WHAT IS STOCK EXCHANGE

Stock exchange is that place where trading of shares is done in terms of sale and purchase. A stock exchange is defined under section 2(3) of the Securities Contracts (Regulation) act 1956, as any body of individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.

INTRODUCTION :

There are 21 stock exchanges in India. Mumbai's (earlier known as Bombay), Bombay Stock Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of the total trading volume in the country. Established in 1875, the exchange is also the oldest in Asia. Among the twenty-one Stock Exchanges recognised by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognised and it is the only one that had the privilege of getting permanent recognition ab-initio.

NAME OF INDIAN STOCK EXCHANGE:

1. Bombay stock exchange 2. National stock exchange(Mumbai) 3. OTC Exchange of India, Mumbai Jaipur stock exchange Madras Stock Exchange Ltd Cochin Stock Exchange Ltd Banglore stock exchange 4. U.P. stock exchange(kanpur) The Gauhati Stock Exchange Limited The Ludhiana Stock Exchange Ltd Calcutta stock exchange(kolkata) Bhubaneswar stock exchange The Delhi Stock Exchange Ltd Vadodara stock exchange(Baroda)

CONT.

11. Ahmedabad Stock Exchange LtdCochin stock exchange 12. Madhya pradesh stock exchange(indore) Pune stock exchange MCX Stock Exchange Ltd Inter connected Sto MCX Stock Exchange Ltdck Exchange of India Ltd. United Stock Exchange of India Limited (USE) Coimbatore Stock Exchange Hyderabad Stock Exchange Magadh Stock Exchange Saurashtra Kutch Stock Exchange (SKSE) Mangalore Stock Exchange

CONT.

Bombay stock exchange : it has 30 companies sripted. 1.ACC 2.BAJAJ 3.AIRTEL 4.BHEI 5.CIPLA 6.DLF 7.GRASIM 8.GUJRAT AMBUJA 9.HDFC 10.HDFC BANK

CONT
11.HERO HONDA 12.HINDALCO 13.HUL 14.ICICI BANK 15.INFICYS 16.ITC 17.L&T 18.MARUTI 19.NTPC 20.ONGC

CONT
21.RANBAXY 22.RELIANCE COMMUNICATION 23.RELIANCE ENERGY 24.RIL 25.SATYAM 26.SBI 27.TCS 28.TATA MOTERS 29.TATA STEEL 30.WIPRO

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NSE

The National Stock Exchange (NSE), located in Bombay, is India's first debt market. It was set up in 1993 to encourage stock exchange reform through system modernization and competition. It opened for trading in mid-1994. It was recently accorded recognition as a stock exchange by the Department of Company Affairs. The instruments traded are, treasury bills, government security and bonds issued by public sector companies

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CONT.
The Organisation: The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing.

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CONT

Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country

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CONT..SS

NSE Group: 1. India Index Services & Products Ltd. (IISL) 2. National Securities Clearing Corporation Ltd. (NSCCL) 3. NSE.IT Ltd. 4. National Securities Depository Ltd. (NSDL) 5. DotEx International Limited

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SPECULATION :

It involves the buying,holding,selling,short-term selling of stocks,bonds,commodities,currencies,collectibles 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.

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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.

CONT
Lame duck : When a bear has made contracts to sell securities, find it difficult to meet his commitment due to nonavailability of security, they appears struggling like it. Stag : He is that type of speculator who applies for a large number of a shares in a new issue with the intention of selling them at a premium. He is bullish and very cautious.

ROLE AND FUNCTIONS OF

A STOCK EXCHANGE Established for the purpose of assisting, regulating and controlling business of buying, selling and dealing in securities. Provides a market for the trading of securities to individuals and organizations seeking to invest their saving or excess funds through the purchase of securities Provides a physical location for buying and selling securities that have been listed for trading on that exchange Establishes rules for fair trading practices and regulates the trading activities of its members according to those rules

The exchange itself does not buy or sell the securities, nor does it set prices for them The exchange assures that no investor will have an undue advantage over other market participants

BENEFITS OF STOCK EXCHANGE

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.It encourages capital formation. 4.Government can undertake projects of national importance and social value raising funds through the sale of its securities on the stock exchange. 5.It is the stock exchanges that central bank of a country can control credit by undertaking open market operations (purchase and sale of securities)

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. 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.

ROLE PLAYER

EXTERNAL:----

1.SHAREHOLDER 2.DEBENTURE

HOLDER

SHAREHOLDER
Shareholders

are divided into two parts 1.Preference shareholder: Preference shareholder are those which have preferential right to the payment of dividend during the life time of the company,and a preferential right to the return of the capital when the company is wound up.

CHARACTERISTICS OF PREF.SHAREHOLDER
1.The

dividend on them is fixed by the articles of the company. 2.They get their fixed rate of dividend before any dividend is distributed among the other class of shareholders. 3.At the time of winding up of the company, the preference shareholder must be paid back their capital before anything is paid to the ordinary shareholders.

KINDS OF PREF.SHAREHOLDER shareholder: These shares are entitled to fixed dividends whether there are profits or loss. If profits are not sufficient to pay in a particular year then that will pay on next year. 2.Non comulative pref.share: These shares cannot claim arrears of dividends of any year (if not paid due to insufficiency of profits ) out of profits of subsequent year.
1.Comulative

CONT.
pref. Shares: These shares receives a fixed rate of dividend in priority to ordinary shares and further, the right to participate in balance of profits in an agreed proportion together with ordinary shares. 4.Redeemable pref.shares: These are shares which can be purchased back by the company. The company reserves its rights to call back or purchased these shares at any time .
3.Participating

EQUITY SHARES
All

shares which are not preference shares are equity shares.These shares do not have a fixed rate of dividend,they are always irredeemable and their holders have normal voting rights. They are also the owners of the company. They take dividend

DEBENTURES
A

document under the company seal which provides for the payment of a principal sum and interest there on at regular intervals which is usually secured by a fixed or floating charge on the companys property or undertaking which acknowledges a loan to the company.

INTERNAL PLAYERS
The members of the stock exchange can be divided into two parts: Broker: He is a commission agent who transacts business in securities on behalf of nonmembers. They may have number of subbrokers to canvass and secure business for them. Jobber: He is an independent dealer securities. He purchase and sells securities in his own name. He is not allowed to deal with nonmembers directly. He works for profit.

TARAWANIWALA
Non-members

: The following categories of non members are also permitted to enter trading hall and transact business on the behalf of members. Authorized clerks: They are the assistant or agents.They buy or sell on the behalf of employers.They can not transact business on their own account. Remisers: They are the sub-brokers. He is also called the half commission men.

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

CONT..

TRADE CYCLE POLITICAL FACTORS SYMPATHETIC FLUCTUATIONS OTHER FACTORS:

EXPECTED MONSOON PERSONAL HEALTH OF HEAD OF GOVERNMENT OR CHAIRMAN OF THE COMPANY OIL PRICES IN THE INTERNATIONAL MARKET.

 

CONT.
CHANGES

IN EXCHANGE RATE BORDER TENSION

STOCK

BROKERS SCAM LIKE HARSHAD MEHTA. AND LOCK-OUT OF THE COMPANY. BUDGET PROPOSALS

STRIKES

NEW

LIBERALIZATION

AND PRIVATIZATION OF THE COMPANY.

BUY BACK SHARES

In

simple term when company repurchase of its own shares that is called buy back shares.

MODES OF REPURCHASE
BASICALLY THERE ARE TWO MODES OF REPURCHASE: Open market repurchase: Company makes an announcement regarding the repurchase of a specified number of shares. The purchases are made anonymously through a broker from the secondary market over a specified period of time. Tender offers: This is basically of two types Fixed price tender offers: company announces a fixed price at which it is willing to buy its shares, a maximum number of shares that it will commit to buy and an expiration date for the offer. The offer price is premium over the market price to encourage the shareholder.

CONT. auction tender offers : In a dutch auction, the company announces the maximum number of shares it wishes to buy and a range of prices at which it will entertain offers. Shareholders who choose to participate must then select a single price in this range at which to tender their shares.
Dutch

RULES FOR REPURCHASE UNDER SEBI ACT 1988

1.Regulations cover only the listed securities of the company 2.In case of purchase through the stock exchange an offer for buy back will not remain open for more than 30 days. 3.Buy back through negotiated deals, spot transactions or private arrangements is not permitted. 4.In the purchases made through stock exchange, the details under the buy back scheme shall be made available to the stock exchange on daily basis:the details in turn shall be made available to public regularly.

HOW RATING IS GIVEN TO THE COMPANY?

Basically rating is given after the company image, management quality, assets quality, auditors quality, accounting accuracy. Rating is not fixed, it may be change. The rating grades are: AAA: HIGHEST SAFTY AA: HIGH SAFTY A: ADEQUATE SAFTY BBB: MODERATE SAFTY BB: IN ADEQUATE SAFTY BC&D: HIGH RISK AND DEFAULT

CREDIT RATING AGENCY IN INDIA

1.CRISIL 2.ICRA 3.CARE

DEPOSITORY

Depository is an institution or a kind of organization which holds securities with it, in which trading is done among shares, debentures, mutual funds, derivatives, F&O and commodities.

BENEFITS OF DEPOSITORY ARE AS FOLLOWS:

Holds securities in electronic form, thus reducing paperwork Applies for IPOs and other public offerings Transfers securities in an immediate manner Risks that are associated with physical certificates such as bad delivery and fake securities are absent Reduces transaction cost Eases nomination facility Direct transmission of securities by the DP to avoid correspondence with companies Records any corporate actions automatically

There are 2 depositories in India :

The National Securities Depository Limited [NSDL] Central Depository for Securities Limited [CDSL]

FACILITIES OFFERED BY NSDL AND CDSL

Dematerialization i.e. converting physical certificates into their electronic form Rematerialization i.e. converting securities in DeMat form into physical certificates Assisting in repurchase / redemption of mutual fund units Electronic settlement of trades in stock exchanges connected to NSDL Pledging or hypothecation of the dematerialized securities against loan Electronic credit of securities allotted in public issue, rights issue Receipt of non-cash corporate benefits such as bonus, in electronic form

Freezing of DeMat account to avoid debits from the account Nomination facilities for DeMat accounts Services related to change of address Effective transmission of securities Other facilities such as holding debt instruments in the same account or availing stock lending / borrowing facility

DEPOSITORY PARTICIPANTS

Services provided by NSDL and CDSL are carried out through their agents known as Depository Participants [DPs]. DPs are appointed by depositories after an approval from SEBI. According to SEBI regulations, 3 categories of entities such as banks, financial institutions, and SEBI registered trading members qualify for becoming DPs Presently, there are 327 DPs in India. Few of them are: Bank of India Bank of Baroda Kotak securities Motilal Oswal Reliance Capital UTI Yes Bank