WORKING OF NATIONAL STOCK

EXCHANGE IN INDIA
Submitted by

DHANUSH VEER S

Reg. No. BC0190010

Name of the Guide

Dr. T. S. Agila, Ph. D

Assistant Professor

TAMIL NADU NATIONAL LAW UNIVERSITY

(A State University established by Act No. 9 of 2012)
Tiruchirappalli
Tamil Nadu – 620 027

DECEMBER – 2020

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Dr. T. S. Agila, Ph. D
Tamil Nadu National Law University
Tiruchirappalli
Tamil Nadu – 620 027

CERTIFICATE
This is to certify that the project work entitled “WORKING OF
NATIONAL STOCK EXCHANGE IN INDIA” is a bonafide record of the
research work done by (Dhanush veer S), under my supervision and guidance.
It has not been submitted by any other University for the award of any degree,
diploma, associateship, fellowship or for any other similar recognition.

Place: Tiruchirappalli
Date:

Signature of the Guide

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Dhanush Veer S
Reg. No. BC0190010
II – B.Com., LLB., (Hons.)
Tamil Nadu National Law University
Tiruchirappalli
Tamil Nadu – 620 027

DECLARATION

I (Dhanush Veer S), Register Number (BC0190010), hereby declare that this
Research Paper work entitled “WORKING OF NATIONAL STOCK
EXCHANGE IN INDIA” has been originally carried out by me under the
guidance and supervision vision of (Dr. T. S. Agila, Ph. D), Assistant professor,
Tamil Nadu National Law University, Tiruchirappalli - 620 027. This work has
not been submitted either in whole or in part of any Degree/ Diploma at any
University.

Place: Tiruchirappalli
Date:20.11.2020
Counter Signed Signature of the candidate

Project Guide

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 ACKNOWLEDGEMENT

At the outset, I take this opportunity to thank my Professor (Dr. Anandh

Kumar Singh, Ph.D.) from the bottom of my heart who have been of immense
help during moments of anxiety and torpidity while the project was taking its
crucial shape.

Secondly, I convey my deepest regards to the Vice Chancellor Mrs.

Elizabeth V.S.  and the administrative staff of TNNLU who held the project in
high esteem by providing reliable information in the form of library
infrastructure and database connections in times of need.

Thirdly, the contribution made by my parents and friends by foregoing

their precious time is unforgettable and highly solicited. Their valuable advice
and timely supervision paved the way for the successful completion of this
project.

Finally, I thank the Almighty who gave me the courage and stamina to
confront all hurdles during the making of this project. Words aren’t sufficient
to acknowledge the tremendous contributions of various people involved in this
project, as I know ‘Words are Poor Comforters’. I once again wholeheartedly
and earnestly thank all the people who were involved directly or indirectly
during this project making which helped me to come out with flying colours.

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 Table of Contents

CONTENT Page.no.
Introduction 6
Objective Of stock Exchange 7
Role of Stock Exchange 8
Formation of Stock Exchange In India 10

National Stock Exchange 11

Structure of NSE 12

Difference Between NSE and BSE 15

Justification of the study 16

Limitations of Stock Exchange 18

Conclusion 19

Introduction

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In the last decade, stock market in India was a golden age. It now provides a much more
significant financial outlet than conventional corporate finance intermediaries. The Indian
economy in terms of a variety of metrics is now equal to several developing markets. The
1990s saw a substantial source of funding for commerce and industry emerging from the
securities market. Instead of relying on FI loans/banks, more businesses enter the stock
market. The business sector relies more and more on external financing sources.

India's National Bursary (NSE) is the country's leading stock exchange. In terms of
microstructure, business operations and trade volumes, NSE has become a tool for changing
the Indian securities market. The Exchange provides incomparable openness, pace,
performance, protection and business integrity. It has developed structures, practises and
procedures that serve as a blueprint for the securities industry.

The stock market is known to be the economic barometer of the world that demonstrates the
essence, at any moment, of the market environment. It is the marketplace for buying and
selling corporate and government securities. It provides the listed scripts with enough
marketability and price consistency. It is also the only market capable of extending rational
security, equal and equitable transactions for the purchase and distribution of securities and of
improving the investor's investment performance at large.

Definition of stock exchange in India

We can see the definition of stock exchange in Section 2(3)of the Securities Contract
(Regulation) Act, 1956. The act states that , “the following securities can be traded at the
stock exchange :

(a)Share, scrips , stocks, bonds, debentures, debenture stocks or other marketable securities of
a like nature in or of any incorporated company or other body corporate.

(b) Government securities ;and

(c) Right or interests in securities.”1

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Sec2(3) of security exchange act

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Objective Of stock Exchange

(1) The key purpose of the stock markets is the provision of ready commercialization and
liquidity.Trade management and interest security for buyers.

(2) The other purpose of the stock exchange is the creation of a nation-wide stock, debt and
hybrid trade facility.

 (3) . Ensuring fair connectivity to an adequate communications network for investors around
the world.

(4) Supplying customers with electronic trading platforms with an equal, effective and open
stock market.

(5) allow shorter settlement times and settlement processes for book entry and achieve
current international securities market standards.

(6) Two more business groups for institutions solely.

(7) In order to promote an institutional market with significant volumes of exchange for
settlement in jumbo lot, an institutional batch segment and trade for the trade segment are
being set up.

Features

Functions

 Sharemarket delivers a ready-to-go business Shares, bond issued by different parties

and shares .
 It helps to assess different price Securities, such as shares, bonds and debentures.
 Helps mobilise unused assets from Co-operatives, businesses and citizens Common
securities investment.
 It plays an important part in guaranteeing larger shares Land. Property.
 It adds to Economic Productivity.
 It guarantees fair dealings and protection of funds.
 Facilitating the formation of capital in the worldproviding an investing path for
diverse Securities yielding higher yields.

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Role of Stock Exchange

(1) Adequate liquidity and Marketability:

One of the essential functions of the stock exchange is to offer opportunities to the investor to
turn their liquid funds (assets) into securities and securities into capital easily with little
difference current market price. The stock market offers liquidity and price continuity only
listed shares listed securities are those, which have been approved to be exchanged on a
specific stock exchange.

(2) Safety to Investor:

The primary duties of a stock exchange are to ensure that the truthful investor is sufficiently
safe in the event of fraud and manipulation arising from the speculators, the members, the
traders, etc. In addition to the above rules, Securities and Exchange Board of India (SEBI)
has ordered India to set up separate cells for representations against all listed companies and
their representatives. To avoid fraud and manipulation by speculators.

(3) Evaluation of securities:

Another essential feature of the stock exchange is to enable the different scripts exchanged on
lts floor to decide rational and equal rates. That is the stocks. Exchange acts as a tool to set
scrip rates by demand and supply market powers.

(4) Mobilization of saving

Another essential role of stock exchanges is to mobilise public savings and channel them for
productive purposes in a market. That is, both participants – including private people and the
institution – have enough opportunities to participate in surplus assets in the capital market.
This allows the stock exchange to grow money in the economy.

(5) Widening share ownership base

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The expansion of the share holding base particularly in developed countries is another
powerless feature of the stock exchange. It is noted that the general public in these countries
is not well aware and familiar with the stock market and available avenues. In this respect,
they do something sufficient. The stock exchange will play a major role in educating the
masses through different media.

(4) Contributor to Economic Growth

The Method of reaching provides a forum for stock exchange in different businesses. This
exchange mechanism includes constant disinvestment and reinvestment, which creates
opportunities for the formation of capital and ultimately economic growth.

(5) Role of an Economic Barometer

It act as a barometer for the economy that indicates the state of the economy. Both the large
and minor movements in share prices are registered. The activity of the economy representing
the state of the economy is correctly said to be.

Formation of Stock Exchange In India

In India bonds may be formed in any institution i.e. public limited company, guaranteed
limited company, individual association, non-profit organisation,and so on. The Securities
Contract (Regulation) Act normally allows a bourse to represent a group of individuals in a
limited company type. The recognised stock exchanges in India were arranged in a variety of
ways. The Mangalore, Jaipur as public limited corporations, and the trade in Hyderabad and
Magadh and Pune, Bhubaneshwar and Saurashtra are limited as guarantees, such as Bombay,
Ahmedabad Stock Exchange, and Indore Stock Exchange (Indore) as a voluntary nonprofit
organisation.

National Stock Exchange

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The NSE is India's leading stock exchange covering different markets and cities around the
world. The National Stock Exchange NSE has been developed by leading institutions to
provide a new, fully digital, nationally available screen trading infrastructure. The Exchange
has created unequalled openness, pace & efficiency, protection and credibility of the sector. It
has developed structures, practises and procedures that serve as a blueprint for the securities
industry.

In terms of microstructure, business operations and trade volumes, NSE has become a tool for
changing the Indian securities market. The industry currently uses state-of-the-art IT to
provide an effective and open system for exchange, clearing and settlement and has seen
many goods and services developments. Settlement cycle compression, dematerialization and
electronical transition of shares, funding and securities financing, professionalisation of the
trading participants, fine-tuning risk control mechanisms, advent of counterparty clearing
firms, debt and derivative markets, and heavy use of IT.

In its report on the High Powered Study Group on the Development of New Stock Markets,
the National Stock Exchange of India Limited proposed supporting the national equity
bursary of financial institutions to ensure fair access to investors from across the world.
Based on the recommendations, NSE was promoted by the Government of India and, unlike
any other stock exchange in the world, it was established as a tax-paying enterprise in
November 1992.

NSE began operative in June 1994 in the section Wholesale Debt Market (WDM) as a stock
exchange under the Securities Contracts (Regulation) Act of 1956 in April 1993. In
November 1994 operations began in the Stock Market segment (Equities) and the Derivatives
segment operations started in June 2000.

Market Segments

Whole sale debt market Statement

 segment is traded a broad variety of securities for fixed income including Securities, treasury
bills, state growth Central government Loans, government-issued shares, floating rate Bonds,
zero coupons, index bonds, company paper, certificate bonds Deposit, corporate and
reciprocal funds

Capital Market Segment

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NSE's capital market division offers an accessible and open forum for shares, choice,
debentures, traded funds and government retail securities trading.

Derivatives

Derivatives like futures and options are derivative instruments, but their value differs from
the underlying securities. A future contract can be defined as "a agreement on the purchase or
sale at a pricing arrangement agreed between the parties of a standard quantity of a particular
instrument, at a predetermined future date." Trading in NSEs Nifty and Sensex Index futures
was initiated on 12 June 2000. In November 2001, future stock trading was allowed. The
future section of the Nifty Index registered on the first day of derivatives a cumulative
amount of Rs.2.31 crore. The total number of contracts exchanged on an NSE basis for stock
futures for the month in Oct 2002, which is way ahead of MEFF (Spain) and (London), has
been shown by a comparative review of the world's leading markets.

The positive performance of the future index pushes the NSE to incorporate an index
alternative. After the launch of the future index, NSE began the trading of S&P CNX Nifty
Options in European cash on 4 June 2001. The consumer approved the commodity as shown
by rising demand within the first ten days following the launch of the index option. In an
average of about 350 shares, about 975 contracts were traded with open interest. NSE index
trade constitutes 90% of the market share with the widespread trading of Mumbai, Calcutta,
Delhi and different other centres.

Present Trading method in NSE

The constant and familiar hallmark of contemporary industrial economies is technological

transition. The Internet is the result, and a transition in the world, of technical improvements
to telecom and information technology. The Internet makes investing in stocks faster. NSE
was the first transaction to encourage brokers to begin trading on the Internet. On 31 March
2000, four participants were allowed to begin trading on the Internet. The stock market
section was accessible via computer terminals from broker premises prior to internet sales but
access was made through the telephone and from mobile devices from WAP, through the
personal computers of investors during internet trading. By way of internet trading orders
from investors' personal computers, the trading terminals of their designated brokers are

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routed over the internet, with which they have connections and exchanges. The trade is
executed until these instructions are complied with and the investors collect the confirmation
directly from their own computers. The adoption of internet trading networks has modified
the venues, layout of the industry and possibilities of trade.

Structure of NSE

In the world that is very divorced from ownership and control of the Exchange, the NSE is
one of the first de-modularized stock exchanges. Whilst policymakers in the country provided
the catalyst to its formation, it was set up as a public limited corporation that belongs to the
country's leading institutional investors.

From one day, NSE took the form of a demutualized transaction - in the hands of three
separate sets of citizens possession, management and commerce. NSE owns and is controlled
by experts, who do not deal on the Market either directly or indirectly, by leading financial
firms (banks, insurance firms and other financial intermediaries). This avoided all conflicts of
interest altogether and helped NSE implement policies and activities vigorously within the
scope of the public interest.

The NSE model does not however, prevent the inclusion, assistance and commitment of trade
partners, but it does also accommodate them in a number of ways. Its Executive Board is
comprised of senior managers from promoter organisations, respected law practitioners,
industry, accounting, finance, and fiscal authorities, SEBI nominees and a full-time
executive.

If the Board deals with large policy concerns, market decisions are assigned to separate
committees created by the Board. These commissions include labour unions, academics, the
public and management. The Exchange's day-to-day administration is assigned to the
Executive Director and has a staff of professionals.

NSE’s Education program regarding market

NSE has been coordinating with many universities including the University of Punjab
University of Cuttack, Patiala, the Gokhale University of Policy & Economics (GIPE), Pune,

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Bharati Vidyapeeth Deemed University (BVDU), Pune, Guru Gobind Singh Indraprastha
University, Delhi. NSE has also established finance, exchange and portfolio management
skills amongst the students using NSE Learn to Trade (NLT), a mock market simulation
programme. The modelling platform is somewhat close to the programme that financial
experts use today and lets students learn how to trade in the markets.

In compliance with its programmes for Qualification of Financial Markets (NCFM), NSE
also offers online evaluation and certification awards. Certification currently available in 46
modules spanning a variety of financial and capital markets, at both the beginning and the
advanced stages. The official website of NSE India lists different modules. The NCCMP or
NSE Certified Capital Market Professionnal is a 3–4 months long 100-hour curriculum
involving theoretical and realistic formation on capital markets-related topics and offers a
short course called the NSE Certified Capital Market Professional (NCCMP) in August 2009.
NCCMP includes such topics as equity, debt, derivatives, macroeconomics, technological
research, and primary analysis. Joint qualification from NSE and the concerned is awarded to
qualified applicants.

Bombay Stock Exchange

The Bombay Bourse in Asia, now widely known as BSE, was established in 1875 as The
Native Share & Stock Brokers' Association.' The Native Share & Stock Brokers' association.

BSE has helped the Indian corporate sector to expand over the last 135 years by giving it an
effective forum for raising money.

Nowadays in terms of the number of companies listed (over 4,900), BSE is the world's
number one exchange. It is the fifth largest trade in the world handled by the electronic
trading system. And in terms of market capitalization of its listed firms (as at 31 December
2009), it is among the top ten global exchanges. As of February 2010, the firms listed under
the BSE order a combined USD 1.28 trillion market capitalisation.

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BSE is the premier exchange to earn ISO 9001:2000 certifications in India and the second in
the country. It is also the first exchange to be accredited BS 7799-2-2002 with its BSE On-
Line Trading System (BOLT) for the nation and the second most relevant in the world.

The first and most famous benchmark index of India's stock market is the BSE Index,
SENSEX. The ETFs listed on SENSEX, BSE, and in Hong Kong. Exchange trade funds
(ETF). BSE also markets future and index futures.

Need for BSE

BSE is one of the items that depend on the Indian economy. In the country's growth, BSE
played an important role. International investors invested in India through BSE. The Indian
economies have begun to display the upward trend towards the country's growth, due to the
internal foreign currency influx.

For several, BSE offers employment. BSE trade is also an industry for others the family's
income depends on whether it is not only affected by the listed firms but also impacts many
families as controversies arise. The bread-winner of a household continues to commit suicide
due to defeats in certain serious situations.

The stock markets were the gateway between suppliers and users of capital in most major
industrial centres around the world where corporations were emerging and needed investment
capital to expand and prosper. One of the major benefits of stock markets is that it offers an
effective medium to raise resources and channel savings from the general public, into a stock
market issue, of equity / debt capital.

Not to ignore that the taxes and other charges levied by BSE are considerable and offer a
large contribution to the exchequer of the Government (Financial Resources; Funds). For eg,
stock exchange transactions shall be subject to stamping duty payable to the Government of
the State. The annual income from this source is between Rs 75 and 100

A number of international institutional investors and brokers have formed a major presence in
Mumbai with the opening of the financial markets to foreign investors.

Difference Between NSE and BSE

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1. The number of BSE firms exceeds Amount of NSE firms.

2. When it comes to sector BSE and NSE Both have demonstrated a big outcome recently
days. times. times. There is no distinction between the two BSE is 10th in the world and NSE
11th in the world As far as market capitalization is concerned.

3. If it is safe to conclude that NSE is well apart from BSE regarding business turnover. BSE
is an old stock exchange, and NSE is relatively new, but because of the fact that NSE arrived
late the modernisation has begun.

It's really early. This helped NSE to reach the deep corners and even to reach the entire
planet. At the beginning of NSE's existence, the structure was not identical and could not be
reached from several places except from many major cities. BSE was a few shy of the club,
while NSE was present and feeling in a democratic way. This all means that NSE meets
people faster than BSE does.

4. Since all have similar working, the price disparity is minimal in both markets. Historical
evidence on both market is observable. In all markets there are many firms, so similar
differences are evident. There are many companies. In recent years, both stocks have
produced fantastic success.

5. BSE has more businesses than than BSE BSE The fluctuation of BSE can be seen in NSE
NSE more than

6. The NSE benefit ratio leads because NSE trading volume is higher than BSE. The NSE
profit ratio leads. Increased the P/B ratio decreases the stock valuation such that the NSE is
smaller than the BSE ratio. In order to pay the business dividends, NSE and BSE steadily
decreased.

Therefore we can infer that both BSE and NSE are the foundations of the Indian capital
market after analysing and comparing the Bombay Bourses and the Bombardia National
Bourses. As it is essential for the body to work, the nervous system is similarly

Economy of India. You're not competitors; you should try to be mutually complementary. It
would lead to quick growth and raising of the country if these go hand in hand. While the
norms and practises of both stock exchanges are different and laws are different.

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The liftmen of the nation's development are the primary cause. These two factors are the
foundation of the nation's rise.

Lastly, BSE and NSE are Indian capital-market classics. It is concluded. BSE is the symbol
of prosperity, stable financial progress, while NSE is the symbol of quick growth and a
pioneer in innovation execution. NSE was incorporated just 20 years ago and has now taken
over the BSE, which has dominated India's stock market monopolistically for over a hundred
years. This illustrates the results and

Quality of NSE management results. BSE and NSE are not rivals; both are Indian economic
foundations. Both must strive to be mutually complimentary. If the two go hand in hand, the
country will expand and grow rapidly.

Justification of the study

Capital takes such a dominant position in the economic philosophy of production and
consumption that it is reasonable to conclude that it plays a key role in contributing economic
development. Economic development and accumulation of capital has generally been found
to be important

Correlation and additional capital stock will cause higher growth rates. The strong growth in
productivity and profits contributes to a high rate of capital accumulation. With all financial
instruments, stock market means a market; for the short and long term. It is the market where
long-term funds are borrowed and lent and both debt and equity investments are made.

The stock market plays an important role in ensuring that saving is immobilised and can be
transformed into profitable expenditure for business and sector growth. The stock market
therefore facilitates the development of capital and the country's economic growth.

The economy promotes the country's production of capital and economic growth. As an
essential relation between the savers and borrowers, the stock market works. The savers are
creditors, while borrowers are creditors. Saviors are called to conserve not all wages. "Excess
units" and "deficit units" are used for borrowing. The stock market is the system for the
transmission of excess units and shortfall units. It is a pipeline whereby surplus units lend
deficit units their surplus assets.

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Funds from individuals and financial intermediaries consumed by trade, industry and
government drain into the stock market. The flows of the capital stream are thereby
encouraged, so that national wages can be used more productively and efficient. Excess units
purchase their excess securities and deficit units sell securities to obtain the required funds.
Funds are transferred directly or indirectly to lenders through banks, unit trusts, reciprocal
funds, etc. The borrowers issue primary shares, which the borrowers buy from financial
institutions directly or indirectly.

Increases savers in the form of a stock or dividend are praised by the financial exchange and
passes funds to customers. It then contributes to the creation of capital. Indeed, for those who
have reserves and for those who need profitable investments money the stock market offers a
market facility. It transforms capital into profitable expenditure from inefficient and
unproductive outlets like gold, jewellery, real estate, obvious consumption, etc.

A well advanced capital market consisting of professional banking and non-banking

intermediaries provides stock and securities with stability. This is achieved by supplying the
poor with capital at an inexpensive rate and by helping to reduce speculative jobs. Economic
prosperity is promoted by the stock market. The different institutions working on the stock
market provide the flows of funds with quantities and qualitative direction and logical

Ressource allocation. They do so by translating financial assets into physical assets for
development. This adds to the private and public sector production of trade and industry,
thereby causing economic growth.

The bond is a significant part of the securities market. In the workings of the stock market,
the establishment of NSE and BSE was at the turning point. This institutions play an
important role in a country's economic life, functioning as a free stock market

Prices shall be dictated by supply and demand powers. In a modern world, bourses have a
critical role to play, without a modern bond

There can be no political economy. That is why in 1992, NSE was born. In November 1994,
the division of the stock market (equity) began operations and in June 2000 derivative
operations began. The key task of NSE was to develop a national stock and indebtedness
trading facility and to have an equal and effective hybrid

The electronic trading scheme uses a straightforward stock exchange for investors.

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Limitations of Stock Exchange

(1) The industrial demand for securities is limited in India.

(2) The currency movements are not a financial indicator of the economy.

(3) The stock market dominates speculators who flourish under inflationary conditions and
shortages.

(4) A few manufacturing units are the subject of the stock exchange.

(5) The company of the public sector shall raise the stock markets business equally.

(6) Only listed shares can be auctioned and acquired and sold on stock exchanges.

(7) The general population in those countries is not well-trained and available regarding the
stock market and avenues.

(8) In these respects, they do not have necessary.

(9) A live rural I and semi-urban areas are the population mass uneducated. The surplus is
immense in this field, which is dormant or unproductive.

Conclusion

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A country's economic growth depends on its formation in that country. A country's
manufacturing progress guarantees the country's economic prosperity. Consequently, a
country's economic growth can be calculated by bourses. In other words, stock markets are a
barometer for a country's economic growth. Therefore a stock exchange offers bonds,
debentures, and other instruments to stock brokers and dealers. Bonds also have services for
securities issuance and restitution. This protection must be indicated in order to be able to sell
a security on a certain stock market.

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