Chapter IV

MARKET & FINANCIAL PERFORMANCE OF

BOMBAY STOCK EXCHANGE

4.1

Introduction (profile of BSE):

The Bombay Stock Exchange (BSE) whose official name is 'The Stock

Exchange, Mumbai, was previously called 'The Stock Exchange, Bombay'. It

is the oldest one in Asia, even older than the Tokyo Stock Exchange. It holds
5th and 2nd rank in the world in term of size of exchange by transactions and
listed companies respectively.1 The BSE was formally established as the
'Native Share and Stock Brokers' Association in 1875, and is still an
association of persons. It is a voluntary non-profit making association of
persons and is converted into demutualised and corporate entity. The BSE
was modeled on London Stock Exchange. It is the first stock exchange in the
country to have permanent recognition in 1956 from the Government of India
under Securities Contracts (Regulation) Act, 1956.
The present chapter deal with a study of A) Profile of Bombay Stock
Exchange, B) Market and Financial Performance of BSE
Presently, BSE and NSE are prominent main stock exchanges of India.
BSE is the first stock exchange in India and second stock exchange all over
the world to obtain an ISO 9001:2000 certification. Thus, with a rich heritage,
now BSE spanning three centuries in its 133 years of existence and it has
reached about 400 cities in India.
4.2 Brief History / Origin
The history of Indian stock market is found in the origin of Bombay
Stock Exchange. In 18th century, East India Company was the dominant
institution and by the end of the century, business in its loan securities gained
full momentum. In 1840, the six enterprising people saw good potential in the
1

ISMR (2009): Volume XII, 2009, p.4.

85

business of stocks and shares and were recognised by banks and merchants.
In 1860, the number of brokers increased to 60, where the broker met
between the Old Fort Walls and Old Mercantile Bank. Later, they found Dalal
Street, a place where they could conveniently assemble. Seth Premchand
Roychand was their leader and he shared his knowledge of business with the
Bombay brokers.
In 1860-61, the American Civil War broke out which caused a stoppage
of cotton supply from United State of America; marking the beginning of the
'Share Mania' in India. Europe turned to India and specially Bombay where
cotton was farmed in abundance. Thus, there was a huge inflow of capital at
this time into India (Bombay). During 1862-63, the number of brokers
increased to about 200 to 250. The period 1868-1875 was hard for stock
market brokers & they realized the effect of public dealing and formed an
informal association for protecting there character, status and interest of
native shares and stockbrokers.
At a meeting of brokers held in February 1887, they formally
established themselves into a society, a sort of a private institution, known as
'The Native Share and Stock Broker' association. The proper deed of a private
institution, known as 'The Native share and stock Broker' association. The
proper deed of association and declaration of trust were executed on 3rd
December 1887. Which are the present constitution and organisation of the
Bombay Stock Exchange. From the beginning of the association, Mr. Chunilal
Motilal was the president and he continued in office till 1896. The other
members, who played a prominent part in founding the bazaar besides the
then president, were Messers. Premchand Roychand, Somarayen Nararayen,
C. N. Kanga, B. B. Kanga and Shapooraj Broach

who succeeded

Mr. Chunilal Motilal in 1896 as the president of the association.

Sir Phiroze Jeejeebhay was another individual/personality who
dominated the stock market scene from 1946 to 1980. His word was law and
he had a great deal in influencing over both brokers and the Government. He
was a good regulator and solved many crises due to his wisdom and
practicality. The BSE's present building which is an icon of the Indian capital
market is called P. J. Tower in his memory.
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The year 2005 has been watershed for BSE. Under the BSE (C&D)
Scheme -2005 notified by SEBI on May 20, 2005, the exchange converted
itself from an association of Persons (AOP) to a company registered under
the Company Act 1956. The due date was August 19, 2005. This is very
important landmark in the history of the exchange, which is known as the
oldest in Asia. This transformation which is in line with what various stock
exchanges have done internationally.
4.2.1 Aims and the Strategic objective of BSE2
The present stock exchange was formerly established by brokers by
forming a society of themselves called themselves called the Native share
and stock Broker's Association. The deed of the association was signed and
Article X V of the deed laid down the primary objects of the Association so as;
to support and protect stocks and securities in Bombay to promote honorable
practice to suppress malpractices, to settle disputes among brokers, to decide
courtesy in conducting brokerage business.
1. To promote, develop and maintain a well-regulated market for dealing in
securities.
2. To safeguard the interest of members and the investing public having
dealing on the exchange.
3. To promote industrial development in the country through efficient resource
mobilization by way of investment in corporate securities.
4. To establish and promote honorable and just practices in securities
transactions.
5. Meeting the current international standards of securities market.
4.2.2 Organization/Management
A Governing Board of BSE has 20 directors, who decide the policies
and regulates the affairs of the exchange. The Governing Board consists of 9
elected directors, who are from broking community (one third of them retire
every year by rotation), three SBI nominees, six public representatives and an
Executive Director and Chief Executive Officer and a Chief Operating Officer.
2

Working of Stock Exchange, Mumbai (2003): p.26.

87

The Executive Director as the Chief Executive Officer is responsible for

the day-to-day administration of the exchange and he is assisted by the Chief
Operating Officer and other Heads of Departments.
There are five Chief General Managers viz. Department of Investors
Services, Inspection and Membership, Economic, Research and Publications,
HRD and General Administration, Internal Audit and ED's Office. Besides,
there are eight General Managers, viz. BSE Service Centres, Information
Technology, Derivative and Debt Market, Legal, Surveillance, Account and
Finance, Secretary, Department of Corporate Services.
4.2.3 Market Segments
The BSE is premier stock exchange in India, which works in 3 different
segments namely Capital Market (CM) segment, Wholesale Debt Market
(WDM) segment and Future and Options (F & O) segment.
The Capital Market segment of BSE provides an efficient and
transparent platform for trading of equities, preference shares, debentures,
warrants, exchange traded funds as well as retail government securities.
The Wholesale Debt Market segment provides the trading platform for
the trading of a wide range of fixed income securities which include state and
central government securities, treasury bills, state development loans, bonds
issued by public sector undertaking, floating rate bonds, index bonds,
commercial papers, certificate of deposit, corporate debentures, SLR and
Non-SLR bonds issued by financial institutions and units of mutual funds.
Future and Option segment of BSE provides the trading of wide range
of derivatives like index future, index option, stock future and future on interest
rates. But BSE hold less market share of this segment in the country.
4.2.4 Trading Technology
The trading on the BSE is carried out by its member brokers and their
authorized assistant from their Trading Work Station (TWS) in their offices
through a screen based online trading system called Bombay Stock Exchange
Online Trading System (BOLT). BOLT was introduced in March 1995 and has
completely replaced the open outcry system of trading on the trading floor by
June 1995. The BOLT system accepts two-way quotes from jobbers and
88

market and limit orders from brokers who have received such order from their
investors. Then, it matches them according to the matching logic specified for
this system.
BOLT is an architecture as a two-tier system. TWS is connected
directly to the back-end server. It acts as a communication server as well as
the Central Trading Engine (CTE). In addition to the above, other services like
information dissemination, index computation, position monitoring is also
provided in the system.
The BOLT displays the touchline and market view on the screen. The
touchline for a particular stocks show the best bid and offer prices that are
currently available in the market along with number of shares placed for sale
or purchase.
4.3. Trading and Settlement
Equity shares of the companies are listed under A Group, BGroup,
S Group (Indo next), T Group (based on surveillance action), TS group
(based on surveillance action), Z Group.
Table No. 4.1: Trading & Settlement Cycle
Day

Activity

Trading on BOLT and daily downloading of statements showing details of

transaction and margins at the end of each trading day.
Downloading of provisional securities and funds obligation statements by
Trading Members
Give up* entry by the Trading Members / Confirmation By the custodians
Trading Members can modify the unconfirmed give up entry upto 11:00am.
Conformation of give up data by the custodians up to 1pm
Downloading of final securities and funds obligation statements by Trading
members/ Custodians
Pay in / Pay out : Pay in of funds and demat securities by 11am. The trading
members to ensure availability of funds in their designated clearing back
account and securities in their demat pool/ Principal Accounts by 10:30am. In
case of delivery of securities in physical from, the trading members have to
deliver the securities to the Clearing House in special closed pouches along with
the relevant details like distinctive numbers, script code, quantity etc, on a
floppy between 9:30am to 10:30am.
Pay out of funds and securities by 1:30pm.
Auction on BOLT between 2:00pm to 2:45pm
Auction Report Downloads to Trading Members between 3:00pm to 3:15pm
Auction Pay- in and Pay out of funds and securities after 11am

T+1

T+2

T+3

Source : BSES certification on securities market published by BSE Training institute ltd ,
P.214 . *Transfer of trading members obligations to custodians.

89

The clearing House of the exchange is an independent company called

BOI shareholding Bank of India and stock Exchange Mumbai for handling the
clearing and settlement operation of funds and securities on behalf of
exchange. The Bank of India holds 51% equity of this company of the balance
49% is held by the stock exchange Mumbai. For the purpose of settlement of
the trades done on the exchange, the clearing and settlement Dept. of the
Exchange liaises with clearing House on a day to day basis.
4.4

Market Indices
A stock market index is to serve as a barometer of the equity market. It

is created to provide investors with the information regarding the average

share price movement in the stock market. The ups and down in the index
represent the movement of equity market.
4.4.1 SENSEX
The Bombay stock Exchange Ltd in 1986 came out with a stock 'index'
that has subsequently become the barometer of Indian stock market.
SENSEX is not only scientifically designed but also based on globally
accepted construction and review methodology. It is a basket of 30
constituent stocks representing a sample of large liquid and representative
companies. The index is widely reported in both domestic and international
markets through print as well as electronic media.
1

Date of Launch &

Calculated Method

Launched on January 1, 1985 and on full

market Capitalization Method.

Base Year

1978-79

Base Index Value

100

Calculation Method

Effective from September 1, 2003, calculation

Method Shifted to free- float Market
Capitalization.

Number of scrips

30

Index calculated
Frequency

Real Time

Source : BSE Training Institute Ltd., published Module Book 'BSE Certification on Securities
Markets, p. 62.

90

4.4.2 Scrip Selection for SENSEX3

1. Listing History : The scrip should have a listing history of at one month
(previously 3 months) at BSE, if full Market capitalization of a newly listed
company ranks among top 10 in the list of BSE universe.
2. Trading Frequency : The scrip should have been traded on each and every
trading day in the last three months.
3. Final Rank : The scrip should figure in the top 100 companies listed by final
rank. The final rank is arrived at by assigning 75% weightage to the rank on
the basis of three-month average full market capitalization and 25%
weightage to the including rank based on three month average daily
turnover and three month average impact cost.
4. Market Capitalization Weightage : The weightage of each scrip in Sensex
based on three-month average free float market capitalization should be at
least 0.5% of the index.
5. Industry Representation : Scrip selection would generally take into account
a balanced representation of the listed companies in the universe of BSE.
6. Track Record : The company should have an acceptable track record.
4.4.3 SENSEX Calculation Methodology
Sensex is regarded to be the pulse of the Indian stock market. It is
calculated using the "free-float market capitalization" methodology. As per this
methodology, the level of index at any point of time reflects the free-float
market value of 30 component stock relative to a base period. The market
capitalization of a company is determined by multiplying the price of its stock
by the number of shares issued by the company. This market capitalization is
further multiplied by the free-float factor to determine the free-float market
capitalization. The base period of Sensex is 1978-79 and the base value is
100 points. This is often indicated by the notation 1978-79 is 100. The
calculation of Sensex involves dividing the free-float market capitalization of
30 companies in the index by a number called the Index Divisor. The Divisor
is the only link to the original base period value of the Sensex. It keeps the

BSES Module Book on Certification of Securities Market, p.124.

91

index comparable, over time & it is the adjustment point for all index
adjustment arising out of corporate action, replacement of scrips etc. During
market hours, prices of the index scrips, at which latest trades are executed,
are used by trading system to calculate Sensex every 15 second and
disseminated in real time.4
4.4.4 Free-float Methodology
Free-float market capitalization is that proportion of total shares issued
by the company that are readily available for trading in the market. It generally
excludes promoters holding, government holdings, strategic holding and other
locked-in shares that will not come to the market for trading in the normal
course.
Free-Float Factors of Companies
The exchange determines the free-float factor for each company based
on the detailed information submitted by the companies in the prescribed
form. Free-float factor is a multiple with which the total market capitalization of
a company is adjusted to arrive at the free-float market capitalization, it is
round-off to the higher multiple of 5 and each company is categorized into one
of the 20 bands given below. A free-float factor of say 0.55 means only 55%
of the market capital.
Table No 4.2: Free Float Bands

>0-5%

Freefloat
Factor
0.05

Freefloat
Factor
>25-30

Freefloat
Factor
0.30

%
Freefloat
>50-55

Freefloat
Factor
0.55

>0-10%

0.10

>30-35

0.35

>55-60

>10-15%

0.15

>35-40

0.40

>15-20%

0.20

>40-45

>20-25%

0.25

>45-50

% Freefloat

>75-80

Freefloat
Facto
0.80

0.60

>80-85

0.85

>60-65

0.65

>85-90

0.90

0.45

>65-70

0.70

>90-95

0.95

0.50

>70-75

0.75

>95-100

1.00

% Freefloat

Source : SENSEX, Free Float Benchmark published by BSE p.08

SENSEX, The Free Float Bench mark, BSE, p.5

92

Table No. 4.3 : Sectoral weightage of Sensex component companies

Sectoral weightage of Sensex
% as on 2009
component companies
Auto
03
Capital Goods
09
Diversified
01
Finance
23
FMCG
10
Health Care
01
Housing related
02
IT
15
Metal
04
Oil & Gas
18
Power
05
Telecom
09
Total
100
Source : SENSEX Free float Benchmark published by BSE pg no 04

It is observed that ,as on 2009 finance sector has weightage of 23%, in

Sensex component companies followed by oil & gas 18%,while Health care &
diversified sector has weightage of 01% respectively.

Graph no. 4.1

4.4.5 Other BSE Indices

Apart from Sensex, BSE maintains and publish other indices to cater to
the varied needs of market participants. They are

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Table No 4.4: Specification of various indices of BSE

Base Year
Date of
Launch
Base
Index
Value
Method of
Calculation

Feb. 1, 1999

BSE Mid Cap

& Small Cap
2002-03

Feb. 1, 1999

May 27, 1994

Aug. 1999

April 11, 2008

Jan. 4, 2001

100

100

1000

1000

1000

Free float
market
capitalization

Free float
market
capitalization

Free float
market
capitalization

Free float
market
capitalization

Full market
capitalization
The index is
sub-set of
BSE-500
Index are
included in
the index&
number are
variable
Real time

BSE 100

BSE 200

BSE 500

1983-84

1989-90

Jan. 3, 1989

Number of
Scrips

100

200

500

Variable to
15% & 5%
market
capitalization
coverage

Calculation
Frequency

Real time

Real time

Real time

Real time

BSE PSU

Source : BSE Training Institute Ltd., published Module Book 'BSE Certification on Securities
Markets, p. 71

4.5

Demutualization of BSE
Historically, stock exchanges were setup as a non-profit organization

owned by their member brokers. BSE is no exception. However, on several

occasion in the past, conflict of interest has arisen at BSE because members
of the exchange who own the exchange enjoy trading rights. Further, the
broker managed stock exchanges are relatively slow and reluctant to change.
This has proved at times detrimental to the interest of stakeholders. In recent
years, there has been a move towards corporate service provider model.
Demutualization involving separation of trading rights from ownership and
management control has been followed in the case of NSE, OTCEI.
According to gazette notification issued on May 20, 2005, BSE being
an association of persons with no profit objective is required to acquire a
corporate form of organization. The role of brokers will be constrained. The
trading members cannot have voting rights in excess of 5%. The number of
brokers on the governing board will not exceed a quarter of total strength.
SEBI will have overriding power to appoint directors. The chief executive is
expected to be a stock market professional and will be an ex-officio director.
The stock exchanges clearing house will be handed over to an independent
94

clearing corporation with approval of SEBI. The exchange will be known as

Bombay Stock Exchange Ltd.5
4.6

BSE Surveillance
One of the important objectives of the exchange is to promote and

inculcate honourbale and just practices of trading in securities and to

discourage malpractices. As the securities transactions are prone to a variety
of manipulations, the exchange has instituted a strong surveillance
mechanism to protect market integrity. SEBI has directed the stock
exchanges in 1995 to setup a separate surveillance department with staff
exclusively assigned to surveillance functions. The exchange has accordingly
setup a surveillance department to keep a close watch on price movement of
scrips & detect market manipulations like price rigging, etc.
The Bombay Stock Exchange has developed an Online Real Time
(OLRT) surveillance system known as BSE On-line Surveillance System
(BOSS), which was commenced from July 15, 1999 with the main objective
of detecting potential market abuses at nascent stage to reduce the ability of
the market participants to influence the price and volumes of the scrips traded
at the exchange, to improve the risk management system and to strengthen
the self regulatory mechanism at the exchange.
4.7

Risk Management at BSE

With the expansion of BOLT by the BSE, it has also increased the risk

of defaults by the member brokers in meeting their settlement obligations. As

a result, the risk management system has assumed greater importance. As
per the guidelines of SEBI, the BSE has taken various risk management
measures as explained below in order to maintain the safety of the market.
to improve the risk management system and to strengthen the self regulatory
mechanism at the exchange.

Machiraju H.R. (2009): The Working of Stock Exchanges in India, New Age Publication,
New Delhi, p.4.

95

4.7

Risk Management at BSE

With the expansion of BOLT by the BSE, it has also increased the risk

of defaults by the member brokers in meeting their settlement obligations. As

a result, the risk management system has assumed greater importance. As
per the guidelines of SEBI, the BSE has taken various risk management
measures as explained below in order to maintain the safety of the market.
4.7.1 Base Minimum Capital (BMC)
All active, individuals, partnership firms and corporate members of BSE
are required to maintain a Base Minimum Capital (BMC) of Rs. 10 lakhs with
the exchange in the prescribed manner. All times and the composite
corporate member brokers are required to maintain BMC in multiple of the
membership right held by them. The BMC as prescribed by SEBI, is required
to be kept in the form of cash (minimum 12.5%), fixed deposit receipts(s) of
banks(s) (Minimum 12.5%) and balance in the form of eligible shares or bank
guarantee(s).
4.7.2 Additional Capital
The member brokers are also allowed to deposit Additional Capital
(AC) over the above BMC with the exchange for availing of higher intra-day
trading limit (i.e. gross purchase - gross sale) and gross exposure limit (i.e.
scripwise cumulative net outstanding purchases + cumulative net outstanding
sales)
4.7.3 Intra-Day Trading Limit (IDTL)
The exchange has prescribed an intra-day trading limit (i.e. gross
purchase + gross sales) of 33.33 times of BMC (Rs. 10 lakhs) + contribution
towards TGF (Rs. 10 lakhs) as aforesaid + effective AC deposited by the
member brokers with the exchange. While watching their compliance with the
intra-day trading limit, the exchange, as a precautionary measure provides on
line warning to the member brokers when they reaches 70%, 80% and 95% of
their respective intra-day trading limit. However, when member brokers cross
100% of this intra-day trading limit, a message is flashed on his BOLT TWSS
which stating that 'Capital Adequacy Limit Violated' and immediately all his

96

BOLT TWSS get deactivated and re-activated only after they deposit AC
(Additional Capital) to cover their turnover in excess of the intra-day limit.
4.7.4 Gross Exposure Limit (GEL)
SEBI has prescribed a ceiling on the gross exposure (i.e. scrip wise
cumulative net outstanding purchase + cumulative net outstanding sales) of
member brokers at 15 times of the BMC (Rs. 10 lakhs) + contribution towards
Trade Guarantee Fund (Rs. 10 lakhs) + effective AC deposited by them with
the exchange. The member brokers, as a pro-active measure, are also
flashed warning BOLT TWSS as soon as they reach 70%, 80% and 95% of
their respective gross exposure limits and when member broker cross 100%
of the gross exposure limit, a message is flashed on the BOLT TWSS stating
'Gross Exposure Limit Exceeded and the BOLT becomes deactivated.
A fine of Rs. 5000/- is recovered, if member broker fail to deposit the
AC to cover his turnover in excess of gross exposure limit on the same day of
violation limit.
4.8

Margins
In order to contain the risk arising out of the transactions, the exchange

has a well designed risk management system which inter-alia includes

recovery of margins from the member brokers. The exchange accordingly
imposes various kinds of margins on the member brokers based on their
outstanding exposures in the market.
4.8.1 VaR Margins (VaR)
All scrips are traded and settled under CRS on T+2 basis. As
mandated by SEBI, the Value at Risk (VaR) margining system is
internationally accepted as the best margining system and is applicable on the
outstanding position of member brokers in all these scrips.
VaR margins on scrips are calculated depending on the group to which
the scrips being : Group I : stocks which have been traded at least 80% (
5%) of the days for the previous 18 months and have impact cost of less than
or equal to 1%, Group II : stock which have been traded at least 80% ( 5%)
of days for the previous 18 month & have the impact cost of more than
1%.Group III-Stock not satisfying the criteria of trading for at least 80%( 5%)
97

of trading are placed in Group III. For scrips in Group I, the VaR margin in
scrip VaR (3.5 sigma) computed in manner specified for the scrips on which
stock future are traded. For scrips in Group II, the VaR margin is higher of the
scrip VaR (3.5 sigma) or three times of the Sensex VaR scaled by root 3, for
scrips in Group III, the VaR margin is equal to five times the Sensex VaR
scaled up by root 3. Further for the purpose of determining the margin for
Groups II & III, the minimum Sensex VaR is taken at 5%.6
4.8.2 Market to Market Margin (MTM)
In addition to VaR margin the member brokers are required to pay
MTM margin. For the purpose of computation of MTM margin, the system at
the end of each trading day, nets off the quantities and outstanding values of
transactions for each scrips at the member broker level across the T day T-1
day's transactions. The net quantity for each scrip is multiplied with closing
price of T day to arrive at the net value. The difference between these two
values, i.e. net value of scrip at the trade rate and net value of scrip at the
closing rate on T day is the MTM profit/loss in the scrip.
4.9

Trade Guarantee Fund (TGF)

SEBI stipulated that the exchange should introduce a system of

guaranteeing settlement of trades or setup a clearing corporation to ensure

that market equilibrium is not disturbed in case of payment default by any
member broker. The BSE has formulated a scheme to guarantee settlement
of benefited transactions of member brokers, which is part of settlement
system. The basic objective behind TGF is to guarantee settlement of
bonafied transactions, to inculcate confidence in the minds of participants,
and to protect the investors interest. The scheme of TGF has come into force
with effect from May 12, 1997.
The scheme is managed by the Defaulters Committee, which is a
Standing Committee constituted by exchange, the constitution of which is
approved by SEBI. 60% of member of this committee are non-brokers and
nomination of non-brokers on this committee is approved by SEBI.

Machiraju H.R. (2009): The Working of Stock Exchanges In India, New Age Publication,
New Delhi, p.40-41

98

The temporary refundable advances for a stipulated period are given

by the Defaulters Committee from TGF to the member brokers, who fail to
meet their settlement obligation subject to certain conditions and payment of
interest at 0.07% per day on the outstanding amount. During the period of
advances, the BOLT TWSs of the member brokers, to whom the advances
has been granted from TGF, are kept de-activated. If a member broker fails to
repay the advance within the stipulated period, he is declared as defaulter by
the Governing Board on the basis of recommendations of the Defaulters
Committee.
All active member brokers in the cash segment are required to make
an initial contribution of Rs. 10000/- in cash to the fund and also contribute
Rs.0.10 for every Rs. 1 lakh of gross turnover in all groups of scrips. The
exchange had made an initial contribution of Rs. 60 crores in the cash to the
fund. The active member brokers are required to maintain a base minimum
capital of Rs.10 lakh each with the exchange.
4.10

BSE Family

4.10.1 Central Depository Service Limited (CDSL)

The Central Depository Service Limited was setup on February 1999,
which offers trading in dematerialized form. The depository, which has an
equity capital of Rs. 100 crores, is promoted by Bombay Stock Exchange,
Bank of India, SBI, Bank of Baroda and HDFC Bank.
4.10.2 Indian Clearing Corporation Limited (ICCL)
Indian Clearing Corporation Limited was incorporated in 2007 by
Bombay Stock Exchange Ltd. as its wholely owned subsidiary company to
carry out clearing and settlement activities for the trades executed on
exchange platform and to ensure effective risk management pleasantly, ICCL
is carrying out clearing and settlement activities for mutual fund segment and
debt segment of BSE.
4.10.3 Market Place Technologies Pvt. Ltd.
It is a subsidiary of BSE & is a leading provider of cutting edge IT
solution which focuses on exchange traded equities, derivatives and
commodities markets in India. It is founded and managed by a team of
99

professionals. Market place has been instrumental in setting up and operating

India's largest stock exchange.
4.10.4 CDSL Venture Limited (CVL)
It is a wholly owned subsidiary of CDSL Ltd., a leading depository in
the country. CVL has in place a stringent policy and systems to ensure
confidentiality of data. Strong electronic and physical security measures
ensure security of confidential data.
4.10.5 BSE Training Institute Ltd. (BTIL)
It is wholly owned subsidiary of BSE. BTIL conducts various
certifications in cash market, derivatives, options trading and fundamental
analysis etc.
4.11. Redressal of Investors Grievances and Arbitration Procedure
The investors dealing in the primary market and secondary market may
have grievances against intermediaries like issuer, member brokers etc. The
BSE has setup a separate department called "Department of Investor Service"
to redress the grievances of investor against the companies as well as its own
members. The exchange also assists in arbitration process both between
investors and members inter-se.
In case of complaints against companies, against non-receipt of
dividend, balance sheet, shares lodged for transfer received to the
Department of Investors Services send it to companies and direct them to
resolve them within 15 days. If a company fails to resolve the total number of
pending case against it and exceeds 25 and if the complaints are pending for
more than 45 days, a show cause notice is issued to a company. After issue,
if they fail to resolve then scrip of company is shifted to 'Z' group.
It has set up an exclusive trading facility in 1989, that has now
emerged as a leading facility in financial and securities market training in
India. It is a wholly subsidiary of the Bombay Stock Exchange Ltd.
4.12

Market Halt7
The modalities of market halt are as under :

SEBI circular Ref. No. SMDRPD/Policy/ Cir-37/2001 dated the June 28, 2001.

100

Movement of either BSE Sensex or the NSE S & P CNX Nifty

whichever is breached earlier would trigger the market wide circuit breakers.
In case of 10% movement of either of these indices, there would be a
1-hour market halt if the movement takes place before 1 p.m. In case the
movement takes place at or after 1 p.m. but before 2.30 p.m. there will be a
trading halt for VI hours. In case if the movement takes place at or after 2.30
p.m. there will be no trading halt at the 10% level and the market will continue
trading.
In case of 15% movement either of the index, there will be a 2-hour
market halt if the movement takes place before 1.00p.m. If the 15% trigger is
reached on or after 1.00p.m. but before 2.00p.m. there will be a 1-hour halt. If
the 15% trigger is reached on or after 2.00p.m. the trading will halt for the
remaining of the day.
In case of a 20% movement of either index, the trading will be halted
for the remaining hours of the day.
4.13

Market performance of BSE

4.13.1 Companies listed on BSE

India has highest number of companies listed in the stock market out of
this about 72% of companies are listed on BSE only. Following table No. 4.5
shows no. of companies listed and delisted on BSE during the study period.
Table no 4.5 : Companies listed on BSE
No. of listed
New Companies
companies
Companies
Listed
Delisted
1991-1992
2861
NA
NA
1992-1993
3585
NA
NA
1993-1994
4702
NA
NA
1994-1995
5603
1114
8
1995-1996
5832
3032
215
1996-1997
5853
511
313
1997-1998
5849
46
23
1998-1999
5815
15
35
1999-2000
5869
44
22
2000-2001
5782
97
51
2001-2002
5650
22
62
2002-2003
5528
25
72
2003-2004
4731
29
1160
2004-2005
4781
54
859
2005-2006
4821
98
93
2006-2007
4887
116
57
2007-2008
4929
117
54
2008-2009
4942
73
59
Source: compiled from various annual reports of BSE from 1991-2009
Year

101

Table no 4.5 shows number of companies newly listed & delisted

during the study period of 1991 to 2009. During 1991- 92 number of
companies listed on BSE was 2861 which has increased to 5832 in 1995-96 &
decreased to 5782 in 2000-01 & further decreased to 4781 in 2004-05. In
2008-09, number of companies listed on BSE was 4942.
It was seen that in the year 1995-96, there were highest number of new
companies listed on BSE. While in the year 1998-99 there was lowest number
of companies newly listed on BSE. As on 2008-09, 4942 newly companies
were listed on BSE.
It is also seen that, during 2003-04 there were highest number of
companies i.e. 1160 companies delisted on BSE.
4.13.2 Fresh capital listed on BSE:
Fresh capital listed on BSE is classified into 3 parts: equity, preference,
debentures & bonds. Following table summarized fresh capital listed on BSE
during the study.
Table 4.6 : Fresh Capital Listed on BSE
Fresh Capital Listed
Equity (Rs. Cr)

Preference
(Rs. Cr)

Debentures/
Bonds/Others
( Rs. Cr)

Total Rs. Cr

1991-1992

2045.8

--

258.6(11.25)

2304.4

1992-1993
1993-1994
1994-1995
1995-1996
1996-1997
1997-1998
1998-1999
1999-2000
2001-2002
2002-2003
2003-2004
2004-2005

5537.3(83.58)
8775.8(53.69)
11971.06(97.42)
9689.0(81.9)
4391.2(93.40)
3164.7(91.33)
1821.8(100)
1399.9(86.1)
2545.2(93.73)
962.7(100)
2142.79(67.5)
9934.3(54.48)

0.60(0.00)
50.02(0.30)
-2.36(0.01)
9.56(0.20)
--57.2(3.5)
---69.8(0.37)

1086.2(16.39)
7517.1(45.99)
316.4(2.57)
2125.2(17.98)
300.8(6.38)
300.0(8.66)
-167.0(10.2)
170(6.2)
-1030.3(32.46)
8229.9(45.12)

6624.1
16343
12287.5
11816.6
4701.6
3464.7
1821.8
1624.1
2715.2
962.7
3173.1
18234.2

2005-2006

8540.4(80.34)

53.3(0.53)

1297.8(13.11)

9891.5

2006-2007

4254.8(86.99)

46.0( )

2080.0(12.69)

Year

3384.9

2007-2008
11927.2(96.10)
-491.4(0.39)
Average
85.94
0.3
15.51
Source : Data is compiled from BSE's Annual Reports from 1994 to 2009
Figures in brackets indicates % to total.

12418.6
-

Table no. 4.6 presents performance of BSE in listing fresh capital on

BSE. It is observed that during 1991-92 to 2008-09

In

case

of

the

percentagewise share of which instruments the equity instruments accounted

102

on an average 85.94%, preferential capital and debentures accounted on an

average 0.3%& 15.51% respectively, to the total fresh capital listed on BSE
during. Equity instrument listed highest amount of capital i.e. Rs. 11971.06
crores in 1994-95, while lowest amount i.e. Rs. 962.7 crores in 2002-03.
Preferential shares listed highest amount of capital i.e. 69.8 crores in 2004-05
whereas lowest amount i.e. 0.60 crores in 1992-93. Debentures accounted
highest amount of capital i.e. 8229.9 crores in 2004-05 while it recorded
lowest amount of capital i.e. Rs.316.4 crores in 1994-95.
4.14 Capital Listed through further Issues of Existing Companies
Capital listed through further issues of existing companies is classified
into equity, preference & debentures/bonds & others. Below Presented table
no. 4.7 furnished the trends in capital listed through further issues of existing
companies.
Table No 4.7 : Capital listed through further issues of existing
companies
Debenture/
Preference
Year
Equity (Rs Cr)
Bonds/Others(R Total Rs. Cr
(Rs Cr)
s Cr)
19911122.0(36.5)
3.6(0.1)
1947(63.4)
3070.6
1992
19923640.8(48)
1.0(0.01)
3941.3(51.9)
7583.2
1993
19932276.(45.48)
NA
2728.6(54.5)
5004.6
1994
19947085.1(66.8)
67.94(0.64)
3454.6(32.5)
10606
1995
19955744.0(58.20)
67.4(0.67)
4057.8(41.10)
9869.2
1996
19964404.5(41.92)
154.4(1.46)
5945.6(56.59)*
10504.5
1997
19972802.9(24.9)
448.0(3.99)
7976.5(71.04)*
11227.4
1998
19982328.7(22.29)
564.1(5.40)
7549.5(72.29)
10442.3
1999
19994340.1(48.54)
100.4(1.11)
4516.0(50.4)
8956.6
2000
20004175..1(56.08)
51.18(0.68)
3218.2(43.2)
7444.5
2001
20011588.9(48.56)
26.0(0.79)
1655.3(50.61)
3270.3
2002
20023960.05(52.54)
10.0(0.1)
3567.7(47.32)
7537.76
2003
103

20032004
20042005
20052006
20062007
20072008
AVERA
GE

4745.0(11.22)

479.0(2.2)

16333.4(75.76)

21557.9

4327.0(10.27)

775.9(1.83)

37022.5(87.88)

42125.5

6621.9(20.49)

702.9(2.1)

25105.1(77.41)

32430

10095.8(22.37)

1175.5(2.63)

33848.7(75.7)

45120.1

8762.1(18.24)

5722.9(12.00

33528(69.26)

48013.3

37.2%

1.7%

61%

Source : Data is compiled from BSEs Annual Reports from 1994-2009

Note : Figures in parentheses shows percentage share to Total Capital

Capital listed through further issue of existing companies on equity

segment of BSE is depicted in Table No. 4.7. It is observed that, existing
companies raised highest amount of debenture and bond capital i.e. Rs.
37022.5 crores in 2004-05 while lowest amount i.e. Rs 1947.0 crores in 199192. Thus, on average existing companies raise 61% of debenture and bonds
capital on BSE during study the period.
Existing companies on an average raised 37.2% equity capital during
1991-92 to 2008-09. Equity shares of existing companies raised highest
amount of capital listed. Rs. 10095.8 crores in 2006-07 while lowest amount
i.e. Rs. 1122.0 crores in 1991-92. Preferential shares accounted lowest share
to the total capital listed capital by existing company on BSE. i.e. 1.7%. It
accounted highest amount i.e. Rs. 5722.9 crores in 2007-08 whereas lowest
amount i.e. 1.0 crores in 1992-93.
The most striking aspect of capital issue of existing companies is that
out of total capital listed, the bonds and debentures accounted larger share
than preference and equity capital. On an average 61% of total listed capital
by bonds and debenture, equity capital accounted on an average of 37.2%.
The fewer (lesser) amount i.e. an average of 1.7% listed capital came from
preferential shares.
4.15 Annual Turnover of various Market segment of BSE
To study the trends in turnover of BSE, it is classified into 3 segments
i.e. annual turnover of capital market segment, annual turnover of debt market
segment & annual turnover of derivative market segment. Following table
104

shows trends in annual turnover of various market segments of BSE during

the study period.
Table 4.8: Trends in Annual Turnover of various Segments of BSE

Year

Annual Turnover
of CM(Rs crore)

Annual Turnover of
debt segment(Rs
crore)

Annual Turnover
of Derivative
Segment(Rs crore)

1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09

45696
84536
67749
50064
124190
207113
310750
686428
1000032
307292
314073
503053
518715
816075
956185
1578857
1100074

280.62
4930
926
5557
3594
NA
1932
NA

1673
1922
2478
12452
16112
9
59004
242309
12268

Source : SEBI Handbook Statistics on Indian Securities Market, 2009, p. 36 & 47

It is clear from the above table no 4.8 that the increasing trend is
observed in case of annual turnover of capital market segment of BSE
from1992-93 to 2000-01 i.e. it increased from Rs 45696 crores to Rs.
1000032 crores, but trend reversed in 2001-02 i.e. Rs. 307292 crores.
Thereafter there was an increasing trend in the annual turnover of the cash
market segment of the BSE. In the year 2007-08 it increased to Rs. 1578857
crores but during 2008-09 there was a decline in the cash market turnover of
BSE and it stood at Rs. 1100074 crores.
Annual turnover of debt market segment do not hold any particular
pattern but it is observed that in 2004-05 debt market recorded highest level
of turnover i.e. Rs. 5557 crores, while it was lowest i.e. Rs. 280.62 crores in
2001-02.
It is also observed that there is an increasing trend in case of annual
turnover of derivative segment of BSE from 2000-01 to 2008-09. It was Rs.
105

1673 crores in 2000-01, it dipped to Rs. 9 crores in 2005-06 thereafter which

increased to Rs. 59004 Crores in 2006-07 & stood at Rs. 12268 crores in
2008-09. The macro economic factors that were responsible for reduction in
market Capitalization also affected the average turnover.

4.16 Average Daily Turnover of Capital Market Segment of BSE

Trading value is a key element to measure supply and demand and it is
the primary indicator of a new price trend. When a stock moves up in price,
usually in high volumes, it could indicate that investors are accumulating the
stocks. When a stock moves down in price on usually heavy volume, major
selling would be the reason.
Table no 4.9 : Average Daily Turnover of CM Segment ( Rs. crores)
Year
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09

Average Daily Turnover

238
388
293
216
517
849
1249
2735
3984
1244
1251
1981
2050
3251
3840
6290
4527

Average Trade Size

3632
6887
3450
2922
8022
10585
8770
9270
7002
240602
22226
24806
21849
30911
27618
29771
20342

Source: compiled from SEBI Handbook of Statistics on Indian Securities Market 2009,
p.36

The average daily turnover and average trade size of capital market
segment of BSE is presented in Table No. 4.9. The average daily turnover
was very high in the year 2007-08 i.e. Rs. 6290 crores and it was very low in
1995-96 i.e. Rs. 216 crores. In the year 2001-02, the market experienced
bearish trend. The average trade size of BSE highest in 2003-04 i.e.
Rs.24806 crores, whereas it was lowest i.e. Rs.2922 crores in 1995-96. It is

106

concluded from the above table that the average trade size of BSEs daily
turnover was very high in 2007-08 i.e. Rs.29771 crores.
4.17 Groupwise Distribution of Market Turnover on BSE
The Bombay Stock Exchange, India's leading stock exchange has
classified equity scrips into categories: A, B, B2, S, T, TS and Z to provide
guidance to the investors. The classification is on the basis of several factors
like market capitalization, trading volumes, track records, profit, dividends,
share holding pattern and some qualitative aspects. 'A' group is a category
where there is a facility for carry forward (Badala) to the next settlement cycle.
These companies are with fairly good growth record in terms of dividend and
capital appreciation. The scrips in this group are classified on the basis of
equity, capital, market capitalization, number of years of listing, public share
holding and trading volume etc.
T, TS,& Z Groups securities ,Which are traded on the exchange on
Trade on trade basis are generated on gross basis (i.e. without netting of
purchase & sell transactions in a scrip). Debentures /Bonds issued by
companies are listed under F group (i.e. fixed income securities). While govt.
Securities are listed under G Group. S Group consist of B1 & B2 Groups.
Thus group A, B, S, T, TS & Z are indicating equity turnover, F group
indicates debt segment & G group indicate turnover of G- Securities .
Annual Distribution of Turnover of BSE among different groups is
summarized into following table.

107

Table No. 4.10 : Annual Turnover Distribution of Different Groups

Year
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
Average
% share

A Group
197015.1
24354.04
611555.6
908946.1
281968.8
266650.6
437851
398860.9
482429.3
552460.1
859285.5
896782
493179.9
73.83

B Group
10097.3
18501.2
69450.1
78274.8
24344.8
47303.6
63209.8
106541.8
272596.4
346204.6
648226.6
179181.2
155327.68
23.26

S Group
-5597.8
46697.4
48662.7
53904
20276.97
35027.77
2.18

T Group
989.5
6335.8
12146.3
7895.9
15723.3
1773.1
7477.3
0.56

Z Group
145.6
4.57
17
22.5
321.2
1158.9
1934.7
791.2
1480.7
407.18
628.355
0.078

F Group
280.6
15.6
85.6
42.9
82.6
94.9
245.5
220.1
269.9
170.13
235.7
753.13
208.055
0.03

Source : Data is compiled from BSEs Annual Reports from 1994-2009

Table No. 4.10 presents distribution of annual turnover among different

groups. Annual turnover of 'A' group was Rs. 197015.1 crores in 1997-98,
which increased to Rs. 896782.0 crores in 2008-09. 'B' group accounted an
annual turnover of Rs. 10097.3 crores, which increased to Rs. 648226.6
crores in 2007-08, and then it declined to Rs. 179181.20 crores in 2008-09.
The annual turnover of 'S' group recorded Rs. 5597.8 crores in 2004-05, then
it declined to Rs. 53904 crores in 2007-08. 'T' group recorded annual turnover
of Rs. 989.5 crores in 2003-04, which increased to Rs. 15723.3 crores in
2007-08, but declined to Rs. 1773.10 crores in 2008-09. 'Z' group accounted
annual turnover of Rs. 145.6 crores, in 1999-2000 which increased to Rs.
1934.7 crores in 2005-06, which declined to Rs. 407.18 crores in 2008-09.
During 1997-98 'F' group recorded Rs. 280.6 crores, it recorded to Rs. 753.13
crores in 2008-09.
It is concluded that during 1997-98 to 2008-09 'A' group accounted
73.83% to total turnover of BSE, 'B' group recorded 23.26%, 'S' group
accounted 2.18%, 'T' group 0.56% whereas 'Z' group and 'F' group accounted
0.078% and 0.03% respectively to the total turnover.

108

4.18 Delivery Ratio

It represents the percentage of delivery (in physical form) to traded
quantity. Generally, delivery ratio rising means lesser speculations. Following
table presents delivery ratio of BSE during the study period
Table No. 4.11 : BSE's Delivery Ratio ( In Term of Physical Shares)
Delivered
% of Delivered
Quantity (Rs.
Quantity to
Lakh)
Traded Quantity
1992-93
NA
NA
1993-94
NA
NA
1994-95
44696
41.68
1995-96
26773
34.67
1996-97
21188
26.18
1997-98
24360
28.37
1998-99
50570
39.12
1999-2000
93312
45.2
2000-01
86684
33.53
2001-02
57668
31.65
2002-03
69893
31.67
2003-04
133240
34.54
2004-05
187519
39.3
2005-06
300653
45.25
2006-07
229685
40.96
2007-08
361628
36.68
2008-09
196630
26.59
Average
35.69
Source : SEBI Handbook Statistics on Indian Securities Market , 2009 p.40.
Year

Number of
Trades
(lakh)
126
123
196
171
155
196
354
740
1428
1277
1413
2005
2374
2643
3462
5303
5408

Traded
Quantity (Rs.
Lakh)
35031
75834
107248
77185
80926
85877
129272
208635
258511
122196
221401
389806
477171
664467
560780
986009
739601

The BSE's delivery ratio in relation to turnover in physical form is

furnished in Table No. 4.11. It is seen that delivery ratio in term of number of
shares was more than 40% in the year 1994-95, 1999-2000, 2005-06 and
2006-07. Delivery ratio is highest in 1994-95 i.e. 41.68% whereas it was
lowest i.e. 26.18% in 1996-97.Thus, delivery ratio of BSE oscillating in the
ranges of 25% to 46% during the study period.
4.19

Concentration of Market
To study security wise concentration of BSEs turnover, securities listed

on BSE is classified into five groups, those are TOP-5, TOP-10, TOP-25,
TOP-50, TOP-100. The percentage share of N securities in turnover of BSE
is presented into following table.

109

4.19.1 Percentage Share of Top 'N' Securities in Turnover of Cash

Segment of BSE
Table No. 4.12 : Percentage Share of Top 'N' Securities in Turnover of
Cash Segment of BSE(%)
Year
TOP 5
TOP 10
TOP 25 TOP 50
TOP 100
1996-1997
72.87
81.68
88.1
91.06
93.41
1997-1998
67.9
79.91
89
93.72
96.83
1998-1999
48.8
64.51
81.07
89.4
95.35
1999-2000
36.95
55.1
77.75
87.29
92.95
2000-2001
49.99
70.35
87.7
94.04
97.45
2001-2002
30.67
43.95
66.24
81.66
91.51
2002-2003
37.72
53.27
74.38
86.19
93.26
2003-2004
30.76
43.55
60.89
74.53
85.93
2004-2005
25.48
39.11
52.61
64.23
75.93
2005-2006
16.78
23.75
35.55
45.55
57.71
2006-2007
15.31
23.86
40.2
55.01
70.05
2007-2008
16.31
25.68
41.76
55.84
77.44
2008-2009
18.54
29.75
49.02
66
79.62
AVERAGE
34.54
46.90
62.82
73.73
83.56
Source: : SEBI Handbook Statistics on Indian Securities Market , 2009 p. 45

The distribution of turnover among top 'N' securities is summarized in

table No. 4.12. It is observed that, on an average Top 5 securities accounted
for 34.54% of total turnover in capital market segment of BSE during 1996-97
to 2008-09. The Top '10' and Top '25' securities accounted for on an average
of 46.90% and 62.82% respectively, whereas top '50' securities accounted for
73.73% and top 100 securities accounted for on an average of 83.56% of the
total turnover of capital market segment of BSE during the same period.
It is concluded that, top '100' securities accounted large share of total
turnover of capital market segment of BSE followed by top '50', '25' and '10'
securities. While top '5' securities accounted lesser share of total turnover of
capital market segment of BSE.

4.19.2 Member wise Concentration of Market

Member wise concentration of BSE turnover is presented into following
table.

110

Table No. 4.13: Percentage Share of Top 'N' Members in Turnover of

Cash Segment at BSE (%)
Year
1992-1993
1993-1994
1994-1995
1995-1996
1996-1997
1997-1998
1998-1999
1999-2000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
Average

TOP 5
5.73
6.15
4.59
7.23
11.82
13.73
9.78
8.42
7.87
8.45
13.65
14.3
14.46
14.83
15.1
14.38
14.33
10.81

TOP 10
10.39
10.58
8.46
12.23
18.28
21.06
16.04
14.3
15.56
14.78
20.78
22.13
22.84
24.02
24.01
22.77
21.73
17.64

Members
TOP 25
22.3
21.05
17.85
24.06
31.32
33.75
28.31
25.9
25.7
28.83
35.79
37.98
38.65
39.21
40.41
39.46
38.21
31.10

TOP 50
36.4
35.3
29.59
37.88
45.55
47.75
44
40.74
40.4
45.3
52.85
54.08
53.44
54.94
56.37
55.74
55.75
46.24

TOP 100
56.37
55.93
48.17
55.62
64.17
65.21
64.3
59.98
59.9
65.75
72.55
73.32
72.14
72.13
73.57
73.56
73.32
65.05

Source : Handbook of Statistics on the Indian Securities Market, 2009, p. 45.

The distribution of turnover among top 'N' members is summarized in

Table No. 4.13. It is observed that, on average top 5 members accounted for
10.81% of total turnover in capital market segment of BSE during 1996-97 to
2008-09. The top '10' and '25' members accounted for on an average of
17.24% and 31.10% respectively. Whereas top '50' members accounted for
46.64% and top '100' members accounted for on an average of 65.05% of the
total turnover of capital market segment of BSE during the same period.
It is concluded that top 100 members accounted large share of total
turnover of capital market segment of BSE followed by top 50, 25 and 10
members. While top 5 members accounted less share of total turnover of
capital market segment of BSE.
4.20

Trading Frequency of Listed Stock at BSE

Trading frequency of listed stock is an indicator of liquidity. Table No.

4.14 summarises trading frequency of listed stocks. It is clear that the

companies traded on BSE for more than 100 days increase significantly
during 1999-00 to 2008-09 except in the year 2001-02. In 1999-00, the
companies traded on BSE for more than 100 days was 27.56%, in1999-2000
which increased to 87.22% during 2008-09.

111

Table No. 4.14 : Trading Frequency of Listed Stocks

Trading
Above 91- 81- 71- 61- 51- 41- 31Frequency
100
100 90
80
70
60
50
40
NST
2210 110 95 110 121 108 167 160
1999-00
% to
27.56 1.37 1.18 1.37 1.51 1.35 2.08
2
Total
NST
1556
98
97
98 117 133 113 131
2000-01
% to
40.64 2.5 2.47 2.5 2.98 3.39 2.88 3.34
Total
NST
1238
93 113 197 579 402 315 299
2001-02
% to
23.15 1.74 2.11 3.68 10.83 7.52 5.89 5.59
Total
NST
1815
63
51
54
68
74
75
53
2002-03
% to
67.7
2.4 1.9
2
2.5 2.8 2.8
2
Total
NST
1960
65
54
49
46
58
61
56
2003-04
% to
75.1 2.49 2.07 1.88 1.76 2.22 2.34 1.95
Total
NST
2368
36
37
35
32
50
34
41
2004-05
% to
81.49 1.24 1.27 1.2 1.1 1.72 1.17 1.41
Total
NST
2630
22
19
21
27
30
25
32
2005-06
% to
86.26 0.72 0.72 0.69 0.89 0.98 0.82 1.05
Total
NST
2673
30
25
31
35
30
22
22
2006-07
% to
86.31 0.97 0.81
1
1.13 0.97 0.71 0.71
Total
NST
2668
17
18
18
18
18
15
15
2007-08
% to
90.59 0.54 0.57 0.57 0.57 0.57 0.47 0.47
Total
NST
2831
29
32
21
24
25
33
34
2008-09
% to
87.22 0.89 0.99 0.65 0.74 0.77 1.02 1.05
Total
NST
2194 56.3 54.1 63.4 106.7 92.8 86.6 84.3
Average
% to
67
1.49 1.4 1.56 2.32 2.22 2.02 1.96
Total
Source : Data is compiled from various issues of ISMR.
Note: NST - Number of Scripts Traded

2130
214

11- 1-10
TOTAL
20
262 4463 8020

2.67 3.27 55.65

241

287 1016 4027

6.14 7.31 25.87

360

100

100

427 1324 5347

6.73 7.99 24.76

100

86

105

235

2679

3.2

3.9

8.8

100

52

63

146

2610

1.99 2.41 5.59

100

68

142

2906

2.34 2.17 4.89

100

43

63

148

3049

1.41 1.71 4.85

100

30

52

50

149

0.97 1.61 4.81

33

103

3166

0.04 0.36 3.25

100

32

43

38

147

3246

0.99 1.77 4.53

100

115.9 142 787.3

2.65 3.25 14.3

Trading took place for 91 to 100 days in case of 1.37% of companies in

1999-00 which increased to 2.49% of companies in 2003-04, then after it
declined to 0.54% of companies in 2007-08 and remained at 0.89% of
companies in 2008-09. The companies traded for more than 81 to 90 days
was 1.18% in 1999-2000, which increased marginally to 2.07% in 2003-04,
then declined to 0.99% during 2008-09. Trading took place for 71 to 80 days
in case of 1.37% of companies in 1999-2000, 1.88% of companies in 2003-04
which declined to 0.65% of companies in 2008-09. Trading took place for 61
112

to 70 days during 1998-99 was 1.51% of companies which increased

marginally to 1.76% of companies in 2003-04 and declined to 0.57% of
companies in 2007-08 & stood at 0.74% in 2008-2009. The companies
available for 51 to 60 days accounted 1.35% of companies during 1999-2000
which increased to 2.22% of companies in 2003-04 then dropped to 0.57% of
companies in 2007-08 it stood at 0.77% in 2008-09. Trading took place for 41
to 50 days in case of 2.08% of companies traded during 1999-2000; it
increased marginally to 2.34% in 2003-04 then declined to 1.02% of
companies in 2008-09.
The companies available for trading of 31 to 40 days accounted 2.0%
of companies in 1999-2000, it accounted 1.95% of companies in 2003-04
whereas declined to 1.05 % in 2008-09.During the year 1999-2000, the
companies available for trading for 21 to 30 days was 2.67% of companies,
which declined to 1.99% in 2003-04 to 0.99% in 2008-09. Trading took place
for 11 to 20 days in case of 3.27% of companies during the year 1999-2000. It
dropped to 2.41% of companies in 2003-04 which decreased to 1.77% of
companies in 2008-09. The companies traded on BSE for 1 to 10 days during
1999-2000 was 55.65% which dropped significantly to 5.59% of companies in
2003-04, Further it declined to 4.53% of companies in 2008-09.
It is concluded that during the study period, on an average 67% of
companies traded for more than 100 days followed by 14.3% traded for 1 to
10 days where as only 1.40% companies traded for 81-90 days.
4.21 Product wise turnover on the derivatives segment of BSE
Index future, stock future, index option, stock option these are products
of equity derivatives segments of BSE. Following table shows development of
equity derivatives segment during the study period.

113

Table No 4.15 : Product wise Turnover on the Derivative Segment of BSE

(Turnover in Rs. crore)
Year

200001

200102

200203

200304

200405

200506

200607

200708

200809

Ave
rage

No of
77743 89552 111324 246443 449630
89
1638
7157078 515915
contract
turnover
INDEX
1673
1276
1811
6572
13600
5
55491
234660
12250
Rs.
FUTURE
% share in
total
100
66.3
73
54.4
84.4
55.5
94
96.8
99.8
Turnover
No of
17951 25842 128193
6725
12
142433 295117
300
contract
turnover
452
644
5171
213
1
3515
7609
9
STOCK
Rs.
FUTURE
% share in
total
23.5
25.9
42.8
1.3
11.1
5.9
3.1
0.07
Turnover
No of
2415
43
1
75275
100
2
1161
373
contract
turnover
INDEX
84
1
0
2298
3
0
39
9
Rs.
OPTION
% share in
total
4.3
0.04
0
14.2
33.3
0
0.01
0.07
Turnover
No of
5105
802
7621
89
2
6
15
0
contract
turnover
114
21
331
2
0
0
0
0
INDEX
Rs.
OPTION
% share in
total
5.9
0.8
2.7
0.01
0
Turnover
No. of
77743 105527 138037 382258 531719 203 1545169 7453371 515588
contract
Total
Turnover
1673
1922
2478
12074
16112
9
59006
242309
12268
Rs.
Daily
8.08
7.7
9.8
47.5
63.6
0.03
236.9
965.3
50.4
Average
Turn over (207) (247)
(251)
(254)
(253) (251)
(249)
(251)
(243)
Source: SEBI; Handbook Statistics on Indian Securities Market , 2009 p.46 & 47
Note : Figures in brackets indicates trading day

78

14

6.5

1.17

Looking at the product wise turnover on the derivative segment of BSE,

it is seen in Table No.4.15 that Index future which accounted for highest
percentage of turnover among the various products i.e. average

turnover

78% during 2000-01 to 2008-09 followed by stock future account on an

average of 14% during same period. While Index option and stock option
recorded 6.5% and 1.17% respectively to the total turnover of derivative
segment of BSE.

114

In the year 2008-09, turnover volume of derivative segment dropped

due to the global slowdown in the derivatives segment as an aftereffect of the
sub-prime crises in USA.
4.21

Financial performance of BSE

Financial performance of BSE indicates health of any institution & it

also indicates is BSE in the position of introducing further development

programmes. To study the financial performance of BSE, following
parameters are selected: a) Capital structure of BSE, b) Working Capital of
BSE, c) Fixed Assets & Long term funds of BSE, d) Total Assets an Total
Liabilities of BSE, e) Profitability of BSE.
4.21.1

Capital Structure of BSE

Capital of BSE is classified into share capital, reserves & surplus,

secured & unsecured deposits and others. Following Table discloses the
capital structure of BSE during the Study period of 1991 to 2009.
Table No. 4.16 : Working Capital of BSE
Year

Share
Capital(Rs)

%
change

Reserves &
Surplus(Rs)

% change

Deposits Secured
& Unsecured ( Rs)

% change

1991

41481997

51125029

1992

43881997

5.79

192573861

40007912

-21.74

1993

44481997

1.37

459769118

138.75

38926036

-2.70

1994

2713911997

6001.15

545486042

18.64

27034160

-30.55

1995

586681999

-78.38

669275702

22.69

24052284

-11.03

1996

709084651

20.86

783360101

17.05

18970408

-21.13

1997

717834651

1.23

867953539

10.80

11063533

-41.68

1998

800586938

11.53

992079779

14.30

5140657

-53.54

1999

977881286

22.15

1191415351

20.09

243000

-95.27

2000

1535155757

56.99

242500000

-79.65

436793348

179650.35

2001

2833946963

84.60

5000000

-97.94

999970244

128.93

2002

2921487786

3.09

3388600522

67672.01

1647920815

64.80

2003

3141046426

7.52

3578893613

5.62

894193802

-45.74

2004

3296847558

4.96

4119858905

15.12

117611377

-86.85

2005

3446767571

4.55

8440373594

104.87

11756685

-90.00

2006

6770000

-99.80

9265732619

9.78

65179590

454.40

2007

6550000

-3.25

10050513067

8.47

-100.00

2008

7802222

19.12

15583554239

55.05

12250751

102377772

1212.16

17179519832

10.24

1853402

-84.87

2009

Source : Data is compiled from Annual Reports of BSE form 1991 to 2009.

115

The Table No. 4.16 shows the capital structure of Bombay Stock
Exchange.
A)

Share Capital
Share capital of BSE was increased continuously from 1991 to 2005

i.e. from Rs. 41481997 to Rs.3446767571 even though it declined in 2006 &
in 2006.

But pursuant to the BSE (corporatisation and demutualization)

scheme 2005, the exchange had to allot 1000 equity shares of Re.1/- each of
those card base members of the BSE whose names appeared on Register of
Members under Rule 64 of the erstwhile BSE Rules, Bye-laws and
Regulations. As on 31st March 2007, out of the total 735000 equity shares of
each of Re. 1/- the exchange has allotted 6950000 equity shares against 695
membership rights and allotted 677000 equity shares against 677
membership rights as on 31st March 2006. As on March 2008, share capital
increased to Rs. 7802222 and it further increased to Rs.102377772 in 2009.
B)

Reserves and Surplus

From March 1992 to March 2000 reserves and surplus increased from

Rs. 192573861 to Rs.242500000 In 2001, it declined to Rs.5000000 in 2001.

Thereafter, it increased steadily & it stood at Rs17179519832 on 2009.
C)

Secured and Unsecured Deposits

As on 31st March 2002, Secured and Unsecured Deposits accounted

highest amount i.e. Rs.1647920815 whereas on 31st March 2007 it remained

nil. It is observed that secured and unsecured deposits do not hold any
particular pattern.
4.21.2

Working Capital of BSE

Working Capital is current assets minus current liabilities. To

understand liquidity position of the BSE the study of working capital position &
current ratio is very significant.
Every company needs working capital to prosper and to grow.
Therefore, every company should maintain satisfactory level of working
capital. Any change in the working capital has an effect on cash flow into or
away from the business.
116

Table No. 4.17: Working Capital of BSE

Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Current
Assets (Rs)
332783461
2731246094
1519116374
908207391
1173370235
2097684947
2377681334
2116613304
5470621090
11624775956
9934004706
7422748981
4388406897
2971653922
5643512640
42249266561
3008798635
377453807
16829257085

Current
Liabilities(Rs)
298591526
2646337259
1630593200
738527016
842157927
1319855754
1458493995
2039371769
5536733458
15671977636
6730536320
3383439318
2078515271
2678845092
3962266467
15523802657
6044931815
8599780321
9148540829

Working
Capital(Rs)
34191935
84908835
-111476826
169680375
331212308
777829193
919187339
77241535
-66112368
-4047201680
3203468386
4039309663
2309891626
292808830
1681246173
26725463904
-3036133180
-8222326514
7680716256

Source : Data is compiled from the Annual Reports of BSE.

Current Ratio = Current Assets / Current Liabilities,
CAWC = Current Assts / Working Capital

Current
Ratio
1.11
1.03
0.93
1.23
1.39
1.59
1.63
1.04
0.99
0.74
1.48
2.19
2.11
1.11
1.42
2.72
0.50
0.04
1.84

CAWC
9.73
32.17
-13.63
5.35
3.54
2.70
2.59
27.40
-82.75
-2.87
3.10
1.84
1.90
10.15
3.36
1.58
-0.99
-0.05
2.19

Working capital= CA-CL

Table No. 4.17 gives the state of working capital of BSE, current ratio &
current assets to working capital ratio. BSE's current assets consist of sundry
debtors, cash and bank balances, loans and advances etc. The value of
current assets was Rs.332783461 in 1991 & it stood at Rs.16829257085 in
2009.

Current liabilities comprise of sundry creditors, income received in

advance and tax liabilities. The value of current liabilities is increasing

continuously. It was Rs. 298591526 in the beginning and it increased to
Rs.9148540829 in the year 2009. Working capital was very high in 2006 i.e.
Rs.26725463904. But in 1993, 2000, 2007 & 2008 BSE accounted negative
working capital because current liabilities are more than current assets.
Standard current ratio is 2:1 i.e. 2 is current assets & 1(one) is current
liabilities. It means CA should twice than CL. It is a test of short term solvency
(liquidity). Higher the ratio indicates sound financial of a company. In the year
117

1991 to 2001, in 2004 &2005& from 2007to 2009 current ratio is lower than
standard ratio (2:1). For the year 2002, 2003, & in 2006 current ratio is higher
than standard ratio.
The CAWC was ratio very high in 1992 i.e. 32.17 whereas less in the
year 2008 i.e. -0.05. It is also seen that CAWC ratio is negative in the year
1993, 1999, 2000, 2007, 2008 because working capital is negative during
these years,
4.21.3 Fixed Assets and Long Term Funds of BSE
Fixed assets are purchased for continued and long term use in earning
profit in a business. BSE's fixed assets include buildings, land, computer
systems, telephone systems, vehicles, furniture and fixtures. Long term funds
include share capital, reserves and surplus and unsecured deposits.
Table No. 4.18: Fixed Assets and Long Term Funds of BSE
Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Fixed Assets
(Rs)
200980281
191554934
299658977
319226826
543802677
578590967
517769384
550359700
450467454
626043193
995855393
691849354
458219339
385936261
412273147
639653408
571145960
907587097
749613255

Long Term Funds

(Rs)
63784801
206529858
52392015
840687039
1277471701
1509553752
1595667190
1797299715
2169539637
38383158501
5900521291
6310331338
6720183039
7416949463
8290255641
9337682209
10057463067
15596359330
17283751006

FAR
3.15
0.93
5.72
0.38
0.43
0.38
0.32
0.31
0.21
0.02
0.17
0.11
0.07
0.05
0.05
0.07
0.06
0.06
0.04

Source : Data is compiled from Annual Reports of BSE from 1991 to 2009.
FAR = Fixed Assets / Long Term Funds

Table No. 4.18 discloses the position of fixed assets and long term
funds of BSE and fixed assets ratio of BSE during study period. FAR Ratio
118

indicates long term financial strength of the company. It indicates long term
solvency (liquidity) of a company. The standard FAR ratio depends upon
nature & types of business. In the year 1991 &1993 fixed assets are 3 times &
five times greater than long term funds respectively. It shows investment in
the fixed assets has been increasing in these years. For the year 1992 & from
1994 to 2009 investment in FA is Less than long term funds. It means since
2003 investment in fixed assets has been reducing.
4.21.4 Total Assets and Total Liabilities of BSE:
The total assets and total liabilities of the business show the financial
health of organization. The total assets of BSE consist of current assets and
fixed assets and total liabilities consist of unsecured loans & secured loans &
liabilities.
Table No. 4.19 : Total Assets and Total Liabilities of BSE
Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Total Assets
(Rs)
547660390
2922801029
2173770351
1582429215
2122167912
2831270914
3055345718
3837179143
7706273095
20189343834
13635784855
3690833347
5179295957
7241809010
6617651677
21812963210
14627695596
22629702384
12215796183

Total Liabilities
(Rs)
329483312
2922801029
2173770351
765561176
866210211
1338826162
1469557528
2044512426
5536976458
16108770984
7730506564
4304688242
2972709073
2901955518
3974023152
15588982247
6044931815
8612031072
9150394231

SOR
1.66
1.00
1.00
0.48
0.41
0.47
0.48
0.53
0.72
0.80
0.57
1.17
0.57
0.40
0.60
0.71
0.41
0.38
0.75

Source : Data is compiled from Annual Reports of BSE from 1991 to 2009.
FAR = Fixed Assets / Long Term Funds

119

Table No. 4.19 exhibits the status of the total assets and liabilities of
BSE. Solvency ratio indicates that whether BSE is in position to meet its short
term and long term obligations. A steady increase in value of total assets
reduces the solvency ratio. In the year 1991-1993 &2002 SOR is above one
(1) it means TL are more than TA. In the year 1992 &1993 TA are equals to
TL, therefore SOR is one. From the year 1994 (except 2002) TA are greater
than TL therefore SOR is less than one. Thus SOR trends of BSE indicates is
in position to meet its short term &long term obligations.
4.21.5 Profitability of BSE
Profitability denotes the surplus generating capacity of any enterprise.
Profit is an incentive to shareholder, managers & perspective investors.
Operating profit means profit before interest & tax. Capital employed means
fixed assets plus working capital. Following Table No. 4.20 depicts profitability
of BSE during the period under review.
Table No. 4.20 : Profitability of BSE
Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Operating
Profit (Rs)
69794594
112947159
267195257
85716924
120839660
103968288
82052517
3829353
155299165
522681573
56005254
281363119
207534288
512324736
595888507
816192442
1001593912
1967883064
2660224166

%
change
0.61
1.36
-0.67
0.41
-0.14
-0.21
-0.95
39.55
2.37
-0.89
29.28
0.09
0.28
0.29
-0.73
0.23
1.00
0.33

Capital
Employed (Rs)
235172216
276463770
411135963
488907201
875014985
1356420160
1436956723
62601235
384255088
-3421158487
4199323779
4731159017
2768111019
678745091
2093519320
-14470652593
-2464987220
-7314739417
8430329511

%
change
-5.00
5.38
2.89
3.66
1.77
7.81
3.03
9.81
-2.32
3.59
2.68
1.24
8.86
4.54
-3.30
-1.18
-1.20
1.58

ROCE
0.30
0.41
0.65
0.18
0.14
0.08
0.06
0.06
0.40
--0.01
0.06
0.07
0.75
0.28
------0.32

Source : Data is compiled from Annual Reports of BSE from 1991-2009

ROCE : Operating Profit/Capital Employed, ROCL :Return on Capital Employed

120

In the year 1993, 2004 & 2005 BSE making more profit as compared to
other years. In these years ROCE remains between 0.64 to 3.4. For the rest
of years it is lower i.e. between 0.02 to 0.40.In the year 2001, 2006, 2007 &
2008 capital employed is negative so cannot find out ROCE but still BSE
getting operating profit.
Conclusion
BSE is an oldest stock exchange in Asia with a rich heritage. Now
spanning three centuries in its 133 years of existence. What is now popularly
known as BSE was established as "The Native Shares & Stock Brokers
Association" in 1875. It is seen that out of total companies listed on BSE 72%
of companies are listed on BSE only. BSE's debt segment and equity
derivative segment are not developed as capital market segment of BSE.
BSE's delivery ratio in term of physical shares oscillates between the range of
25% to 46%. The BSE contributed very little share of total derivative market.
FII are continuously pumping their money into the Indian stock market and on
BSE, but there are fluctuations in their investment. About turnover of BSE
Group-A shares and specified shares accounted larger part of BSE's total
annual turnover.
About the concentration of market, Top-100 securities and Top-100
members accounted largest percentage of total turnover of BSE's cash
market segment. In case of trading frequency, companies traded on BSE for
more than 100 days increase significantly during the study period of 19911992 to 2008-09.
Looking into product wise turnover of derivative segment of BSE, index
future which accounted for highest percentage of turnover among the various
products of equity derivative segment of BSE. In case of fresh capital listed on
BSE, preferential instruments listed highest amount of capital than equity
instruments and debentures and bonds. It is also observed that average daily
turnover of specified shares is greater than average daily turnover of nonspecified shares.

121