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BOMBAY STOCK EXCHANGE

Project Report

On

Bombay Stock Exchange

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BOMBAY STOCK EXCHANGE

What Is Stock?
Imagine you wanted to start a retail store with members of your family. You
decide you need Rs.100,000 to get the business off the ground so you
incorporate a new company. You divide the company into 1,000 pieces, or
"shares" of stock. (They are called this because each piece of stock is
entitled to a proportional share of the profit or loss). You price each new
share of stock at Rs.100. If you can sell all of the shares to your family
members, you should have the Rs.100,000 you need (1,000 shares x Rs.100
contributed capital per share = Rs.100,000 cash raised for the company).

If the store earned Rs.50,000 after taxes during its first year, each share of
stock would be entitled to 1/1,000th of the profit. You'd take Rs.50,000 and
divide it by 1,000, resulting in Rs.50.00 earnings per share (or EPS). You
could call a meeting of the company's Board of Directors (these are the
people the stockholders elected to watch over their interest since they
couldn't run the business) and decide to use the money to pay dividends,
repurchase, or expand the company by reinvesting in the retail store.

At some point, you may decide you want to sell your shares of the family
retailer. If the company is large enough, you could trade on a stock
exchange. That's what is happening when you buy or sell shares of a
company through a stock broker. You are telling the market you are
interested in acquiring or selling shares of a certain company and Wall Street
matches you up with someone and takes fees and commissions for doing it.
Alternatively, shares of stock could be issued to raise millions, or even
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billions, of dollars for expansion. When Sam Walton formed Wal-Mart


Stores, Inc., the initial public offering that resulted from him selling newly
created shares of stock in his company gave him enough cash to pay off
most of his debt and fund Wal-Mart's nationwide expansion.

STOCK EXCHANGE

STOCK EXCHANGE is an organized market place, either corporation


or mutual organization, where members of the organization gather to
trade company stocks or other securities.Stock Exchange also facilitates
for the issue and redemption of securities and other financial
instruments including the payment of income and dividends. The trade
on an exchange is only by members and stock broker who have a seat
on the exchange.

Name of Indian Stock Exchanges

1. Ahmedabad Stock Exchange


2. Bangalore Stock Exchange
3. Bhubaneswar Stock Exchange
4. Bombay Stock Exchange
5. Calcutta Stock Exchange
6. Cochin Stock Exchange
7. Coimbatore Stock Exchange
8. Delhi Stock Exchange Association
9. Gawahati Stock Exchange
10.Hyderabad Stock Exchange
11.Inter-connected Stock Exchange of India
12.Jaipur Stock Exchange
13.Ludhiana Stock Exchange
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14.Madhya pradesh Stock Exchange


15.Madras Stock Exchange
16.Mangalore Stock Exchange
17.National Stock Exchange
18.Magadh Stock Exchange (Patna)
19.Over The Counter Stock Exchange of India (OTCEI)
20.Pune Stock Exchange
21.Uttar Pradesh Stock Exchange
22.Vadodara Stock Exchange
23.Meerut Stock Exchange
24.United Stock Exchange (started in June09)
25.Saurashtra Stock Exchange
Stock Exchange being a very vast topic, we are focusing on BOMBAY
STOCK EXCHANGE (BSE).

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CHAPTER 1-INTRODUCTION

Bombay Stock Exchange is the oldest stock exchange in Asia What is now
popularly known as the BSE was established as "The Native Share & Stock
Brokers Association" in 1875.

Over the past 135 years, BSE has facilitated the growth of the Indian
corporate sector by providing it with an efficient capital raising platform.

Today, BSE is the world's number 1 exchange in the world in terms of the
number of listed companies (over 4900). It is the world's 5th most active in
terms of number of transactions handled through its electronic trading
system. And it is in the top ten of global exchanges in terms of the market
capitalization of its listed companies (as of December 31, 2009). The
companies listed on BSE command a total market capitalization of USD
Trillion 1.28 as of Feb, 2010.

BSE is the first exchange in India and the second in the world to obtain an
ISO 9001:2000 certifications. It is also the first Exchange in the country and
second in the world to receive Information Security Management System
Standard BS 7799-2-2002 certification for its BSE On-Line trading System
(BOLT).

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The BSE Index, SENSEX, is India's first and most popular Stock Market
benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on
BSE and in Hong Kong. Futures and options on the index are also traded at
BSE.

BSE continues to innovate:

Became the first national exchange to launch its website in Gujarati


and Hindi and now Marathi

Purchased of Marketplace Technologies in 2009 to enhance the in-


house technology development capabilities of the BSE and allow
faster time-to-market for new products

Launched a reporting platform for corporate bonds christened the


ICDM or Indian Corporate Debt Market

Acquired a 15% stake in United Stock Exchange (USE) to drive the


development and growth of the currency and interest rate derivatives
markets

Launched 'BSE StAR MF' Mutual fund trading platform, which


enables exchange members to use its existing infrastructure for
transaction in MF schemes.

BSE now offers AMFI Certification for Mutual Fund Advisors


through BSE Training Institute (BTI)

Co-location facilities for Algorithmic trading

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BSE also successfully launched the BSE IPO index and PSU website

BSE revamped its website with wide range of new features like 'Live
streaming quotes for SENSEX companies', 'Advanced Stock Reach',
'SENSEX View', 'Market Galaxy', and 'Members'

With its tradition of serving the community, BSE has been undertaking
Corporate Social Responsibility (CSR) initiatives with a focus on Education,
Health and Environment. BSE has been awarded by the World Council of
Corporate Governance the Golden Peacock Global CSR Award for its
initiatives in Corporate Social Responsibility (CSR).

Other Awards:

The Annual Reports and Accounts of BSE for the year ended March
31, 2006 and March 31, 2007 have been awarded the ICAI awards for
excellence in financial reporting.

The Human Resource Management at BSE has won the Asia - Pacific
HRM awards for its efforts in employer branding through talent
management at work, health management at work and excellence in
HR through technology

Drawing from its rich past and its equally robust performance in the recent
times, BSE will continue to remain an icon in the Indian capital market.

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CHAPTER 2-NEED FOR BSE

BSE is one of the factors Indian Economy depends upon. BSE has played a
major role in the development of the country. Through BSE, Foreign
Investors have invested in India. Due to inward flow of foreign currency the,
the Indian economies have started showing the upward trend towards the
development of the country.

BSE provides employment for many people. Trading in BSE is also a


business for a few, their family income depends on it that is the reason why
when scandals occur in the stock market it not only affects the companies
listed but also affects many families. In the few extreme cases, it is observed
that the bread winner of a family tends to suicide due to the losses occurred.

In most of major industrial cities all over the world, where the businesses
were evolving and required investment capital to grow and thrive, stock
exchanges acted as the interface between Suppliers and Consumers of
capital. One of the key advantages of the stock exchanges is that they are
efficient medium for raising resources and channeling savings from the

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general public by the way of issue of Equity / Debt Capital by joint stock
companies which are listed on stock exchanges.

Not to forget that the taxes and other statutory charges paid by BSE are
substantial and make a sizeable contribution to the Government exchequer
(Financial resources; funds). For example, transactions on the stock
exchanges are subject to stamp duties, which are paid to the State
Government. The annual revenue from this source ranges from Rs 75 100
crores

With the opening up of the financial markets to Foreign Investors a number


of foreign institutional investors and brokers have established a sizeable
presence in Mumbai.

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CHAPTER 3-FUNCTIONS OF BSE

The Stock Market is a pivotal institution in the financial system. A well-


ordered stock market performs several economic functions: It ensures
the measure of safety and fair dealing

It performs an act of magic by translating short-term


investments into long-term funds for companies.
It directs the flow of capital in the most profitable
channels.
It induces companies to raise their standard of
performance.
It offers guidance to management about the cost of capital.
1. Measure of Safety and Fair Dealing:

The stock exchanges operate under a regulatory framework which seeks


to protect the interest of investors. The rules, regulations, and bye-laws
of a stock exchange, which are approved by the central government, are
meant to ensure that a reasonable measure of safety is provided to

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investors and transactions take place in competitive conditions which


are fair to all concerned.

2. Act of Magic:

Most of the investors are interested in short-term investments. The


requirements of companies are, however, long-term in naturethey
require equity capital on a more or less permanent basis and debenture
capital for 3 to 15 years. Thanks to the negotiability and transferability
of securities, through the stock market, it is possible for companies to
obtain their long-term requirements from investors with short-term
horizons. While one investor is substituted by another when a security
is transacted, the company is assured of availability of funds.

3. Flow of Capital in the Most Profitable Channels:

Companies which have more profitable investment opportunities are


normally able to raise substantial funds through the stock market,
whereas companies which do not have such opportunities are normally
not able to do so. As a result, the stock market facilitates the direction
of the flow of capital in the most profitable channels.

4. Inducement to Companies to Raise their Standard of


Performance:

When the equity, capital of a company is listed on a stock exchange, the


performance of the company is reflected in the market price of the
equity stock, which is readily available for public consumption. Put
differently, the companys performance is more visible in the eyes of
public. Such a public exposure normally induces companies to raise
their standard of performance.

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5. Guidance of Cost of Capital:

The market value of the securities of company are required for


computing its cost of capital. Such values can be obtained from stock
market quotations. Hence the stock market offers guidance on cost of
capital.

CHAPTER 4-OBJECTIVES OF BSE

1) To safeguard the interest of investing public having dealings on the


exchange.
2) To establish and promote honorable and just practices in securities
transactions.
3) To promote, develop and maintain well regulated market in securities.
4) To promote industrial development in the country through efficient
resource mobilization by the way of investment in corporate securities.

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CHAPTER 5-FEATURES OF SENSEX

1) Sensex is a value weighted index


2) Composed of 30 stocks representing various sectors
3) These companies accounts for one fifth of market capitalization
4) Base value of sensex is 100 (april 1,1979)
5) Base year (1978-79)
6) Free float capitalization method
7) Iconic stature-tracked worldwide
8) Index cooperation agreement with deutsche borse has made sensex
available to investors in europe and america
9) Also available in hong kong

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CHAPTER 6-INDICES OF BSE

Broad Market Indices


1) Sensex 2) Bse 100 3) Bse 200
4) Bse500 5) Bse Mid Cap 6) Bse Small Cap

Sectoral Indices
1) Bse Auto 2) Bankex 3) Capital Goods
4) Consumerable Goods 5) Fmcg 6)IT, Power

Dollar Linked Indices

1) Dollex30 2) Dollex100 3) Dollex 200

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CHAPTER 7-CONSTITUENTS LIST OF BSE SENSEX


Bombay Stock Exchange has 30 companies scripted
1. BHEL
2. BHARTI AIRTEL
3. DLF UNIVERSAL Ltd.
4. GRASIM INDUSTRIES
5. HDFC
6. HDFC BANK
7. HERO HONDA MOTORS Ltd.
8. HINDALCO INDUSTRIES Ltd.
9. HLL
11.ICICI BANK
12.INFOSYS
13.ITC Ltd.
14.JAIPRAKASH ASSOCIATES
15.L&T
16.M&M Ltd.
17.MARUTI UDYOG
18.NTPC
19.ONGC
20.RELIANCE COMMUNICATION

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21.RELIANCE INDUSTRIES
22.RELIANCE INFRASTRUCTURE
23.SBI
24.STERLITE INDUSTRIES
25.SUN PHARMACEUTICAL INDUSTRIES
26.TCS
27.TATA MOTERS
28.TATA STEEL
29.TATA POWER
30.WIPRO

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CHAPTER 8-WHO SELECTS THE SCRIP

1. They are selected by the Index Committee.


2. This committee consists of all sorts of individuals including
academicians, mutual fund managers, finance journalists,
Independent governing board members and Other participants in the
financial markets.

SCRIP SELECTION CRITERIA

Market capitalization: The company should have a market capitalization in


the Top 100market capitalizations of the BSE. Also the market
capitalization of each company should Be more than 0.5% of the total
market capitalization of the Index.

Trading frequency: The Company to be included should have been traded


on each and every trading day for the last one year. Exceptions can be made
for extreme reasons like share suspension etc.

Number of trades: The scrip should be among the top 150 companies listed
by average number of trades per day for the last one year.

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Industry representation: The companies should be leaders in their industry


group.

Listed history: The companies should have a listing history of at least one
year on BSE.

Track record: In the opinion of the index committee, the company should
have an acceptable track record.

KINDS OF SHARES
Small Caps (small market Capitalization less lie in between $300
million - $2billion),
Large Caps (large Capitalization in between $10billion-
$200billion),
Mid Caps (lie in between Small & Large)

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CHAPTER 9-MARKET CAPITALIZATION

It is the worth of the company in terms of shares


Based on this market capitalization values onlycompanies are
classified into "large-cap", "mid-cap"and "small cap"
Market Capitalization = No. of outstanding shares
x Current market price of one share

IN CASE OF BONUS SHARES

Sensex will be based on some adjustment in the total market


capitalization
Total market capitalization (new) = Total market capitalization(old) x
[ New market capitalizationof stock / old market capitalization of
stock]

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CHAPTER 10-BENEFITS OF BSE

FROM THE POINT OF VIEW OF COMMUNITY:


1. It assist the economic development by providing a body of interested
investors.
2. it uploads the position of superior enterprises and assist them in raising
further funds.
3. Government can undertake projects of national importance and social
value raising funds through the sale of its securities on the stock exchange.
4. It is the stock exchanges that central bank of a country can control credit
by undertaking open market operations (purchase and sale of security)

FROM THE COMPANY POINT OF VIEW:


1. A company whose shares quoted on stock exchange they enjoy better
reputation and credit.
2. The market for the shares of such a company is naturally widened.
3. The market price of securities is likely to be higher in relation to its
earnings, dividends and property values. This raises the bargaining power of
the company in the event of a takeover, merger or amalgamation.

FROM THE INVESTORS POINT OF VIEW:


1. Liquidity of the investment is increased
2.The securities dealt on a stock exchange are good
collateral security for loans.

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3. The stock exchange safeguards interests of investors through strict


enforcement of rules and regulations.
4. The present net worth of investments can be easily known by the daily
quotations.
5. His risk is considerably less when he holds or purchases listed securities.

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CHAPTER 11-FACTORS AFFECTING BSE

There are various factors that affect BSE:

(a) THE KETAN PAREKH SCAM

Ketan Parekh was a graduate from HR College and CA by profession. Ketan


Parekhs scam was often referred to as the one-man army or Pentafour Bull.
The 176-point Sensex crash on March 1, 2001 came as a major shock for the
Government of India, the stock markets and the investors alike

This sudden crash in the stock markets prompted the Securities Exchange
Board of India (SEBI) to launch immediate investigations into the volatility
of stock markets.

The scam shook the investor's confidence in the overall functioning of the
stock markets. By the end of March 2001, at least eight people were reported
to have committed suicide and hundreds of investors were driven to the
brink of bankruptcy.

The first arrest in the scam was of the noted bull, Ketan Parekh (KP), on
March 30, 2001, by the Central Bureau of Investigation (CBI). Soon, reports
abounded as to how KP had single handedly caused one of the biggest scams
in the history of Indian financial markets. He was charged with defrauding
Bank of India (BoI) of about $30 million among other charges.

KP's arrest was followed by yet another panic run on the bourses and the
Sensex fell by 147 points. By this time, the scam had become the 'talk of the
nation,' with intensive media coverage and unprecedented public outcry.

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Bank of India along with Punjab National Bank and SBI were at the
receiving end. Madhavapura Bank and Classic Cooperative Bank are the
others affected. Ketan Parekh owes around Rs1.3bn to the Bank of India

KPs scam was one of the major scam in India after Harshad Mehta which
lost the confidence of investors in investing in share market. KPs scam is
also regarded as one mans army scam.

(b) FOREIGN INSTITUTIONAL INVESTORS (FII)

Foreign investment refers to investments made by residents of a country


in another countrys financial assets and production processes. After the
opening up of the borders for capital movement, foreign investments in
India have grown enormously. It affects the productivity factor of the
beneficiary or the receiver country and has the potential to create a
ripple effect on the balance of payments of that country. In developing
countries like India, foreign capital helps in increasing the productivity
of labor and to build up foreign exchange reserves to meet the current
account deficit. It provides a channel through which these countries can
have access to foreign capital.

Foreign investment can be of two forms: Foreign direct investment


(FDI) and Foreign portfolio investment (FPI).FDI involves direct
production activity and has a medium to long term investment plans. In
contrast the FPI has a short term investment horizon. They mostly
investment in the financial markets which consist of Foreign
Institutional Investors (FIIs). They invest in domestic financial markets
like money market, stock market, foreign exchange market etc.

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Foreign institutional investors investments are volatile in nature, and


they mostly invest in the emerging markets. They usually keep in mind
the potential of a particular market to grow.

FII has lead a significant improvement in India relating to the flow of


foreign capital during the period of post economic reforms. The inflow
of FII investments has helped the stock market to raise at a greater
height according to financial analysts. Sensex touched a new height. It
crossed 10000-mark in January 2006, which was 8073 on November 2,
2005, and 9323 in December 2005.FII participation in the Indian stock
market triggers its upward movement, but, at the same time, increased
liquidity through FII investment inflow increases volatility too.

FIIs IMPACT ON THE INDIAN ECONOMY.

The Ashok Lahiri Committee Report on encouraging FII Flows (Ministry of


Finance, the Government of India) mentions some reasons for the need of
FII flows. FII flows supplement and augment domestic savings and domestic
investment without increasing the foreign debt of our country. Capital
inflows to the equity market increase stock prices lower the cost of equity
capital and encourage investment by Indian firms.

The Indian stock markets are both shallow and narrow and the movement of
stocks depends on limited number of stocks. As FIIs purchases and sells
these stocks there is a high degree of volatility in the stock markets. If any
set of development encourages outflow of capital that will increase the
vulnerability of the situation. The high degree of volatility can be attributed
to the following reasons:

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The increase in investment by FIIs increases stock indices in turn


increases the stock prices and encourages further investments. In this
event when any correction takes place the stock prices declines and
there will be full out by the FIIs in large number as earning per share
declines.
The FIIs manipulate the situation of boom in such a manner that they
wait till the index raises up to a certain height and exit at an
appropriate time. This tendency increases the volatility further.

So even though the portfolio investment by FIIs increases the flow of money
in the economic system, it may create problems of inflation.

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CHAPTER 12-CAUSES OF PRICE FLUCTUATION:

1. DEMAND AND SUPPLY


2. BANK RATE
3. SPECULATIVE PRESSURE
4. ACTIONS OF UNDERWRITERS AND OTHER FINANCIAL
INSTITUTIONS
5. CHANGE IN COMPANYS BOARD OF DIRECTORS
6. FINANCIAL POSITION OF THE COMPANY
7. TRADE CYCLE
8. POLITICAL FACTORS
9. SYMPATHETIC FLUCTUATIONS
10.OTHER FACTORS:
i) EXPECTED MONSOON
ii) PERSONAL HEALTH OF HEAD OF GOVERNMENT OR
CHAIRMAN OF THE COMPANY
iii) OIL PRICES IN THE INTERNATIONAL MARKET.
iv) CHANGES IN EXCHANGE RATE
v) BORDER TENSION
vi) STOCK BROKERS SCAM LIKE HARSHAD MEHTA AND
KETHAN PAREKH
vii) STRIKES AND LOCK-OUT OF THE COMPANY.
viii) NEW BUDGET PROPOSALS
ix) LIBERLIZATION AND PRIVATIZATION OF THE
COMPANY.

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CHAPTER 13-SPECULATION

It involves the buying, holding, selling, short-term selling of stocks,


bonds, commodities, currencies, collectible or any valuable financial
instrument to profit from fluctuations in its price as opposed to buying it
for use or for income via method like dividends or interest.

Kinds of speculation

Bull Market (Tejiwala):


In case of that they purchase the shares at current prices to sell at a higher
price in the near future and makes a profit if his expectations come true.
He is also called a long buyer.
Bear Market (Mandiwala):
He sells security in the hope that he will be able to buy them back at
lesser price. It is also called short selling.
Stag:

He is that type of speculator who applies for a large number of shares in a


new issue with the intention of selling them at a premium. He is bullish
and very cautious.

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CHAPTER 14-HIGHS AND LOWS OF BSE


15,000, July 6, 2007 The Sensex on July 6,2007 crossed the magical figure
of 15,000 to touch 15,005 points in afternoon trade. It took seven months for
the Sensex to move from 14,000 to 15,000 points.
16,000, September 19, 2007 The Sense scaled yet another milestone during
early morning trade on September 19, 2007.Within minutes after trading
began, the Sensex crossed 16,000, rising by 450 points from the previous
close. The 30-share Bombay Stock Exchange's sensitive index
took 53 days to reach 16,000 from 15,000

17,000, September 26, 2007 The Sensex scaled yet another height during
early morning trade on September 26, 2007.Within minutes after trading
began, the Sensex crossed the 17,000-mark .
18,000, October 09, 2007 The BSE Sensex crossed the 18,000-mark on
October 09, 2007. It took just 8 days to cross 18,000 points from the 17,000
mark. The market set several new records including the biggest single day
gain of 789 points at close, as well as the largest intra-day gains of 993.
19,000, October 15, 2007 The Sensex crossed the 19,000-mark backed by
revival of funds-based buying in blue chip stocks in metal, capital goods and
refinery sectors. The index gained the last 1,000 points injust four trading
days.
20,000, October 29, 2007 The Sensex crossed the 20,000 mark on the back
of aggressive buying by funds ahead of the US Federal Reserve meeting.
The index took only 10 trading days to gain 1,000 points after the index
crossed the 19,000-mark on October 15. The major drivers were index

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21,000, January 8, 2008 The sensex peaks. It crossed the 21,000 mark in
intraday trading after 49 trading sessions. However, it later fell back due to
profit booking.
15,200, June 13, 2008 The sensex closed below 15,200 mark, Indian market
suffer with major downfall from January 21,2008
14,220, June 25, 2008 The sensex touched an intraday low of 13,731 during
the early trades, then pulled back and ended up at 14,220 amidst a negative
sentiment.

12,822, July 2, 2008 The sensex hit an intraday low of 12,822.70 on July
2nd, 2008.This is the lowest that it has ever been in the past year. Six months
ago, on January 10th, 2008, the market had hit an all time high of
21206.70. This is a bad time for the Indian markets, although Reliance and
Infosys continue to lead the way with mostly positive results.
11801.70, Oct 6, 2008 The sensex closed at 11801.70 hitting the lowest in
the past 2years.
10527, Oct 10, 2008 The Sensex today closed at 10527,800.51 points down.
14284.21, May 18, 2009 After the result of15th Indian general election
Sensex gained 2110.79 points from the previous close of 12173.42 these
creates a new history in Indian Market. In the Opening Trade itself sensex
gains 15% from the previous day close this leads to the suspension of 2
hours trade. After 2 hours sensex again surged this
leads to the suspension of full day trading.

Sensex falls
Some major single-day falls of the Sensex have occurred on the following
dates
January 21, 2008 --- 1,408.35 points

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Oct 24, 2008---1070.63 points


March 17, 2008 --- 951.03 points
July 6, 2009 --- 870 points
January 22, 2008 --- 857 points
February 11, 2008 --- 833.98 points
May 18, 2006 --- 826 points
October 10,2008 --- 800.10 points

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CONCLUSION

With the increasing Globalization, the Stock Exchanges have


tremendously affected the financial conditions of India.

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

Already, BSE has shown its proactive response by increasingly using


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

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


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

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BIBLOGRAPHY

www.google.com

www.wikepedia.org

www.bse.in

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