Chapter-1

LUDHIANA
STOCK
EXCHANGE
STOCK EXCHANGE
INTRODUCTION
STOCK EXCHANGE is a platform where buyers an sellers of se!urities issue
by Go"ernment# finan!ial institutions# an !orporate houses et!$ meet an where
the train% of these !orporate se!urities ta&es pla!e$ The se!urities# whi!h are
trae in the sto!& e'!han%e# are shares# ebentures of publi! limite !ompanies#
port trusts# utility unerta&in%s# an su!h other authorities$ The se!urities !ontra!ts
(re%ulations) a!t# *+,- efines sto!& e'!han%e as. AN ASSOC/AT/ON#
O0GAN/SAT/ON O0 1O23 O4 /N2/5/26A7S# 8HETHE0 /NCO09O0ATE
O0 ASS/ST/NG# 0EG67AT/NG AN2 CONT0O77/NG 16S/NESS /N
163/NG# SE77/NG AN2 2EA7/NG /N SEC60/T/ES$
A sto!& e'!han%e is a platform for the trae of alreay issue se!urities throu%h
primary mar&et$ /t is the essential pillar of the pri"ate se!tor an !orporate
e!onomy$ /t is the open au!tion mar&et where buyers an sellers meet an in"ol"e
a !ompetiti"e pri!e for the se!urities$
Sin!e buyin% an sellin% of ifferent types of se!urities ta&e pla!e in sto!&
e'!han%e# the pri!e of parti!ular se!urities refle!ts their eman an supply$ /n
fa!t# sto!& e'!han%e is sai to be barometer of e!onomi! an finan!ial health$ :ust
li&e reain% on a barometer refle!t the atmospheri! pressure an !han%es# sto!&
mar&et ;uotations of se!urities pri!es %i"e an iea about the e!onomi! an
inustrial !onitions$ /t measures of all the pull an pressure of se!urities in the
mar&et$ The trae in mar&et is throu%h the authori<e members who ha"e uly
re%istere with !on!erne sto!& e'!han%e an SE1/$
/t refle!ts hopes# aspiration an fears of people re%arin% the performan!e of the
e!onomy$ /t e'erts a powerful an si%nifi!ant influen!e as a epressant or stimulant
of business a!ti"ity$
HISTORY
OF
STOCK
EXCHANGE
The train% of se!urities in /nia was starte in early *+=>$ The only sto!&
e'!han%e operatin% in the *+th !entury were those of 1ombay set up in *?=, an
in Ahmeaba# set up in *?+@$ These were or%ani<e as "oluntary nonAprofit
ma&in% asso!iations of bro&ers to re%ulate an prote!t their interests$ 1efore the
!ontrol on se!urities train% be!ame a !entral subBe!t uner tC !onstitution in *+,D$
/t was a state subBe!t an 1ombay se!urities !ontra!t (!ontrol) a!t of *+E, use to
re%ulate train% in se!urities$ 6ner this a!t# 1ombay sto!& e'!han%e was
re!o%ni<e in *+E= an Ahmeaba sto!& e'!han%e were or%ani<e at 1ombay#
Ahmeaba an other !enters but they were not re!o%ni<e soon after it be!ame a
!entral subBe!t# !entral le%islation was propose an a !ommittee heae by Sh$
A$2$GO08A7A went into bill for se!urity re%ulation$ On the basis se!urities
!ontra!t a!t be!ame law in *+,-$
At present there were E> re!o%ni<e sto!& e'!han%es in /nia$ 4rom these 1SE F
NSE are the two maBor sto!& e'!han%es an rest E* are the re%ional sto!&
e'!han%es$ 2aily turno"er of all the sto!& e'!han%e is app$ ED#DDD!r$ 1SE is *>*
years ol$ NSE is *> years ol an it brou%ht the s!reen base train% system in
/nia$
FEATURES OF STOCK EXCHANGES
Sto!& e'!han%es ha"e been an asso!iation of ini"iual members !alle
member bro&er$
Sto!& e'!han%es are forme for the e'press purpose of re%ulatin% an
fa!ilitatin% the buyin% an sellin% of se!urities by an institution at lar%e$
Sto!& e'!han%e operate with ue re!o%nition from the %o"t$ uner se!urities
an !ontra!t re%ulation a!t *+,-$
The member bro&ers are milemen who transa!t on behalf of publi! for
!ommission$
1oar of ire!torGs limit %i"en by SE1/$
SE1/ has been set to o"ersee the orerly e"elopment of sto!& e'!han%e$
Sto!& e'!han%e lists the !ompanies who wish to raise the funs of !apital
from publi!$
Sto!& e'!han%e fa!ilitates train% in se!urities of the publi! se!tor
!ompanies as well as %o"t$ se!urities$
The re!o%nition a!!ore to a sto!& e'!han%e is "ali for perio +f fi"e
years subBe!t to satisfa!tory performan!e of sto!& e'!han%e urin% this
perio$
There are mainly three parti!ipants in sto!& e'!han%e i$e$
/ssuer of se!urity (!ompany)$
/n"estor of se!urity (/ni"iual# H64)$
/ntermeiaries an prou!ts (bro&er# mer!hant ban&ers an shares# bons#
warrants# eri"ati"es prou!ts et!$)$
FUNCTIONS OF STOCK EXCHANGE
Sto!& E'!han%e performs the followin% fun!tions.
The sto!& e'!han%e pro"ies appropriate !onitions where by pur!hase an
sale of se!urities ta&es pla!e at reasonable an fair pri!es$
9eople ha"in% surplus funs in"est in the se!urities an these funs use for
inustriali<ation an e!onomi! e"elopment of !ountry that leas to !apital
formation$
The sto!& e'!han%e pro"ies a reay mar&et for the !on"ersion of e'istin%
se!urities into !ash an "i!eA"ersa$
The sto!& e'!han%e a!ts as the !enter of pro"iin% business information
relatin% to enterprise whose se!urities are trae as the liste !ompanies are
to present their finan!ial an other statements to it$
Sto!& e'!han%e prote!ts the interest of the in"estors throu%@ stri!t
enfor!ement of rules an re%ulations with respe!t to ealin%s$ 9unishments
(in!luin% fine# suspension or e"en e'pulsion of membership) may be there
if bro&er ma&e any malpra!ti!e in ealin% with in"estors li&e !har%in% hi%h
!ommissions et!$
Sto!& e'!han%e a!ts as the barometer of the !ountry as it measures all the
pulls an pressures of the se!urities in the mar&et$
The sto!& e'!han%e pro"ies the lin&a%e between the sa"in%s in the
househol se!tor an the in"estment in !orporate e!onomy$
LSE SECURITIES
LIMITED
LSE SECURITIES LIMITED
PROFILE
OBJECTIVES OF THE COMPANY
7SE Se!urities 7imite is a subsiiary of the 7uhiana Sto!& E'!han%e#
whi!h was forme with an obBe!ti"e to enhan!e business an in"estment
opportunities for the in"estors an members of 7uhiana Sto!& E'!han%e at lar%e#
throu%h inno"ati"e prou!ts by en!ompassin% a "ariety of a!ti"ities relate to the
!apital mar&et$ The Company has a pai Aup !apital of 0s$,$,, !rores$
INTRODUCTION OF THE LSE SECURITIES LTD.
7SE Se!urities 7t$# was in!orporate in :anuary# EDDD with a "iew to re"i"e
the !apital mar&et in the re%ion an for ta&in% full a"anta%e of the emer%in%
opportunities bein% pro"ie by e'pansion of bi%%er sto!& e'!han%es li&e NSE an
SSE$ The !ompany sin!e its in!eption has mar!he forwar rapily an a!hie"e
many milestones in a short span of its e'isten!e$
DETAILS OF DIRECTORS OF LSE SECURITIES LIMITED
Sr.No. Name Des!"a#o" Da#e o$ A%%o"#me"#
*$ Hr$ 5ishal Goomber Chairman E@$D+$ED**
E$ Hr$ Krishan Kant 9uri 5i!eAChairman *,$D+$ED*E
>$ Hr$ 7alit Kishore HemberA2ire!tor E@$D+$ED**
@$ Hr$ Su&hBiwan 0ai HemberA2ire!tor E@$D+$ED**
,$ Hr$ Naresh Sareen HemberA2ire!tor *,$D+$ED*E
-$ Hr$ ABay Chauhary
9ubli! 0epresentati"e
2ire!torA
E@$D+$ED**
=$ Hr$ Ashish A%%arwal
9ubli! 0epresentati"e
2ire!torA
E@$D+$ED**
?$ Hr$ 1ir 9al Sin%h
9ubli! 0epresentati"e
2ire!torA
*@$DE$EDD+
+$ 2r$ 0a&esh K$ Gupta
9ubli! 0epresentati"e
2ire!torA
E@$D+$ED**
*D$ Hr$ 5inesh Kumar
9ubli! 0epresentati"e
2ire!torA
E@$D+$ED**
**$ Hrs$ 9ooBa H$ Kohli 7SEA0epresentati"e 2ire!tor*@$DE$EDD+
Chapter-2
OBJECTIES
OBJECTIVES
To %et a basi! unerstanin% of the prou!ts# players an fun!tionin% of
finan!ial mar&ets# parti!ularly the !apital mar&et$
To unerstan the "arious prou!ts# parti!ipants an the fun!tions of the
se!urities mar&et$
To &now the re%ulatory framewor& for the /nian se!urities mar&et$
To unerstan the !on!ept of mutual funs$
To &now about the roles of ifferent players "i<$# !ustoians# asset
mana%ement !ompanies# sponsor et!$ in the mutual fun inustry$
To learn about the ta' an re%ulatory issues relate to mutual funs$
To unerstan the !on!ept of eri"ati"e$
To learn the types of eri"ati"e prou!ts an their appli!ation$
To learn about the the train% of eri"ati"es on the sto!& e'!han%es$
To unerstan the !apital mar&et train% operations$
To learn the other important re%ulatory aspe!ts$
To learn the basi!s of the eri"ati"es mar&et
To unerstan the use of eri"ati"e prou!ts in spe!ulatin%# he%in% an
arbitra%in%
To learn the train%# !learin%# settlement an ris& mana%ement in e;uity
eri"ati"es
To ha"e a pra!ti!al orientation towars the prin!iples of in"estment# pri!in%
an "aluation$
To learn the "arious methoolo%ies of finan!ial analysis$
Chapter-!
CA"ITAL
MARKET
DEFINATION OF CAPITAL MARKET
The mar&et where in"estment instruments li&e bons# e;uities an
mort%a%es are trae is &nown as the !apital mar&et$
The primal role of this mar&et is to ma&e in"estment from in"estors who
ha"e surplus funs to the ones who are runnin% a efi!it
INTRODUCTION TO CAPITAL MARKET
Har&ets e'ist to fa!ilitate the pur!hase an sale of %oos an ser"i!es$ The
finan!ial mar&et e'ists to fa!ilitate sale an pur!hase of finan!ial instruments an
!omprises of two maBor mar&ets# namely the !apital mar&et an the money mar&et$
The istin!tion between !apital mar&et an money mar&et is that !apital mar&et
mainly eals in meium an lon%Aterm in"estments (maturity more than a year)
while the money mar&et eals in short term in"estments (maturity upto a year)$
The !apital mar&et is the mar&et for se!urities# where Companies an %o"ernments
!an raise lon%Aterm funs$ /t is a mar&etin% whi!h money is lent for perios lon%er
than a
year$ A nationGs !apital mar&et in!lues su!h finan!ial institutions as ban&s#
insuran!e !ompanies# an sto!& e'!han%es that !hannel lon%Aterm in"estment
funs to !ommer!ial an inustrial borrowers$ 6nli&e the money mar&et# on whi!h
lenin% is orinarily short term# the !apital mar&et typi!ally finan!es fi'e
in"estments li&e those in builin%s an ma!hinery$
A&'a"#a!es o$ (o"& mar)e#
/t is !onsiere a wise mo"e to in"est in bons as part of a !onsiere
i"ersifie in"estment portfolio that also !onsists of sto!&s an !ash$
They are !onsiere to be a relati"ely safe in"estment for in!reasin%
!apital an re!ei"in% a reliable interest in!ome$ The prin!ipal an
interest are set at the time the bon is pur!hase$ /f the owner !olle!ts
the !oupon an hols it to maturity# the mar&et is irrele"ant to final
payout$ As a lon%Aterm in"estment# bons may be !onsiere a wise
!hoi!eIbearin% in min the isa"anta%es$
Dsa&'a"#a!es o$ (o"& mar)e#
1ons are not a"isable for shortAterm sa"in%s for the ini"iual
parti!ipant in the mar&et$
7on%Aterm !ommitment is essential as the parti!ipant who !ashes in
before maturity is open to the ris& of flu!tuations in interest rates$
8hene"er there is an in!rease in interest rates# there is a !orresponin%
e!rease in the "alue of e'istin% bons$ Con"ersely# a e!rease in
CAPIT
AL
MARK
DEBT
0R
BOND MARKET
STOCK
MARKET
interest rates will !orrespon to a rise in the "alue of e'istin% bons$
This is ue to the fa!t that new issues pay out a lower yiel$ The basi!
!on!ept of bon mar&et "olatility is that the "alue of bons an !han%es
in interest rates run in"ersely to ea!h other$
8hen interest rates rop# in"estors ha"e to rein"est their interest
in!ome an return of prin!ipal at lower rates$
The final pur!hasin% power of an in"estment in bons is reu!e by a
!orresponin% in!rease in inflation# whi!h also results in hi%her interest
rates an !orresponin%ly lower bon pri!es$
/f there is a e!line in the bon mar&et as a whole# ini"iual se!urities
also fall in "alue$
Timin% is !ru!ial. a se!urity may in the future une'pe!tely
unerperform relati"e to the mar&et$
A bon may perform poorly after pur!hase# or it may impro"e after you
sell it$
Corporate bons ha"e relati"ely low li;uiity !ompare with
%o"ernment bons# whi!h usually ha"e a short lo!&Ain perio (i$e$ they
!an be !ashe in ;ui!&ly)$
T*e ma+or re$orms " #*e (o"& mar)e# " I"&a
The system of au!tion introu!e to sell the %o"ernment se!urities$
The introu!tion of eli"ery "ersus payment (2"9) system by the
0eser"e 1an& of /nia to nullify the ris& of settlement in se!urities
an assure the smooth fun!tionin% of the se!urities eli"ery an
payment$
The !omputeri<ation of the SG7$
The laun!h of inno"ati"e prou!ts su!h as !apital ine'e bons
an <ero !oupon bons to attra!t more an more in"estors from the
wier spe!trum of the popula!e$
Sophisti!ation of the mar&ets for bons su!h as inflation ine'e
bons$
The e"elopment of the more an more primary ealers as !reators
of the Go"ernment of /nia bons mar&et$
The establishment of the a powerful re%ulatory system !alle the
trae for trae system by the 0eser"e 1an& of /nia whi!h state
that all eals are to be settle with bons an funs$
A new se%ment !alle the 8holesale 2ebt Har&et (82H) was
establishe at the NSE to report the train% "olume of the
Go"ernment of /nia bons mar&et$
/ssue of a ho! treasury bills by the Go"ernment of /nia as a
funin% instrument was abolishe with the introu!tion of the
8ays An Heans a%reement$
CAPITAL MARKET
The !apital mar&et is the mar&et for se!urities# where Companies an %o"ernments
!an raise lon%Aterm funs$ /t is a mar&et in whi!h money is lent for perios lon%er
than a year$ A nationGs !apital mar&et in!lues su!h finan!ial institutions as ban&s#
insuran!e !ompanies# an sto!& e'!han%es that !hannel lon%Aterm in"estment
funs to !ommer!ial an inustrial borrowers$ 6nli&e the money mar&et# on whi!h
lenin% is orinarily short term# the !apital mar&et typi!ally finan!es fi'e
in"estments li&e those in builin%s an ma!hinery$
Na#,re a"& Co"s##,e"#s-
The !apital mar&et !onsists of number of ini"iuals an institutions (in!luin% the
%o"ernment) that !hannali<e the supply an eman for lon% term !apital an
!laims on !apital$ The sto!& e'!han%e# !ommer!ial ban&s# !oAoperati"e ban&s#
sa"in% ban&s# e"elopment ban&s# insuran!e !ompanies# in"estment trust or
!ompanies# et!$# are important !onstituents of the !apital mar&ets$
The !apital mar&et# li&e the money mar&et# has three important Components#
namely the suppliers of loanable funs# the borrowers an the /ntermeiaries who
eal with the leaers on the one han an the borrowers on the other$
The eman for !apital !omes mostly from a%ri!ulture# inustry# trae the
%o"ernment$ The preominant form of inustrial or%ani<ation e"elope Capital
Har&et be!omes a ne!essary infrastru!ture for fast inustriali<ation$ Capital mar&et
not !on!erne solely with the issue of new !laims on !apital# 1ut also with ealin%
in e'istin% !laims$
ROLE OF CAPITAL MARKET IN INDIA
/t is "ery iffi!ult toay to ima%ine oursel"es the times when there were no ban&s#
sto!& mar&ets# money mar&ets# publi! ebts# times when the fortune of a person
was only measure by the surfa!e of lan owne# by the number of animals one
possesse as well as by the number of wor& hans one !oul use in the wor&in% the
fiel$ E!onomies presente themsel"es in the form of %ol or sil"er %oblets or
Bewels# an usury J the pra!ti!e !onsistin% of the !har%in% of interest on money J
was prohibite both by law an by the Chur!h$
The !apital mar&et toay is a reality met in any moern e!onomy$ /t is a mar&et the
ne!essity of whi!h is un!hallen%eable# an e'tremely ynami! an inno"ati"e
stru!ture# permanently aaptin% to the e!onomi! en"ironment an at the same time
an influential fa!tor of it# %eneratin% opportunities an to the same e'tent ris& for
all !ate%ories of parti!ipants to the e!onomi! a!ti"ity# bein% a repli!a of a national
e!onomy to a small s!ale# but ne"ertheless espe!ially representati"e$
Tributary to the !onitions in whi!h it was forme an e"elope# the !apital
mar&et brin%s to%ether uner this synta%ma ifferent !on!eptions$ The !ontinentalA
European !on!eption attributes to this mar&et a more !omprisin% stru!ture#
!ontainin% the monetary mar&et# the mort%a%e mar&et an the finan!ial mar&et$ /n
the An%loASa'on !on!eption# whi!h the e!onomi! pra!ti!e has also aopte in our
!ountry# the !apital mar&et is a !omponent of the finan!ial mar&et to%ether with the
monetary mar&et an the insuran!e mar&et$
FACTORS AFFECTING CAPITAL MARKET IN
INDIA
The !apital mar&et is affe!te by a ran%e of fa!tors $ Some of the fa!tors whi!h
influen!e !apital mar&et are as follows.A
a. Per$orma"/e o$ &omes#/ /om%a"es-0
The performan!e of the !ompanies or rather !orporate earnin%s is one of the
fa!tors whi!h has ire!t impa!t or effe!t on !apital mar&et in a !ountry$ 8ea&
!orporate earnin%s ini!ate that the eman for %oos an ser"i!es in the e!onomy
is less ue to slow %rowth in per !apita in!ome of people$ 1e!ause of slow %rowth
in eman there is slow %rowth in employment whi!h means slow %rowth in
eman in the near future$ Thus wea& !orporate earnin%s ini!ate a"era%e or not so
%oo prospe!ts for the e!onomy as a whole in the near term$ /n su!h a s!enario the
in"estors ( both omesti! as well as forei%n ) woul be wary to in"est in the
!apital mar&et an thus there is bear mar&et li&e situation$ The opposite !ase of it
woul be robust !orporate earnin%s an itKs positi"e impa!t on the !apital mar&et$
The !orporate earnin%s for the April J :une ;uarter for the !urrent fis!al has
been %oo$ The !ompanies li&e TCS# /nfosys#Haruti Su<u&i# 1harti Airtel# ACC#
/TC# 8ipro#H24C#1inani !ement# /2EA# Hari!o Canara 1an&# 9iramal Health#
/nia !ements # 6ltra Te!h# 7FT# Co!aA Cola# 3es 1an&# 2r$ 0eyKs 7aboratories#
Oriental 1an& of Commer!e# 0anba'y# 4ortis# Shree Cement #et! ha"e re%istere
%rowth in net profit !ompare to the !orresponin% ;uarter a year a%o$ Thus we
see !ompanies from /nfrastru!ture se!tor# 4inan!ial Ser"i!es# 9harma!euti!al
se!tor# /T Se!tor# Automobile se!tor# et!$ oin% well $ This a!ross the se!tor %rowth
ini!ates that the /nian e!onomy is on the path of re!o"ery whi!h has been
positi"ely refle!te in the sto!& mar&et( rise in sense' F nifty) in the last two
wee&s$
(. E"'ro"me"#a1 Fa/#ors -0
En"ironmental 4a!tor in /niaKs !onte't primarily meansA Honsoon $ /n /nia
aroun -D L of a%ri!ultural prou!tion is epenent on monsoon$ Thus there is
hea"y epenen!e on monsoon$ The maBor !hun& of a%ri!ultural prou!tion !omes
from the states of 9unBab # Haryana F 6ttar 9raesh$ Thus efi!ient or elaye
monsoon in this part of the !ountry woul ire!tly affe!t the a%ri!ultural output in
the !ountry$ Apart from monsoon other natural !alamities li&e 4loos# tsunami#
rou%ht# earth;ua&e# et!$ also ha"e an impa!t on the !apital mar&et of a !ountry$
The /nian Het 2epartment (/H2) state that /nia woul re!ei"e only +> L
rainfall of 7on% 9erio A"era%e (79A)$ This pie!e of news ire!tly ha an impa!t
on /nian !apital mar&et with 1SE Sense' fallin% by D$, L$ The maBor losers were
automa&ers an !onsumer %oos firms sin!e the below normal monsoon fore!ast
tri%%ere !on!erns that eman in the !ru!ial rural heartlan woul ta&e a hit$
This is be!ause a efi!ient monsoon !oul seriously s;uee<e rural in!omes# reu!e
the eman for e"erythin% from motorbi&es to soaps an worsen a slowin%
e!onomy$
/. Ma/ro E/o"om/ N,m(ers -0
The ma!ro e!onomi! numbers also influen!e the !apital mar&et$ /t in!lues /ne'
of /nustrial 9rou!tion (//9) whi!h is release e"ery month# annual /nflation
number ini!ate by 8holesale 9ri!e /ne' (89/) whi!h is release e"ery wee&#
E'port J /mport numbers whi!h are e!lare e"ery month# Core /nustries %rowth
rate ( /t in!lues Si' Core infrastru!ture inustries J Coal# Crue oil# refinin%#
power# !ement an finishe steel) whi!h !omes out e"ery month# et!$ This ma!ro J
e!onomi! ini!ators ini!ate the state of the e!onomy an the ire!tion in whi!h
the e!onomy is heae an therefore impa!ts the !apital mar&et in /nia$
A !ase in the point was e!laration of !ore inustries %rowth fi%ure$ The si' Core
/nfrastru!ture /nustries J Coal# Crue oil# refinin%# finishe steel# power F !ement
J%rew -$,L in :une # the fi%ure !ame on the E> r of :uly an ha a positi"e
impa!t on the !apital mar&et with the sense' an nifty risin% by >?? points F
*E, points respe!ti"ely$
&. G1o(a1 C,es -0
/n this worl of %lobalisation "arious e!onomies are interepenent an
inter!onne!te$ An e"ent in one part of the worl is boun to affe!t other parts of
the worl # howe"er the ma%nitue an intensity of impa!t woul "ary$
Thus !apital mar&et in /nia is also affe!te by e"elopments in other parts of the
worl i$e$ 6$S$# Europe# :apan # et!$
Global !ues in!lues !orporate earnin%s of HNCKs# !onsumer !onfien!e ine' in
e"elope !ountries# Bobless !laims in e"elope !ountries# %lobal %rowth outloo&
%i"en by "arious a%en!ies li&e /H4# e!onomi! %rowth of maBor e!onomies# pri!e of
!rue Joil# !reit ratin% of "arious e!onomies %i"en by HooyKs# S F 9# et!$
An ob"ious e'ample at this point in time woul be that of subprime !risis F
re!ession $ 0e!ession starte in 6$S$ an some parts of the Europe in early
EDD? $Sin!e then it has impa!te all the !ountries of the worlA e"elope#
e"elopin% # lessA e"elope an e"en emer%in% e!onomies$
e. Po1#/a1 s#a(1#2 a"& !o'er"me"# %o1/es-0
4or any e!onomy to a!hie"e an sustain %rowth it has to ha"e politi!al stability
an proA %rowth %o"ernment poli!ies$ This is be!ause when there is politi!al
stability there is stability an !onsisten!y in %o"ernmentKs attitue whi!h is
!ommuni!ate throu%h "arious %o"ernment poli!ies$ The "i!eA "ersa is the !ase
when there is no politi!al stability $So !apital mar&et also rea!ts to the nature of
%o"ernment # attitue of %o"ernment# an "arious poli!ies of the %o"ernment$
The abo"e statement !an be substantiate by the fa!t the when the manate !ame
in 69A %o"ernmentKs fa"our ( 8ithout the ba%%a%e of left party) on Hay *- EDD+#
the sto!& mar&ets on Honay # *?
th
Hay ha a bullish rally with sense' !losin%
?DD point hi%her o"er the pre"ious ayKs !lose$ The reason was politi!al stability$
Also without the ba%%a%e of left party %o"ernment !an %o ahea with reforms$
$. Gro3#* %ros%e/#,s o$ a" e/o"om2-0
8hen the national in!ome of the !ountry in!reases an per !apita in!ome of
people in!reases it is sai that the e!onomy is %rowin% $ Hi%her in!ome also means
hi%her e'peniture an hi%her sa"in%s$This au%urs well for the e!onomy as hi%her
e'peniture means hi%her eman an hi%her sa"in%s means hi%her in"estment$
Thus when an e!onomy is %rowin% at a %oo pa!e !apital mar&et of the !ountry
attra!ts more money from in"estors# both from within an outsie the !ountry an
"i!e A"ersa$ So we !an say that %rowth prospe!ts of an e!onomy oes ha"e an
impa!t on !apital mar&ets$
!. I"'es#or Se"#me"# a"& rs) a%%e##e -0
Another fa!tor whi!h influen!es !apital mar&et is in"estor sentiment an their ris&
appetite$ E"en if the in"estors ha"e the money to in"est but if they are not
!onfient about the returns from their in"estment # they may stay away from
in"estment for some time$ At the same time if the in"estors ha"e low ris&
appetite # whi!h they were ha"in% in %lobal an /nian !apital mar&et some four
to fi"e months ba!& ue to %lobal finan!ial meltown an re!essionary situation in
6$S$ F some parts of Europe # they may stay away from in"estment an wait for
the ri%ht time to !ome$
I"&a" Ca%#a1 Mar)e#
4*2 Ca%#a1 Mar)e#s E5s#
M Capital mar&ets fa!ilitate the transfer of !apital (i.e. finan!ial) assets from one
owner to another$
M They pro"ie li;uiity$
J 7i;uiity refers to how easily an asset !an be transferre without loss of
"alue$
M A sie benefit of !apital mar&ets is that the transa!tion pri!e pro"ies a measure of
the "alue of the asset$
Ro1e o$ Ca%#a1 Mar)e#s
M Hobili<ation of Sa"in%s F a!!eleration of Capital 4ormation
M 9romotion of /nustrial Growth
M 0aisin% of lon% term Capital
M 0eay F Continuous Har&ets
M 9roper Channelisation of 4uns
M 9ro"ision of a "ariety of Ser"i!es
F,"/#o"s o$ a /a%#a1 mar)e#
M 2isseminate information effi!iently
M Enable ;ui!& "aluation of finan!ial instruments Jboth e;uity an ebt
M 9ro"ie insuran!e a%ainst mar&et ris& or pri!e ris&
M Enable wier parti!ipation
M 9ro"ie operational effi!ien!y throu%h
Asimplifie transa!tion pro!eure
A lowerin% settlement timin%s an
A lowerin% transa!tion !osts
M 2e"elop inte%ration amon%
Areal se!tor an finan!ial se!tor
Ae;uity an ebt instruments
Alon% term an short term funs
A9ri"ate se!tor an %o"ernment se!tor an
A2omesti! funs an e'ternal funs
M 2ire!t the flow of funs into effi!ient !hannels throu%h
Ain"estment
Aisin"estment
Arein"estment
Fa/#ors /o"#r(,#"! #o !ro3#* o$ I"&a" Ca%#a1 Mar)e#
M Establishment of 2e"elopment ban&s F /nustrial finan!ial institution$
M 7e%islati"e measures
M Growin% publi! !onfien!e
M /n!reasin% awareness of in"estment opportunities
M Growth of unerwritin% business
M Settin% up of SE1/
M Hutual 4uns
M Creit 0atin% A%en!ies
I"&a" Ca%#a1 Mar)e# 0 Hs#or/a1 %ers%e/#'e
M Sto!& Har&et was for a pri"ile%e few
M Ar!hai! systems A Out !ry metho
M 7a!& of Transparen!y A Hi%h tones !osts
M No use of Te!hnolo%y
M Outate ban&in% system
M 5olumes A less than 0s$ >DD !r per ay
M No settlement %uarantee me!hanism A Hi%h ris&s
I"&a" Ca%#a1 mar)e#s 6 C*ro"o1o!2
M *++@AE;uity Train% !ommen!es on NSE
M *++,AAll Train% %oes Ele!troni!
M *++-A 2epository !omes in to e'isten!e
M *+++A 4//s 9arti!ipationA Globalisation
M EDDDA o"er ?DL traes in 2emat form
M EDD*A HaBor Sto!&s mo"e to 0ollin% Sett
M EDD>A TNE settlements in all sto!&s
M EDD> A 2emutualisation of E'!han%es
Ca%#a1 Mar)e#s 6 Re$orms
M Ea!h s!am has brou%ht in reforms A *++E O EDD*
M S!reen base Train% throu%h NSE
M Capital ae;ua!y norms stipulate
M 2emateriali<ation of Shares A ris&s of frauulent paper eliminate
M Entry of 4orei%n /n"estors
M /n"estor awareness pro%rams
M 0ollin% settlements
M /nterAa!tion between ban&in% an e'!han%es
CAPITAL MARKET REFORMS IN INDIA
M The *++Ds ha"e witnesse the emer%en!e of the se!urities mar&et as a maBor
sour!e of finan!e for trae an inustry in /nia$
M A %rowin% number of !ompanies ha"e been a!!essin% the se!urities mar&et rather
than epenin% on loans from finan!ial institutions O ban&s$
M The !orporate se!tor is in!reasin%ly epenin% on e'ternal sour!es for meetin% its
funin% re;uirements$
Re$orms 7 I"#a#'es %os# 8999
M Corporatisation of e'!han%e memberships
M 1annin% of 1ala O A71H
M /ntrou!tion of 2eri"ati"e prou!ts A /ne' O Sto!& 4utures F Options
M 0eformsOChan%es in the mar%inin% system
M ST9 A ele!troni! !ontra!ts
M Har%in 7enin%
M Se!urities 7enin%
Prmar2 Mar)e#
M Har&et for new issuesOfresh !apital (/9OKs)
M New issues m&t$
M 9arti!ipants
issuer
in"estors
intermeiaries
Chapter-#
INITIAL "UBLIC OFFER
AND FOLLO$ ON
"UBLIC OFFER
"ROCESS
INITIAL PUBLIC OFFERING
An "#a1 %,(1/ o$$er"! (IPO) or s#o/) mar)e# 1a,"/* is a type of publi!
offerin% where shares of sto!& in a !ompany are sol to the %eneral publi!# on
a se!urities e'!han%e# for the first time$ Throu%h this pro!ess# a pri"ate
!ompany transforms into a publi! !ompany$ /nitial publi! offerin%s are use by
!ompanies to raise e'pansion !apital# to possibly moneti<e the in"estments of early
pri"ate in"estors# an to be!ome publi!ly trae enterprises$ A !ompany sellin%
shares is ne"er re;uire to repay the !apital to its publi! in"estors$ After the /9O#
when shares trae freely in the open mar&et# money passes between publi!
in"estors$ Althou%h an /9O offers many a"anta%es# there are also si%nifi!ant
isa"anta%es$ Chief amon% these are the !osts asso!iate with the pro!ess# an the
re;uirement to is!lose !ertain information that !oul pro"e helpful to !ompetitors#
or !reate iffi!ulties with "enors$ 2etails of the propose offerin% are is!lose to
potential pur!hasers in the form of a len%thy o!ument &nown as a prospe!tus$
Host !ompanies unerta&in% an /9O o so with the assistan!e of anin"estment
ban&in% firm a!tin% in the !apa!ity of an unerwriter$ 6nerwriters pro"ie a
"aluable ser"i!e# whi!h in!lues help with !orre!tly assessin% the "alue of shares
(share pri!e)# an establishin% a publi! mar&et for shares (initial sale)$ Alternati"e
methos su!h as the ut!h au!tion ha"e also been e'plore$ /n terms of si<e an
publi! parti!ipation# the most notable e'ample of this metho is
the Goo%le /9O$ China has re!ently emer%e as a maBor /9O mar&et# with se"eral
of the lar%est /9Os ta&in% pla!e in that !ountry$
/n ED*># o!uments uner seal in an on%oin% lawsuit were obtaine by New York
Times 8all Street 1usiness !olumnist :oe No!era$ The o!uments relate to the
/9O of eToys$!om# urin% the otA!om bubble# an alle%e that &i!&ba!&s were
emane from institutional in"estors who mae lar%e profits flippin% eliberately
uner"alue /9Os unerwritten byin"estment ban&er Golman Sa!hs$ Reuters 8all
Street !orresponent 4eli' Salmon su%%este that both the !ompany %oin% publi!
an their initial shareholers woul be efraue by su!h a pra!ti!e$ The lawsuit is
on%oin%# an the alle%ations remain unpro"en$
REASONS FOR LISTING
8hen a !ompany lists its se!urities on a public exchange# the money pai by the
in"estin% publi! for the newly issue shares %oes ire!tly to the !ompany
(primary offerin%) as well as to any early pri"ate in"estors who opt to sell all
or a portion of their holin%s (se!onary offerin%) as part of the lar%er /9O$
An /9O# therefore# allows a !ompany to tap into a wie pool of potential
in"estors to pro"ie itself with !apital for future %rowth# repayment of ebt#
or wor&in% !apital$ A !ompany sellin% !ommon shares is ne"er re;uire to
repay the !apital to its publi! in"estors$ Those in"estors must enure the
unprei!table nature of the open mar&et to pri!e an trae their shares$ After
the /9O# when shares trae freely in the open mar&et# money passes between
publi! in"estors$ 4or early pri"ate in"estors who !hoose to sell shares as part
of the /9O pro!ess# the /9O represents an opportunity to monetize their
in"estment$ After the /9O# on!e shares trae in the open mar&et# in"estors
holin% lar%e blo!&s of shares !an either sell those shares pie!emeal in the
open mar&et# or sell a lar%e blo!& of shares ire!tly to the publi!# at a fi'e
pri!e# throu%h a secondary market offering$ This type of offerin% is not
iluti"e# sin!e no new shares are bein% !reate$
On!e a !ompany is liste# it is able to issue aitional !ommon shares in a number
of ifferent ways# one of whi!h is the followAon offerin%$ This metho pro"ies
!apital for "arious !orporate purposes throu%h the issuan!e of e;uity (see sto!&
ilution) without in!urrin% any ebt$ This ability to ;ui!&ly raise potentially lar%e
amounts of !apital from the mar&etpla!e is a &ey reason many !ompanies see& to
%o publi!$
An /9O a!!ors se"eral benefits to the pre"iously pri"ate !ompany.
Enlar%in% an i"ersifyin% e;uity base
Enablin% !heaper a!!ess to !apital
/n!reasin% e'posure# presti%e# an publi! ima%e
Attra!tin% an retainin% better mana%ement an employees throu%h li;ui
e;uity parti!ipation
4a!ilitatin% a!;uisitions (potentially in return for shares of sto!&)
Creatin% multiple finan!in% opportunities. e;uity# !on"ertible ebt# !heaper
ban& loans# et!$
Chapter-%
BENCHMARK
INDICES OF INDIA
I"&/es- SENSEX : NIFTY
Sto!& Har&et performan!e is ;uantifie by !al!ulatin% an ine' usin% the
ben!hmar& s!ripKs an as &nown to all SENSEX (Sensiti"e /ne') is asso!iate
with 1ombay Sto!& E'!han%e an SF9 CNX N/4T3 is asso!iate with National
Sto!& E'!han%e
NSE- Na#o"a1 S#o/) E5/*a"!e
The National Sto!& E'!han%e (NSE)# lo!ate in 1ombay# is /niaGs first ebt
mar&et$ /t was set up in *++> to en!oura%e sto!& e'!han%e reform throu%h system
moerni<ation an !ompetition$ /t opene for train% in miA*++@$ /t was re!ently
a!!ore re!o%nition as a sto!& e'!han%e by the 2epartment of Company Affairs$
The instruments trae are# treasury bills# %o"ernment se!urity an bons issue by
publi! se!tor !ompanies
Ori%ins
The National Sto!& E'!han%e of /nia was set up by Go"ernment of
/nia on the re!ommenation of 9herwani Committee in *++*$9romote by
leain% 4inan!ial institutions essentially le by /21/ at the behest of
the Go"ernment of /nia# it was in!orporate in No"ember *++E as a ta'A
payin% !ompany$ /n April *++># it was re!o%ni<e as a sto!& e'!han%e uner
the Se!urities Contra!ts (0e%ulation) A!t# *+,-$ NSE !ommen!e operations
in the 8holesale 2ebt Har&et (82H) se%ment in :une *++@$ The Capital
mar&et (E;uities) se%ment of the NSE !ommen!e operations in No"ember
*++@# while operations in the 2eri"ati"es se%ment !ommen!e in :une EDDD
O(+e/#'es
Establishin% nationwie train% fa!ilities for all types of se!urities$
Ensurin% e;ual a!!ess to in"estors allAo"er the !ountry throu%h an
appropriate !ommuni!ation networ&$
Heetin% international ben!hmar&s an stanars$
Enablin% shorter settlement !y!les an boo& entry settlements$
Pro&,/#s
NSE has laun!he se"eral sto!& ini!es# in!luin%
SF9 CNX Nifty (Stanar F 9oorGs C0/S/7 NSE /ne')
CNX Nifty :unior
CNX *DD (P SF9 CNX Nifty N CNX Nifty :unior)
SF9 CNX ,DD (P CNX *DD N @DD maBor players a!ross =E inustries)
CNX Hi!ap (introu!e on *? :uly EDD, repla!in% CNX Hi!ap EDD)
SF9 CNX Nifty
The SF9 CNX Nifty# also !alle the Nifty ,D or simply the Nifty# is a sto!&
mar&et ine' an ben!hmar& ine' for inian e;uity mar&et$ Nifty is owne
an mana%e by /nia /ne' Ser"i!es an 9rou!ts 7t$ (//S7)# whi!h is a
Boint "enture between NSE an C0/S/7 (Creit 0atin% an /nformation
Ser"i!es of /nia 7t)$ //S7 is /niaGs first spe!iali<e !ompany fo!use
upon the ine' as a !ore prou!t$ //S7 has a mar&etin% an li!ensin%
a%reement with Stanar F 9oorGs for !oAbranin% e;uity ini!es$ GCNXG in
its name stans for GC0/S/7 NSE /ne'G$
SF9 CNX Nifty has shape up as the lar%est sin%le finan!ial prou!t in
/nia# with an e!osystem !omprisin%. e'!han%e trae funs (onshore an
offshore)# e'!han%eAtrae futures an options (at NSE in /nia an
at SGX an CHE abroa)# other ine' funs an OTC eri"ati"es (mostly
offshore)$
Graph of SF9 CNX Nifty from :anuary *++= to Har!h ED**
The SF9 CNX Nifty !o"ers EE se!tors of the /nian e!onomyan offers
in"estment mana%ers e'posure to the /nian mar&et in one portfolio$ The
SF9 CNX Nifty sto!&s represents about -=$E=L of the free float mar&et
!apitali<ation of the sto!&s liste at National Sto!& E'!han%e (NSE) as on
September >D# ED*E$
The SF9 CNX Nifty ine' is a free float mar&et !apitalisation wei%hte
ine'$ The ine' was initially !al!ulate on full mar&et !apitalisation
methoolo%y$ 4rom :une E-# EDD+# the !omputation was !han%e to free
float methoolo%y$ The base perio for the SF9 CNX Nifty ine' is
No"ember ># *++,# whi!h mar&e the !ompletion of one year of operations
of NSEGs Capital Har&et Se%ment$ The base "alue of the ine' has been set
at *DDD# an a base !apital of 0s E$D- trillion$
Q*R
The SF9 CNX Nifty /ne'
was e"elope by ABay Shah an Susan Thomas$
C,rre"/2 o$ Ca1/,1a#o"
4or the SF9 CNX Nifty# all pri!es are in /nian rupees$
Base Da#e
The base perio for the SF9 CNX Nifty ine' is No"ember ># *++,# whi!h
mar&e the !ompletion of one year of operations of NSEGs Capital Har&et
Se%ment$ The base "alue of the ine' has been set at *DDD# an a base
!apital of 0s E$D- trillion$
Par#"ers*%
The SF9 CNX Nifty is owne an mana%e by /nia /ne' Ser"i!es an
9rou!ts 7t$ (//S7)# whi!h is a Boint "enture between the NSE an C0/S/7$
//S7 is /niaKs first spe!iali<e !ompany fo!use on an ine' as a !ore
prou!t$ //S7 has a li!ensin% an mar&etin% a%reement with Stanar F
9oorKs# who is a worl leaer in ine' ser"i!es$
H!*1!*#s
The SF9 CNX Nifty is a ,D sto!&# floatAaBuste mar&etA!apitali<ation
wei%hte ine' for /nia# a!!ountin% for E* i"ersifie se!tors of the
e!onomy$ /t is use for a "ariety of purposes# su!h as ben!hmar&in% fun
portfolios# ine' base eri"ati"es an ine' funs$
The SF9 CNX Nifty is eri"e from e!onomi! resear!h an is !reate for
those intereste in in"estin% an train% in /nian e;uities$
Mar)e# Re%rese"#a#o". : D'ers$/a#o"
Mar)e# Re%rese"#a#o".
The SF9 CNX Nifty sto!&s represent about -,L of the total floatAaBuste
mar&et !apitali<ation of the National Sto!& E'!han%e (NSE)$
D'ers$/a#o".
The SF9 CNX Nifty is a i"ersifie ine'# a!!urately refle!tin% the o"erall
mar&et$ The rewarAtoAris& ratio of SF9 CNX Nifty is hi%her than other
leain% ini!es# offerin% similar returns but at lesser ris&$
L;,&#2.
Har&et impa!t !ost is the best measure of the li;uiity of a sto!&$ /t
a!!urately refle!ts the !osts fa!e when a!tually train% an ine'$ 4or a
sto!& to ;ualify for in!lusion in the SF9 CNX Nifty# it has to reliably ha"e
mar&et impa!t !ost below D$,D L# when oin% SF9 CNX Nifty traes of
0upees (0s) ED million$ The !urrent impa!t !ost of the SF9 CNX Nifty for
a portfolio si<e of 0s ED million is D$*>L$
He&!"! E$$e/#'e"ess
The basi! ris& of the SF9 CNX Nifty futures is lower than other ine'
portfolios# ue to the li;uiity of the SF9 CNX Nifty !onstituent sto!&s an
of the NSE$ /n aition# the SF9 CNX Nifty has hi%her !orrelations with
typi!al in"estment portfolios in /nia# !ompare to other ini!es$ These two
fa!tors allow for effe!ti"e he%in% of the /ne'$
I"&e5 Fam12
S:P CNX De$#2.
The SF9 CNX 2efty is a 6$S$ ollarAenominate ine' base on the SF9
CNX Nifty$ This ine' was e"elope to pro"ie a ben!hmar& of /nian
sto!&s to international in"estors# pro"iin% them with an instrument for
measurin% returns on their e;uity in"estment in ollar terms$ This ensures
that the ris& arisin% out of !urren!y flu!tuation is !o"ere throu%h the SF9
CNX 2efty$
How are the SENSEX >D F N/4T3 ,D Sto!&s are sele!teS
7istin% History
Train% 4re;uen!y
0an& base on the Har&et Cap (Shoul be Amon% top *DD)
Har&et Capitali<ation wei%ht
/nustry O se!tor they belon%
Histori!al 0e!or
4ree 4loat Har&et Capitali<ationSS
The "alue of all the shares a"ailable for publi! train% e'!luin% the promoter
e;uity# holin%s throu%h 42/ 0oute# Holin%s by pri"ate !orporate# an holin%s
by Employee 8elfare 4uns$
8hy 4ree 4low Har&et CapS
*$ /t epi!ts the mar&et more rationally
E$ /t remo"es unue influen!e of %o"ernment or promoter share holin%# there
by %i"in% the e;ual opportunity for !ompanies to be in the N/4T3
>$ Almost all the /ni!es worl o"er are !al!ulate by this methoolo%y
@$ /t %i"es 4un mana%ers more authenti! information for ben!hmar&
!omparisons$
SENSEX : "$#2 Ca1/,1a#o" Me#*o&o1o!2
SENSEX is !al!ulate usin% the C4reeAfloat Har&et Capitali<ationC
methoolo%y# wherein# the le"el of ine' at any point of time refle!ts the
freeAfloat mar&et
/t refle!ts "alue of >D !omponent sto!&s relati"e to a base perio$
The mar&et !apitali<ation of a !ompany is etermine by multiplyin% the
pri!e of its sto!& by the number of shares issue by the !ompany$
This mar&et !apitali<ation is further multiplie by the freeAfloat fa!tor to
etermine the freeAfloat mar&et !apitali<ation$
The base perio of SENSEX is *+=?A=+ an the base "alue is *DD ine'
points$ ( notation *+=?A=+P*DD)$
The !al!ulation of SENSEX in"ol"es i"iin% the freeAfloat mar&et
!apitali<ation of >D !ompanies in the /ne' by a number !alle the /ne'
2i"isor$
The 2i"isor is the only lin& to the ori%inal base perio "alue of the
SENSEX$ /t &eeps the /ne' !omparable o"er time an is the aBustment
point for all /ne' aBustments arisin% out of !orporate a!tions# repla!ement
of s!ripKs et!$
2urin% mar&et hours# pri!es of the ine' s!ripGs# at whi!h latest traes are
e'e!ute# are use by the train% system to !al!ulate SENSEX e"ery *,
se!ons$ The "alue of SENSEX is isseminate in real time$
Ca1/,1a#o"s o$ #*e S:P CNX De$#2
The 6$S$ ollarO0upee e'!han%e rate is base on a realAtime polle
ini!ati"e ata fee# whi!h !ontains biOas& rates at a point in time$ The
polle ata is sour!e from Thomson 0euters$ The ata is polle from
mar&et parti!ipants# in!luin% leain% nationali<e ban&s# pri"ate /nian
ban&s an forei%n e'!han%e bro&ers$ The fre;uen!y of polle ata is more
than >A@ upates per minute# epenin% on mar&et "olatility# totalin% more
than *DDD upates in a ay$ The !losin% "alue of SF9 CNX 2efty is
!ompute base on a simple a"era%e of the 6$S$ ollarO0upee e'!han%e
rates re!ei"e urin% the last half an hour of train% on the National Sto!&
E'!han%e of /nia 7t$ (NSE) an applie to the !losin% "alue of the SF9
CNX Nifty$
I"&e5 C1os,re A1!or#*m
The !losin% SENSEX F N/4T3 on any train% ay is !ompute ta&in% the
wei%hte a"era%e of all the traes on SENSEX F N/4T3 !onstituents in the
last >D minutes of train% session$
/f a SENSEX F N/4T3 !onstituent has not trae in the last >D minutes# the
last trae pri!e is ta&en for !omputation of the /ne' !losure$
/f a SENSEX F N/4T3 !onstituent has not trae at all in a ay# then its last
ayGs !losin% pri!e is ta&en for !omputation of /ne' !losure$
The use of /ne' Closure Al%orithm pre"ents any intentional manipulation
of the !losin% ine' "alue$
NIFTY
The National Sto!& E'!han%e (NSE) is asso!iate with N/4T3 an it is also
!al!ulate by the same methoolo%y but with two &ey ifferen!es$
*$ 1ase year is *++, an base "alue is *DDD$
E$ N/4T3 is !al!ulate base on ,D sto!&s$
E"erythin% else remains the same in N/4T3 /ne' !al!ulation as well$
1enefits of Sto!& E'!han%es to Community
*$ /t assist the e!onomies e"elopment by pro"iin% a boy of intereste
in"estors$
E$ /t uploas the position of superior enterprises an assist them in raisin%
further funs$
>$ /t en!oura%es !apital formation
@$ Go"ernment !an unerta&e proBe!ts of national importan!e an so!ial "alue
raisin% funs throu%h the sale of its se!urities on the sto!& e'!han%e$
,$ /t is the sto!& e'!han%es that !entral ban& of a !ountry !an !ontrol !reit by
unerta&in% open mar&et operations (pur!hase an sale of se!urities)
Be"e$#s #o I"'es#or
*$ 7i;uiity of the in"estment is in!rease
E$ The se!urities ealt on a sto!& e'!han%e are %oo !ollateral se!urity for
loans$
>$ The sto!& e'!han%e safe%uars interests of in"estors throu%h stri!t
enfor!ement of rules an re%ulations$
@$ The present net worth of in"estments !an be easily &nown by the aily
;uotations$
,$ The ris& is !onsierably less when in"estor hols or pur!hases liste
se!urities$
Be"e$#s #o #*e /om%a"2
*$ A !ompany whose shares ;uote on sto!& e'!han%e they enBoy better
reputation an !reit$
E$ The mar&et for the shares of su!h a !ompany is naturally wiene$
>$ The mar&et pri!e of se!urities is li&ely to be hi%her in relation to its
earnin%s# i"iens an property "alues$ This raises the bar%ainin% power of
the !ompany in the e"ent of a ta&eo"er# mer%er or amal%amation$
A&+,s#me"#s $or Bo",s< R!*#s a"& Ne312 Iss,e& Ca%#a1
N/4T3 !al!ulation nees to be aBuste for issue of 1onus or 0i%hts shares#
/f no aBustments are mae# a is!ontinuity woul arise between the !urrent
"alue of the ine' an its pre"ious "alue espite the nonAo!!urren!e of any
e!onomi! a!ti"ity of substan!e
At the NSE /ne' Cell # the base "alue is aBuste# whi!h is use to alter
mar&et !apitali<ation of the !omponent sto!&s to arri"e at the N/4T3 "alue$
A&+,s#me"#s $or R!*#s Iss,es
8hen a !ompany# in!lue in the !ompilation of the ine'# issues ri%ht
shares# the freeAfloat mar&et !apitali<ation of that !ompany is in!rease by
the number of aitional shares issue base on the theoreti!al pri!e$
An offsettin% or proportionate aBustment is then mae to the 1ase Har&et
!apitali<ation (see G1ase Har&et !apitali<ation ABustmentG below)$
A&+,s#me"#s $or Bo",s Iss,e
8hen a !ompany# in!lue in the !ompilation of the ine'# issues bonus
shares# the mar&et !apitali<ation of that !ompany oes not uner%o any
!han%e$ Therefore# there is no !han%e in the 1ase Har&et !apitali<ation# only
the Gnumber of sharesG in the formula is upate$
O#*er Iss,es
1ase Har&et !apitali<ation aBustment is re;uire when new shares are
issue by way of !on"ersion of ebentures# mer%ers# spinAoffs et!$ or when
e;uity is reu!e by way of buyAba!& of shares# !orporate restru!turin% et!$
CHA"TER-%
FINDINGS
FINDINGS
/t has foun that ma'imum people are train% in share mar&et$
/n"estors li&e to in"est money in share mar&e to obtain %oo returns$
Host of them are ris& a"ersi"e in their approa!h$
They li&e to in"est most of their money in mutual funs$
LIMITATIONS
Sin!ere efforts ha"e been mae to !olle!t authenti! an reliable information
from responents# howe"er the report is subBe!t to followin% limit$
*$ S!ope of my stuy was limite to 7uhiana !ity only$ So the results may
at be appre!iable in other areas$
E$ Often the first an most si%nifi!ant barrier to entry is simply the !ost of
%oin% publi!# whi!h !an ran%e upwars from a ;uarter of a million
ollars to o"er a million ollars an hi%her$
>$ 9ubli! !ompanies# with the re;uirement to pro"ie etails of the intimate
finan!ial pi!ture of the !ompany itself# are also more "ulnerable to
a!;uisition by other !ompanies$
@$ The problem relate to %atherin% ata arise$
,$ The members of sto!& e'!han%e are not helpin% us properly$
Chapter-%
CONCLUSION
CONCLUSION
/n"estment Trusts play a "ital role in helpin% wellAmana%e businesses to se!ure
finan!e$ At the same time they pro"ie attra!ti"e opportunities to many in"estors A
from youn% aults sa"in% for their future# to parents sa"in% for their !hilGs
eu!ation or to pro"ie an in!ome for those alreay in retirement$ They also
pro"ie a ser"i!e to lar%e finan!ial institutions that are responsible for pro"iin%
in!ome an %rowth for pension funs an other in"estments$
The fun mana%er plays a "ital role in eli"erin% returns to shareholers$ 4un
Hana%ers !onstantly &eep their shareholers in min# &nowin% that their own
performan!e is Bu%e aily by the "alue of the /n"estment Trust# whi!h is reporte
on in the finan!ial press an throu%h other meia$ 4un mana%ers nee to ha"e a
&een unerstanin% of all that is happenin% in the worl that affe!ts the e!onomy#
in!luin% politi!al# so!ial an te!hnolo%i!al !han%es$
/n aition# the /n"estment Trust must prou!e a formal annual report to
shareholers on!e a year# hol an annual %eneral meetin% for shareholers to
e'press their "iews on!e a year# as well as re%ularly !ommuni!ate with
shareholers e% newsletters or upate reports on the !ompanyGs webAsite$
BIBLIOGRA"HY
www$money!ontrol$!om
www$onlinesear!honline$!om
www$lse$!o$in
www$bseinia$!om
www$nseinia$!om
www$!slinia$!om
www$nsl$!o$in
SUMMER TRAINING REPORT
ON
BENCHMARK INDICES OF INDIA
Submitte in partial fulfillment of the re;uirements
for the e%ree of
BACHELOR OF COMMERCE
=Sesso"- 89>?0>@.
PUNJAB TECHNICAL UNIVERSITY< JALANDHAR
S,(m##e& #o- S,(m##e& (2-
Hrs$ 9ooBa Kohli Amaneep
1$Com (E
n
year)
0oll No$*+
DESH BHAGAT FOUNDATION GROUP OF
INSTITUTION
MOGA
ACKNO4LEDGEMENT
3ou !annot is!o"er new o!eans unless you ha"e the !oura%e to lose si%ht of the
share
The worl of !apital mar&et was far from us# but we %ot an opportunity to emission
the !apital mar&et at 7uhiana sto!& e'!han%e$ 8e are inebte to our Tea!hers
who mole at this Bun!tion of our !areer from where we !an ta&e off better in the
!ompetiti"e s!enario of toayKs worl$
8e woul li&e to than&s Mrs. Poo+a Ko*1 for %i"in% us an opportunity to o our
9roBe!t 0eport in 7uhiana Sto!& E'!han%e$
A feelin% of elathim insists me on e'pressin% my heartiest than&s# eep sense of
%ratitue to all my maBor a"isors for their Bui!ious impe!!able$
Amaneep
DECLARATION
/ Amaneep# 0oll No$*+# stuent of 1$Com (E
n
year) of 2esh 1ha%at 4ounation Group
of /nstitution# Ho%a# unerta&e the Summer Trainin% wor& on ARo1e o$ Ca%#a1 Mar)e#
" E/o"om/ De'e1o%me"#B in my own wor& an is ori%inal one in has not seen an
submitte earlier to the uni"ersity or to any institute for fulfillment of the re;uirement of
a !ourse of stuy$
9la!e. 7uhiana Si%nature
2ate. Amaneep
0oll No$*+
1$Com (E
n
year)
PREFACE
The su!!essful !ompletion of this proBe!t was a uni;ue e'perien!e for me be!ause
by "isitin% many pla!e an intera!tin% "arious person# / a!hie"e a better
&nowle%e about this system$ The e'perien!e whi!h / %aine by oin% this proBe!t
was essential at this turnin% point of my !arrier this proBe!t is bein% submitte
whi!h !ontent etaile analysis of the resear!h uner ta&en by me$
The resear!h pro"ies a opportunity to the stuent to e"ote hisOher s&ills
&nowle%e an !ompeten!ies re;uire urin% the te!hni!al session$
The resear!h is on the topi! 0ole of Capital Har&et in E!onomi! 2e"elopment$
INDEX
Sr. No. CHAPTERS
*$ /NT0O26CT/ON
History
7SE Se!urities 7t$
E$ O1:ECT/5ES O4 THE ST623
>$ CA9/TA7 HA0KET /N /N2/A
@$ /N/T/A7 9617/C O44E0 AN2 4O77O8 ON 9617/C
O44E0 90OCESS
,$ 1ENCHHA0K /N2/CES O4 /N2/A
-$ 4/N2/NGS F 7/H/TAT/ONS
=$ CONC76S/ONS
1/17/OG0A9H3