C H AP T ER I S E C UR I T I E S M AR K E T I N I N DI A A N OU T LI N E I N TR O DU C TI ON A f t e r t h e s e c u r i t ie s a r e i s s u e d i n t h e p r i ma r y ma r k e t , t h e y a r e T r a d e d i n t h e s e c o n d a r y ma r ke t b y t h e i n v e s t o r s . T h e s t o c k E x c h a n g e s a l o n g w i t h a h o s t o f o t h e r i n t e r me d i ar i e s p r o v i d e the N e c e s s a r y p l a t f o r m f o r t r a d i n g i n s e c o n d a r y ma r ke t a n d a l s o for clearing A n d s e t t l e me n t . T h e s e c u r i t i e s a r e t r a d e d , c l e a r e d a n d s e t t l e d within the r e g u l a t o r y f r a me w o r k p r e s c r i b e d b y t h e E x c h a n g e s a n d t h e SEBI.

. Till r e c e n t l y , i t w as ma n d a t o r y f o r t h e c o m p a n i e s t o l i s t t h e i r securities on The regional stock exchange nearest to their registered office, in order To provide an opportunity to investors to invest/trade in the securities of L o c a l c o mp a n i e s. H ow e v e r , f o l l ow i n g t h e w i t h d r a w a l o f t h i s restriction, T h e c o mp a n i e s h a v e a n o p t i o n t o c h o o s e f r o m a n y o n e o f t h e existing Stock exchanges in India to list their securities. Due to the earlier r e g u l a t i o n r e q u i r i n g c o mp a n i e s t o g e t l i s t e d f i r s t a t t h e regional stock

exchange, there are in all 23 exchange s operating today in the country. W i t h t h e i n c r e a s e d a p p l i c a t i o n o f i n f o r ma t i o n t e c h n o l o g y , t h e trading p l a t f o r ms o f a l l t h e s t o c k e x c h a n g e s a r e a c c e s s i b l e f r o m anywhere in t h e c o u n t r y t h r o u g h t h e i r t r a d i n g t e r mi n a l s . H o w e v e r , t h e trading p l a t f o r m o f NS E i s a l s o a c c e s s i b l e t h r o u g h i n t e r n e t a n d mo b i l e devices. I n a g e o g r a p h i c a l l y w i d e s p r e a d c o u n t r y l i ke I n d i a , t h i s h a s significantly e x p a n d e d t h e r e a c h o f t h e e x c h an g e s t o t h e h o me s o f o r d i n a r y I n v e s t o r s a n d a ss u a g e d t h e a s p i r a t i o n s o f p e o p l e t o h a v e exchanges in Their vicinity. A s a r e s u l t o f t h e r e f o r ms / i n i t i a t i v e s t a ke n b y t h e G o v e r n me n t and the R e g u l a t o r s , t h e ma r ke t mi c r o s t r u c t u r e h a s b e e n r e f i n e d a n d mo d e r n i z e d . T h e i n v e s t me n t c h o i c e s f o r t h e i n v e s t o r s h a v e also B r o a d e n e d . T h e s e c u r i t i e s ma r ke t mo v e d f r o m T + 3 s e t t l e me n t periods T o T + 2 r o l l i n g s e t t l e me n t w i t h e f f e c t f r o m Ap r i l 1 , 2 0 0 3 . Further, straight t h r o u g h p r o c e s s i n g h a s b e e n ma d e ma n d a t o r y f o r a l l institutional trades

e x e c u t e d o n t h e s t o c k e x c h a n g e . R e a l t i me g r o s s s e t t l e me n t h a s also Been introduced by RBI to settle inter -bank transactions online at real T i me mo d e . T h e s e d e v e l o p me n t s i n t h e s e c u r i t i e s ma r ke t provide the N e c e s s a r y i mp e t u s f o r g r o w t h a n d d e v e l o p me n t , a n d t h e r e b y strengthen T h e e me r g i n g ma r ke t e c o n o my i n I n d i a . B . P RO D U CT S A N D PA R T I CI PA N T S Mo b i l i z a t i o n o f s a v i n g s f r o m s u r p l u s s a v e r s t o d e f i c i t s a v e r s i s Mo s t e f f i c i e n t l y c a r r i e d o u t b y t h e s e c u r i t i e s ma r ke t t h r o u g h a R a n g e o f c o mp l e x p r o d u c t s c a l l e d s e c u r i t i e s . T h e d e f i n i t i o n O f s e c u r i t i e s a s p e r t h e S C R A , 1 9 5 6 i n c l u d e s s h ar e s , b o n d s , scripts, S t o c ks o r o t h e r ma r ke t a b l e s e c u r i t i e s o f l i ke n a t u r e i n o r o f any I n c o r p o r a t e c o mp a n y o r b o d y c o r p o r a t e , g o v e r n me n t securities, D e r i v a t i v e s o f s e c u r i t i e s , u n i t s o f c o l l e c t i v e i n v e s t me n t s c h e me , i n t e r e s t And rights in securities, security receipt or any other i n s t r u me n t s s o D e c l a r e d b y t h e c e n t r a l g o v e r n me n t . T h e s e c u r i t i e s ma r ke t h a s E s s e n t i a l l y t h r e e c a t e g o r i e s o f p a r t i c i p a n t s , v i z ., t h e i s s u e r o f securities,

I n v e s t o r s i n s e c u r i t i e s a n d t h e i n t e r me d i a r i e s . T h e i s s u e r s a r e the B o r r ow e r s o r d e f i c i t s a v e r s , w h o i s s u e s e c u r i t i e s t o r a i s e funds. The Investors, who are surplus savers, deploy their savings by subscribing to T h e s e s e c u r i t i e s . T h e i n t e r me d i a r i e s a r e t h e a ge n t s w h o ma t c h the N e e d s o f u s e r s an d s u p p l i e r s o f f u n d s f o r a c o mmi s s i o n . T h e s e I n t e r me d i a r i e s p a c k a n d u n p a c k s e c u r i t i e s t o h e l p b o t h t h e issuers and Investors to achieve their respective goals. C . MA R K E T S E G ME NT S T h e s e c u r i t i e s ma r ke t h a s t w o i n t e r d e p e n d e n t s e g me n t s : t h e P r i ma r y a n d t h e s e c o n d a r y ma r ke t . T h e p r i ma r y ma r ke t i s t h e C h a n n e l f o r c r e a t i o n o f n ew s e c u r i t i e s . T h e s e s e c u r i t i e s a r e I s s u e d b y p u b l i c l i mi t e d c o mp a n i e s o r b y g o v e r n me n t a g e n c i e s . In the P r i ma r y ma r ke t t h e r e s o u r c e s ar e mo b i l i z e d e i t h e r t h r o u g h the public I s s u e o r t h r o u g h p r i v a t e p l a c e me n t r o u t e . I t i s a p u b l i c i s s u e if anybody And everybody can subscribe for it, whereas if the issue is ma d e A v a i l a b l e t o a s e l e c t e d g r o u p o f p e r s o n s i t i s t e r me d a s p r i v a t e

P l a c e me n t . T h e r e a r e t w o ma j o r t y p e s o f i s s u e r s o f s e c u r i t i e s , the C o r p o r a t e e n t i t i e s w h o i s s u e ma i n l y d e b t a n d e q u i t y i n s t r u me n t s a n d t h e G o v e r n me n t ( c e n t r a l a s w e l l a s s t a t e ) w h o i s s u e d e b t securities. These N e w s e c u r i t i e s i s s u e d i n t h e p r i ma r y ma r ke t a r e t r a d e d i n t h e secondary Ma r ke t . T h e s e c o n d a r y ma r ke t e n a b l e s p a r t i c i p a n t s w h o h o l d securities To adjust their holdings in response to changes in their a s s e s s me n t o f R i s ks a n d r e t u r n s . T h e s e c o n d a r y ma r ke t o p e r a t e s t h r o u g h two me d i u ms , n a me l y , t h e o v e r - t h e - c o u n t e r ( O T C) ma r ke t a n d t h e E x c h a n g e - t r a d e d ma r ke t . O T C ma r ke t s a r e i n f o r ma l ma r ke t s where T r a d e s a r e n e g o t i a t e d . Mo s t o f t h e t r a d e s i n t h e g o v e r n me n t securities A r e i n t h e O T C ma r ke t . Al l t h e s p o t t r a d e s w h er e s e c u r i t i e s are traded F o r i mme d i a t e d e l i v e r y a n d p a yme n t t a ke p l a c e i n t h e O T C ma r ke t . T h e Other option is to trade using the infrastructure provided by the stock Exchanges. There are 23 exchanges in India and all of them follow a

S y s t e ma t i c s e t t l e me n t p e r i o d . Al l t h e t r a d e s t a k i n g p l a c e o v e r a trading c y c l e ( d a y = T ) a r e s e t t l e d t o g e t h e r a f t e r a c e r t a i n t i me ( T + 2 day). T h e t r a d e s e x e c u t e d o n t h e Na t i o n a l S t o c k E x c h a n g e ( N S E ) a r e cleared And settled by a clearing corporation. The clearing corporation acts as a c o u n t e r p a r t y a n d g u a r a n t e e s s e t t l e me n t . N e a r l y 1 0 0 % o f t h e trades in c a p i t a l ma r ke t s e g me n t a r e s e t t le d t h r o u g h d e ma t d e l i v e r y . NSE also p r o v i d e s a f o r ma l t r a d i n g p l a t f o r m f o r t r a d i n g o f a w i d e r a n g e of debt S e c u r i t i e s , i n c l u d i n g g o v e r n me n t s e c u r i t i e s . A v a r i a n t o f t h e secondary ma r ke t i s t h e f o r w a r d ma r ke t , w h e r e s e c u r i t i e s a r e t r a d e d f o r future d e l i v e r y a n d p a y me n t . A v a r i a n t o f t h e f o r w a r d ma r ke t i s Futures and O p t i o n s ma r ke t . P r e s e n t l y o n l y t w o e x c h a n g e s v i z . , NS E a n d Stock E x c h a n g e , M u mb a i ( B S E ) p r o v i d e s t r a d i n g i n t h e d e r i v a t i v e s of Securities. D . S E CO ND A RY M A RK E T Corporate Securities - There are 23 exchanges in the country,

W h i c h o f f e r s c r e e n b a s e d t r a d i n g s y s t e m. T h e t r a d i n g s y s t e m is c o n n e c t e d u s i n g t h e V S AT t e c h n o l o g y f r o m o v e r 3 5 7 c i t i e s . T h e r e w e r e 9 ,3 6 8 t r a d i n g me mb e r s r e g i s t e r e d w i t h S E B I a s a t e n d Ma r c h 2004 T h e ma r ke t c a p i t a l i z a t i o n h a s g r o w n o v e r t h e p e r i o d i n d i c a t i n g mo r e c o mp a n i e s u s i n g t h e t r a d i n g p l a t f o r m o f t h e s t o c k e x c h a n g e . The all I n d i a ma r ke t c a p i t a l i z a t i o n i s e s t i ma t e d a t Rs . 1 3 ,1 8 7 ,9 5 3 mi l l i o n a t t h e E n d o f Ma r c h 2 0 0 4 . T h e ma r ke t c a p i t a l i z a t i o n r a t i o d e f i n e d a s the value o f l i s t e d s t o c ks d i v i d e d b y G DP i s u s e d a s a me a s u r e o f s t o c k ma r ke t S i z e . I t i s o f e c o n o m i c s i g n i f i c a n c e s i n c e ma r ke t i s p o s i t i v e l y correlated W i t h t h e a b i l i t y t o mo b i l i z e c a p i t a l a n d d i v e r s i f y r i s k. I t increased sharply T o 5 2 .3 % i n 2 0 03 - 0 4 a g a i n s t 2 8 .5 % i n t h e p r e v i o u s y e a r . T h e trading V o l u me s o n e x c h a n g e s h a v e b e e n w i t n e s s i n g p h e n o me n a l growth over t h e p a s t d e c a d e . T h e t r a d i n g v o l u me , w h i c h p e a ke d a t Rs . 2 8 ,8 0 9 ,9 0 0

mi l l i o n i n 2 0 0 0 - 0 1 , f e l l s u b s t a n t i a l l y t o Rs . 9 ,6 8 9 ,0 9 3 mi l l i o n in 2002-03. H o w e v e r , t h e y e a r 2 0 0 3 - 0 4 s aw a t u r n a r o u n d i n t h e t o t a l trading v o l u me s o n t h e e x c h a n g e s . I t r e g i s t e r e d a v o l u me o f Rs . 1 6 ,2 0 4 ,9 7 7 mi l l i o n . T h e t u r n o v e r r a t i o , w h ic h r e f l e c t s t h e v o l u me o f trading in R e l a t i o n t o t h e si z e o f t h e ma r ke t , h a s b e e n i n c r e a s i n g b y leaps and bounds after the advent of screen based trading system by the NSE. The T u r n o v e r r a t i o f o r t h e y e a r 2 0 0 3 - 0 4 a c c o u n t e d a t 1 2 2 .9 % . T h e relative i mp o r t a n c e o f v a r i o u s s t o c k e x c h a n g e s i n t h e ma r ke t h a s undergone d r a ma t i c c h a n g e d u r i n g t h i s d e c a d e . T h e i n c r e a se i n t u r n o v e r took place mo s t l y a t t h e b i g e x c h a n g e s . T h e NS E y e t a g a i n r e g i s t e r e d a s the Ma r ke t l e a d e r w i t h mo r e 8 5 % o f t o t a l t u r n o v e r ( v o l u me s o n all S e g me n t s ) i n 2 0 0 3 - 0 4 . T o p 5 s t o c k e x c h a n g e s a c c o u n t e d f o r 9 9 .8 8 % o f t u r n o v e r , w h i l e t h e r e s t 1 8 e x c h a n g e f o r l e s s t h an 0 .1 2 % during 2003-04 A b o u t t e n e x c h a n g e s r e p o r t e d n i l t r a d i n g v o l u me d u r i n g

The year. T h e mo v e me n t o f t h e S & P C N X N i f t y , t h e mo s t w i d e l y u s e d indicator of T h e ma r ke t i s p r e s e n t e d i n Ch a r t 1 - 1 . T h e i n d e x mo v e me n t h a s been R e s p o n d i n g t o c h a n g e s i n t h e g o v e r n me n t s e c o n o mi c p o l i c i e s , the I n c r e a s e i n FI I s i n f l o w s , e t c . H ow e v e r , t h e y e a r 2 0 0 3 - 0 4 witnessed a F a v o r a b l e mo v e me n t i n t h e Ni f t y , w h e r e i n i t r e g i s t e r e d i t s a l l t i me h i g h I n J a n u a r y 2 0 0 4 o f 2 0 1 4 .6 5 . T h e p o i n t - t o - p o i n t r e t u r n o f Ni f t y was 8 0 .1 4 % f o r 2 0 0 3 - 0 4 . G o v e r n me n t S e c u r i t i e s - T h e t r a d i n g i n g o v e r n me n t s e c u r i t i e s E x c e e d e d t h e c o mb i n e d t r a d i n g i n e q u i t y s e g me n t s o f a l l t h e Exchanges in the country during 2003 -04. The aggregate T r a d i n g i n c e n t r a l a n d s t a t e g o v e r n me n t d a t e d s e c u r i t i e s , including t r e a s u r y b i l l s , i n c r e a s e d b y ma n i f o l d o v e r a p e r i o d o f t i me . During 20030 4 i t r e a c h e d a l e v e l o f Rs . 2 6 ,7 9 2 ,0 9 0 mi l l i o n . T h e s h a r e o f WDM S e g me n t o f NS E i n t o t a l t u r n o v e r f o r g o v e r n me n t s e c u r i t i e s decreased Ma r g i n a l l y f r o m 5 2 % i n 2 0 0 2 - 0 3 t o 4 7 .6 % i n 2 0 03 - 0 4 . However, the

S h a r e o f W D M s e g me n t o f N S E in t h e t o t a l o f No n - r e p o g o v e r n me n t S e c u r i t i e s i n c r e a s e d ma r g i n a l l y f r o m 7 4 .0 1 % i n 2 0 0 2 - 0 3 t o 7 4 .8 9 % i n 2003-04.

E N D O F CH A PT E R I

C H A PT E R I I - R E G UL A T O RY F R A ME W O R K T h e f o u r ma i n l e g i s l a t i o n s g o v e r n i n g t h e s e c u r i t i e s ma r ke t a r e ( a ) T h e S E B I A c t , 1 9 9 2 ( b ) T h e C o mp a n i e s A c t , 1 9 5 6 ( c ) T h e S e c u r i t i e s Co n t r a c t s ( Re g u l a t i o n ) Ac t , 1 9 5 6 , a n d ( d ) T h e D e p o s i t o r i e s Ac t , 1 9 9 6 A brief about these legislations are as given below: S E B I A c t , 1 9 9 2 : T h e S E B I Ac t , 1 9 9 2 w a s e n a c t e d t o e mp o w e r SEBI with statutory powers for (a) protecting the interests of I n v e s t o r s i n s e c u r i t i e s , ( b ) p r o mo t i n g t h e d e v e l o p me n t o f t h e S e c u r i t i e s ma r ke t , a n d ( c ) r e g u l a t i n g t h e s e c u r i t i e s ma r ke t . I t s r e g u l a t o r y j u r i sd i c t i o n e x t e n d s o v e r c o r p o r a t e s i n t h e i s s u i n g capital and A l l i n t e r me d i a r i e s a n d p e r s o n s a s s o c i a t e d w i t h s e c u r i t i e s ma r ke t . I t c a n

Conduct enquiries, audits and inspection of all concerned participants A n d a d j u d i c a t e o f f e n c e s u n d e r t h i s Ac t . I t h a s p o w e r s t o register and R e g u l a t e a l l t h e ma r ke t i n t e r me d i a r i e s . Fu r t h e r i t c a n a l s o penalize them I n c a s e o f v i o l a t i o n s o f t h e p r o v i s i o n s o f t h e Ac t , R u l e s a n d Regulations Ma d e t h e r e u n d e r . S E B I h a s f u l l a u t o n o my a n d a u t h o r i t y t o regulate and d e v e l o p a n o r d e r l y s e c u r i t i e s ma r ke t . S e c u r i t i e s Co n t r a c t s ( Re g u l a t i o n ) Ac t , 1 9 5 6 : I t p r o v i d e s f o r Direct and indirect control of virtually all aspects of the S e c u r i t i e s t r a d in g i n c l u d i n g t h e r u n n i n g o f s t o c k e x c h a n g e s with an aim to prevent undesirable transactions in securities. It gives the C e n t r a l G o v e r n me n t r e g u l a t o r y j u r i s d i c t i o n o v e r ( a ) s t o c k exchanges Through a process of recognition and continued supervision, (b) Contracts in securities, and (c) listing of securi ties on stock exchanges. A s a c o n d i t i o n o f r e c o g n i t i o n , a s t o c k e x c h a n g e c o mp l i e s w i t h the R e q u i r e me n t s p r e s c r i b e d b y t h e C e n t r a l G o v e r n me n t . T h e stock

E x c h a n g e s f r a me t h e i r ow n l i s t i n g r e g u l a t i o n s in c o n s o n a n c e with the M i n i mu m l i s t i n g c r i t e r i a s e t o u t i n t h e R u l e s . D e p o s i t o r i e s Ac t , 1 9 9 6 : T h e De p o s i t o r i e s Ac t , 1 99 6 p r o v i d e s F o r t h e e s t a b l i s h me n t o f d e p o s it o r i e s f o r s e c u r it i e s t o e n s u r e T r a n s f e r a b i l i t y o f s e c u r i t i e s w i th s p e e d , a c c u r a c y a n d security. F o r t h i s , t h e s e p r o v i s i o n s h a v e b e e n ma d e : ( a ) ma ki n g securities of P u b l i c l i mi t e d c o mp a n i e s f r e e l y t r a n s f e r a b l e s u b j e c t t o c e r t a i n e x c e p t i o n s ; ( b ) d e ma t e r i a l i z i n g t h e s e c u r i t i e s i n t h e d e p o s i t o r y mo d e ; a n d ( c ) p r o v i d i n g f o r ma i n t e n a n c e o f o w n e r s h i p r e c o r d s i n a book entry f o r m. I n o r d e r t o s t r e a ml i n e t h e s e t t l e me n t p r o c e s s , t h e Ac t envisages T r a n s f e r o f o w ne r s h i p o f s e c u r i t i e s e l e c t r o n i c a l ly b y b o o k entry without Mo v i n g t h e s e c u r i t i e s f r o m p e r s o n s t o p e r s o n s . T h e A c t h a s ma d e t h e s e c u r i t i e s o f a l l p u b l i c l i mi t e d c o mp a n i e s f r e e l y t r a n s f e r a b l e , restricting T h e c o mp a n y s r i g h t t o u s e d i s c r e t i o n i n e f f e c t i n g t h e t r a n s f e r of Securities, and the transfer deed and other procedural r e q u i r e me n t s u n d e r t h e Co mp a n i e s Ac t h a v e b e e n d i s p e n s e d w i t h .

C o mp a n i e s A c t , 1 9 5 6 : I t d e a l s w i t h i s s u e , a l l o t me n t a n d T r a n s f e r o f s e c u r i t i e s a n d v a r i ou s a s p e c t s r e l a t i n g t o c o mp a n y Ma n a g e me n t . I t p r o v i d e s f o r s t a n d a r d s o f d i s c l o s u r e i n t h e p u b l i c i s s u e s , p a r t i c u l a r l y i n t h e f i e l d s o f c o mp a n y ma n a g e me n t a n d p r o j e c t s , i n f o r ma t i o n a b o u t o t h e r l i s t e d c o mp a n i e s u n d e r t h e s a me ma n a g e me n t , a n d ma n a g e me n t p e r c e p t i o n o f r i s k f a c t o r s . I t also r e g u l a t e s u n d e r w r i t i n g , t h e u s e o f p r e mi u m a n d d i s c o u n t s o n issues, r i g h t s a n d b o n u s i s s u e s , p a y me n t o f i n t e r e s t a n d d i v i d e n d s , supply of A n n u a l r e p o r t a n d o t h e r i n f o r ma t i o n . A . R UL E S , RE G U L AT I O NS & RE G U L A T O RS T h e G o v e r n me n t h a s f r a me d r u l e s u n d e r t h e S CR A , t h e S E B I Act A n d t h e De p o s i t o r i e s Ac t . T h e S E B I h a s f r a me d r e g u l a t i o n s under t h e s e a c t s f o r r e g i s t r a t i o n a n d r e g u l a t i o n o f t h e ma r ke t i n t e r me d i a r i e s a n d f o r p r e v e n t i o n o f u n f a i r t r a d e p r a c t i c e s . Under these A c t s , t h e G o v e r n me n t a n d t h e S E B I i s s u e n o t i f i c a t i o n s , guidelines and C i r c u l a r s , w h i ch t h e ma r ke t p a r t i c i p a n t s c o mp ly w i t h . T h e S RO s l i ke t h e Stock exchanges have also laid down their rules and regulations. The

r e g u l a t o r h a s t o e n s u r e t h a t t h e ma r ke t p a r t i c i p a n t s b e h a v e i n a desired Ma n n e r s o t h a t s e c u r i t i e s ma r ke t c o n t i n u e t o b e a ma j o r source of F i n a n c e f o r c o r p o r a t e a n d g o v e r n me n t w h i l e p r o t e c t i n g t h e interest of Investors. The responsibility for regulating the securitie s ma r ke t i s s h a r e d j o i n t l y b y D e p a r t me n t o f E c o n o mi c Af f a i r s ( DE A) , D e p a r t me n t o f C o mp a n y A f f a i r s ( DC A ) , Re s e r v e B a n k o f I n d i a ( RB I ) a n d SEBI. The Activities of all these agencies are coordinated by a High Level C o mmi t t e e o n Ca p i t a l Ma r ke t s . Mo s t o f t h e p o w e r s u n d e r t h e SCRA are E x e r c i s a b l e b y D E A w h i l e a f ew o t h e r s b y S E B I a n d s o me a r e C o n c u r r e n t l y b y t h e m. T h e r e g u l a t i o n o f t h e c o n t r a c t s f o r s a l e and p u r c h a s e o f s e c u r i t i e s , g o l d r e l a t e d s e c u r i t i e s , mo n e y ma r ke t securities A n d s e c u r i t i e s d e r i v e d f r o m t h e se s e c u r i t i e s a n d r e a d y forward contracts I n d e b t s e c u r i t i e s a r e e x e r c i s e d c o n c u r r e n t l y w i th t h e RB I . T h e S E B I Ac t A n d t h e De p o s i t o r i e s Ac t a r e mo s t l y a d mi n i s t e r e d b y S E B I . While the

R u l e s u n d e r t h e s e c u r i t i e s l a w s ar e f r a me d b y g ov e r n me n t , regulations A r e f r a me d b y S E B I . T h e p o w e rs u n d e r t h e Co mp a n i e s Ac t relating to I s s u e a n d t r a n s f e r o f s e c u r i t i e s a n d n o n - p a y me n t o f d i v i d e n d are A d mi n i s t e r e d b y S E B I i n c a s e o f l i s t e d p u b l i c c o mp a n i e s a n d public c o mp a n i e s p r o p o s i n g t o g e t t h e i r s e c u r i t i e s l i s t e d . T h e S RO s ensure C o mp l i a n c e o f ma r ke t p a r t i c i p a n t s w i t h t h e i r o w n r u l e s a s well as with t h e r u l e s r e l e v a n t f o r t h e m u n d e r t h e s e c u r i t i e s l aw s .

E N D O F CH A PT E R I I

C H A PT E R I I I - R E FO RM S I N I N DI A N S E C U RI T I E S M A RK E T S A . Po l i c y De v e l op me n t s O v e r t h e l a s t d e c a d e t h e G o v e r n me n t a n d t h e ma r ke t regulators H a v e t a ke n s e v e r a l p o l i c y me a s u r e s t o i mp r o v e t h e o p e r a t i o n s O f t h e s t o c k e x c h a n g e s a n d ma r ke t i n t e r me d i a r i e s . T h e M e a s u r e s a r e a i me d a t i mp r o v i n g t h e ma r ke t i n f r a s t r u c t u r e and

u p g r a d a t i o n o f r i s k c o n t a i n me n t , s o a s t o p r o t e c t t h e i n t e r e s t of the i n v e s t o r s . T h e p o l i c y d e v e l o p me n t s d u r i n g Ap r i l 2 0 0 3 a n d June 2004 p e r t a i n i n g t o t r a d i n g o f s e c u r i t i e s a r e e n u me r a t e d b e l o w : I n i t i a t i v e s f r o m G o v e r n me n t I . Un i o n B u d g e t T h e U n i o n B u d g e t f o r 2 0 0 4 - 0 5 p r o p o s e d t h e f o l lo w i n g me a s u r e s t h a t H a v e a b e a r i n g o n t h e f u n c t i o n in g o f t h e s e c o n d a r y ma r ke t : 1 . An a l t e r n a t e t r a d i n g p l a t f o r m f o r S ma l l a n d M e d i u m E n t e r p r i s e s ( S ME ) H a v e b e e n p r o p o s e d t o b e s e t u p . T h i s w i ll h e l p t h e s e enterprises in r a i s i n g e q u i t y an d d e b t f r o m t h e Ca p i t a l Ma r ke t . 2 . T h e p r o c e d u r e f o r r e g i s t r a t i o n a n d o p e r a t i o n o f FI I s i s t o b e ma d e S i mp l e r a n d q u i c ke r . 3 . T h e i n v e s t me n t c e i l i n g f o r FII s i n d e b t f u n d s h a v e b e e n r a i s e d t o US $ 1 .7 5 b i l l i o n Fr o m U S $ 1 b i l l i o n . 4 . L o n g - t e r m c ap i t a l g a i n s t a x o n s e c u r i t i e s t r a n s a c t i o n h a s been Abolished. The short term capital gains tax has been proposed to be at a Flat rate of 10 percent.

5 . T u r n o v e r t a x e s h a v e a l s o b e e n i mp o s e d o n d e l i v e r y - b a s e d transaction A t t h e r a t e o f 0 .1 5 % a n d f o r n o n - d e l i v e r y t r a n s a c t i o n s a t t h e rate of 0 .0 1 5 % f o r e q u i t i e s a n d 0 .0 1 % o n t r a d e s o n t h e d e r i v a t i v e s s e g me n t . I I . Pe n s i o n S y s t e m/ I n t e r i m P e n s i o n Fu n d Re g u l at o r T h e G o v e r n me n t h a s a p p r o v e d t h e b a s i c f e a t u r e s o f t h e n e w pension s y s t e m. A p e n s i o n f u n d r e g u l a t o r y a n d d e v e l o p me n t a u t h o r i t y ( P F RD A ) In the interim is to be set up with the purpose to regulate and develop T h e p e n s i o n ma r ke t . I n t h i s s y s t e m, t h e r e w o u ld b e t h r e e different c h o i c e s f o r i n v e s t me n t s e .g . O p t i o n A, B a n d C . T h e o p t i o n A would i mp l y p r e d o mi n a n t i n v e s t me n t s i n f i x e d i n c o me i n s t r u me n t s w i t h s o me i n v e s t me n t s i n e q u i t y . O p t i o n B w i t h g r e a t e r i n v e s t me n t s i n equity and O p t i o n C w o u l d c a r r y e q u a l i n v e s t me n t i n f i x e d i n c o me a n d equity. The p e n s i o n f u n d ma n a g e r s w o u l d b e f r e e t o ma ke i n v e s t me n t s i n i n t e r n a t i o n a l ma r ke t s s u b j e c t t o r e g u l a t o r y r e s t r i c t i o n s . I I I . A me n d me n t t o S e c u r i t i e s Co n t r a c t s ( Re g u la t i o n ) Ac t , 1 9 5 7

A s p e r t h e r e c omme n d a t i o n s o f a Co mmi t t e e c on s t i t u t e d b y t h e SEBI U n d e r t h e c h a i r ma n s h i p o f S h r i K . R . Ra ma mo o r t h y , t h e Securities C o n t r a c t s ( Re g u l a t i o n ) Ru l e s , 1 9 5 7 h a v e b e e n a me n d e d . T h e y are called T h e S e c u r i t i e s Co n t r a c t s ( Re g u la t i o n ) A me n d me n t R u l e s , 2003. It states t h a t a me mb e r i s p e r mi t t e d t o c o n d u c t b u s i n e s s i n c o mmo d i t y d e r i v a t i v e s o n l y b y s e t t i n g u p a s e p a r a t e c o mp a n y . I t i s required that T h e c o mp a n y s h o u l d c o mp l y w i th t h e r e g u l a t o r y r e q u i r e me n t s i n t e r ms O f n e t w o r t h , c a p i t a l a d e q u a c y , ma r g i n s a n d e x p o s u r e n o r ms a s ma y b e S p e c i f i e d b y t h e Fo rw a r d Ma r ke t Co mmi s s i o n . I V. Re v i s e d E CB G u i d e l i n e s T h e G o v e r n me n t n o t i f i e d t h e l i b e r a l E x t e r n a l Co mme r c i a l B o r r ow i n g (ECB) policy on J a n u a r y 1 9 , 2 0 0 4 . L i s t e d b e l ow a r e t h e n e w p o l i c i e s : ( i ) Re mo v a l o f e n d - u s e r e s t r i c t i o n s : E C B s a r e a l l ow e d f o r corporate I n v e s t me n t s i n i n d u s t r i a l s e c t o r e s p e c i a l l y i n f r a s t r u c t u r e sector for A c q u i s i t i o n o f s h a r e s u n d e r t h e G o v e r n me n t s d i s i n v e s t me n t p r o g r a mme d

O f PS U s h a r e s u p t o US $ 5 0 0 mi l l i o n h a v i n g mi n i mu m a v e r a g e ma t u r i t y O f 5 y e a r s u n d e r t h e a u t o ma t i c r o u t e . T h e u s u a l r e s t r i c t i o n o n E CB f o r I n v e s t me n t i n c a p i t a l ma r ke t o r i n t h e r e a l e s t a t e i s t o continue. ( i i ) E l i g i b i l i t y : A l l c o r p o r a t e , e x c e p t b a n ks , NB F Cs a n d FI s are eligible T o b o r r ow t h r o u g h t h e E CB r o u t e . H ow e v e r , t h o s e b a n ks a n d FIs, who Have participated in the Textile or Steel sector restructuring p a c ka g e o f T h e G o v e r n me n t / RB I , a r e p e r mi t t e d , b u t o n l y t o t h e e x t e n t o f their I n v e s t me n t i n t h e p a c ka g e . ( i i i ) I n t e r e s t Ra t e S p r e a d s : Al l E CB s a r e s u b j e c t t o t h e following r e v i s e d ma x i mu m s p r e a d s , o v e r s i x mo n t h L I B O R o r t h e applicable b e n c h ma r k( s ) , a s t h e c a s e ma y b e ( a ) Av e r a g e ma t u r i t y o f 3 - 5 years - 2 0 0 b a s i s p o i n t s a n d ( b ) Mo r e t h a n 5 y e a r s o f a v e r a g e ma t u r i t y - 3 5 0 Basis points. ( I v ) G u a r a n t e e : B a n ks , FI s , NB FC s a r e n o t p e r mi t t e d t o provide g u a r a n t e e / l e t t e r o f c o mf o r t .

( v ) Pr o c e d u r e : A l l E C B s s a t i s f yi n g t h e a b o v e c r i t e r i a w i l l b e under the a u t o r o u t e u p t o U S $ 2 0 mi l l i o n f o r E C B s b e t w ee n 3 - 5 y e a r s o f average ma t u r i t y a n d u p t o U S $ 5 0 0 mi l l i o n f o r E CB s h a v i n g a v e r a g e ma t u r i t y o f Mo r e t h a n 5 y e a r s . Al l c a s e s , w h i c h f a l l o u t s i d e t h e p u r v i e w o f the autoRoute in the new liberalized ECB policy, should be subject to the A p p r o v a l b y t h e E mp o w e r e d Co mmi t t e e o f t h e R B I . O n s i mi l a r lines, G u i d e l i n e s f o r Fo r e i g n Cu r r e n c y Co n v e r t i b l e B o n d s ( F C CB s ) have been Liberalized. V . Co mp a n i e s ( I s s u e o f I n d i a n De p o s i t o r y Ru l e s ) 2 0 0 4 M i n i s t r y o f Fi n a n c e ( Mo F ) h a s n o t i f i e d t h e Co mp a n i e s ( I s s u e of Indian D e p o s i t o r y Ru l e s ) , 2 0 0 4 , a p p l i c a b l e t o t h o s e c o mp a n i e s incorporated Outside India desiring to raise resources through Indian securities Ma r ke t s . T h e i s s u e r c o mp a n y c a n i s s u e I n d i a n D e p o s i t o r y Receipts ( I D Rs ) o n l y a g a i n s t i t s u n d e r l y i n g e q u i t y s h a r e s . T h e r u l e s require that

t h e i s s u e r c o mp a n y s p r e - i s s u e p a i d u p c a p i t a l a n d a v e r a g e turnover S h o u l d b e US $ 1 0 0 mi l l i o n s a n d U S $ 5 0 0 mi l l i o n , r e s p e c t i v e l y . The C o mp a n y s h o u l d a l s o b e ma ki n g p r o f i t s f o r a t l e a s t 5 y e a r s preceding t h e i s s u e a n d mu s t h a v e d e c l a r e d d i v i d e n d o f a t l e a s t 1 0 % during the period and has a pre -issue debt equity ratio of 2:1. The issuer c o mp a n y H a s t o o b t a i n p r i o r p e r mi s s i o n f r o m t h e S E B I a n d t h e necessary a p p r o v a l s / e x e mp t i o n s f r o m t h e c o u n t r y o f i t s i n c o r p o r a t i o n (where R e q u i r e d ) f o r ma ki n g t h e i s s u e . F o l l ow i n g t h e ap p r o v a l , i s s u e r should a p p o i n t a n u mb e r o f i n t e r me d i ar i e s s u c h a s o v e r s e a s c u s t o d i a n b a n k, d o me s t i c d e p o s i t o r y , a n d a me r c h a n t b a n ke r . T h e i s s u e r c o mp a n y s h o u l d a l s o t a ke i n - p r i n c i p l e l i s t i n g a p p r o v a l f r o m o n e o r mo r e s t o c k e x c h a n g e s h a v i n g n a t i o n w i d e t r a d i n g t e r mi n a l s i n I n d i a . T h e I DRs s h o u l d b e d e n o mi n a t e d i n I n d i a n Ru p e e s a n d n o t e x c e e d 1 5 % of the t o t a l p a i d - u p c ap i t a l a n d f r e e r e s e r v e s o f t h e c o mp a n y . R e d e mp t i o n s a r e

t o b e s u b j e c t t o F E MA a n d o t h e r l aw s a n d c a n n o t b e ma d e within one Y e a r o f t h e i r i s su e . I n c a s e o f r e d e mp t i o n , t h e u n d e r l y i n g equity shares Ma y b e r e l e a s e d t o t h e I D R h o l d e r o r ma y b e s o l d d i r e c t l y b y h i m.

Initiatives from SEBI I . S E B I ( L i s t i n g A u t h o r i t y ) Re g u l a t i o n s , 2 0 0 3 T o b r i n g a b o u t u n i f o r mi t y i n s c r u t i n i z i n g l i s t i n g a p p l i c a t i o n s across the S t o c k e x c h a n g e s a n d t o s t r e n g t h e n t h e l i s t i n g a g r e e me n t , S E B I has E s t a b l i s h e d t h e C e n t r a l L i s t i n g A u t h o r i t y ( CL A) u n d e r t h e S E B I ( Ce n t r a l L i s t i n g Au t h o r i t y ) Re g u l a t i o n s , 2 0 0 3 . T h e i mp o r t a n t f e a t u r e s o f t h e s e R e g u l a t i o n s a r e a s f o l l ow s : ( i ) T h e Ce n t r a l L i s t i n g Au t h o r i t y ( CL A) i s t o b e c o n s t i t u t e d b y SEBI and S h o u l d c o n s i s t o f a P r e s i d e n t a n d a ma x i mu m o f t e n o t h e r me mb e r s , o f W h i c h a t l e a s t f o u r me mb e r s s h o u l d b e r e p r e s e n t a t i v e s o f t h e stock E x c h a n g e s . T h e S E B I B o a r d s h a l l a p p o i n t t h e Pr e s i d e n t a n d the M e mb e r s f r o m a mo n g s t p e r s o n s h a v i n g i n t e g r i t y a n d o u t s t a n d i n g a b i li t y

f r o m j u d i c i a r y , l a w y e r s , a c a d e mi c i a n s , f i n a n c i a l e x p e r t s e t c . ( i i ) T h e a u t h o r i t y s h o u l d d i s c h a r g e t h e f o l l ow i n g f u n c t i o n s v i z ., p r o c e s s i n g t h e a p p l i c a t i o n ma d e f o r l i s t i n g b y an y b o d y corporate, MF or C I S , i s s u i n g t h e l e t t e r o f r e c o mme n d a t i o n s , r e v i e w i n g l i s t i n g n o r ms a n d A n y o t h e r f u n c t i o n s a s ma y b e s p e c i f i e d b y t h e B o a r d f r o m t i me t o t i me . ( I i i ) Pr i o r t o a p p l y i n g f o r l i s t i n g t o a n y s t o c k e x c h a n g e , a body corporate, M F o r CI S s h o u l d o b t a i n a l e t t e r o f r e c o mme n d a t i o n s t o l i s t from the CLA. (iv)Any exchange should not consider any listing application, unless it is A c c o mp a n i e d b y a l e t t e r o f r e c o mme n d a t i o n i s s u e d b y t h e CLA. ( v ) I n c a s e , t h e C L A r e f u s e s t o i s s u e l e t t e r o f r e c o mme n d a t i o n in A c c o r d a n c e w i th t h e P r o c e d u r e l a i d d o w n i n t h e R e g u l a t i o n s , t h e a gg r i e v e d p a r t y ma y Approach SEBI within 10 days of receipt of the ref usal. If the SEBI is not S a t i s f i e d w i t h t h e r e a s o n , S E B I ma y d i r e c t t h e C L A t o i s s u e a letter of

R e c o mme n d a t i o n w i t h i n 1 5 d a y s o f r e c e i p t o f s u c h representation. ( v i ) I f t h e e x c h an g e r e f u s e s l i s t i n g t o t h e b o d y c o r p o r a t e , M F o r CI S , i t Ma y a p p e a l t o t h e S e c u r i t i e s Ap p e l l a t e T r i b u n a l ( S AT ) a s provided in the S e c u r i t i e s Co n t r a c t s ( Re g u l a t i o n ) Ac t , 1 9 5 6 . ( v i i ) T h e C L A s h o u l d a l s o c o n s t i t u t e a Fu n d t o b e c a l l e d t h e Central L i s t i n g Au t h o r i t y F u n d , w h i c h s h o u l d b e c o n s t i t u t e d b a s i c a l l y from the P r o c e s s i n g f e e s c h a r g e d a n d r e c e i v e d b y t h e Au t h o r i t y .

I I . A me n d me n t s t o L i s t i n g Ag r e e me n t SEBI advised the Stock Exchanges to initiate action against the listed C o mp a n i e s , w h o h a v e n o t c o mp l i e d w i t h t h e v a r i o u s r e q u i r e me n t s o f t h e L i s t i n g a g r e e me n t s . I t h a s b e e n c l a r i f i e d t h a t S e c t i o n 2 3 ( 2 ) o f the S C ( R ) A , 1 9 5 6 p r e s c r i b e s p u n i s h me n t f o r v i o l a t io n a n d n o n c o mp l i a n c e o f T h e p r o v i s i o n s of l i s t i n g a g r e e me n t . F u r t h e r , i n o r d e r t o ensure that l i s t e d c o mp a n i e s d o n o t i n a n y w a y v i o l a t e o r o ve r r i d e o r c i r c u ms c r i b e

t h e p r o v i s i o n s of s e c u r i t i e s l a w s o r t h e s t o c k e x c h a n g e r e q u i r e me n t s , S E B I a me n d e d t h e c l a u s e 2 4 o f t h e l i s t i n g a g r e e me n t . T h e a me n d e d C l a u s e s a r e a s g i v e n b e l ow : ( a ) T h e c o mp a n y s h o u l d f i l e w i th t h e s t o c k e x c h a n g e f o r approval any s c h e me / p e t i t i o n p r o p o s e d t o b e f i l e d b e f o r e a n y c o u r t o r tribunal at l e a s t a mo n t h b e f o r e i t i s p r e s e n t e d t o t h e Co u r t / t r i b u n a l . ( b ) T h e c o mp a n y s h o u l d e n s u r e t h a t a n y s c h e me o f a r r a n g e me n t / a ma l g a ma t i o n / me r g e r / r e c o n s t r u c t i o n / r e d u c t i o n of capital, e t c ., t o b e p r e s e n t e d t o a n y C o u r t o r T r i b u n a l d o e s n o t i n a n y w ay V i o l a t e , o v e r r i d e o r c i r c u ms c r i b e t h e p r o v i s i o n s o f s e c u r i t i e s laws or the S t o c k e x c h a n g e r e q u i r e me n t s . S e c u r i t i e s l a w h e r e me a n s t h e SCRA 1 9 5 6 , t h e S E B I A c t , 1 9 9 2 , t h e De p o s i t o r i e s A c t 1 9 9 6 a n d t h e provisions O f Co mp a n i e s Ac t 1 9 5 6 a n d t h e o t h e r r u l e s , r e gu l a t i o n s , guidelines etc. Ma d e u n d e r t h e s e Ac t s , a n d t h e L i s t i n g Ag r e e me n t .

I I I . Ma r g i n T r a d i n g

W i t h a v i e w t o i mp r o v e l i q u i d i t y i n t h e e q u i t y ma r ke t , S E B I initiated S t e p s t o i n t r o d u c e ma r g i n t r a d i n g w .e . f . Ap r i l 1 , 2 0 0 4 . T h e securities, E l i g i b l e f o r ma r g i n t r a d i n g , s h o u l d h a v e a n a v e r a g e i mp a c t cost of less Than or equal to 1 and should be traded on at least 80% (+/ 5 %) o f t h e D a y s f o r t h e p r e v i o u s e i g h t e e n mo n t h s . O n l y c o r p o r a t e b r o ke r s w i t h n e t W o r t h o f a t l e a st Rs . 3 c r o r e a r e e l i g i b l e t o o f f e r t h i s f a c i l i t y . T h e y ma y u s e t h e i r o w n o r b o r r o w e d f u n d s , h ow e v e r , t h e i r t o t a l indebtedness s h o u l d n o t e x c e e d 5 t i me s t h e i r n e t w o r t h . T h e i n i t i a l a n d ma i n t e n a n c e ma r g i n i s t o b e p a i d i n c a s h a n d h a v e t o b e a mi n i mu m o f 5 0 % a n d 4 0 % , r e s p e c t i v e l y . W h i l e p r o v i d i n g t h e ma r g i n t r a d i n g f a c i l i t y , t h e b r o ke r should be prudent and ensure that there is no concentration on any single client. The a r b i t r a t i o n me c h a n i s m o f t h e e xc h a n g e i s n o t a v a i l a b l e f o r grievances arising out of this facility.

I V. E l i g i b i l i t y o f a S u b - b r o ke r t o T r a d e t h r o u g h t h e Subsidiary C o mp a n y . T h e S t o c k E x c h a n g e s h a d b e e n a l l ow e d t o s e t u p s u b s i d i a r y c o mp a n y t o A c q u i r e me mb e r s h i p r i g h t s o f o t h e r s t o c k e x c h a n g e s s u b j e c t t o certain c o n d i t i o n s p r e s c r i b e d b y S E B I . A s p e r t h e c o n d it i o n s s t a t e d i n the SEBI D i r e c t i v e , t h e s u b s i d i a r y c o mp a n y c o u l d r e g i s t e r o n l y t h e me mb e r s o f T h e p a r e n t s t o c k e x c h a n g e a s s u b - b r o ke r s o f t h e s u b s i d i a r y c o mp a n y . H o w e v e r , i t w a s n o t i c e d t h a t t h e n e c e s s a r y c h a n ge s h a v e n o t been Ma d e i n t h e r u l e s , b y e - l a w s a n d t h e r e g u l a t i o n s o f a l l t h e stock E x c h a n g e s w h i ch h a v e s e t u p s u b s i d i a r i e s a n d M e mo r a n d u m/ Ar t i c l e s o f A s s o c i a t i o n o f t h e s u b s i d i a r y c o mp a n y . T h e r e f o r e , a l l t h e stock Exchanges, which have set up subsidiaries were directed to ma ke t h e N e c e s s a r y p r o v is i o n s i n t h e i r r u l e s , r e g u l a t i o n s a n d t h e b y e laws as well a s i n t h e Me mo r a n d a / Ar t i c l e s o f As s o c i a t i o n s t o t h i s e f f e c t .

V . L i s t i n g Fe e s . It has been decided by SEBI, that the stock exchanges should have the F r e e d o m t o c h a r g e l i s t i n g f e e s w i t h o u t s e e ki n g p r i o r a p p r o v a l from the S E B I . Ac c o r d i n g l y , t h e e x c h a n g e s h a v e b e e n d i r e c t e d t o ma ke necessary A me n d me n t s t o t h e b y e - l aw s , r u l e s a n d r e g u l a t i o n s / l i s t i n g a g r e e me n t .

V I . Ma r k- u p i n r e s p e c t o f d e b e n t u r e s a n d b o n d s t r a d e d o n t h e Stock Exchange. T h r o u g h a c i r c u l a r i s s u e d b y S E B I o n De c e mb e r 0 9 , 1 9 9 6 , i t has been S t i p u l a t e d t h a t t h e ma r k - u p f o r t h e c l o s e o u t s h o u l d b e 2 0 % above the official closing price for equities as well as debentures and bonds. H o w e v e r , b a s e d o n t h e r e c o mme n d a t i o n s o f t h e A d v i s o r y C o mmi t t e e o n D e r i v a t i v e s a n d Ma r ke t Ri s k M a n a g e me n t i t h a s n o w b e e n decided that I n c a s e o f d e b e n t u r e s a n d b o n d s w i t h a c r e d i t r a t i n g A AA a n d above, C l o s e o u t ma r k - u p o f 5 % s h o u l d b e a p p l i e d . I n c a s e s w h e r e t h e credit R a t i n g i s b e l ow A A A , t h e n t h e e x i s t i n g c l o s e o u t ma r k - u p o f 20% should

Be applicable.

V I I . Fa i r Pr a c t i c e s a n d Co d e o f C o n d u c t A c o d e o f c o n d u c t f o r p u b l i c r e p r e s e n t a t i v e s / S E B I n o mi n e e directors has Been notified to ensure that the affairs of the stock exchanges are Conducted on the healthy lines with the highest standards of P r o f e s s i o n a l c o n d u c t , b u s i n e s s e t h i c s a n d mo r a l it y . Al s o t h e guidelines e n u me r a t i n g f a ir p r a c t i c e s h a v e b e e n n o t i f i e d . T h e p u b l i c r e p r e s e n t a t i v e s / S E B I n o mi n e e d i r e c t o r s s h o u l d : e n d e a v o r t o a t t e n d a l l t h e b o a r d me e t i n g s . T h e y s h o u l d b e liable T o v a c a t e t h e i r o f f i c e i f t h e y r e ma i n a b s e n t f o r t h r e e consecutive M e e t i n g s o f t h e B o a r d o f Di r e c t o r s o r d o n o t a t t e n d 7 5 % o f the T o t a l me e t i n g s o f t h e B o a r d i n a c a l e n d a r y e a r . n o t p a r t i c i p a t e i n t h e d i s c u s s i on o n s u b j e c t s , w h i c h ma y involve A n y c o n f l i c t o f in t e r e s t o r g i v e r i s e t o . I f i n c a s e i t h a p p e n s then T h e s a me s h o u l d b e d i s c l o s e d a n d r e c o r d e d i n t h e mi n u t e s o f the

M e e t i n g ; h o w e ve r , d u r i n g t h e me e t i n g t h e a g e n d a p a p e r s should N o t b e c i r c u l a t e d , u n l e s s c i r c u ms t a n c e s r e q u i r e s . me e t a t l e a s t o n c e i n 6 mo n t h s s e p a r a t e l y , i f n e c e s s a r y , t o Exchange views on critical issues. o f f e r t h e i r c o mme n t s o n t h e d r a f t mi n u t e s a n d e n s u r e t h a t t h e S a me a r e i n c o r p o r a t e d i n t h e f i n a l mi n u t e s . I t s h o u l d b e ensured T h a t t h e mi n u t e s o f t h e p r e v i o u s me e t i n g a r e p l a c e d f o r approval I n t h e s u b s e q u e n t me e t i n g . e n d e a v o r t o h a v e t h e d a t e o f n e x t me e t i n g f i x e d a t e a c h B o a r d M e e t i n g i t s e l f i n c o n s u l t a t i o n w it h o t h e r me mb e r s o f t h e G o v e r n i n g B o a r d . I n c a s e , a l l t h e i t e ms o f t h e a g e n d a o f a me e t i n g A r e n o t c o v e r e d , t h e n n e x t me e t i n g i s t o b e h e l d w i t h i n 1 5 days. p a r t i c i p a t e i n t h e f o r mu l a t i o n a n d e x e c u t i o n o f v a r i o u s strategies B y b e i n g p r o - a c t i v e i n d e c i s i o n ma ki n g i n t h e B o a r d me e t i n g s , so That the exchanges benefits from their experience and expertise. endeavor to ensure that the Exchange abides by all the provisions O f t h e S E B I A c t , S e c u r i t i e s Co n t r a c t s ( Re g u l a t i o n ) Ac t , Ru l e s ,

R e g u l a t i o n s f r a me d t h e r e u n d e r a n d t h e c i r c u l a r s , d i r e c t i o n s I s s u e d b y t h e G o v e r n me n t / S E B I . e n d e a v o u r t o ma ke t h e r e g u l a t o r y s y s t e m f o o l p r o o f b y ensuring C o mp l i a n c e a t a l l l e v e l s o f h i e r a r c h y i n t h e E x c h a n g e . T h e y should A l s o e n s u r e t h a t t h e E x c h a n g e h o n o r s t h e t i me l imi t prescribed by SEBI for corrective actions. n o t s u p p o r t a n y d e c i s i o n o f t h e B o a r d , w h i c h ma y a d v e r s e l y affect The interest of investors. They should report forthwith any such Decision to SEBI. ma ke s u r e t h a t t h e a r b i t r a l a w ar d i s g i v e n w i t h i n t h e p e r i o d S t i p u l a t e d i n t h e B y e - L a w s , Ru l e s o r R e g u l a t i o n s o f t h e Exchange And in any case, the award is to be delivered within 15 days after T h e f i n a l me e t i n g . priorities redressing of investor grievances by encouraging fair T r a d e p r a c t i c e . T h e y s h o u l d a l s o ma ke u s e o f e v e r y opportunity to E n h a n c e a n d i mp r o v e t h e i r l e v e l o f kn o w l e d g e , s o t h a t t h e y are

Able to resolve various issues arising in the operations o f the e x c h a n g e w i t h p r o f e s s i o n a l c o mp e t e n c e , f a i r n e s s , i mp a r t i a l i t y , Efficiency and effectiveness. s u b mi t t h e n e c e s s a r y d i s c l o s u r e s / s t a t e me n t o f holdings/dealings In securities as required by the Exchange as per their Rules or A r t i c l e s o f As s o c i a t i o n . ma i n t a i n c o n f i d e n t i a l i t y a b o u t a n y i n f o r ma t i o n o b t a i n e d i n the d i s c h a r g e o f t h e i r d u t y u n l e s s o t h e r w i s e r e q u i r e d b y l aw . Further, T h e y s h o u l d n o t u s e t h e c o n f i d e n t i a l i n f o r ma t i o n f o r t h e i r personal Gains. avoid any interest or activity which is in conflict with the conduct Of their official duties. N o t e n g a g e i n a n y a c t i n v o l v i n g mo r a l t u r p i t u d e , d i s h o n e s t y , F r a u d , d e c e i t , o r mi s r e p r e s e n t a t i o n o r a n y o t h e r a c t prejudicial to T h e a d mi n i s t r a t i o n o f t h e e x c h a n g e .

V I I I . Co r p o r a t e G o v e r n a n c e i n L i s t e d Co mp a n i e s C l a u s e 4 9 o f t h e l i s t i n g a g r e e me n t h a s b e e n a me n d e d t o include the

R e c o mme n d a t i o n s a s p r e s c r i b e d b y t h e c o mmi t t e e o n corporate G o v e r n a n c e s e t u p u n d e r t h e c h a i r ma n s h i p o f S h r i N . R . Narayana Murthy: C o mp o s i t i o n o f B o a r d : T h e b o ar d o f d i r e c t o r s o f a c o mp a n y should H a v e a n o p t i mu m c o mb i n a t i o n o f e x e c u t i v e a n d n o n - e x e c u t i v e directors. However, the non-executive Directors should not be less than 50% of the directors. The n u mb e r o f Independent D i r e c t o r s s h o u l d b e d e t e r mi n e d o n t h e b a s i s o f t h e p o s t h e l d by the C h a i r ma n ; i n c a s e o f a n o n - e x e c u t i v e c h a i r ma n , a t l e a s t 1 / 3 r d of board S h o u l d c o mp r i s e o f i n d e p e n d e n t d i r e c t o r s a n d i f h e i s a n executive C h a i r ma n , t h e n a t l e a s t h a l f o f B o a r d s h o u l d c o mp r i s e o f independent Directors. N o n - E x e c u t i v e D i r e c t o r s Co mp e n s a t i o n a n d Di s c l o s u r e s : A l l t h e c o mp e n s a t i o n p a i d t o n o n - e x e c u t i v e d i r e c t o r s s h o u l d b e fixed by the Board and should be approved by shareholders in g e n e r a l me e t i n g .

A l i mi t s h o u l d b e p l a c e d f o r t h e ma x i mu m n u mb e r o f s t o c k options that Can be granted to them in any financial year and in aggregate. In its A n n u a l r e p o r t , t h e c o mp a n y s h ou l d p u b l i s h i t s c o mp e n s a t i o n philosophy, S t a t e me n t o f e n t i t l e d c o mp e n s a t io n i n r e s p e c t o f n o n - e x e c u t i v e Directors and the details of shares held by non -executive directors. I n d e p e n d e n t Di r e c t o r : I n d e p e n d e n t Di r e c t o r s h o u l d periodically R e v i e w t h e c o mp a n y s l e g a l c o mp l i a n c e r e p o r t s a s w e l l a s t h e steps T a ke n b y t h e c o mp a n y . I n t h e e v e n t o f a n y l e g a l p r o c e e d i n g s against an Independent director in connection with the affairs of the c o mp a n y , t h e d e f e n c e w o u l d n o t b e p e r mi t t e d o n t h e g r o u n d t h a t h e w a s u n aw a r e o f His responsibility. B o a r d Pr o c e d u r e : T h e B o a r d s h o u l d me e t a t l e as t f o u r t i me s a year, W i t h a ma x i mu m t i me g a p o f f o u r mo n t h s b e tw e e n a n y tw o me e t i n g s . A D i r e c t o r s h o u l d n o t b e a me mb e r i n mo r e t h a n 1 0 c o mmi t t e e s or act as C h a i r ma n o f mo r e t h a n f i v e

C o mmi t t e e s a c r o s s a l l c o mp a n i e s i n w h i c h h e i s a d i r e c t o r . F u r t h e r mo r e , I t s h o u l d b e ma n d a t o r y f o r a l l t h e d i r e c t o r s t o i n f o r m t h e c o mp a n y a b o u t T h e p o s i t i o n s t h e y o c c u p y i n o t h e r c o mp a n i e s e v e r y y e a r a n d also notify C h a n g e s a s a n d w h e n t h e y t a ke p l a c e . C o d e o f Co n d u c t : I t i s o b l i g a t o r y f o r t h e B o a r d t o l a y d ow n the code of C o n d u c t f o r a l l i t s me mb e r s a n d t h e s e n i o r ma n a g e me n t o f t h e c o mp a n y , w h i c h s h o u l d b e p o s t e d o n t h e c o mp a n y s w e b s i t e . On an a n n u a l b a s i s , a l l t h e me mb e r s o f t h e B o a r d a n d s e n i o r ma n a g e me n t P e r s o n n e l s h o u l d a f f i r m c o mp l i a n c e w i t h t h e c od e . I n a d d i t i o n , T h e a n n u a l r e p o r t s h o u l d c o n t a in a d e c l a r a t i o n t o t h i s e f f e c t signed by T h e C E O a n d CO O . T e r m o f O f f i c e o f No n - e x e c u t i ve d i r e c t o r s : A p e r s o n w o u l d b e Eligible for the office of non -executive director so long as his term in the O f f i c e h a s n o t e x c e e d e d n i n e y e a r s i n t h r e e t e r ms o f t h r e e years each, Running continuously. Q u a l i f i e d a n d I n d e p e n d e n t Au d i t Co mmi t t e e : A q u a l i f i e d a n d

I n d e p e n d e n t a u d i t c o mmi t t e e w i t h a mi n i mu m o f t h r e e me mb e r s C o mp r i s i n g o f a c h a i r ma n a n d me mb e r s s h a l l b e s e t u p . Wherein the C h a i r ma n s h o u l d b e a n i n d e p e n d e n t d i r e c t o r a n d ma j o r i t y o f me mb e r s Should be independent directors. It is required that all the me mb e r s o f A u d i t c o mmi t t e e s h o u l d b e f i n a n c i a l l y l i t e r a t e a n d a t l e a s t o n e of them S h o u l d h a v e a c c o u n t i n g o r r e l a t e d f i n a n c i a l ma n a g e me n t expertise. The C h a i r ma n s h o u l d b e p r e s e n t a t A n n u a l G e n e r a l M e e t i n g t o answer the Q u e r i e s o f t h e sh a r e h o l d e r s . T h e a u d i t c o mmi t t e e s h o u l d invite Executives, as it considers appropriate (and particularly the head of the F i n a n c e f u n c t i o n ) t o b e p r e s e n t a t t h e me e t i n g s , b u t o n o c c a s i o n s i t ma y A l s o me e t w i t h o u t t h e p r e s e n c e o f a n y e x e c u t i v e s . A u d i t Co mmi t t e e : T h e a u d i t c o mmi t t e e s h o u l d me e t a t l e a s t thrice a Y e a r , b u t o n c e e v e r y s i x mo n t h s ; a t l e a s t o n e me e t i n g s h o u l d be held Before finalization of annual accounts. The quorum for the me e t i n g

S h o u l d b e e i t h e r t w o me mb e r s or o n e t h i r d o f t h e t o t a l me mb e r s ; W h i c h e v e r i s h i g h e r a n d mi n i mu m o f t w o i n d e p e n d e n t directors? The C o mmi t t e e i s e mp o w e r e d t o ( i ) i n v e s t i g a t e a n y a c t i v i t y w i t h i n i t s t e r ms O f r e f e r e n c e ( i i ) s e e k i n f o r ma t i o n f r o m a n y e mp l o y e e ( i i i ) obtain outside Legal or other professional advice (IV) s ecure attendance of outsiders With relevant expertise, if it considers necessary. R o l e o f Au d i t Co mmi t t e e : T h e r o l e o f t h e a u d i t c o mmi t t e e should be To ( a ) O v e r s e e s t h e c o mp a n y s f i n an c i a l r e p o r t i n g p r o c e s s a n d the D i s c l o s u r e ma d e i n t h e f i n a n c i a l s t a t e me n t a n d a s c e r t a i n s i t s accuracy, Sufficiency and credibility ( b ) Re c o mme n d t h e a p p o i n t me n t a n d r e mo v a l o f e x t e r n a l auditor, F i x a t i o n o f a u d i t f e e a n d a l s o a p p r o v e p a y me n t f o r a n y o t h e r services (c) Review the adequacy of internal audit function, inclu ding the structure of T h e i n t e r n a l a u d i t d e p a r t me n t , i t s s t a f f , o f f i c i a ls h e a d i n g t h e d e p a r t me n t ,

Reporting structure coverage and frequency of internal audit. Further, T h e c o mmi t t e e s h o u l d d i s c u s s w it h i n t e r n a l a u d i t o r s a n y significant findings and follow them up (d) review the findings of any internal i n v e s t i g a t i o n s i n t o ma t t e r s o f a s u s p e c t e d f r a u d o r i r r e g u l a r i t y or a F a i l u r e o f i n t e r n a l c o n t r o l s y s t e ms o f a ma t e r i a l n a t u r e a n d reporting the Ma t t e r t o t h e b o a r d . Al s o , t h e c ommi t t e e s h o u l d d i s c u s s w i t h external A u d i t o r s b e f o r e t h e a u d i t c o mme n c e s a b o u t n a t u r e a n d s c o p e of audit. P o s t - a u d i t t h e c o mmi t t e e s h o u l d a s c e r t a i n a n y a r e a o f c o n c e r n R e g a r d i n g c o mp a n y s f i n a n c i a l a n d r i s k ma n a g e me n t p o l i c i e s . The Audit C o mmi t t e e s h o u l d a l s o c o mp u l s or i l y r e v i e w i n f o r ma t i o n related to (I) F i n a n c i a l s t a t e me n t s a n d d r a f t a u d i t r e p o r t , i n c l u d i n g quarterly/halfY e a r l y f i n a n c i a l i n f o r ma t i o n ; ( i i ) ma n a g e me n t d i s c u s s i o n a n d analysis of Financial condition and results of operat ions; (iii) reports relating to C o mp l i a n c e w i th l a w s a n d t o r i s k ma n a g e me n t ; a n d ( I V) ma n a g e me n t l e t t e r s / l e t t e r s o f i n t e r n a l c o n t r o l w e a kn e s s e s i s s u e d b y statutory/internal

Auditors. I X. L i s t i n g o f Fu r t h e r I s s u e o f C a p i t a l F o l l ow i n g t h e w it h d r a w a l o f c o mp u l s o r y l i s t i n g o f c o mp a n i e s on regional Stock exchange, it has been decided by the SEBI that a c o mp a n y s h o u l d Be listed on any of the stock exchanges, which have a n a t i o nw i d e T r a d i n g t e r mi n al s . I f t h e c o mp a n y i s n o t l i s t e d o n a n y s t o c k exchange H a v i n g n a t i o n w id e t r a d i n g t e r mi n a l s , t h e n i t s h o u l d c o n t i n u e to obtain in-principle approval from all the exchanges where it is listed. The l i s t i n g a g r e e me n t s t a t e s : T h e Co mp a n y a g r e e s t o o b t a i n i n principle A p p r o v a l f o r l i s t i n g f r o m t h e e x c h a n g e s h a v i n g n a t i o nw i d e trading T e r mi n a l s w h e r e i t i s l i s t e d , b e f o r e i s s u i n g f u r t h e r s h a r e s o r securities. W h e r e t h e c o mp a n y i s n o t l i s t e d o n a n y e x c h a n g e h a v i n g n a t i o nw i d e T r a d i n g t e r mi n al s , i t a g r e e s t o o b t a i n s u c h i n - p r i n c i p l e approval from all The exchanges in which it is listed before issuing further shares or S e c u r i t i e s .

X . A me n d me n t t o S E B I ( D e p o s i t o r i e s a n d Pa r t i c i p a n t s ) (Second A me n d me n t ) Re g u l a t i o n s 2 0 0 3 S E B I a me n d e d t h e S E B I ( De p o s it o r i e s a n d Pa r t i c i p a n t s ) Regulations 1 9 9 6 t o i n c l u d e t h e c l a u s e s r e g a r d i n g t h e ma n n e r o f h a n d l i n g the share R e g i s t r y w o r k, r e d r e s s a l o f i n v e s t o r g r i e v a n c e s a n d ma i n t e n a n c e o f a u d i t R e p o r t s . Al l ma t t e r s r e l a t i n g t o t r a n s f e r o f s e c u r i t i e s , ma i n t e n a n c e o f Records of holders of securities, handling of physical securities should be H a n d l e d a n d ma i n t a i n e d a t a s i n g l e p o i n t b y e s t a b l i s h i n g connectivity With the depositories i.e. either in -house by the issuer or by a Share T r a n s f e r Ag e n t ( S T A) r e g i s t e r e d w i t h t h e S E B I . E v e r y i s s u e r or its agent O r a n y p e r s o n w h o i s r e g i s t e r e d a s a n i n t e r me d i a r y u n d e r t h i s act, S h o u l d r e d r e s s t h e g r i e v a n c e s o f b e n e f i c i a l o w n er s w i t h i n thirty days of T h e r e c e i p t o f t h e c o mp l a i n t . S i mu l t a n e o u s l y , t h e d e p o s i t o r y should also B e i n f o r m e d a b o u t t h e n u mb e r a n d n a t u r e o f g r i e v a n c e s redressed by it

A n d n u mb e r o f g r i e v a n c e s p e n d i n g b e f o r e i t . T h e i s s u e r s s h o u l d s u b mi t The audit report on a quarterly basis, starting from S e p t e mb e r 3 0 , 2 0 0 3 T o t h e c o n c e r n e d s t o c k e x c h a n ge s a u d i t e d b y a q u a l i f i e d Chartered Acc . X I . A me n d me n t t o S E B I ( FI I ) ( S e c o n d A me n d me n t ) Regulations 2003 T h e S E B I ( Fo r e i g n I n s t i t u t i o n a l I n v e s t o r s ) Re g u l a t i o n s h a s b e e n a me n d e d By the SEBI T o i n c l u d e t h e n e w c l a u s e s a s s t a t e d h e r e w i t h . T h e FI I s s h o u l d fully D i s c l o s e i n f o r ma t i o n c o n c e r n i n g t h e t e r ms o f a n d p a r t i e s t o off-shore D e r i v a t i v e i n s t r u me n t s s u c h a s P a r t i c i p a t o r y No t e s ( P - No t e s ) , Equity L i n ke d No t e s ( E L N) o r a n y o t h e r s u c h i n s t r u me n t s l i s t e d o r proposed to Be listed. The code of conduct has also been S p e c i f i e d w h i c h s t a t e s t h a t ( a ) a F I I a n d i t s ke y p e r s o n n e l should observe H i g h s t a n d a r d s o f i n t e g r i t y , f a i r n e s s a n d p r o f e s si o n a l i s m i n a l l t h e i r o u n t a n t o r a p r a c t i c i n g C o mp a n y S e c r e t a r y .

D e a l i n g s w i t h i n t e r me d i a r i e s , r e g u l a t o r y a n d o t h e r g o v e r n me n t A u t h o r i t i e s i n t h e I n d i a n s e c u r i t i e s ma r ke t . T h e y s h o u l d , a t a l l t i me s , R e n d e r h i g h s t an d a r d s o f s e r v i c e ; e x e r c i s e d u e d i l i g e n c e a n d I n d e p e n d e n t p r o f e s s i o n a l j u d g me n t ( b ) a FI I s h ou l d e n s u r e a n d ma i n t a i n Confidentiality in respect of trades done on its own behalf and/or on Behalf of its sub-accounts/clients. There should be clear segregation of I t s ow n mo n e y / se c u r i t i e s a n d s u b - a c c o u n t s mo n e y / s e c u r i t i e s ; a r ms L e n g t h r e l a t i o n s h i p s h o u l d b e ma i n t a i n e d b e t w ee n i t s b u s i n e s s of fund Ma n a g e me n t / i n v e s t me n t a n d i t s o t h e r b u s i n e s s ( c ) a FI I s h o u l d ma i n t a i n A n a p p r o p r i a t e l e v e l o f kn o w l e d g e a n d c o mp e t e n c y a n d a b i d e by the P r o v i s i o n s o f t h e Ac t , r e g u l a t i on s ma d e t h e r e u n d e r a n d t h e circulars A n d g u i d e l i n e s a p p l i c a b l e a n d r e l e v a n t t o t h e m. E v e r y FI I should also c o mp l y w i t h aw a r d o f t h e O mb u d s ma n a n d d e c i s i o n o f t h e Board under S E B I ( O mb u d s ma n ) Re g u l a t i o n s , 2 0 0 3 ( d ) a FI I s h o u l d n o t ma ke a n y

u n t r u e s t a t e me n t o r s u p p r e s s a n y ma t e r i a l f a c t i n a n y d o c u me n t s , r e p o r t s o r i n f o r ma t i o n f u r n i s h e d t o t h e B o a r d ( e ) t h e y s h o u l d ensure that good corporate policies and corporate governance are observed and do n o t e n g a g e i n f r a u d u l e n t a n d ma n i p u l a t i v e t r a n s a c t i o n s i n t h e securities L i s t e d i n a n y s t o c k e x c h a n g e i n I n d i a ( f ) a FI I an d / o r a n y o f its affiliates Should not indulge in any insider trading, should not be a party to or I n s t r u me n t a l f o r c r e a t i o n o f f a l s e ma r ke t i n s e c u r i t i e s l i s t e d or proposed T o b e l i s t e d i n an y s t o c k e x c h a n g e i n I n d i a . T h e y s h o u l d n o t be involved I n p r i c e r i g g i n g o r ma n i p u l a t i o n o f p r i c e s o f s e c u r i t i e s l i s t e d or proposed T o b e l i s t e d i n an y s t o c k e x c h a n g e i n I n d i a . X I I . S E B I ( Ce n t r a l Da t a b a s e o f Ma r ke t Pa r t i c i p a n t s ) Regulations 2003. T h e S E B I ( C e n t r a l Da t a b a s e o f Ma r ke t Pa r t i c i p a n t s ) R e g u l a t i o n s , 2 0 03 I n t e n d s t o d e v e l o p a n i n v e n t o r y o f Ma r ke t Pa r t ic i p a n t s a n d Investors and

A l s o s e t u p s t a n d a r d s f o r c l i e n t c o d e . I t p l a c e s a ma n d a t o r y obligation On all entities under the jurisdiction of SEBI and specified investors to O b t a i n u n i q u e i d e n t i f i c a t i o n n u mb e r u n d e r M AP I d a t a b a s e . T h e ma i n Features of this regulation are as cited: (a) every investor, listed C o mp a n y , c o mp a n y i n t e n d i n g t o g e t i t s s e c u r i t i e s l i s t e d , i n t e r me d i a r y A n d o t h e r e n t i t i e s s h o u l d ma ke a p p l i c a t i o n s f o r a l l o t me n t o f unique I d e n t i f i c a t i o n n u mb e r s ( UI Ns ) f o r i t s e l f a n d f o r i t s r e l a t e d persons (b) the A p p l i c a t i o n ma d e b y a s p e c i f i e d i n t e r me d i a r y o r a n y o t h e r entity should B e i n a s p e c i f i e d f o r m. O n r e c e i p t o f a n a p p l i c a t i o n , t h e designated Service provider should allot to the applicant a UIN. In case of any Defect, the designated service provider should give the applicant an Opportunity to rectify it within a period of 15 days from the date of the I n t i ma t i o n o r w it h i n t h e p e r i o d a p p r o v e d b y t h e B o a r d . I f t h e defect is N o t r e c t i f i e d w i th i n t h e a l l o t t e d t i me p e r i o d , t h e n t h e designated service

Provider should refer the application to the SEBI board (c) if unique I d e n t i f i c a t i o n n u mb e r w a s o b t a i n e d t h r o u g h f r au d o r M i s r e p r e s e n t a t i o n o r w a s a l l o t t e d t o a p e r s o n b y mi s t a ke , t h e Board Ma y , a f t e r g i v i n g h i m a n o p p o r t u n i t y o f ma ki n g r e p r e s e n t a t i o n s , r e v o ke T h e UI N a l l o t t e d t o h i m o r t o t h e r e l a t e d p e r s o n s . O n c e t h e UIN is R e v o ke d , t h e p e r s o n w i l l b e t r e at e d a s i f n o UI N w a s a l l o t t e d t o h i m. I n Case a person issues any security or buys, sells or deals in any securities I n c o n t r a v e n t i o n o f t h e s e r e g u l a t i o n s , t h e y w o ul d b e l i a b l e f o r S u s p e n s i o n f r o m t r a d i n g o r ma y b e d e b a r r e d f r o m d e a l i n g i n the S e c u r i t i e s ma r ke t o r a n y o t h e r a c t i o n a s ma y b e d e e me d appropriate by The Board. X I I I . Di s c l o s u r e o f P r o p r i e t a r y T r a d i n g b y B r o ke r s t o Cl i e n t . To increase the transparency in the dealings between the b r o ke r a n d T h e c l i e n t , i t h a s b e e n d e c i d e d t h a t e v e r y b r o ke r s h o u l d disclose to his Client whether he does client based business or proprietary trading as

Well. This should be disclosed to all his existing cl ients and also to his N e w c l i e n t s a t t h e t i me o f e n t e r i n g i n t o t h e K n o w Yo u r Client A g r e e me n t . I n c a s e o f a b r o ke r w h o a t p r e s e n t d o e s n o t t r a d e on proprietary account, chooses to do so at a later date, he is required to D i s c l o s e t h i s t o h i s c l i e n t s b e f o r e c a r r y i n g o u t an y p r o p r i e t a r y trading. X I V . T r a d i n g b y M e mb e r s / S u b - b r o ke r s . S i n c e c e r t a i n me mb e r s / s u b - b r o ke r s d e a l t h r o u g h a l a r g e n u mb e r o f O t h e r s t o c k b r o ke r s / s u b - b r o ke r s o n t h e s a me e x c h a n g e / o t h e r exchanges For their proprietary trades as well a s trades on behalf of their clients, SEBI has prohibited these transactions, except with the prior p e r mi s s i o n O f t h e e x c h a n g e . Af t e r t h e s t o c k e x c h a n g e c o n s i d e r s t h e reason stated B y t h e b r o ke r - s u b - b r o ke r f o r s u c h t r a n s a c t i o n s a n d c a r r y o u t due d i l i g e n c e , i t s h o u l d p e r mi t s u c h d e a l s w i t h o n l y o n e b r o ke r / s u b - b r o ke r R e g i s t e r e d w i t h i t . T h e s t o c k b r o ke r / s u b - b r o ke r o f a n exchange can deal W i t h o n l y o n e b r o ke r / s u b - b r o ke r o f a n o t h e r e x c h a n g e f o r proprietary

T r a d i n g a f t e r i n t i ma t i n g t h e n a me s o f s u c h s t o c k b r o ke r / s u b b r o ke r t o His parent stock exchange. X V . Di s c l o s u r e o f T r a d e D e t a i l s o f B u l k D e a l s . SEBI has decided to bring about greater disclosure in the nature of the Bulk deals. All transactions in scrip where total quantity of shares bought/sold is Mo r e t h a n 0 .5 % o f t h e o u t s t a n d i n g e q u i t y s h a r e s o f t h a t c o mp a n y a r e C o n s i d e r e d t o b e b u l k d e a l s . T h e b r o ke r s s h o u ld d i s c l o s e t o the stock E x c h a n g e t h e n a me o f t h e s c r i p , n a me o f t h e c l i e n t , q u a n t i t y o f shares B o u g h t / s o l d a n d t h e t r a d e d p r i c e . I mme d i a t e l y a f t e r e x e c u t i n g the trade, T h e b r o ke r s s h o u l d i n t i ma t e t h e e x c h a n g e a n d t h e s t o c k exchange, in T u r n , s h o u l d d i ss e mi n a t e t h e a f o r e s a i d i n f o r ma t i o n o n t h e s a me d a y A f t e r t h e ma r ke t h o u r s t o t h e g e n e r a l p u b l i c . X VI . Ch a n g e s i n t h e Na me o f t h e L i s t e d Co mp a n i e s . A l l l i s t e d c o mp a n i e s , w h i c h d e c i d e t o c h a n g e t h e i r n a me s , a r e required

t o c o mp l y w i t h c e r t a i n p r o v i s i o n s : ( i ) T h e y h a v e t o ma i n t a i n a t i me p e r i o d o f at l e a s t o n e y e a r b e f o r e t h e l a s t n a me c h a n g e ( i i ) At l e a s t 5 0 % Of its total revenue in the preceding one year period should have been A c c o u n t e d f o r b y t h e n e w a c t i v it y s u g g e s t e d b y t h e n e w n a me (iii) The N e w n a me a l o n g w i t h t h e o l d n a me s h o u l d b e d i s c l o s e d through web S i t e s o f t h e r e s p e c t i v e s t o c k e x c h a n g e / s w h e r e t h e c o mp a n y i s listed A n d a l s o t h r o u gh E DI F AR w e b s i t e f o r a c o n t i n u o u s p e r i o d o f one year F r o m t h e d a t e of l a s t n a me c h a n g e . X VI I . R e d u c t i o n i n No t i c e Pe r i o d f o r Fi x i n g t h e B o o k C l o s u r e / Re c o r d D a t e . On receiving representations from various quarters and in view of the Ma j o r s t r u c t u r a l c h a n g e s / d e v e l o p me n t s i n t h e s e c o n d a r y ma r ke t s , S E B I D e c i d e d t o r e d u c e t h e n o t i c e p e r i o d w h i c h t h e l i s t e d c o mp a n i e s have to Give to the stock exchanges before their book-closure/record date. In The first phase, the said notice period has been reduced to 15 calendar

D a y s f r o m 3 0 d ay s i n c a s e o f d e ma t e r i a l i z e d s c r i p t s a n d f r o m 42 days to 2 1 c a l e n d a r d a ys i n c a s e o f p h y s i c a l s c r i p t s . Initiatives from RBI I . FI s T r a d i n g i n G O I S e c u r i t i e s With a view to facilitate participation of the financial i n s t i t u t i o n s ( FI s ) f o r T r a d i n g i n g o v er n me n t s e c u r i t i e s o n t h e s t o c k e x c h a n g e s , t h e FIs have T o f o l l ow t h e p r o c e d u r e me n t i o n e d b e l o w : 1 . FI s s h o u l d o p e n d e ma t a c c o u n t s w i t h t h e De p o s i t o r y P a r t i c i p a n t ( D P) Of either NSDL/CDSL, in addition to their SGL Accounts with RBI. 2 . Va l u e f r e e t r an s f e r , ( i .e . t r a n s f e r o f t h e G O I s e c u r i t i e s f r o m the S G L / CS G L a c c o u n t t o t h e d e ma t a c c o u n t o f t h e s a me p a r t y ) o f securities B e t w e e n S G L / CS G L a n d d e ma t Accounts should be enabled subject to operational guidelines. 3 . FI s s h o u l d a l s o e n s u r e : ( a ) t o o b t a i n s p e c i f i c a p p r o v a l f r o m their Board o f Di r e c t o r s t o e n a b l e t h e m t o t r a d e i n G o v e r n me n t s e c u r i t i e s on the stock exchanges, (b) they should put in place necessary infrastructure,

r i s k ma n a g e me n t s y s t e ms a n d a p p r o p r i a t e i n t e r n a l c o n t r o l s y s t e ms f o r t r a d i n g / s e t t l e me n t o f G o v e r n me n t s e c u r i t i e s o n s t o c k exchanges (c) t h e i r t r a n s a c t i o n s t h r o u g h a n y s i n g l e b r o ke r s h o u l d b e subjected to the e x t a n t g u i d e l i n e s o n d e a l i n g s t h r o u g h b r o ke r s ( d ) a l l t h e i r trades should be settled either directly with clearing corporation/clearing house or else t h r o u g h c l e a r i n g me mb e r c u s t o d i a n s ( e ) a t t h e t i me o f t r a d e , securities s h o u l d b e a v a i l ab l e w i t h t h e FI s e i t h e r i n t h e i r S G L a c c o u n t w i t h RB I o r i n d e ma t a c c o u n t w i t h d e p o s i t o r i e s ( f ) t h e p u r c h a s e t r a n s a c t i o n s b y t h e FI s should be subject to availability of clear funds in thei r s e t t l e me n t A c c o u n t s a t t h e t i me o f p a y - i n , ( g ) a l l p a y - o u t o f f u n d s s h o u l d invariably B e o u t o f c l e a r f u n d s , i .e . t h e p a y o u t mu s t n o t b e c o n t i n g e n t upon the O u t c o me o f a n y c l e a r i n g t o b e c o n d u c t e d o n t h at d a y . 4 . An y s e t t l e me n t f a i l u r e o n a c c o u n t o f n o n - d e l i v e r y o f securities/nonavailability of clear funds should be treated as SGL bouncing and the

penalties in respect of SGL bouncing should be applicable. 5 . Al l t h e d e t a i l s o f t r a n s a c t i o n i n G o v e r n me n t s e c u r i t i e s , o n aggregate Basis, undertaken on the stock exchanges and particulars of any closed O u t s h o u l d b e r e p o r t e d t o t h e a u d i t c o mmi t t e e o f t h e B o a r d . I n t h e mi d - t e r m r e v i e w o f t h e mo n e t a r y a n d c r e d i t p o l i c y , RB I has P e r mi t t e d s a l e of G o v e r n me n t s e c u r i t y a l r e a d y c o n t r a c t e d f o r purchase Subject to two conditions: (a) the purchase contract is confined prior to T h e s a l e , i s g u a r a n t e e d b y C CI L o r t h e s e c u r i t y i s c o n t r a c t e d for P u r c h a s e f r o m t h e RB I ; ( b ) t h e s a l e t r a n s a c t i o n s e t t l e s e i t h e r in the s a me s e t t l e me n t c y c l e a s t h e p r e c e d i n g p u r c h a s e c o n t r a c t s o t h a t t h e d e l i v e r y o b l i g a t i o n u n d e r t h e s a l e c o n t r a c t i s me t b y the securities Acquired under the purchase contract. I I . De - r e c o g n i t i o n o f O v e r s e a s C o r p o r a t e B o d i e s a s a n Investor Class R B I i n c o n s u l t a t i o n w i t h t h e G o v e r n me n t h a v e d e - r e c o g n i z e d Overseas C o r p o r a t e B o d i e s ( O CB s ) i n I n d i a a s a n e l i g i b l e c l a s s o f investor under

V a r i o u s r o u t e s / sc h e me s a v a i l a b le u n d e r e x t a n t Fo r e i g n Exchange Ma n a g e me n t Re g u l a t i o n s . I n a d d i t i o n , f o l l ow i n g m e a s u r e s have also Been initiated (I) an unincorporated entity also should not be a l l ow e d t o Ma ke f r e s h i n v e s t me n t s u n d e r t h e Fo r e i g n Di r e c t I n v e s t me n t s c h e me I n c l u d i n g t h e a u t o ma t i c r o u t e . H o w e v e r , t h e u n i n c o r p o r a t e d entities and O CB s ma y c o n t i n u e t o h o l d s h a r e s a n d c o n v e r t i b l e d e b e n t u r e s till they A r e s o l d / r e d e e me d ( i i ) t h e y s h o u l d a l s o n o t u n d e r t a ke purchase of G o v e r n me n t d a t e d s e c u r i t i e s o r t r e a s u r y b i l l s o r u n i t s o f d o me s t i c M Fs O r u n i t s o f Mo n e y Ma r ke t Mu t u a l F u n d s ( M MMF s ) i n I n d i a o r National Plan/Savings Certificates both on repatriation and no repatriation basis. H o w e v e r , t h e y ma y c o n t i n u e t o h o l d t h e s e s e c u r i t i e s t i l l t h e y are S o l d / ma t u r e d ( i i i ) a p e r s o n r e s i d e n t o u t s i d e I n d i a i n c l u d i n g O CB s s h o u l d N o t t r a n s f e r b y w ay o f s a l e o r g i f t , t h e s h a r e s o r c o n v e r t i b l e debentures H e l d b y t h e m t o a n o t h e r O CB ( I V ) O CB s s h o u l d n o t p u r c h a s e equity or

Preference shares or convertible debentures offered on right basis by an I n d i a n c o mp a n y . A p e r s o n r e s i d e n t i n I n d i a s h o u l d a l s o n o t b o r r ow i n F o r e i g n c u r r e n c y f r o m O C B s ( v ) a n I n d i a n c o mp a n y s h o u l d not borrow in Rupees on repatriation and non -repatriation basis from OCBs by way of I n v e s t me n t i n No n - Co n v e r t i b l e D e b e n t u r e s ( N CD s ) ( VI ) a n Indian C o mp a n y , a p r o p r i e t o r s h i p c o n c e r n o r a f i r m i n I n d i a s h o u l d not accept D e p o s i t s f r o m O C B s o n n o n - r e p a t r i a t i o n b a s i s ( v i i ) O CB s should not open A n d ma i n t a i n No n - R e s i d e n t ( E x t e r n a l ) Ru p e e Ac c o u n t ( N RE ) , Foreign C u r r e n c y ( No n - R e s i d e n t ) Ac c o u n t ( B a n ks ) [ F C NR ( B ) ] A c c o u n t s a n d No n R e s i d e n t O r d i n a r y Ru p e e ( NR O ) D e p o s i t Ac c o u n t w i t h A u t h o r i z e d D e a le r s i n I n d i a . ( v i i i ) n o n ew NR E / FC N R/ N RO A c c o u n t s i n t h e n a me o f O CB s s h o u l d b e o p e n e d a n d n o r e n e w al o f d e p o s i t s s h o u l d b e ma d e . As R e g a r d s w i t h i n v e s t me n t o n r e p a t r i a t i o n b a s i s , a u t h o r i z e d d e a l e r s ( ADs ) Ma y a l l ow r e p a t r i a t i o n a s a u t h or i z e d . Fo r i n v e st me n t o n n o n repatriation

B a s i s , A Ds s h o u l d a r r a n g e t o o b t a i n r e q u e s t s f o r d i s p o s a l o f funds from T h e i r O CB c l i e n t s a n d s e e k t h e s p e c i f i c a p p r o v a l f o r e a c h c a s e from the R B I . T h e b a n i mp o s e d o n O CB s u n d e r PI S v i d e a c i r c u l a r issued earlier Shall continue. However, they are allowed to hold the shares and C o n v e r t i b l e d e b e n t u r e s p u r c h a s e d u n d e r PI S t i l l s u c h t i me these are sold On Stock Exchange in India. It has also been clarified that the deR e c o g n i t i o n o f O CB s a s a s e p a r a t e c a t e g o r y o f i n v e s t o r me a n t W i t h d r aw a l o f s p e c i a l f a c i l i t i e s ma d e a v a i l a b l e t o t h e m. However, the O v e r s e a s e n t i t i e s ow n e d b y NRI s r e ma i n u n a f f e c t e d o f t h e s a me . I I I . B a n k Fi n a n c i n g o f E q u i t i e s a n d I n v e s t me n t s i n S h a r e s . A s p e r t h e R B I d i r e c t i v e , b a n ks w e r e r e q u i r e d t o a p p l y a u n i f o r m ma r g i n Of 40% on all advances against shares/financing of I PO s / i s s u e o f G u a r a n t e e s . A mi n i mu m c a s h ma r g i n o f 2 0 p e r c e n t ( w i t h i n t h e ma r g i n o f 4 0 %) i s a l s o t o b e a p p l i e d i n r e s p e c t o f g u a r a n t e e s i s s u e d b y the

B a n ks . T h i s h a s b e e n r e v i ew e d a n d i t h a s b e e n r a i s e d t o a uniform Ma r g i n o f 5 0 % t o a l l f r e s h a d v a n c e s / g u a r a n t e e s i s s u e d . A mi n i mu m C a s h ma r g i n o f 2 5 % ( w i t h i n t h e ma r g i n o f 5 0 %) s h o u l d b e ma i n t a i n e d i n R e s p e c t o f g u a r a n t e e s i s s u e d b y b a n ks f o r c a p i t a l ma r ke t operations. T h e e x i s t i n g a d v a n c e s / g u a r a n t e e s i s s u e d ma y c o n t i n u e a t t h e earlier Ma r g i n s u n t i l t h e y c o me u p f o r r e n e w al . . B u y B a c k: B u y b a c k i s d o n e b y t h e c o mp a n y w i t h t h e p u r p o s e T o i mp r o v e l i q u i d i t y i n i t s s h a r e s a n d e n h a n c e t h e S h a r e h o l d e r s w e a l t h . Un d e r t h e S E B I ( B u y B a c k o f Securities) R e g u l a t i o n s , 1 9 98 , a c o mp a n y i s p e r mi t t e d t o b u y b a c k i t s s h a r e s f r o m: (a) Existing shareholders on a proportionate basis through the offer D o c u me n t ; ( b ) O p e n ma r ke t t h r o u g h s t o c k e x c h a n g e s u s i n g b o o k b u i l d i n g process; And (c) Shareholders holding odd lot shares. T h e c o mp a n y h a s t o d i s c l o s e t h e p r e a n d p o s t - b u y b a c k holdings of the

P r o mo t e r s . T o e n s u r e c o mp l e t i on o f t h e b u y b a c k p r o c e s s speedily, the R e g u l a t i o n s h a ve s t i p u l a t e d T i me l i mi t f o r e a c h s t e p . Fo r e x a mp l e , i n t h e c a s e s o f purchases through S t o c k e x c h a n g e s , a n o f f e r f o r b u y b a c k s h o u l d n o t r e ma i n o p e n f o r mo r e Than 30 days. The verification of shares received in buy back has to be C o mp l e t e d w i t h i n 1 5 d a y s o f t h e c l o s u r e o f t h e o f f e r . T h e p a y me n t s f o r A c c e p t e d s e c u r i t i e s h a s t o b e ma d e w i t h i n 7 d a y s o f t h e c o mp l e t i o n o f Verification and bought back shares have to be extinguished and P h y s i c a l l y d e s t r o y e d w i t h i n 7 d a y s o f t h e d a t e o f t h e p a y me n t . Further, t h e c o mp a n y ma ki n g a n o f f e r f o r b u y b a c k w i l l h a v e t o o p e n a n e s c r ow a c c o u n t o n t h e s a me l i n e s a s p r o v i d e d i n t a ke o v e r r e g u l a t i o n s . C i r c u i t B r e a ke r s : Vo l a t i l i t y i n s t o c k p r i c e s i s a c a u s e o f concern F o r b o t h t h e p o l i c y ma ke r s a n d t h e i n v e s t o r s . T o c u r b excessive V o l a t i l i t y , S E B I h a s p r e s c r i b e d a s y s t e m o f c i r c u i t b r e a ke r s . The

C i r c u i t b r e a ke r s b r i n g a b o u t a n a t i o n - w i d e c o o r d i n a t e d h a l t i n trading on A l l t h e e q u i t y a n d e q u i t y d e r i v a t i v e s ma r ke t s . An i n d e x b a s e d ma r ke t W i d e c i r c u i t b r e a ke r s y s t e m a p p l i e s a t t h r e e s t a g e s o f t h e index Mo v e me n t e i t h e r w ay a t 1 0 %, 1 5 % a n d 2 0 %. T h e b r e a ke r s a r e triggered B y mo v e me n t o f e i t h e r S & P C NX Ni f t y o r S e n s e x , w h i c h e v e r i s breached e a r l i e r . Fu r t h e r , t h e NS E v i e w s e n t r i e s o f n o n - g e n u i n e o r d e r s with U t mo s t s e r i o u s n e s s a s t h i s h a s ma r ke t -w i d e r e p e r c u s s i o n . I t ma y s u o Mo t o c a n c e l t h e o r d e r s i n t h e a b s e n c e o f a n y i mme d i a t e c o n f i r ma t i o n F r o m t h e me m b e r s t h a t t h e s e o r d e r s a r e g e n u i n e o r f o r a n y other reason A s i t ma y d e e m f i t . As a n a d d i t i o n a l me a s u r e o f s a f e t y , individual scripWise price bands have been fixed as below: Daily price bands of 2% (either way) on a set of specified Securities, Daily price bands of 5% (either way) on a set of specified Securities, D a i l y p r i c e b a n d s o f 1 0 % ( e i t h e r w ay ) o n a n o t h e r s e t o f specified

Securities, P r i c e b a n d s o f 2 0 % ( e i t h e r w a y) o n a l l r e ma i n i n g s e c u r i t i e s (Including debentures, warrants, preference sha res etc. which are T r a d e d o n CM s e g me n t o f N S E ) , No price bands are applicable on scripts on which derivative Products are available or on scripts included in indices on which D e r i v a t i v e s p r od u c t s a r e a v a i l ab l e . F o r a u c t i o n ma r ke t t h e p r i c e b an d s o f 2 0 % a r e a p p l i c a b l e . I n order to P r e v e n t me mb e r s f r o m e n t e r i n g o r d e r s a t n o n - g e n u i n e p r i c e s in these Securities, the Exchange has fixed operating range of 20% for such Securities.

D e ma t T r a d i n g : A d e p o s i t o r y h o l d s s e c u r i t i e s i n D e ma t e r i a l i z e d f o r m. I t ma i n t a in s o w n e r s h i p r e c o r d s o f S e c u r i t i e s i n a b o o k e n t r y f o r m, a n d a l s o e f f e c t s t r a n s f e r o f O w n e r s h i p t h r o u g h b o o k e n t r y . T h o u g h , t h e i n ve s t o r s h a v e a right to H o l d s e c u r i t i e s i n e i t h e r p h y s i c a l o r d e ma t f o r m, S E B I h a s ma d e i t

C o mp u l s o r y t h a t t r a d i n g i n s e c u r i t i e s s h o u l d b e o n l y i n d e ma t e r i a l i z e d F o r m. T h i s w a s i n i t i a l l y i n t r o d u c e d f o r i n s t i t u t i o n a l i n v e s t o r s and was L a t e r e x t e n d e d t o a l l i n v e s t o r s . T h e c o mp a n i e s , w h i c h f a i l t o establish C o n n e c t i v i t y w i th b o t h t h e d e p o s i t o r i e s o n t h e s c h e d u l e d d a t e as Announced by SEBI, their securities are traded on the trade for trade S e t t l e me n t w i n do w o f t h e e x c h an g e s . At t h e e n d o f Ma r c h 2004, the N u mb e r o f c o mp a n i e s c o n n e c t e d t o NS DL a n d CD S L w e r e 5 ,2 1 2 a n d 4 ,7 2 0 , r e s p e c t i v e l y . T h e n u mb e r o f d e ma t e r i a l i se d s e c u r i t i e s have I n c r e a s e d f r o m 7 6 .9 b i l l i o n a t t h e e n d o f Ma r c h 2 0 0 3 t o 9 7 .7 billion at T h e e n d o f Ma r c h 2 0 0 4 . Du r i n g t h e s a me p e r i o d t h e v a l u e o f D e ma t e r i a l i z e d s e c u r i t i e s h a v e i n c r e a s e d f r o m Rs . 5 ,8 7 5 b i l l i o n t o Rs . 1 0 ,7 0 1 b i l l i o n . S i n c e t h e i n t r o d u c t i o n o f t h e d e p o s i t o r y s y s t e m, d e ma t e r i a l i z a t i o n h a s p r o g r e s s e d a t a f a s t p a c e a n d h a s g a i n e d A c c e p t a n c e a mo n g s t t h e ma r ke t p a r t i c i p a n t s . Al l a c t i v e l y traded scripts A r e h e l d , t r a d e d a n d s e t t l e d i n d e ma t f o r m. G. Charges for Services.

A s p e r S E B I R e g u l a t i o n s , e v e r y s t o c kb r o ke r , o n t h e b a s i s o f his Total turnover, is required to pay annual turnover charges, Which are to be collected by the stock exchanges? In order to Share the benefits of efficiency; NSE has been reducing the transaction C h a r g e s o v e r a p e r i o d o f t i me . A t p r e s e n t a t r ad i n g me mb e r i s required T o p a y t h e e x c h a n g e t r a n s a c t i o n c h a r g e s @ 0 .0 0 4 % ( Rs . 4 p e r R s .1 l a kh ) Of the turnover. T h e ma x i mu m b r o ke r a g e c h a r g e a b l e b y a b r o ke r i s f i x e d a t 2 .5 % o f t h e C o n t r a c t p r i c e , e x c l u s i v e o f s t a t u t o r y l e v i e s l i ke , S E B I turnover fee, S e r v i c e t a x , a n d s t a mp d u t y . T h is i s i n c l u s i v e o f t h e b r o ke r a g e charged B y t h e s u b - b r o ke r , w h i c h s h o u l d n o t e x c e e d 1 .5 % o f c o n t r a c t price? H o w e v e r , t h e b r o ke r a g e c h a r g e d v a r i e s f r o m c l i e n t s t o c l i e n t s . There are I n s t a n c e s w h e r e i n b r o ke r a g e a s l o w a s 0 .1 5 % h a s b e e n charged. S t a mp d u t i e s a r e p a y a b l e a s p e r t h e r a t e s p r e s c r i b e d b y t h e relevant S t a t e s . I n Ma h a r a s h t r a , i t i s c h a r g e d @ Re . 1 f o r e v e r y Rs . 1 0 ,0 0 0 o r p a r t

T h e r e o f ( i . e . 0 .01 %) o f t h e v a l u e o f s e c u r i t y a t t h e t i me o f i t s P u r c h a s e / s a l e a s t h e c a s e ma y b e . H ow e v e r , i f t h e s e c u r i t i e s are not D e l i v e r e d , i t i s l e v i e d @ 2 0 p a i se f o r e v e r y Rs . 1 0 ,0 0 0 o r p a r t there of ( 0 .0 0 2 %) . T h e d e p o s i t o r i e s p r o v i d e d e p o s i t o r y s e r v i c e s t o investors T h r o u g h d e p o s i t o r y p a r t i c i p a n t s ( D Ps ) . T h e y d o n o t c h a r g e the investors D i r e c t l y , b u t c h a r g e t h e i r DPs w h o a r e f r e e t o h a v e t h e i r o w n free Structure for their clients. The deposi tories, however, have been R e d u c i n g t h e i r c h a r g e s f r o m D Ps o v e r a p e r i o d o f t i me . T h e charges L e v i e d o n D Ps b y N S D L a n d C DS L a r e p r e s e n t e d .

H. Institutional Trades. T r a d e s b y M u t u a l F u n d s a n d Fo r e i g n I n s t i t u t i o n a l I n v e s t o r s are T e r me d a s I n s t i t u t i o n a l t r a d e s , T r a n s a c t i o n s b y M Fs i n t h e S e c o n d a r y ma r ke t a r e g o v e r n e d b y S E B I ( M u t u al F u n d s ) R e g u l a t i o n s , 1 9 96 . A M F u n d e r a l l i t s s c h e me s i s n o t a l l o w e d t o ow n

Mo r e t h a n 1 0 % o f a n y c o mp a n y s p a i d - u p c a p i t a l . T h e y a r e a l l ow e d t o Do only delivery-based transactions. A MF cannot invest mo r e t h a n 1 0 % o f t h e N AV o f a p a r t i c u l a r s c h e me i n t h e e q u i t y s h a r e s o r equity R e l a t e d i n s t r u me n t s o f a s i n g l e c o mp a n y . T h e i n v e s t me n t s b y FIIs are Governed by the rules and regulations of the RBI and the S E B I . As p e r T h e R B I g u i d e l i n e s , e a c h FI I c a n i n v e s t u p t o 1 0 % o f t h e p a i d up capital O f a c o mp a n y ; h o w e v e r , t h e t o t a l FI I i n v e s t me n t s h o u l d n o t exceed 24%. T h i s c a n , h o w e ve r , b e i n c r e a s e d u p t o t h e s e c t o r a l cap/statutory ceiling, A s a p p l i c a b l e , p r o v i d e d t h e I n d i a n c o mp a n y s b o a r d o f d i r e c t o r s a n d a ls o I t s g e n e r a l b o d y a p p r o v e i t . As p e r t h e S E B I g u i d e l i n e s , a l l FII T r a n s a c t i o n s a r e t o b e r o u t e d t h r o u g h a r e g i s t e r e d me mb e r o f a R e c o g n i z e d s t o c k e x c h a n g e i n I n d i a . FI I s h a v e t o n e c e s s a r i l y give and T a ke d e l i v e r y o f s e c u r i t i e s s o l d a n d b o u g h t . I. Index Services.

S t o c k i n d e x c o n s i s t s o f a s e t o f s t o c ks t h a t a r e r e p r e s e n t a t i v e of E i t h e r t h e w h o l e ma r ke t o r a s p e c i f i e d s e c t o r . I t h e l p s t o M e a s u r e t h e c h a n g e i n o v e r a l l b e h a v i o r o f t h e ma r ke t s o r S e c t o r o v e r a p e r i o d o f t i me . N S E a n d C RI S I L , i n t e c h n i c a l partnership W i t h S t a n d a r d & Po o r s , h a v e j o i n t l y p r o mo t e d t h e I n d i a Index Services & P r o d u c t s L i mi t e d ( I I S L ) . T h e I I S L p r o v i d e s s t o c k i n d e x services by D e v e l o p i n g a n d ma i n t a i n i n g a n a r r a y o f i n d i c e s f o r s t o c k prices. IISL is The only specialized organization of this type in the country. IISL Ma i n t a i n s a n u mb e r o f e q u i t y i n d i c e s c o mp r i s i n g b r o a d - b a s e d B e n c h ma r k i n d i c e s , s e c t o r a l i n d i c e s a n d c u s t o mi z e d i n d i c e s . T h e mo s t P o p u l a r i n d e x i s t h e S & P CN X Ni f t y , f o l l ow e d b y t h e C N X Nifty Junior, S & P C N X D e f t l y , S & P C N X 5 0 0, C N X Mi d c a p 2 0 0 , S & P C N X Industry Indices (for 73 industries) and CNX IT Index. These indices are Mo n i t o r e d a n d u p d a t e d d y n a mi c a l l y a n d a r e r e v i e w e d regularly. These A r e ma i n t a i n e d p r o f e s s i o n a l l y t o e n s u r e t h a t i t c o n t i n u e s t o b e a

C o n s i s t e n t b e n c h ma r k o f t h e e q u i t y ma r ke t s , w h i c h i n v o l v e s inclusion A n d e x c l u s i o n of s t o c ks i n t h e i n d e x , d a y - t o - d ay t r a c ki n g a n d giving E f f e c t t o c o r p o r a t e a c t i o n s o n i n d i v i d u a l s t o c ks . S & P C N X Nifty is a well Diversified 50 stock indexes accounting for 24 sectors of the e c o n o my . I t A c c o u n t e d f o r 5 6 .9 7 % o f t o t a l ma r ke t c a p i t a l i z a t i o n o f CM s e g me n t o f N S E a s a t e n d - Ma r c h 2 0 0 4 . T h e t o t a l t r a d e d v a l u e o f a l l Ni f t y s t o c ks i s A p p r o x i ma t e l y 7 7 % o f t h e t r a d e d v a l u e o f a l l t h e s t o c ks o n t h e N S E . CN X N i f t y J u n i o r a c c o u n t s f o r 1 1 .6 % o f t h e m a r ke t c a p i t a l i z a t i o n i n NS E . Af t e r C a r r y i n g o u t a n u mb e r o f i t e r a t i o n s , i t w a s f e l t t h a t I n d i a n s t o c k ma r ke t H a d c o mf o r t a b l e l i q u i d i t y a t a r o u n d 5 0 s t o c ks . B e y o n d 5 0 , t h e liquidity L e v e l s b e c a me i n c r e a s i n g l y l ow e r . H e n c e t h e i n d e x s e t s i z e o f 5 0 s t o c ks W a s c h o s e n . T h e s t o c ks i n c l u d e d i n t h e Ni f t y i n d e x a r e selected on the B a s i s o f t h e i r i mp a c t c o s t , l i q u i d i t y a n d ma r ke t c a p i t a l i z a t i o n . T h e c o mp o s i t i o n o f Ni f t y i s r e v i e w e d a t e v e r y q u a r t e r . T h e index is

C a l c u l a t e d a f r e s h e v e r y t i me a t r a d e t a ke s p l a c e i n a n y o f t h e index S t o c k. I t i s c a l c u l a t e d o n - l i n e an d d i s s e mi n a t e d o v e r t r a d i n g t e r mi n a l s A c r o s s t h e c o u n t r y . An n e x u r e 4 - 2 t o 4 - 5 p r e s e n t t h e ma r ke t C a p i t a l i z a t i o n , w e i g h t a g e , b e t a a n d mo n t h l y r e t u r n s o f t h e S&P CNX N i f t y s t o c ks f o r t h e p e r i o d A p r i l 2 0 0 3 - Ma r c h 2 0 0 4 . S & P C N X Nifty was Introduced considering the fact that it would not only be used for R e f l e c t i n g t h e s t o c k ma r ke t b e h a v i o r a c c u r a t e l y , b u t a l s o f o r mo d e r n Applications such as index funds and index derivatives. It has b e c o me T h e mo s t p o p u l a r a n d w i d e l y u s e d s t o c k ma r ke t i n d i c a t o r i n the country. I n d e x f u t u r e s a n d o p t i o n s h a v e b e e n l a u n c h e d b as e d o n S & P C N X Ni f t y I n d e x a n d o n CN X I T I n d e x . Fu t u r e s c o n t r a c t s b a s e d o n S & P C N X Ni f t y Have also been launched at the derivative exchange at Singapore. It is The only Indian index-based derivative product traded on a foreign Exchange. J . Ma r ke t O u t c o me .

T u r n o v e r G r o w t h a n d Di s t r i b u t i o n : T r a d i n g vo l u me s i n t h e E q u i t y s e g me n t s o f t h e s t o c k e x c h a n g e s h a v e w i tn e s s e d P h e n o me n a l g r ow t h o v e r t h e l a st f ew y e a r s . W h i l e i t h a s I n c r e a s e d f r o m R s . 1 0 ,2 3 3 ,8 2 0 mi l l i o n i n 1 9 9 8 - 9 9 t o Rs . 2 8 ,8 0 9 ,9 0 0 M i l l i o n i n 2 0 0 0 - 0 1 , i t w i t n e s s e d a s l u mp d u r i n g 2 0 0 1 - 0 2 registering V o l u me s o f o n l y Rs . 8 ,9 5 8 ,1 8 0 mi l l i o n . T h e t r a i t s o f r e c o v e r y in the Ma r ke t s a r e v i s i b l y s e e n f o r t h e l a s t t w o y e a r s . T h e v o l u me s have risen to R s . 9 ,6 8 9 ,0 9 3 mi l l i o n i n 2 0 0 2 - 0 3 a n d f u r t h e r t o Rs . 1 6 ,2 0 4 ,9 7 7 mi l l i o n i n 2 0 0 3 - 0 4 . i n p e r c e n t a g e t e r ms t h e r e h a s b e e n a g r o w t h o f 6 7 .2 9 % i n 2 0 0 3 - 0 4 o v e r t h e p r e v i o u s y e a r s v o l u me t h e mo n t h l y t r a d i n g v a l u e o f t h e C M s e g me n t O n NS E i n c r e a se d f r o m Rs . 4 8 9 ,7 1 3 mi l l i o n i n Ap r i l 2 0 0 3 t o Rs. 1 ,0 4 8 ,7 6 5 mi l l i o n i n Ma r c h 2 0 0 4 t h e d a i l y t u r n o v e r o n NS E a v e r a g e d a r o u n d Rs . 4 3 ,2 8 9 mi l l i o n i n t h i s y e a r . Mo s t o f t h e exchanges S a w l a r g e s c a l e d e c l i n e s i n t h e i r t r a d i n g v o l u me s i n t h e y e a r 2003-04 W i t h n i n e e x c h a n g e s v i z ., Ca l c u t t a , U t t a r Pr a d e s h , A h me d a b a d , De l h i ,

P u n e , I CS E , H y d e r a b a d , Va d o d a r a a n d Ma g a d h o b s e r v i n g t h e highest d e c l i n e . Fi v e e xc h a n g e s v i z . , N S E , B S E , B a n g a l or e , Ma d r a s a n d O T CE I W e r e t h e o n l y o n e s s h ow i n g g r o w t h t r e n d s i n t h i s p e r i o d . NS E C o n s o l i d a t e d i t s p o s i t i o n f u r t h e r a s t h e ma r ke t l e a d e r b y contributing A b o u t 6 7 .8 % o f t h e t o t a l t u r n o ve r . S i n c e i t s i n c e p t i o n i n 1994, NSE has E me r g e d a s t h e f a v o r e d e x c h a n ge a mo n g t r a d i n g me mb e r s . The c o n s i s t e n t i n c r e a s e i n p o p u l a r i t y o f N S E i s c l e ar l y e v i d e n t f r o m An n e x u r e 4 - 6 , w h i c h p r e s e n t s b u s i n e s s g r o w t h o f CM s e g me n t o f N S E . N S E n ow reports higher turnover f r o m i t s t r a d i n g t e r mi n a l s i n mo s t o f t h e c i t i e s t h a n t h e i r corresponding r e g i o n a l e x c h a n g e s . T h e c o mp a r a t i v e p i c t u r e o f t u r n o v e r o f regional s t o c k e x c h a n g e s a n d t u r n o v e r o f N S E t e r mi n a l s a t d i f f e r e n t cities is p r e s e n t e d i n T ab l e 4 - 7 . No t o n l y i n t h e n a t i o n a l a r e n a , b u t also in the i n t e r n a t i o n a l ma r ke t s , N S E h a s b e e n s u c c e s s f u l i n c r e a t i n g a niche for

i t s e l f . Ac c o r d i n g t o r e p o r t s o f FI B V , i n t h e c a l e n d a r y e a r 2 0 0 3 , i n t e r ms o f t r a d i n g i n t e n s i t y N S E r a n ke d 3 r d n e x t o n l y t o N AS D AQ a n d NYSE. E N D O F CH A PT E R I I I