate in the
cash as well as derivative segments of NSE and BSE. Online trading in Cash Market and FAO
are available at all the branches. Connectivity is provided at the Branches by way of V-Sat or
VPN / Broad Band. The group services both retail and institutional customers.

SERVICES RENDERED BY DBFS

 Equity & Derivative

Trading Institutional Distribution

Lending Services
Services

Insurance Broking Depository

Services
Private Equity
Commodities
Internet Broking
Trading
Services

International
Investment Banking Wealth Equity &
Management Commodities

Services

CHAPTER- 5

THEORETICAL FRAME WORK

THERE ARE TWO TYPES OF MARKETS IN INDIA

MONEY MARKET

Money market is a market for debt securities that pay off in the short term usually less
than one year, for example the market for 90-days treasury bills. This market
encompasses the trading and issuance of short term non equity debt instruments
including treasury bills, commercial papers, bankers acceptance, certificates of
deposits, etc.

In other word we can also say that the Money Market is basically concerned with the
issue and trading of securities with short term maturities or quasi-money
instruments. The Instruments traded in the money-market are Treasury Bills,
Certificates of Deposits (CDs), Commercial Paper (CPs), Bills of Exchange and other
such instruments of short-term maturities (i.e. not exceeding 1 year with regard to the
original maturity)

CAPITAL MARKET

Capital market is a market for long-term debt and equity shares. In this market, the
capital funds comprising of both equity and debt are issued and traded. This also
includes private placement sources of debt and equity as well as organized markets like
stock exchanges.

Capital market can be divided into Primary and Secondary Markets.

PRIMARY MARKET

In the primary market, securities are offered to public for subscription for the purpose of
raising capital or fund. Secondary market is an equity trading avenue in which already
existing/pre- issued securities are traded amongst investors. Secondary market could
be either auction or dealer market. While stock exchange is the part of an auction
market, Over-the-Counter (OTC) is a part of the dealer market. In addition to the
traditional sources of capital from family and friends, startup firms are created and
nurtured by Venture Capital Funds and Private Equity Funds. According to the Indian
Venture Capital Association Yearbook (2003), investments of $881 million were injected
into 80 companies in 2002, and investments of $470 million were injected into 56
companies in 2003. The firms which received these investments were drawn from a
wide range of industries, including finance, consumer goods and health. The growth of
the venture capital and private equity mechanisms in India is critically linked to their
track record for successful exits. Investments by these funds only commenced in recent
years, and we are seeing a rapid buildup in a full range of channels for exit, with a mix
of profitable and unprofitable outcomes. This success with exit suggests that investors
will allocate increased resources to venture funds and private equity funds operating in
India, who will (in turn) be able to fund the creation of new firms.

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. Majority
of the trading is done in the secondary market. Secondary market comprises of equity
markets and the debt markets.

For the general investor, the secondary market provides an efficient platform for trading
of his securities. For the management of the company, Secondary equity markets serve
as a monitoring and control conduit—by facilitating value-enhancing control activities,
enabling implementation of incentive-based management contracts, and aggregating
information (via price discovery) that guides management decisions.

Difference between the primary market and the secondary market In the primary
market, securities are offered to public for subscription for the purpose of raising capital
or fund. Secondary market is an equity trading avenue in which already existing/pre-
issued securities are traded amongst investors. Secondary market could be either
auction or dealer market. While stock exchange is the part of an auction market, Over-
the-Counter (OTC) is a part of the dealer market.
Main financial products/instruments dealt in the secondary market

• Equity: The ownership interest in a company of holders of its common and preferred
stock.

The various kinds of equity shares are as follows –

• Equity Shares:

• An equity share, commonly referred to as ordinary share also represents the form of
fractional ownership in which a shareholder, as a fractional owner, undertakes the
maximum entrepreneurial risk associated with a business venture. The holders of such
shares are members of the company and have voting rights. A company may issue
such shares with differential rights as to voting, payment of dividend, etc.

• Rights Issue/ Rights Shares:

When an existing company issues shares to its existing shareholders in proportion to

the number of shares held by them, it is known as Rights Issue. Rights issue is
obligatory for a company where increase in subscribed capital is necessary after two
years of its formation or after one year of its first issue of shares, whichever is earlier.
SEBI has issued guidelines for issue of right shares. Accordingly, only a listed company
can make right issue. Rights issue can be made only in respect of fully paid up shares.
No reservation is allowed for rights issue of fully or partly convertible debentures. The
company has to make announcement of rights issue and once the announcement is
made it cannot be withdrawn. The company has to make the appointment Registrar but
underwriting is optional. It has also to appoint category I Merchant Bankers holding a
certificate of registration issued by SEBI. Letter of offer should contain disclosures as
per SEBI requirements. The rights issue should be open for minimum period of 30 days,
and maximum up to 60 days. The company has to make an agreement with the
depository for materialization of securities to be issued in demat form. A minimum
subscription of 90 per cent of the issue should be received. A no complaints certificate
is to be filed by the Lead Merchant Banker with the SEBI after 21 days from the date of
issue of offer document.
• Bonus Shares: Shares issued by the companies to their shareholders free of cost
by capitalization of accumulated reserves from the profits earned in the earlier years.

• Preferred Stock/ Preference shares: Owners of these kind of shares are entitled
to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before
dividend can be paid in respect of equity share. They also enjoy priority over the equity
shareholders in payment of surplus. But in the event of liquidation, their claims rank
below the claims of the company’s creditors, bondholders / debenture holders.

• Cumulative Preference Shares: A type of preference shares on which dividend

accumulates if remains unpaid. All arrears of preference dividend have to be paid out
before paying dividend on equity shares.

• Cumulative Convertible Preference Shares: A type of preference shares where

the dividend payable on the same accumulates, if not paid. After a specified date, these
shares will be converted into equity capital of the company.

• Participating Preference Share: The right of certain preference shareholders to

participate in profits after a specified fixed dividend contracted for is paid.

Participation right is linked with the quantum of dividend paid on the equity shares over
and above a particular specified level.

• Security Receipts: Security receipt means a receipt or other security, issued by a

securitisation company or reconstruction company to any qualified institutional buyer
pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of
an undivided right, title or interest in the financial asset involved in securitisation.

• Government securities (G-Secs): These are sovereign (credit risk-free) coupon

bearing instruments which are issued by the Reserve Bank of India on behalf of
Government of India, in lieu of the Central Government's market borrowing programme.
These securities have a fixed coupon that is paid on specific dates on half-yearly basis.
These securities are available in wide range of maturity dates, from short dated (less
than one year) to long dated (upto twenty years).
• Debentures: Bonds issued by a company bearing a fixed rate of interest usually
payable half yearly on specific dates and principal amount repayable on particular date
on redemption of the debentures. Debentures are normally secured/ charged against
the asset of the company in favour of debentureholder.

• Bond: A negotiable certificate evidencing indebtedness. It is normally unsecured. A

debt security is generally issued by a company, municipality or government agency. A
bond investor lends money to the issuer and in exchange, the issuer promises to repay
the loan amount on a specified maturity date. The issuer usually pays the bond holder
periodic interest payments over the life of the loan. The various types of Bonds are as
follows-

• Zero Coupon Bond: Bond issued at a discount and repaid at a face value. No
periodic interest is paid. The difference between the issue price and redemption price
represents the return to the holder. The buyer of these bonds receives only one
payment, at the maturity of the bond.

• Convertible Bond: A bond giving the investor the option to convert the bond into
equity at a fixed conversion price.

• Commercial Paper: A short term promise to repay a fixed amount that is placed on
the market either directly or through a specialized intermediary. It is usually issued by
companies with a high credit standing in the form of a promissory note redeemable at
par to the holder on maturity and therefore, doesn’t require any guarantee. Commercial
paper is a money market instrument issued normally for a tenure of 90 days.

• Treasury Bills: Short-term (up to 91 days) bearer discount security issued by the
Government as a means of financing its cash requirements.
2. SEBI (SECURITY AND EXCHANGE BOARD OF INDIA)

SEBI AND ITS ROLE IN THE SECONDARY MARKET

The SEBI is the regulatory authority established under Section 3 of SEBI Act 1992 to
protect the interests of the investors in securities and to promote the development
of,and to regulate, the securities market and for matters connected therewith and
incidental thereto.

Securities and Exchange Board of India constituted under the Resolution of the
Government of India in the Department of Economic Affairs No.1 (44)SE/86, dated the
12th day of April, 1988;

The Board shall consist of the following members, namely:-

1. A Chairman

2. Two members from amongst the officials of the Ministry of the Central Government
dealing with Finance (and administration of the Companies Act, 1956;) 2 of 1934

3. One member from amongst the officials of [the Reserve Bank

4. Five other members of whom at least three shall be the whole-time members

Departments of SEBI regulating trading in the secondary market

(1) Market Intermediaries Registration and Supervision department (MIRSD)

Registration, supervision, compliance monitoring and inspections of all market

intermediaries in respect of all segments of the markets viz. equity, equity derivatives,
debt and debt related derivatives.

(2) Market Regulation Department (MRD)

Formulating new policies and supervising the functioning and operations (except
relating to derivatives) of securities exchanges, their subsidiaries, and market
institutions such as Clearing and settlement organizations and Depositories (Collectively
referred to as ‘Market SROs’).

(3)Derivatives and New Products Departments (DNPD)

Supervising trading at derivatives segments of stock exchanges, introducing new

products to be traded, and consequent policy changes.

POWERS & FUNCTIONS

1. Regulating the business in stock exchanges and any other securities markets.

2. Registering and regulating the working of stock brokers, sub-brokers, share transfer
agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant
bankers, underwriters, portfolio managers, investment advisers and such other
intermediaries who may be associated with securities markets in any manner.

3. Registering and regulating the working of the depositories, participants custodians of

securities, foreign institutional investors, credit rating agencies and such other
intermediaries as the board may, by notification, specify in this behalf.

4. Registering and regulating the working of (venture capital funds and collective
investment schemes) including mutual funds.

5. Promoting and regulating self-regulatory organizations.

6. Prohibiting fraudulent and unfair trade practices relating to securities markets.

7. Promoting investors' education and training of intermediaries of securities markets.

8. Prohibiting insider trading in securities.

9. Regulating substantial acquisition of shares and take-over of companies.

10. Calling for information from, undertaking inspection, conducting inquiries and audits
of the stock exchanges, (mutual funds) and other persons associated with the securities
market and intermediaries and self- regulatory organizations in the securities market.

11. Performing such functions and exercising such powers under the provisions of
securities contracts (regulation) act, 1956, as may be delegated to it by the central
government.

12. Levying fees or other charges for carrying out the purpose of this section.

13. Conducting research for the above

INVESTORS: -

The investors in the past have suffered at the hands of insufficient stock exchanges and
greedy unprofessional brokers. This was one of the reasons why SEBI was created.
The investor today can look forward to redress of his grievances through SEBI.
Normally investors have complaints of following nature:

1. Delays in refund of application money.

2. Delay in receipt of dividend and / or interest warrants.

3. Delay in receiving the maturity value of fixed deposits or debentures on redemption.

4. Delay in receipt of share and debenture certificates after allotment.

Major part of the liberalization process was the repeal of the Capital Issues
(Control) Act, 1947, in May 1992. With this, Government’s control over issues of capital,
pricing of the issues, fixing of premium and rates of interest on debentures etc. ceased,
and the office which administered the Act was abolished, the market was allowed to
allocate resources to competing uses. However, to ensure effective regulation of the
market, SEBI Act, 1992 was enacted to establish SEBI with statutory powers for:
(a) Protecting the interests of investors in securities,

(b) Promoting the development of the securities market, and

(c) Regulating the securities market.

SEBI receives many such complaints regularly and tries to redress all such grievances.
SEBI has from time to time pulled up companies against whom the complaints are
received and has also initiated action against the defaulting companies.

SEBI has encouraged the registration of investors associations in various parts of the
country to organize investors into an effective force for protection of their own interests.

Some of the actions taken by SEBI can be summarized as below:

1. The introduction of screen based trading.

2. The ban on BadIa.

3. The dematerialization of shares.

4. The method of postal ballots so that small investors views are heard.

5. The book building process in buy-back of shares by the companies.

6. The capital adequacy norms for brokers.

SEBI may, for the protection of investors,

1. specify, by regulations,

a) the matters relating to issue of capital, transfer of securities and other matters
incidental thereto; and

b) the manner in which such matters, shall be disclosed by the companies and

2. by general or special orders,

a) prohibit any company from issuing of prospectus, any offer document, or

advertisement soliciting money from the public for the issue of securities, specify the
conditions subject to which the prospectus, such offer document or advertisement, if not
prohibited may be issued.

BOMBAY STOCK EXCHANGE OF INDIA LIMITED

Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich
heritage. Popularly known as "BSE", it was established as "The Native Share & Stock
Brokers Association" in 1875. It is the first stock exchange in the country to obtain
permanent recognition in 1956 from the Government of India under the Securities
Contracts (Regulation) Act, 1956.

The Exchange's pivotal and pre-eminent role in the development of the Indian capital
market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an
Association of Persons (AOP), the Exchange is now a demutualised and corporative
entity incorporated under the provisions of the Companies Act, 1956, pursuant to the
BSE (Corporatization and Demutualization) Scheme, 2005 notified by the Securities and
Exchange Board of India (SEBI). With demutualization, the trading rights and ownership
rights have been de-linked

effectively addressing concerns regarding perceived and real conflicts of interest. The
Exchange is professionally managed under the overall direction of the Board of
Directors.

The Board comprises eminent professionals, representatives of Trading Members and

the Managing Director of the Exchange. The Board is inclusive and is designed to
benefit from the participation of market intermediaries.

In terms of organization structure, the Board formulates larger policy issues and
exercises over-all control. The committees constituted by the Board are broad-
based.The day-to-day operations of the Exchange are managed by the Managing
Director and a management team of professionals.

The Exchange has a nation-wide reach with a presence in 417 cities and towns of India.
The systems and processes of the Exchange are designed to safeguard market integrity
and enhance transparency in operations. During the year 2004-2005, the trading
volumes on the Exchange showed robust growth.

The Exchange provides an efficient and transparent market for trading in equity, debt
instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietary
system of the Exchange and is BS 7799-2-2002 certified. The surveillance and clearing
& settlement functions of the Exchange are ISO 9001:2000 certified.

Bombay Stock Exchange Limited (BSE) which was founded in 1875 with six brokers
has now grown into a giant institution with over 874 registered Broker-Members spread
over 380 cities across the country. Today, BSE's Wide Area Network (WAN) connecting
over 8000 BSE Online Trading (BOLT) System Trader Work Stations (TWS) is one of
the largest of its kind in the country.

With a view to provide efficient and integrated services to the investing public through
the members and their associates in the operations pertaining to the Exchange,
Bombay Stock Exchange Limited (BSE) has set up a unique Member Services and
Development to attend to the problems of the Broker-Members.

Member Services and Development Department is the single point interface for
interacting with the Exchange Administration to address to Members' issues. The
Department takes care of various problems and constraints faced by the Members in
various products such as Cash, Derivatives, Internet Trading, and Processes such as
Trading, Technology, Clearing and Settlement, Surveillance and Inspection,
Membership, Training, Corporate Information, etc.
PERSONALIZED SERVICE PROVIDER

Member Services and Development has put in place the concept of 'Relationship
Managers' whereby an Officer is responsible for providing comprehensive services to a
group/ set of Members alloted to him/her. The Relationship Managers maintain a
comprehensive database on the members and their associates. A distinct feature of the
functioning of the Relationship Manager is attending to the diverse problems of the
Members at one stop by co-ordinating with various departments thus saving valuable
time and energy for the Members. This synergetic effort will benefit both the Exchange
and its members in consolidating the business and exploiting the opportunities.

VISION OF BSE

“Emerge as the premier Indian stock exchange by establishing global benchmarks"

COMMODITY EXCHANGES

There are three categories:

• NCDEX

• MCX

• NMCE

A brief description of commodity exchanges are those which trade in particular

commodities, neglecting the trade of securities, stock index futures and options etc.

In the middle of 19th century in the United States, businessmen began organizing
market forums to make the buying and selling of commodities easier. These central
marketplaces provided a place for buyers and sellers to meet, set quality and quantity
standards, and establish rules of business.

Agricultural commodities were mostly traded but as long as there are buyers and
sellers, any commodity can be traded. In 1872, a group of Manhattan dairy merchants
got together to bring chaotic condition in New York market to a system in terms of
storage, pricing, and transfer of agricultural products.

In 1933, during the Great Depression, the Commodity Exchange, Inc., was established
in New York through the merger of four small exchan ges – the National Metal
Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and
the New York Hide Exchange.

The major commodity markets are in the United Kingdom and in the USA. In india there
are 25 recognized future exchanges, of which there are three national level multi-
commodity exchanges. After a gap of almost three decades, Government of India has
allowed forward transactions in commodities through Online Commodity Exchanges, a
modification of traditional business known as Adhat and Vayda Vyapar to facilitate
better risk coverage and delivery of commodities.

The three exchanges are:

1. National Commodity & Derivatives Exchange Limited(NCDEX)

2. Multi Commodity Exchange of India Limited (MCX)

3. National Multi-Commodity Exchange of India Limited (NMCEIL)

All the exchanges have been set up under overall control of Forward

Market Commission (FMC) of Government of India.

National Commodity & Derivatives Exchange Limited (NCDEX)

National Commodity & Derivatives Exchange Limited (NCDEX) located in Mumbai is a

public limited company incorporated on April 23, 2003 under the Companies Act, 1956
and had commenced its operations on December 15, 2003.This is the only commodity
exchange in the country promoted by national level institutions. It is promoted by ICICI
Bank Limited, Life Insurance Corporation of India (LIC), National Bank for Agriculture
and Rural Development (NABARD) and National Stock Exchange of India Limited
(NSE).

It is a professionally managed online multi commodity exchange. NCDEX is regulated

by Forward Market Commission and is subjected to various laws of the land like the
Companies Act, Stamp Act, Contracts Act, Forward Commission (Regulation) Act and
various other legislations.

Multi Commodity Exchange of India Limited(MCX)

Headquartered in Mumbai Multi Commodity Exchange of India Limited (MCX), is an

independent and de-mutulised exchange with a permanent recognition from

Government of India. Key shareholders of MCX are Financial Technologies (India) Ltd.,
State Bank of India, Union Bank of India, Corporation Bank, Bank of India and Canara
Bank. MCX facilitates online trading, clearing and settlement operations for commodity
futures markets across the country.

MCX started offering trade in November 2003 and has built strategic alliances with
Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors’ Association
of India, Pulses Importers Association and Shetkari Sanghatana.

National Multi-Commodity Exchange of India Limited (NMCEIL)

National Multi Commodity Exchange of India Limited (NMCEIL) is the first demutualzed,
Electronic Multi-Commodity Exchange in India. On 25th July, 2001, it was granted
approval by the Government to organize trading in the edible oil complex. It has
operationalised from November 26, 2002. It is being supported by Central Warehousing
Corporation Ltd., Gujarat State Agricultural Marketing Board and Neptune Overseas
Limited. It got its recognition in October 2000.

Commodity exchange in India plays an important role where the prices of any
commodity are not fixed, in an organized way. Earlier only the buyer of produce and its
seller in the market judged upon the prices. Others never had a say.

Today, commodity exchanges are purely speculative in nature. Before discovering the
price, they reach to the producers, end-users, and even the retail investors, at a
grassroots level. It brings a price transparency and risk management in the vital market.

A big difference between a typical auction, where a single auctioneer announces the
bids, and the Exchange is that people are not only competing to buy but also to sell.

By Exchange rules and by law, no one can bid under a higher bid, and no one can offer
to sell higher than someone else’s lower offer. That keeps the market as efficient as
possible, and keeps the traders on their toes to make sure no one gets the purchase or
sale before they do.

INTRODUCTION OF NSE

3. NSE - A NEW IDEOLOGY

GENESIS

Capital market reforms in India have outstripped the process of liberalization in most
other sectors of the economy. However, the creation of an independent capital market
regulator was the initiation of this reform process. After the formation of the Securities
Market regulator, the Securities and Exchange Board of India (SEBI), attention were
drawn towards the inefficiencies of the bourses and the need was felt for better
regulation, discipline and accountability. A Committee recommended the creation of a
2nd stock exchange in Mumbai called the "National Stock Exchange". The Committee
suggested the formation of an exchange which would provide investors across the
country a single, screen based trading platform, operated through a VSAT network. It
was on this recommendation that setting up of NSE as a technology driven exchange

was conceptualized. NSE has set up its trading system as a nation-wide, fully
automated screen based trading system. It has written for itself the mandate to create a
world-class exchange and use it as an instrument of change for the industry as a whole
through competitive pressure. NSE was incorporated in 1992 and was given recognition
as a stock exchange in April 1993. It started operations in June 1994, with trading on
the Wholesale Debt Market Segment. Subsequently it launched the Capital Market
Segment in November 1994 as a trading platform for equities and the Futures and
Options Segment in June 2000 for various derivative instruments.

NSE was set up with the objectives of:

• Establishing a nationwide trading facility for all types of securities;

• Ensuring equal access to investors all over the country through an appropriate
communication network;

• Providing a fair, efficient and transparent securities market using electronic trading
system;

• Enabling shorter settlement cycles and book entry settlements; and

• Meeting international benchmarks and standards.

NSE has been able to take the stock market to the doorsteps of the investors.

The technology has been harnessed to deliver the services to the investors across the
country at the cheapest possible cost. It provides a nation-wide, screen-based,
automated trading system, with a high degree of transparency and equal access to
investors irrespective of geographical location. The high level of information
dissemination through on-line system has helped in integrating retail

investors on a nation-wide basis. The standards set by the exchange in terms of market
practices, products, technology and service standards have become industry
benchmarks and are being replicated by other market participants.

Within a very short span of time, NSE has been able to achieve all the objectives for
which it was set up. It has been playing a leading role as a change agent in
transforming the Indian Capital Markets to its present form. The Indian Capital Markets
are a far cry from what they used to be a decade ago in terms of market practices,
infrastructure, technology, risk management, clearing and settlement and investor
service.

NSE - A New ideology

The broad objective for which the exchange was set up has made it to play a leading
role in enlarging the scope of market reforms in securities market in India. During last
one decade it has been playing the role of a catalytic agent in reforming the markets in
terms of market microstructure and in evolving the best market practices keeping in
mind the investors.

The Exchange is set up on a demutualised model wherein the ownership,

management and trading rights are in the hands of three different sets of people.This
has completely eliminated any conflict of interest. This has helped NSE toaggressively
pursue policies and practices within a public interest framework.

NSE's nationwide, automated trading system has helped in shifting the trading platform
from the trading hall in the premises of the exchange to the computer terminals at the
premises of the trading members located at different geographicallocations in the
country and subsequently to the personal computers in the homes of investors and
even to hand held portable devices for the mobile investors. It has been encouraging
corporatization of membership in securities market.

It has also proved to be instrumental in ushering in scrip less trading and providing
settlement guarantee for all trades executed on the Exchange. Settlement risks have
also been eliminated with NSE's innovative endeavors in the area of clearing and
settlement viz., establishment of the clearing corporation (NSCCL), setting up a
settlement guarantee fund (SGF), reduction of settlement cycle, implementing on-line,
real-time risk management systems dematerialization and electronic transfer of
securities to name few of them.

As a consequence, the market today uses state-of-the-art information technology to

provide an efficient and transparent trading, clearing and settlement mechanism. In
order to take care of investors interest, it has also created an investors protection fund
(IPF), that would help investors who have incurred financial loss due to default of
brokers.

Ownership and Management the NSE

NSE is owned by a set of leading financial institutions, banks, insurance companies and
other financial intermediaries. It is managed by a team of professional managers and
the trading rights are with trading members who offer their services to the investors.

The Board of NSE comprises of senior executives from promoter institutions and
eminent professionals, without having any representation from trading members.

While the Board deals with the broad policy issues, the Executive Committees which
include trading members, formed under the Articles of Association and the Rules of
NSE for different market segments, set out rules and parameters to manage the dayto-
day affairs of the Exchange. The ECs have constituted several committees, like
Committee on Trade Related Issues (COTI), Committee on Settlement Issues (COSI)
etc., comprising mostly of trading members, to receive inputs from the market
participants and implement suggestions which are in the best interest of the investors
and the market.

The day-to-day management of the Exchange is delegated to the Managing Director

and CEO who is supported by a team of professional staff. Therefore, though the role of
trading members at NSE is to the extent of providing only trading services to the
investors, the Exchange involves trading members in the process of consultation and
participation in vital inputs towards decision making.

Market Segments and Products

NSE provides an electronic trading platform for of all types of securities for investors
under one roof - Equity, Corporate Debt, Central and State Government Securities,
TBills, Commercial Paper, Certificate of Deposits (CDs), Warrants, Mutual Funds units,
Exchange Traded Funds, Derivatives like Index Futures, Index Options, Stock Futures,
Stock Options, Futures on Interest Rates etc., which makes it one of the few exchanges
in the world providing trading facility for all types of securities on a single exchange.

The Exchange provides trading in 3 different segments viz.

• Wholesale debt market (WDM)

• Capital market (CM) segment and

• The futures & options (F&O) segment.

The Wholesale Debt Market segment provides the trading platform for trading of a wide
range of debt securities which includes State and Central Government securities, T-
Bills, PSU Bonds, Corporate Debentures, CPs, CDs etc. However, along with these
financial instruments, NSE has also launched various products (e.g. FIMMDA-NSE
MIBID/MIBOR) owing to the market need. A reference rate is said to be an accurate
measure of the market price. In the fixed income market, it is the interest rate that the
market respects and closely matches. In response to this, NSE started computing and
disseminating the NSE Mumbai Inter-bank Bid Rate (MIBID) and NSE Mumbai Inter-
Bank Offer Rate (MIBOR). Owing to the robust methodology of computation of these
rates and its extensive use, this product has become very popular among the market
participants.

Keeping in mind the requirements of the banking industry, FIs, MFs, insurance
companies, who have substantial investments in sovereign papers, NSE also started
the dissemination of its yet another product, the ‘Zero Coupon Yield Curve’. This helps
in valuation of sovereign securities across all maturities irrespective of its liquidity in the
market. The increased activity in the government securities market in India and
simultaneous emergence of MFs (Gilt MFs) had given rise to the need for a well defined
bond index to measure the returns in the bond market. NSE constructed such an index
the, ‘NSE Government Securities Index’. This index provides a benchmark for portfolio
management by various investment managers and gilt funds.

The Capital Market segment offers a fully automated screen based trading system,
known as the National Exchange for Automated Trading (NEAT) system. This operates
on a price/time priority basis and enables members from across the country to trade
with enormous ease and efficiency. Various types of securities e.g. equity shares,
warrants, debentures etc. are traded on this system.,

NSE started trading in the equities segment (Capital Market segment) on November 3,
1994 and within a short span of 1 year became the largest exchange in India in terms of
volumes transacted.

The Equities section provides you with an insight into the equities segment of NSE and
also provides real-time quotes and statistics of the equities market. In-depth information
regarding listing of securities, trading systems & processes, clearing and settlement,
risk management, trading statistics etc are available here.

Futures & Options segment of NSE provides trading in derivatives instruments like
Index Futures, Index Options, Stock Options, Stock Futures and Futures on interest
rates. Though only four years into its’ operations, the futures and options segment of
NSE has made a mark for itself globally. In the Futures and Options segment, trading in
Nifty and CNX IT index and 53 single stocks are available..

Technology
Technology has been the backbone of the Exchange. Providing the services to the
investing community and the market participants using technology at the cheapest
possible cost has been its main thrust. NSE chose to harness technology in creating a
new market design. It believes that technology provides the necessary impetus for the
organisation to retain its competitive edge and ensure timeliness and satisfaction in
customer service. In recognition of the fact that technology will continue to redefine the
shape of the securities industry,

NSE stresses on innovation and sustained investment in technology to remain ahead of

competition. NSE is the first exchange in the world to use satellite communication
technology for trading. It uses satellite communication technology to energise
participation through about 2,829 VSATs from nearly 345 cities spread all over the

country.

The list of towns and cities and the state-wise distribution of VSATs as at end March
2005. Its trading system, called National Exchange for Automated Trading (NEAT), is a
state of the art client server based application. At the server end all trading information
is stored in an in-memory database to achieve minimum response time and maximum
system availability for users.

It has uptime record of 99.7%. For all trades entered into NEAT system, there is

uniform response time of less than 1.5 seconds. NSE has been continuously

undertaking capacity enhancement measures so as to effectively meet the

requirements of increased users and associated trading loads.

With recent up gradation of trading hardware, NSE can handle up to 6 million trades per
day. NSE has also put in place NIBIS (NSE's Internet Based Information System) for
on-line real-time dissemination of trading information over the Internet. As part of its
business continuity plan, NSE has established a disaster back-up site at Chennai along
with its entire infrastructure, including the satellite earth station and the highspeed
optical fiber link with its main site at Mumbai.
This site at Chennai is a replica of the production environment at Mumbai. The
transaction data is backed up on near real time basis from the main site to the disaster
back-up site through the 2 mbps high-speed link to keep both the sites all the time
synchronized with each other.

Application Systems

The various application systems that NSE uses for its trading as well clearing and
settlement and other operations form the backbone of the Exchange. The application
systems used for the day-to-day functioning of the Exchange can be divided into

(a) Front end applications

(b) Back office applications.

IN THE FRONT END APPLICATION SYSTEM, THERE ARE 6

APPLICATIONS:

• NEAT – CM system takes care of trading of securities in the Capital Market segment
that includes equities, debentures/notes as well as retail Gilts. The NEAT – CM
application has a split architecture wherein the split is on the securities and users. The
application runs on two Stratus systems with Open Strata Link (OSL). The application
has been benchmarked to support 15000 users and handle more than 6 million trades
daily. This application also provides data feed for processing to some other systems like
Index, OPMS through TCP/IP. This is a direct interface with the trading members of the
CM segment of the Exchange for entering the orders into the main system. There is a
two way communication between the NSE main system and the front end terminal of
the trading member.

• NEAT – WDM system takes care of trading of securities in the Wholesale Debt Market
(WDM) segment that includes Gilts, Corporate Bonds, CPs, T-Bills, etc. This is a direct
interface with the trading members of the WDM segment of the Exchange for entering
the orders/trades into the main system. There is a two way communication between the
NSE main system and the front end terminal of the trading member.

• NEAT – F&O system takes care of trading of securities in the Futures and Options
(F&O) segment that includes Futures on Index as well as individual stocks and Options
on Index as well as individual stocks. This is a direct interface with the trading members
of the F&O segment of the Exchange for entering the orders into the main system.
There is a two way communication between the NSE main system and the front end
terminal of the trading member.

• NEAT – IPO system is an interface to help the initial public offering of companies
which are issuing the stocks to raise capital from the market. This is a direct interface
with the trading members who are registered for undertaking

order entry on behalf of their clients for IPOs. NSE uses the NEAT IPO system that
allows bidding in several

• issues concurrently. There is a two way communication between the NSE main
system and the front end terminal of the trading member.

• NEAT – MF system is an interface with the trading members for order collection of
designated mutual funds units.

• Surveillance system offers the users a facility to comprehensively monitor the trading
activity and analyze the trade data online and offline. In the back office,

the following important application systems are operative:

(A) NCSS (Nationwide Clearing and Settlement System) is the clearing and

settlement system of the NSCCL for the trades executed in the CM segment of the
Exchange. The system has 3 important interfaces – OLTL (Online Trade loading) that
takes each and every trade executed on real time basis and allocates the same to the
clearing members, Depository Interface that connects the depositories for settlement of
securities and Clearing Bank Interface that connects the 10 clearing banks for
settlement of funds. It also interfaces with the clearing members for all required reports.
Through collateral management system it keeps an account of all available collaterals
on behalf of all trading/clearing members and integrates the same with the position
monitoring of the trading/ clearing members. The system also generates base capital
adequacy reports.

(B) FOCASS is the clearing and settlement system of the NSCCL for the trades
executed in the F&O segment ofthe Exchange. It interfaces with the clearing members
for all required reports. Through collateral management system it keeps an account of
all available collaterals on behalf of all trading/ clearing members and integrates the
same with the position monitoring of the trading/clearing members. The system also
generates base capital adequacy reports.

(C) OPMS – the online position monitoring system that keeps track of all trades
executed for a trading member vis-à-vis its capital adequacy.

(D) PRISM is the parallel risk management system for F&O trades using Standard
Portfolio Analysis (SPAN). It is a system for comprehensive monitoring and load
balancing of an array of parallel processors that provides complete fault tolerance. It
provides real time information on initial margin value, mark to market profit or loss,
collateral amounts, contract-wise latest prices, contract-wise open interest and limits.
The system also tracks online real time client level portfolio, base upfront margining and
monitoring.

(E) Data warehousing, that is the central repository of all data in CM as well as F&O
segment of the Exchange.

(F) Listing system, that captures the data of companies which are listed on the

Exchange and integrates the same with the trading system for necessary broadcasts,
information dissemination and
(G) Membership system, hat keeps track of all required details of the Trading

Members of the Exchange.

4. NSE FAMILY

NSCCL

National Securities Clearing Corporation Ltd. (NSCCL), a wholly-owned subsidiary of

NSE, was incorporated in August 1995 and commenced clearing operations in April
1996. It was the first clearing corporation in the country to provide notation/settlement
guarantee that revolutionized the entire concept of settlement system in India. It was set
up to bring and 9 sustain confidence in clearing and settlement of securities; to promote
and maintain short and consistent settlement cycles; to provide counter-party risk
guarantee, and to operate a tight risk containment system. It carries out the clearing and
settlement of the trades executed in the equities and derivatives segments of the NSE.
It operates a well-defined settlement cycle and there are no deviations ordeferments
from this cycle. It aggregates trades over a trading period T, nets the positions to
determine the liabilities of members and ensures movement of funds and securities to
meet respective liabilities. It also operates a Subsidiary

General Ledger (SGL) for settling trades in government securities for its constituents. It
has been managing clearing and settlement functions since its inception without a
single failure or clubbing of settlements. It assumes the counter-party risk of each
member and guarantees financial settlement. It has tied up with 10 Clearing Banks viz.,
Canara Bank, HDFC Bank, IndusInd Bank, ICICI Bank, UTI Bank, Bank of India, IDBI
Bank and Standard Chartered Bank for funds settlement while it has direct connectivity
with depositories for settlement of securities. It has also initiated a working capital
facility in association with the clearing banks that helps clearing members to meet their
working capital requirements. Any clearing bank interested in utilizing this facility has to
enter into an agreement with NSCCL and with the clearing member. NSCCL has also
introduced the facility of direct payout to clients’ account on both the depositories. It
ascertains from each clearing member, the beneficiary account details of their
respective clients who are due to receive pay out of securities. It has provided its
members with a front-end for creating the file through which the information is provided
to NSCCL. Based on the information received from members, it sends payout
instructions to the depositories, so that the client receives the pay out of securities
directly to their accounts on the pay-out day. NSCCL currently settles trades under T+2
rolling settlement. It has the credit of continuously upgrading the clearing and settlement
procedures and has also brought Indian financial markets in, line with international
markets. It has put in place online real-time monitoring and surveillance system to keep
track of the trading and clearing members’ outstanding positions and each member is
allowed to trade/operate within the pre-set limits fixed according to the funds available
with the Exchange on behalf of the member. The online surveillance mechanism also
generates various alerts/reports on any price/volume movements of securities not in line
with the normal trends/patterns.

IISL

India Index Services and Products Limited (IISL), a joint venture of NSE and Credit
Rating Information Services of India Limited (CRISIL), was set up in May 1998 to
provide indices and index services. It has a consulting and licensing agreement with
Standard and Poor's (S&P), the world's leading provider of invest able equity indices, for
co-branding equity indices. IISL pools the index development efforts of NSE and CRISIL
into a coordinated whole. It is India's first specialized company which focuses upon the
index as a core product. It provides a broad range of products and professional index
services. It maintains over 70 equity indices comprising broadbased benchmark indices,
sectoral indices and customized indices. Many investment and risk management
products based on IISL indices have been developed in the recent past. These include
index based derivatives on NSE, a number of index funds and India's first exchange
traded fund.

NSDL

Prior to trading in a dematerialized environment, settlement of trades required moving

the securities physically from the seller to the ultimate buyer, through the seller's broker
and buyer's broker, which involved lot of time and the risk of delay somewhere along the
chain.

Further, the system of transfer of ownership was grossly inefficient as every transfer
involved physical movement of paper to the issuer for registration, with the change of
ownership being evidenced by an endorsement on the security certificate. In many
cases, the process of transfer took much longer than stipulated in the then regulations.

Theft, forgery, mutilation of certificates and other irregularities were rampant. All these
added to the costs and delays in settlement and restricted liquidity.

To obviate these problems and to promote dematerialization of securities, NSE joined

hands with UTI and IDBI to set up the first depository in India called the "National
Securities Depository Limited" (NSDL).

The depository system gained quick acceptance and in a very short span of time it was
able to achieve the objective of eradicating paper from the trading and settlement of
securities, and was also able to get rid of the risks associated with fake/forged/stolen/
bad paper. Dematerialized delivery today constitutes almost 100% of the total delivery
basedsettlement.

NSE.IT

NSE.IT Limited, a 100% technology subsidiary of NSE, was incorporated in October

1999 to provide thrust to NSE’s technology edge, concomitant with its overall goal of
harnessing latest technology for optimum business use.

It provides the securities industry with technology that ensures transparency and
efficiency in the trading, clearing and risk management systems. Additionally, NSE.IT
provides consultancy services in the areas of data warehousing, internet and business
continuity plans.

Amongst various products launched by NSE.IT are NEAT XS, a Computer-To-

Computer Link (CTCL) order routing system, NEAT iXS, an internet trading system and
Promos, professional broker’s back office system. NSE.IT also offers an elearning ortal,
invarsitywww.finvarsity.com) dedicated to the finance sector.

The site is powered by Enlitor - a learning management system developed by NSE.IT

jointly with an e-learning partner. New initiatives include payment gateways, products
for derivatives segments and Enterprise Management Services (EMSs).

NCDEX

NSE joined hand with other financial institutions in India viz., ICICI Bank, NABARD, LIC,
PNB, CRISIL, Canara Bank and IFFCO to promote the NCDEX which provide a
platform for market participants to trade in wide spectrum of commodity derivatives.
Currently NCDEX facilitates trading of 37 agro based commodities, 1 base metal and2
precious metal.
Shareholders of NSEIL

1. Industrial Development Bank of India Limited

2. Industrial Finance Corporation of India Limited

3. Life Insurance Corporation of India

4. State Bank of India

5. ICICI Bank Limited

6. IL & FS Trust Company Limited

7. Stock Holding Corporation of India Limited

8. SBI Capital Markets Limited

9. The Administrator of the Specified Undertaking of Unit Trust of India

10. Bank of Baroda

11. Canara Bank

12. General Insurance Corporation of India

13. National Insurance Company Limited

14. The New India Assurance Company Limited

15. The Oriental Insurance Company Limited

16. United Insurance Company Limited

17. Punjab National Bank

18. Oriental Bank of Commerce

19. Corporation Bank

20. Indian Bank

21. Union Bank of India

5. LISTING OF SECURITIES

The stocks, bonds and other securities issued by issuers require listing for providing
liquidity to investors. Listing means formal admission of a security to the trading platform
of the Exchange. It provides liquidity to investors without compromising the need of the
issuer for capital and ensures effective monitoring of conduct of the issuer and trading
of the securities in the interest of investors.

The issuer wishing to have trading privileges for its securities satisfies listing
requirements prescribed in the relevant statutes and in the listing regulations of the
Exchange. It also agrees to pay the listing fees and comply with listing requirements on
a continuous basis. All the issuers who list their securities have to satisfy the corporate
governance requirement framed by regulators.

Benefits of Listing on NSE

􀂙 NSE provides a trading platform that extends across the length and breadth of the
country. Investors from approximately 345 centers can avail of trading facilities on the
NSE trading network. Listing on NSE thus, enables issuers to reach and service
investors across the country.

􀂙 NSE being the largest stock exchange in terms of trading volumes, the securities
trade at low impact cost and are highly liquidity. This in turn reduces the cost of trading
to the investor.

􀂙 The trading system of NSE provides unparallel level of trade and post-trade
information. The best 5 buy and sell orders are displayed on the trading system and the
total number of securities available for buying and selling is also displayed. This helps
the investor to know the depth of the market.
Further, corporate announcements, results, corporate actions etc are also available on
the trading system, thus reducing scope for price manipulation or misuse.

􀂙 The facility of making initial public offers (IPOs), using NSE's network and software,
results in significant reduction in cost and time of issues.

􀂙 NSE's web-site www.nseindia.com provides a link to the web-sites of the companies

that are listed on NSE, so that visitors interested in any company can visit that
company's web-site from the NSE site.

􀂙 Listed companies are provided with monthly trade statistics for the securities of the
company listed on the Exchange.

􀂙 The listing fee is nominal.

CM Segment

Two categories, namely 'listed' and 'permitted to trade' categories of securities (equity
shares, preference shares and debentures) are available for trading in the CM segment.
However, the permitted to trade category is being phased out gradually and no new
company is been given the benefit of this category.

Listing Criteria

The Exchange has laid down criteria for listing of new issues by companies, companies
listed on other exchanges, and companies formed by amalgamation/restructuring, etc.
in conformity with the Securities Contracts(Regulation) Rules, 1957 and directions of the
Central Government and the Securities and Exchange Board of India (SEBI). The
criteria include minimum paid-up capital and market capitalisation, project appraisal,
company/promoter's track record, etc. The issuers of securities are required to adhere
to provisions of the Securities Contracts (Regulation) Act, 1956, the Companies Act,
1956, the Securities and Exchange Board of India Act, 1992, and the rules, circulars,
notifications, guidelines, etc. prescribed there under.

Listing Agreement

All companies seeking listing of their securities on the Exchange are required to enter
into a listing agreement with the Exchange. The agreement specifies all the
requirements to be continuously complied with by the issuer for continued listing.

The Exchange monitors such compliance. Failure to comply with the requirements
invites suspension of trading, or withdrawal/delisting, in addition to penalty under the
Securities Contracts (Regulation) Act, 1956. The agreement is being increasingly used
as a means to improve corporate governance.

Shareholding Pattern

In the interest of transparency, the issuers are required to disclose shareholding

pattern on a quarterly basis. On an average, the promoters hold more than 55.63% of
total shares. Though non-promoter holding is nearly 44.37%, Indian public held only
17.03% and the public float (holding by foreign institutional investors, mutual funds, and
Indian Public) is at best 27.27%.

Market Types

The NEAT system in NSE has four types of market. They are:

 Normal Market
All orders which are of regular lot size or multiples thereof are traded in the Normal
Market. For shares, which are traded in the compulsory dematerialised mode the
market lot of these shares, is one. Normal market consists of various book types
wherein orders are segregated as Regular lot orders, Special Term orders, Negotiated
Trade Orders and Stop Loss orders depending on their order attributes.

 Odd Lot Market

All orders whose order size is less than the regular lot size are traded in the odd-lot
market. An order is called an odd lot order if the order size is less than regular lot size.
These orders do not have any special terms attributes attached to them. In an odd-lot
market, both the price and quantity of both the orders (buy and sell) should exactly
match for the trade to take place. Currently the odd lot market facility is used for the
Limited Physical Market as per the SEBI directives.

 Spot Market
Spot orders are similar to the normal market orders except that spot orders have
different settlement period’s vis-à-vis normal market. These orders do not have any
special terms attributes attached to them. Currently the Spot Market is being used for
the Automated Lending & Borrowing Mechanism (ALBM) session.

 Auction Market
In the Auction Market, the Exchange on behalf of trading members for settlement
related reasons initiates’ auctions.

There are 3 participants in this market.

 Initiator
The party who initiates the auction process is called an initiator.

 Competitor
The party who enters orders on the same side as of the initiator is called
Competitor.
  Solicitor
The party who enters orders on the opposite side as of the initiator is called a
Solicitor.

WHAT IS AN AUCTION?

The Exchange purchases the requisite quantity in the Auction Market and gives them to
the buying trading member. The shortages are met through auction process and the
difference in price indicated in contract note and price received through auction is paid
by member to the Exchange, which is then liable to be recovered from the client.

What happens if the shares are not bought in the auction?

If the shares could not be bought in the auction i.e. if shares are not offered for sale in
the auction, the transactions are closed out as per SEBI guidelines.

The guidelines stipulate that “the close out Price will be the highest price recorded in
that scrip on the exchange in the settlement in which the concerned contract was
entered into and up to the date of auction/close out OR 20% above the official closing
price on the exchange on the day on which auction offers are called for (and in the
event of there being no such closing price on that day, then the official closing price on
the immediately preceding trading day on which there was an official closing price),
whichever is higher.

Since in the rolling settlement the auction and the close out takes place during trading
hours, the reference price in the rolling settlement for close out procedures would be
taken as the previous day’s closing price.

Order Books

The NSE trading system provides complete flexibility to members in the kinds of orders
that can be placed by them. Orders are first numbered and time-stamped on receipt and
then immediately processed for potential match. Every order has a distinctive order
number and a unique time stamp on it. If a match is not found, then the orders are
stored in different 'books'. Orders are stored in price-time priority in various books in the
following sequence:

 Best Price- Price priority means that if two orders are entered into the system, the
order having the best price gets the higher priority.

 Within Price, by time priority-Time priority means if two orders having the same price
are entered, the order that is entered first gets the higher priority.

The Capital Market segment has following types of books:

1. Regular Lot Book

The Regular Lot Book contains all regular lot orders that have none of the following
attributes attached to them.
a) All or None (AON)
b) Minimum Fill (MF)
c) Stop Loss (SL)

2. Special Terms Book

The Special Terms book contains all orders that have either of the following terms
attached:
a) All or None (AON)
b) Minimum Fill (MF)
Note: Currently, special term orders i.e AON and MF are not available on the
system as per the SEBI directives.

3. Negotiated Trade Book

The Negotiated Trade book contains all negotiated order entries captured by the
system before they have been matched against their counterparty trade entries.
These entries are matched with identical counterparty entries only. It is to be noted
that these entries contain a counter party code in addition to other order details.
4. Stop-Loss Book
Stop Loss orders are stored in this book till the trigger price specified in the order is
reached or surpassed. When the trigger price is reached or surpassed, the order is
released in the Regular lot book.

The stop loss condition is met under the following circumstances:

Sell order - A sell order in the Stop Loss book gets triggered when the last traded price
in the normal market reaches or falls below the trigger price of the order.

Buy order - A buy order in the Stop Loss book gets triggered when the last traded price
in the normal market reaches or exceeds the trigger price of the order.
5. Odd Lot Book
The Odd lot book contains all odd lot orders (orders with quantity less than
marketable lot) in the system. The system attempts to match an active odd lot
order against passive orders in the book. Currently, pursuant to a SEBI
directive
the Odd Lot Market is being used for orders which has a quantity less than or
equal to 500 (Qty more than the market lot) for trading. This is referred as the
Limited Physical Market (LPM).

6. Spot Book
The Spot lot book contains all spot orders (orders having only the settlement period
different) in the system. The system attempts to match an active spot lot order
against the passive orders in the book. Currently the Spot Market book type is being
used for conducting the Automated Lending & Borrowing Mechanism (ALBM)
session.

7. Auction Book This book contains orders that are entered for all auctions. The
matching process for auction orders in this book is initiated only at the end of the
solicitor period.
DEMAT: -

Demat is “dematerialization” on shares. Dematerialization is a process by which the

shares, debentures etc in the physical form get converted into the electronic form and
are stored in the computers by the depository. Earlier there used to be the hectic
procedure of physical delivery of shares. Dematerialization is a unique process of
trading the shares in the electronic form rather then the vulnerability of the physical
delivery of the shares.

The introduction of NEAT and BOLT has increased the reach of capital market
manifolds. The increase in number of investors participating in the capital market has
increased the probability of being hit by a bad delivery. The cost and time spent by the
brokers for rectification of these bad deliveries tends to be higher. In this technological
world things are needed to move at a faster pace, and with the introduction of
dematerialization process the stock exchange has expanded its business at a
tremendous speed.

ADVANTAGES OF DEMAT: -

1. Easy liquidity

2. Trading in demat segment benefits elimination of bad deliveries and all risks
associated with physical certificate such as loss, theft, mutilation, forgery, etc

3. You can also expect a lower interest charge for loans taken against demat shares as
compared to the interest for loan against physical shares. This could result in a saving
of about 0.25% to 1.5%.

4. In case of transfer of electronic shares, you save 0.5% in stamp duty.

5. You also avoid the cost of courier/ notarization/ the need for further follow-up with
your broker for shares returned for company objection
KNOW-HOW OF THE DEMAT ACCOUNT: -

A person need to have a Demat Account in banks possessing demat units(depository

participants services), so that, if he is buying the shares, shares will be directly
transferred into his A/c by the broker after the payment, and if he is selling the shares,
the shares will directly be transferred to the brokers A/c and he will get the payment
after the scripts have reached on the counter side.

For this, an investor needs to submit his DP Id (depository participant’s Id), DP

name and Client Id to his broker. This DP Id is the bank’s Id, DP name is the bank’s
name, and Client Id is the number given by the bank to the person who opens a demat
A/c. A depository transfers securities as per the investor's instructions without actually
handling securities, through the electronic mode. The DP will maintain the account
balances of securities bought and sold by the investor from time to time. The DP will
also give the investor a statement of holdings, which is similar to a passbook. Basically
the holding of a Demat Account is similar to holding a Current Account in the bank.

Trading members

They are recognized members of NSE. The persons eligible to become TMs are body
corporates, subsidiaries of banks and financial institutions. They are selected on the
basis of a comprehensive selection criterion. The whole time directors/dealers of thess

Trading mechanism

Rolling Settlement
In a rolling settlement, each trading day is considered as a trading period and trades
executed during the day are settled based on the net obligations for the day.

In NSE, the trades in rolling settlement are settled on a T+5 basis i.e. on the 5th working
day. For arriving at the settlement day all intervening holidays, which include bank
holidays, NSE holidays, Saturdays and Sundays are excluded. Typically trades taking
place on Monday shall be settled on the next Monday, Tuesday's trades shall be settled
on the next Tuesday and so on.
Limited Physical Market

Pursuant to SEBI guidelines, NSE introduced a new market called Limited Physical
Market to provide a facility to small investors to trade and settle physical shares in those
securities where compulsory dematerialized trading and settlement is enforced by SEBI.
In this segment quantities not exceeding 500 shares of each security held in the name
of the investor can be traded.

Institutional Segment

Trading in this market segment is available for institutional investors only. In order to
ensure that the overall FII ceiling limits are not violated, trading members are allowed to
enter sell orders in this market segment only for their FII clients. However, members can
enter buy orders on behalf of FII/FI clients. The settlement of transactions in this
segment is in demat mode only.

Trade for Trade Segment

Trading in this segment is available only for those securities, which have not established
connectivity with both the depositories as per SEBI directive. The list of these securities
is notified by SEBI from time to time.

Trading System
NSE operates on the 'National Exchange for Automated Trading' (NEAT) system, a fully
automated screen based trading system, which adopts the principle of an order driven
market. NSE consciously opted in favour of an order driven system as opposed to a
quote driven system. This has helped reduce jobbing spreads not only on NSE but in
other exchanges as well, thus reducing transaction costs.

Till the advent of NSE, an investor wanting to transact in a security not traded on the
nearest exchange had to route orders through a series of correspondent brokers to the
appropriate exchange. This resulted in a great deal of uncertainty and high transaction
costs. NSE has made it possible for an investor to access the same market and order
book, irrespective of location, at the same price and at the same cost.

TRADING PROCEDURE: -

NSE was the first stock exchange in the country to provide nation-wide, anonymous,
order driven, screen-based trading system, known as the National Exchange for
Automated Trading (NEAT) system. The member inputs, in the NEAT system, the
details of his order such as the quantities and prices of securities at which he desires to
transact. The transaction is executed as soon as it finds a matching sale or buys order
from a counter party. All the orders are electronically matched on a price/time priority
basis. This has resulted in a considerable reduction in time spent, cost and risk of error,
as well as frauds, resulting in improved operational efficiency. It allows for faster
incorporation of price sensitive information into prevailing prices, as the market
participants can see the full market on real time basis. This increases informational
efficiency and makes the market more transparent. Further, the system allows a large
number of participants, irrespective of their geographical locations, to trade with one
another simultaneously, improving the depth and liquidity of the market. 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 book stores only limit orders, which are
orders to buy or sell shares at a stated quantity and stated price, are executed only if
the price quantity conditions match. Thus, the NEAT system provides an Open
Electronic Consolidated Limit Order Book (OECLOB), which ensures full anonymity by
accepting orders, big or small, from members without revealing their identity. Thus,
provides equal access to all the investors. A perfect audit trail, which helps to resolve
disputes by logging in the trade execution process in entirety, is also provided. The
trading platform of the CM segment of NSE is accessed not only from the computer
terminals, but also from the personal computers of the investors through the Internet
and from the hand-held
devices through WAP. SEBI has allowed the use of internet as an order routing system
for communicating investors’ orders to the exchanges through the registered brokers.
These brokers should obtain the permission from their respective stock exchanges. In
February 2000, NSE became the first exchange in the country to provide web-based
access to investors to trade directly on the Exchange followed by BSE in March
2001.The orders originating from the PCs of investors are routed through the internet to
the trading terminals of the designated brokers with whom they have relations and
further to the exchange. After these orders are matched, the transaction is executed
and the investors get the confirmation directly on their PCs. SEBI has also allowed
trading through wireless medium or Wireless Application Protocol (WAP) platform. NSE
is the only exchange to provide access to its order book through the hand held devices,
which use WAP technology. This particularly helps those retail investors, who are
mobile and want to trade from any place.

The following are the steps involved in the trading of securities at a stock

exchange:

1. PLACING ORDER: -

An order is to be placed by an investor with the broker either to buy or sale of certain
number of securities at a certain specified price. An order can be placed by telegram,
telephone, telex/ fax, and letter or in person. There are different types of orders. When
in the order the client places a limit on the price of the security it is called limit order.
Where the order is to be executed by the broker at the best price, such an order is
called 'Best Rate Order'. When the client does not fix any price limit or time limit on the
execution of the order and relies on the judgement of the broker is called 'Open Order'.

2. TRADE EXECUTION: -

The broker has to execute the order placed by his client during the trading hours.
The order is executed as per requirements of the client. The broker may negotiate with
other parties in order to execute the orders.

3. CONTRACT NOTE: -

When the order is executed, the broker prepares a contract note. It is the basis of the
transaction. Particulars such as price, quantity of securities, date of transaction, names
of the parties, brokerage etc. are entered in the contract note.

4. DELIVERIES AND CLEARING: -

Delivery of shares takes place through the instrument known as transfer deed. The
transfer deed is signed by the transferor (seller) and is authenticated by a witness. It
contains the details of the transferee, stamp of the selling broker, etc. Delivery and
payment may be completed after 14 days as specified at the time of negotiation.
Delivery and clearing of security takes place through a clearance house.

SETTLEMENT: -

The clearing and settlement mechanism in Indian securities market has witnessed
significant changes and several innovations during the last decade. These include use
of the state-of-art information technology, emergence of clearing corporations to
assume counterparty risk, shorter settlement cycle, dematerialization and electronic
transfer of securities, fine-tuned risk management system, etc., though many of these
are yet to permeate the whole market.

In order to bring settlement efficiency and reduce settlement risk, in 1989, the
group of 30 had recommended that all secondary markets across the globe should
adopt a rolling settlement cycle on T+3 basis by 1992, i.e., the trades should be settled
by delivery of securities and payment of monies within three business days after the
trade day. But in India, due to multiple problems faced by the secondary market like the
open out cry system, wide geographical coverage, settlement of securities in physical
form, inadequate banking and depository infrastructure, India could not implement the
G30 recommendations within the stipulated time frame. In 1999, rolling settlements
were introduced in select scrips on a T+5 basis, which had got an effect from December
2001.

After successful implementation of rolling settlement on T+5 basis, SEBI moved

the settlement to T+3 basis with effect from April 2002. To carry the reforms further in
this area, the Indian equity market has reduced the settlement cycle to T+2 basis w.e.f.
1st April, 2003. The main advantage of this T+1 settlement cycle is that as the trades
spread across all trading days, this reduces undue concentration of payment of monies
and delivery of securities on a single day. As the settlement is spread across evenly, it
results in efficiency utilization of infrastructure and system capacity. In addition, trades
are guaranteed by the National Clearing Corporation. India Ltd. (NSCCL), and Bank of
India

Shareholding Ltd. (BOISL), Clearing Corporation Houses of NSE and BSE respectively.

The main functions of Clearing Corporation are to work out:

(a) What counterparties owe and

(b) Why counterparties are due to receive on the settlement date.

Furthermore, each exchange has a Settlement Guarantee Fund to meet with any
unpredictable situation. The Clearing Corporation of the exchanges assumes the
counterparty risk of each member and guarantees settlement through a fine-tuned risk
management system and an innovative method of online position monitoring. It also
ensures the financial settlement of trades on the appointed day and time irrespective of
default by members to deliver the required funds and/or securities with the help of a
settlement guarantee fund.

De-listing

The securities listed on NSE can be de-listed from the Exchange as per the SEBI
(Delisting of Securities) Guidelines, 2003 in the following manner:
Voluntary De-listing of Companies

Any promoter or acquirer desirous of delisting securities of the company under the
provisions of these guidelines shall obtain the prior approval of shareholders of the
company by a special resolution passed at its general meeting, make a public
announcement in the manner provided in these guidelines, make an application to the
delisting exchange in the form specified by the exchange, and comply with such other
additional conditions as may be specified by the concerned stock exchanges from
where securities are to be de-listed. Any promoter of a company which desires to de-list
from the stock exchange shall also determine an exit price for delisting of securities in
accordance with the book building process as stated in the guidelines. The stock
exchanges shall provide the infrastructure facility for display of the price at the terminal
of the trading members to enable the investors to access the price on the screen to
bring transparency to then delisting process.

Compulsory De-listing of Companies

The stock exchanges may de-list companies which have been suspended for a
minimum period of six months for non-compliance with the listing agreement. The stock
exchanges have to give adequate and wide public notice through newspapers and also
give a show cause notice to a company. The exchange shall provide a time period of 15
days within which 30 representation may be made to the exchange by any person who
may be aggrieved by the proposed delisting. Where the securities of the company are
de-listed by an exchange, the promoter of the company shall be liable to compensate
the security holders of the company by paying them the fair value of the securities held
by them and acquiring their securities, subject to their option to remain security-holders
with the company.

WDM Segment

In the WDM segment, all government securities, state development loans and treasury
bills are 'deemed' listed as and when they are issued. The other categories of securities
are traded under the 'listed' category. All eligible securities whether publicly issued or
privately placed can be made available for trading in the WDM segment. Amongst other
requirements, privately placed debt paper of banks, institutions and corporates require
credit rating to be eligible for listing.
6. MEMBERSHIP ADMINISTRATION

The trading in NSE has a three tier structure-the trading platform provided by the
Exchange, the broking and intermediary services and the investing community. The
trading members have been provided exclusive rights to trade subject to their
continuously fulfilling the obligation under the Rules, Regulations, Byelaws, Circulars,
etc. of the Exchange. The trading members are subject to its regulatory discipline. Any
entity can become a trading member by complying with the prescribed eligibility criteria
and exit by surrendering trading membership. There are no entry/exit barriers to trading
membership.

Eligibility Criteria

The Exchange stresses on factors such as corporate structure, capital adequacy, track
record, education, experience, etc. while granting trading rights to its members. This
reflects a conscious effort by the Exchange to ensure quality broking services which
enables to build and sustain confidence in the Exchange's operations. The standards
stipulated by the Exchange for trading membership are substantially in excess of the
minimum statutory requirements as also in comparison to those stipulated by other
exchanges in India. The exposure and volume of transactions that can be undertaken
by a trading member are linked to liquid assets in the form of cash, bank guarantees,
etc. deposited by the member with the Exchange as part of the membership
requirements. The trading members are admitted to the different segments of the
Exchange subject to the provisions of the Securities Contracts (Regulation) Act, 1956,
the Securities and Exchange Board of India Act, 1992, the rules, circulars, notifications,
guidelines, etc., issued there under and the byelaws, Rules and Regulations of the
Exchange. All trading members are registered with SEBI.
Trading Membership

A prospective trading member is admitted to any of the following combinations of

market segments:

• Wholesale Debt Market (WDM) segment,

• Capital Market (CM) and the Futures and Options (F&O) segments,

• CM Segment, the WDM and the F&O segment.

In order to be admitted as a trading member, at least two directors of the applicant

corporate must be graduates and must possess at least two years' experience in
securities markets. The applicant/any of its partners /shareholders/directors must not
have been declared defaulters on any stock exchange, must not be debarred by SEBI
for being associated with capital market as intermediaries and must not be engaged in
any fund-based activity.

For the F&O segment, at least two dealers should also have passed SEBI-approved
certification test for derivatives. In case of corporate applicant, the minimum paid up
capital should be Rs. 30 lakh and the dominant promoter/shareholder group should hold
at least 51% (40% in case 2 20

of listed companies) of paid-up equity capital of such corporate entity. The net worth
required for trading members on CM & F&O Segment is Rs. 100 lakh, however, a net
worth of Rs. 300 lakh is required for members clearing for self as well as for other
trading members.

Clearing Membership

The trades executed on the Exchange may be cleared and settled by a clearing
member. The trading members in the CM segment are also clearing members. In the
F&O segment, some members, who are registered with SEBI as self-clearing members,
clear and settle their own trades. Certain others, registered as trading member-cum-
clearing member, clear and settle their own trades as well as trades of other trading
members. Besides this, there is a special category of members, called professional
clearing members (PCMs), who do not trade but only clear trades executed by others.
This means that some members clear and settle their trades through a trading member-
cum-clearing member or a PCM, not themselves. The members clearing their own
trades or trades of others, and the PCMs are required to bring in additional security
deposits in respect of every trading member whose trades they undertake to clear and
settle.

7. INVESTOR GRIEVANCES

Investors are the backbone of the securities market. Protection of their interests is
paramount for NSE. In furtherance of their interests, NSE has put in place systems to
ensure availability of adequate, up-to-date and correct information to investors to enable
them to take informed decisions. It ensures that critical and price-sensitive information
reaching the exchange is made available to all classes of investor at the same point of
time.

Such price-sensitive information as bonus announcements, mergers, new line of

business, etc. received from the companies is disseminated to all the market
participants through the network of NSE terminals all over India. Action is initiated by
the Exchange whenever any kind of price sensitive information is not provided to the
Exchange at the prescribed time by companies listed on the Exchange. In an attempt to
ease the existing system of information dissemination by the listed companies, NSE
launched the electronic interface for listed companies in August 2004. Under the new
system, all corporate announcements including that of Board meetings which needs to
be disclosed to the market is handled electronically in a straight through and hands free
manner.

The Exchange also conducts various seminars and programs for the investors all over
the country with a view of educating them on their rights and obligations. Investors are
also made aware of the precautions they need to take while dealing in the securities
market.
The Exchange makes an audit trail available on request for all transactions executed on
NSE to enable investors to counter-check trade details for the trades executed on his
behalf by the member. The Exchange has also prescribed and makes efforts to ensure
the implementation of various safeguards like time schedules for issuing contract notes,
for receiving funds and securities purchased by investors, segregation of client funds
and securities from those of members, etc.

In spite of all the necessary steps taken by the Exchange to offer quality services to
investors, it is possible that some investors may still have certain complaints,
grievances. For this NSE has put in place a system for redressal of investor grievances
for matters/issues related to/against trading members/listed companies.

The Investor Grievance Cell (IGC) of NSE is manned by a team of professionals

possessing relevant experience in the areas of securities markets, company and legal
affairs and specially trained to identify problems faced by the investor and to find and
effect a solution quickly. It takes up complaints in respect of trades executed on the
NSE through its NEAT terminal and routed through the NSE trading member or SEBI
registered sub-broker of NSE trading member and trades pertaining to companies
traded on NSE.

Investor Protection Fund

Some cushion to the interests of investors is provided by the Investor Protection

Funds (IPFs) set up by the stock exchange. The exchanges maintains an IPF to take
care of investor claims, which may arise out of non settlement of obligations by the
trading member, who has been declared a defaulter, in respect of trades executed on
the Exchange. The maximum amount of claim payable from the Fund to the investor is
Rs. 10 lakh.
Arbitration

Arbitration is a speedy and alternative dispute resolution mechanism provided by the

Exchange for resolving disputes between the trading members and between a trading
member and his client, in respect of trades done on the Exchange. The arbitration
mechanism is provided by the Exchange in all its Regional offices to facilitate the
speedy dispute resolution mechanism.

The parties to dispute appoint an arbitrator from the panel of arbitrators maintained by
the Exchange and approved by SEBI. The arbitrator(s) pronounces an award after
going through various documents submitted by the parties and hearing them.

8. DEMATERIALISATION & REMATERIALISATION

DEMATERIALISATION

MEANING

Dematerialisation is the process by which physical certificates of an investor are

converted to an equivalent number of securities in electronic form and credited into the
investor's account with his/her DP. Dematerialising securities (physical holding into
electronic holding) In order to dematerialise physical securities one has to fill in a DRF
(Demat Request Form) which is available with the DP and submit the same along with
physical certificates one wishes to dematerialise. Separate DRF has to be filled for each
ISIN Number.

The complete process of dematerialisation is outlined below:

Surrender certificates for dematerialisation to your depository participant.

Depository participant intimates Depository of the request through the system.
Depository participant submits the certificates to the registrar of the Issuer Company.
Registrar confirms the dematerialisation request from depository. After dematerialising
the certificates, Registrar updates accounts and informs depository of the completion of
dematerialisation.
Depository updates its accounts and informs the depository participant.

Depository participant updates the demat account of the investor.

REMATERIALISATION

The process of rematerialisation is used to convert the electronic holding into physical
holdings. If one wishes to get back his securities in the physical form one has to fill in
the RRF (Remat Request Form) and request his DP for rematerialisation of the
balances in his securities account. The process of rematerialisation is outlined below:

• One makes a request for dematerialisation.

• Depository participant intimates depository of the request through the system.

• Depository confirms dematerialisation request to the registrar.

• Registrar updates accounts and prints certificates.

• Depository updates accounts and downloads details to depository participant.

• Registrar dispatches certificates to investor.

Procedure for buying & selling dematerialised securities

The procedure for buying and selling dematerialised securities is similar to the

procedure for buying and selling physical securities. The difference lies in the process of
delivery (in case of sale) and receipt (in case of purchase) of securities.

In case of purchase:-

1. The broker will receive the securities in his account on the payout day

2. The broker will give instruction to its DP to debit his account and credit investor's
account
3. Investor will give ‘Receipt Instruction to DP for receiving credit by filling appropriate
form. However one can give standing instruction for credit into ones account that will
obviate the need of giving Receipt Instruction every time.

In case of sale:-

The investor will give delivery instruction to DP to debit his account and credit the
broker’s account. Such instruction should reach the DP’s office at least 24 hours before
the pay-in as other wise DP will accept the instruction only at the investor’s risk.

9. BROKER & SUB-BROKER

STOCK BROKER

A Stock Broker plays a very important role in the secondary market helping both the
seller and the buyer of the securities to enter in to a transaction. The buyer and
sellermay be either a broker or a client. A broker is an intermediary who arranges to buy
and sell securities on behalf of clients (the buyer and the seller). They get commission
on these transactions. About one fourth of the members of the stock exchange are
specialist known as market makers.

According to Rule 2 (e) of SEBI (Stock-Brokers and Sub-Brokers) Rules, 1992, a

stockbroker means a member of a recognized stock exchange. No stockbroker is
allowed to buy, sell or deal in securities, unless he or she holds a certificate of
registration granted by SEBI. A stockbroker shall not buy, sell, and deal in securities,
unless he holds a certificate granted by SEBI.

SUB BROKER

A sub-broker is a person who intermediates between investors and stockbrokers. He

acts on behalf of a stockbroker as an agent or otherwise for assisting the investors for
buying, selling or dealing in securities through such stockbroker. No sub-broker is
allowed to buy, sell, or deal in securities, unless he or she holds a certificate of
registration granted by SEBI. A sub-broker may take the form of a sole proprietorship, a
partnership firm or a company. Stockbrokers of the recognized stock exchanges are
permitted to transact with sub-brokers. He is also known as Remiseres.

Client Agreement Form

This form is an agreement entered between client and broker in the presence of witness
where the client agrees (is desirous) to trade/invest in the securities listed on the
concerned Exchange through the broker after being satisfied of brokers capabilities to
deal in securities. The member, on the other hand agrees to be satisfied by the
genuineness and financial soundness of the client and making client aware of his
(broker’s) liability for the business to be conducted.

Details of Client Registration form

The brokers have to maintain a database of their clients, for which you have to fill client
registration form. In case of individual client registration, you have to broadly provide
following information:

􀂙 Your name, date of birth, photograph, address, educational qualifications, occupation,

residential status(Resident Indian/ NRI/others)

􀂙 Unique Identification Number (wherever applicable)

􀂙 Bank and depository account details

􀂙 Income tax No. (PAN/GIR) which also serves as unique client code.

􀂙 If you are registered with any other broker, then the name of broker and

concerned Stock exchange and Client Code Number.

􀂙 Proof of identity submitted either as MAPIN UID Card/Pan No./Passport/Voter

ID/Driving license/Photo Identity card issued by Employer registered under

MAPIN
For proof of address (any one of the following):

1. Passport

2. Voter ID

3. Driving license

4. Bank Passbook

5. Rent Agreement

6. Ration Card

7. Flat Maintenance Bill

8. Telephone Bill

9. Electricity Bill

10. Certificate issued by employer registered under MAPIN

11. Insurance Policy

Each client has to use one registration form. In case of joint names /family members, a
separate form has to be submitted for each person.

In case of Corporate Client, following information has to be provided:

1. Name, address of the Company/Firm

2. Unique Identification Number (wherever applicable)

3. Date of incorporation and date of commencement of business.

4. Registration number(with ROC, SEBI or any government authority)

5. Details of PAN Account Number:

6. Details of Promoters/Partners/Key managerial Personnel of the Company/Firm in

specified format.
7. Bank and Depository Account Details

8. Copies of the balance sheet for the last 2 financial years (copies of annual balance
sheet to be submitted every year)

9. Copy of latest share holding pattern including list of all those holding more than 5% in
the share capital of the company, duly certified by the Company Secretary / Whole time
Director/MD. (copy of updated shareholding pattern to be submitted every year)

10. Copies of the Memorandum and Articles of Association in case of a company / body
incorporate / partnership deed in case of a partnership firm 11. Copy of the Resolution
of board of directors' approving participation in equity / derivatives / debt trading and
naming authorized persons for dealing in securities.

12. Photographs of Partners/Whole time directors, individual promoters holding 5% or

more, either directly or indirectly, in the shareholding of the company and of persons
authorized to deal in securities.

13. If registered with any other broker, then the name of broker and concerned Stock
exchange and Client Code Number.

Unique Client Code

In order to facilitate maintaining database of their clients, it is mandatory for all brokers
to use unique client code which will act as an exclusive identification for the client. For
this purpose, PAN number/passport number/driving License/voters ID number/ ration
card number coupled with the frequently used bank account number and the depository
beneficiary account can be used for identification, in the given order, based on
availability.

MAPIN

MAPIN is the Market Participants and Investors Integrated Database. The SEBI (Central
Database of Market Participants) Regulations, 2003 were notified on November 20,
2003. As per these regulations, all the participants in the Indian Securities Market viz.,
SEBI registered intermediaries, listed companies and their associates and the investors
would need to get registered and obtain a Unique Identification Number (UIN). The
system for allotment of UIN involves the use of biometric impressions for natural
persons.

The major objective is creation of a comprehensive database of market participants.

Once created, the database would not only help the regulator in establishing the identity
of person(s) who have taken large exposures in the market and/or who are trading
through a large number of different brokers but also enable the regulator to take
adequate risk containment measures such as imposition of margins, trading or
exposure limits etc., depending upon the exposures of various investors. Hence, in the
event of a failure of market integrity, an immediate audit trail would be possible and the
regulator would be able to take early preventive and / or remedial measures and track
down the defaulters and / or manipulators.

It has been decided to suspend all fresh registrations for obtaining UIN and the
requirement to obtain/quote UIN under the MAPIN Regulations/Circulars with effect
from July 01, 2005.

Maximum brokerage that a broker/sub broker can charge

The maximum brokerage that can be charged by a broker has been specified in the
Stock Exchange Regulations and hence, it may differ from across various exchanges.
As per the BSE & NSE Bye Laws, a broker cannot charge more than 2.5% brokerage
from his clients. This maximum brokerage is inclusive of the brokerage charged by the
sub-broker. Further, SEBI (Stock brokers and Sub brokers) Regulations, 1992 stipulates
that sub broker cannot charge from his clients, a commission which is more than 1.5%
of the value mentioned in the respective purchase or sale note.

Charges that can be levied on the investor by a stock broker/sub broker

The trading member can charge:

1. Brokerage charged by member broker.

2. Penalties arising on specific default on behalf of client (investor)

3. Service tax as stipulated.

4. Securities Transaction Tax (STT) as applicable.

The brokerage, service tax and STT are indicated separately in the contract note.

STT (Securities Transaction Tax)

Securities Transaction Tax (STT) is a tax being levied on all transactions done on the
stock exchanges at rates prescribed by the Central Government from time to time.
Pursuant to the enactment of the Finance (No.2) Act, 2004, the Government of India
notified the Securities Transaction Tax Rules, 2004 and STT came into effect from
October 1, 2004.

Account Period Settlement

An account period settlement is a settlement where the trades pertaining to a period

stretching over more than one day are settled. For example, trades for the period
Monday to Friday are settled together. The obligations for the account period are settled
on a net basis. Account period settlement has been discontinued since January 1, 2002,
pursuant to SEBI directives.

Rolling Settlement

In a Rolling Settlement trades executed during the day are settled based on the net
obligations for the day. Presently the trades pertaining to the rolling settlement are
settled on a T+2 day basis where T stands for the trade day. Hence, trades executed on
a Monday are typically settled on the following Wednesday (considering 2 working days
from the trade day). The funds and securities pay-in and pay-out are carried out on T+2
day.

10. PAY-IN DAY AND PAY- OUT DAY

Pay in day is the day when the brokers shall make payment or delivery of securities to
the exchange. Pay out day is the day when the exchange makes payment or delivery of
securities to the broker. Settlement cycle is on T+2 rolling settlement basis w.e.f. April
01, 2003. The exchanges have to ensure that the pay out of funds and securities to the
clients is done by the broker within 24 hours of the payout. The Exchanges will have to
issue press release immediately after pay out.

Prescribed pay-in and pay-out days for funds and securities for Normal Settlement The
pay-in and pay-out days for funds and securities are prescribed as per the Settlement
Cycle. A typical Settlement Cycle of Normal Settlement is given below:

Trading Rolling Settlement Trading

Clearing Custodial Confirmation +1 working days
Delivery Generation +1 working days
Settlement Securities and Funds pay in +2 working days
Securities and Funds pay out +2 working days
Cost Settlement valuation Debit +2 working days
Auction +3 working days
Bad Delivery Reporting +4 working days
Auction settlement +5 working days
Close out +5 working days
Rectified bad delivery pay-in and
Pay-out +6 working days
Re-bad delivery reporting and pickup +8 working days
Close out of re-bad delivery +9 working days
(Note: The above is a typical settlement cycle for normal (regular) market segment. The
days prescribed for the above activities may change in case of factors like holidays,
bank closing etc. You may refer to scheduled dates of pay-in/pay-out notified by the
Exchange for each settlement from time-to-time.)
 CHAPTER- 6

DATA ANALYSIS

&

INTERPRETATION
Data collected from Respondents using Structured Questionnaire is then tabulated & put to the
analysis using Frequency Distribution, Charts, using Ms-Excel

Question wise analysis has been made to arrive at the meaningful inferences.

1. Age

a) Below 25 years b) 26 to 30 years

c) 31 to 40 years d) Above 40 years

Age of the Investors

  Frequency Percent Valid Percent

Below 25 years 9 18 18

26 to 30 years 16 32 32

31 to 40 years 12 24 24

40 years & above 13 26 26

Total 50 100 100

Table 14: Age of the Investors

Graph 1: Age of the Investors

Interpretation: Out of 50 Investors

 [Majority of investors falls between the age of 26 to 30 years, & later followed by 40
years & above. There is no investment activity between the age of below 25 years, it may be
because of the people in this age are found to be students or employees. Were in the investment
activity is not so active in these age]
2. Occupation
a) Employee b) Businessman
c) Retired d) Student
e) Others

Occupation of the Investors

  Frequency Percent Valid Percent

Employee 29 58 58

Businessman 8 16 16

Retired 3 6 6

Student 4 8 8

Others 6 12 12

Total 50 100 100

Table 15: Occupation of the Investors

 Graph 2: Occupation of the Investors

Interpretation: Out of 50 Investors

[Majority of investors are Employees, Businessman & later followed by others. Very less
investment activity is seen with retired, Students & others, the interesting outcome is the
investment activity among the students also, and even students are keen of saving their money.]
3. Annual Income
a) Less than Rs.50,000 b) Rs. 50,001 to Rs. 1,00,000
c) Rs.1,00,001 to Rs.5,00,000 d) Above Rs. 5,00,000

Annual income of the Investors

  Frequency Percent Valid Percent

Less than Rs. 50,000 12 24 24

Rs 50,001 to Rs. 1,00,000 12 24 24

Rs. 1,00,001 to Rs. 5,00,000 25 50 50

Above Rs. 5,00,000 1 2 2

Total 50 100 100

 Table 16: Annual income of the Investors

Graph 3: Annual income of the Investors

Interpretation: Out of 50 Investors
[Majority of investors annual income fall in the group between the Rs. 1,00,000 to Rs.
5,00,000 & later followed by below Rs. 50,000 & between Rs. 50,000 to Rs. 1,00,000. A very
less percentage of investment is seen investors with annual income of above Rs. 5,00,000.]

4. Monthly Savings
a) Below Rs. 5,000 b) Rs. 5,001 to Rs. 10,000
c) Rs. 10,001 to Rs. 20,000 d) Above Rs. 20,000

Savings of the Investors

  Frequency Percent Valid Percent

Below Rs. 5,000 28 56 56

Rs. 5,001 to Rs. 10,000 15 30 30

Rs. 10,001 to Rs. 20,000 5 10 10

Above Rs. 20,000 2 4 4

Total 50 100 100

 Table 17: Savings of the Investors

Graph 4: Savings of the Investors

Interpretation: Out of 50 Investors
[Majority of investors monthly savings are below Rs.5,000 & later followed by investors
savings between Rs. 5,000 to 10,000 very less percentage Is seen investors savings with above
Rs.20,000]

5. Which type of Investment do you prefer?

a) Bank Deposit b) Stock Market
c) Commodities d) Real Estate
e) Insurance f) Others

Type of Investment respondents Prefer

  Frequency Percent Valid Percent

Bank Deposit 28 56 56

Stock Market 13 26 26

Real Estate 1 2 2

Insurance 4 8 8
 Others 4 8 8

Total 50 100 100

Table 18: Type of Investment Investors Prefer

Graph 5: Type of Investment Investors Prefer

Interpretation: Out of 50 Investors

[Majority of investors invest still in bank & later followed by Stock market, investors still
consider banks as a safe way to invest & were the returns are assured when compared to stock
market because of its recent fluctuation, global meltdown etc.]

6.  What are the factors you consider while investing?

a) Safety b) Returns
c) Time horizon d) Others

Factors considered by Investors while investing

  Frequency Percent Valid Percent

Safety 33 66 66

Returns 16 32 32
 Time horizon 1 2 2

Total 50 100 100

Table 19: Factors considered by Investors while investing

Graph 6: Factors considered by Investors while investing

Interpretation: Out of 50 Investors
[Majority of investors consider safety as a factor while investing & less percentage of
investors consider returns as a factor while investing & very less percentage of investors consider
time horizon as a factor while investing.]

7. Your current savings/investments are in?

a) Bank b) Equities
c) Insurance d) Mutual Funds

Your current savings are in?

Frequency Percent Valid Percent

Bank 28 56 56

Equities 8 16 16
 Insurance 8 16 16

Mutual funds 6 12 12

Total 50 100 100

Table 22: Your current savings are in?

Graph 9: your current savings are in?

Interpretation: Out of 50 Investors
[Majority of investors still prefers or follows the traditional form of investing the money
in Bank Deposits because of the Safety concern & guaranteed returns, & same percentage of
investors Savings are in Equity & Insurance, & very less savings is seen in Mutual funds.]
8. where you have invested?
a) Futures b) Options
c) Commodities d) Others

where you have invested?

Frequency Percent Valid Percent

Futures 6 12 25

Commodities 4 8 16.67
 Others 14 28 58.33

Total 24 48 100

Missing 26 52

Total 50 100

Table 23: where you have invested?

Graph 10: if yes then where you have invested?

Interpretation: Out of 50 Investors
[Majority of investors has invested in others, 12% investors have invested in Futures, &
only 8% investors have invested in commodities.]

9. From whom do you take advice?

a) Brokers b) Family
c) Friends d) Others

From whom do you take advice?

  Frequency Percent Valid Percent

Brokers 9 18 64.28
 Family 3 6 21.42

Friends 1 2 7.14

Others 1 2 7.14

Total 14 28 100

Missing 36 72  

Total 50 100  

Table 27: From whom do you take advice?

Graph 14: If yes then from whom do you take advice?

Interpretation: Out of 50 Investors
[Majority of investors takes advice from brokers, 6% investors take advice from family, & 2%
each take advice from Friends & others while investing in derivatives. the outcome says that Brokers can
educate well to the investors while investing in derivatives.]

10.  How do you rate the facilities provided by the Capital Market Services?
a) Excellent b) Good
c) Fair d) Poor
 Rate services provided by capital market services

  Frequency Percent Valid Percent

Excellent 15 30 30

Good 30 60 60

Fair 5 10 10

Total 50 100 100

Table 30: Rate services provided by capital market services

Graph 17: Rate services provided by capital market services

Interpretation: Out of 50 Investors

[Majority of investors rated services provided by Capital Market services as Good & it
can be improved further by taking the necessary steps by filling the gaps by conducting programs
like clients meeting or investors meeting.]
 CHAPTER- 7

FINDINGS & SUGGESTIONS

SUGGESTIONS

The suggestion to exchange authorities is to take steps to educate investors about their
rights and obligation , try to increase investors confidence. I suggest the exchange authorities to
be vigilant to curb wide fluctuations of prices on the exchanges in the prices ,not attracting to
the genuine investors to the greater extents towards the market .Try to explain them how fraud
will take place so that they will be alert and they can take necessary steps to avoid the frauds.

Genuine investors are not at all interested in the speculative gain as their investment is based on
the future profits , therefore the authorities of exchange should be more vigilant in imposing
heavy margin to curb the speculative of securities.
 CHAPTER- 8

CONCLUSION

&

BIBLIOGRAPHY
 CONCLUSION

With the increasing Globalization, the Stock Exchange’s have

tremendously affected the financial conditions of India.

The stock markets of the future will have a redefined pupose and
reinvented architecture due to the advent and widespread use of
technology. Information and stock price quotations are available almost
instantaneously, and, more importantly, investors can act on this data
by executing a trade from anywhere at anytime. This new market will
bring benefits to investors, the listed companies, and the economies of
the company. Trading will become cheaper, faster and settlement will be
simpler wit reduced risk. Raising capital for companies will become
easier, thereby contributing directly to the Economic Growth.

Already, NSE has shown its proactive response by increasingly using

leading edge to technologies to effectively compete in the global
environment. In the not too distant future, once full capital account
convertibility is permitted in India, one could well witness an expansion
of trading volumes and its resultant economic benefits to the thriving
and ever young metropolis of Mumbai.

Inspite of all these positive predictions, the future of Stock Exchanges is

likely to be uncertain and even their survival is a major question mark.
 BIBLIOGRAPHY

The information provided in this project have been taken from the
following sources:

WEBSITES

 www.indiainfoline.com
 www.countercurrents.org
 www.icfai.org
 www.bseindia.com
 www.moneycontrol.com
 www.indlaw.com
 www.sebi.gov.in
 www.bombayfirst.org

BOOKS

 Fundamentals Of Financial Management

–PRASANNA CHANDRA

 Portfolio Organizer ( The ICFAI University Press)

– Edition : Dec’05, Mar’06, May’06, Jun’06