A PROJECT ON

“THE STUDY OF STOCK MARKET IN INDIA’’

SUBMITTED
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE AWARD OF DEGREE OF
BACHELOR OF MANAGEMENT STUDIES
SEMESTER VI
(2022-2023)

By
KAMAL GOKARAN KHADKA
ROLL NO. 38

Under the Guidance of

PROF. DEVIKA SURYAWANSHI

SIDDHARTH COLLEGE OF COMMERCE AND ECONOMICS

ANAND BHAVAN, DR. D.N ROAD, FORT, MUMBAI 400001

FEBRUARY 2023

1
 A PROJECT ON
“THE STUDY OF STOCK MARKET IN INDIA’’

SUBMITTED
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE AWARD OF DEGREE OF
BACHELOR OF MANAGEMENT STUDIES
SEMESTER VI
(2022-2023)

By
KAMAL GOKARAN KHADKA
ROLL NO. 38

Under the Guidance of

PROF. DEVIKA SURYAWANSHI

SIDDHARTH COLLEGE OF COMMERCE AND ECONOMICS

ANAND BHAVAN, DR. D.N ROAD, FORT, MUMBAI 400001

FEBRUARY 2023

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 Certificate

This is to verify that Mr Kamal Gokaran Khadka , Roll No. 38 has worked and duly
completed his Project Work for the degree of Bachelor in Management Studies under
the Faculty of Commerce in the subject of Finance and his project is entitled," THE
STUDY OF STOCK MARKET IN INDIA” under my supervision.
I further certify that the entire work has been done by the learner under my guidance
and that no part of it has been submitted previously for any Degree or Diploma of any
University.
It is his own work and facts required by his personal findings and investigations.

PROF. DEVIKA SURYAWANSHI

Place : MUMBAI
Date of submission:
ROLL NO :

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 Declaration

I the undersigned Mr. Kamal Gokaran Khadka here by, declare that the work
embodied in this project work titled “THE STUDY OF STOCK MARKET IN
INDIA ", forms my own contribution to the research work carried out under the
guidance of Prof. Devika Suryawanshi is a result of my own research work and has
not been previously submitted to any other University for any other Degree and
Diploma to this or any other University.
Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Kamal Gokaran Khadka

Certified by
PROF. DEVIKA SURYAWANSHI

Acknowledgment
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To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.
I would like to acknowledge the following as being idealistic channels and
fresh dimensions in the completion of the project.
I take this opportunity to thank the University of Mumbai for giving me
chance to do this project.
I would like to thank my Principal, DR. U.M.MASKE for providing the
necessary facilities required for completion of the project.
I take this opportunity to thank our Coordinator Prof. Devika
Suryawanshi , for her moral support and guidance. I would also like to
express my sincere gratitude towards my project guide Prof. Devika
Suryawanshi whose guidance and care made the project successful.
I would like to thank my College Library, for having providing various
reference books and magazines related to my project.
Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
parents and peers who supported me throughout my project.

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STOCK MARKET IN INDIA

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 OBJECTIVES OF THE STUDY

 To Study the various aspect of Indian Stock Market in detail.

 To find out the views of different researcher and author in relation to Indian
Stock Market.

 To know the past and current movements in Indian Stock Market.

 To know the future prospects of Indian stock market.

 To help the investors

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 EXECUTIVE SUMMARY

In the present situation where stock market is going up and down, it is

necessary to invest consciously in the market whatever it is, this is the
study about the last two year function in stock market which enables the
investor in taking decision regarding investment.
This study tells the factor which directly or indirectly affects the market
and some basic information on stock market for the new investors or the
students who have some interest in the stock market.
The objective of selecting the topic is to know about the market trends of
the stock market and the information related to the investment for finure
investors.
The study of fluctuations of the stock market makes the investor aquatinted
with the factor affecting the investment and stock prices can be volatile and
some analysts argue that this volatility is excessive.
This is not easy to prove. since it is difficult to assess certainty about future
earnings and dividend.
Companies tend to smooth dividends, so they will be less volatile than
stock prices.
Volatile stock prices do not have a major impact on consumption and
capital spending since there is a good chance that price movements in one
direction may be reversed,

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 Index

CHAPTE PARTICULAR PAGE

R.NO NO
01 INTRODUCTION
1.1 WHAT IS STOCK MARKET ?
1.2 EXPLAINING STOCKS AND STOCK MARKET
1.3 TYPE OF STOCK
1.4 SHAREHOLDERS
1.5 WHY DOES COMPANY ISSUE STOCKS
1.6 ISSUE OF STOCK
1.7 HOW ARE SHARE PRICE SET ?
1.8 NEED FOR STOCK MARKET
1.9 WHY BUY STOCK ?
1.10 ADVANTAGE AND DISADVANTAGE OF STOCK
MARKET
02 EMERGENCE OF THE STOCK EXCHANGES
2.1 NATIONAL STOCK EXCHANGE (NSE)
2.2 BOMBAY STOCK EXCHANGE (BSE)
2.3 OVER THE COUNTER EXCHANGE OF INDIA
2.4 OPERATIONAL FEATURES OF BSE AND NSE:
2.5 The Role of the Stock Exchange in the Economy
03 TRADING OF STOCK
3.1 MERITS OF OWNING STOCK
3.2 DEMERITS OF OWNING STOCK
3.3 WHAT IS TRADING OF SHARES ?
3.4 WHO IS A STOCKBROKER ?
3.5 STOCK BROKERS IN INDIA
3.6 ROLE OF STOCKBROKER IN A STOCK MARKET
3.7 METHOD OF TRADING IN STOCK EXCHANGES AND
THE TYPES OF BROKERS
3.8 BULLS AND BEARS
3.9 BULLISH AND BEARISH BEHAVIOUR
3.10 WHAT IS A STOCK CHARTS ?
3.11 TYPES OF STOCK CHARTS
04 THE INDIAN STOCK MARKET
4.1 REGULATORS IN THE STOCK MARKET
4.2 WHAT IS STOCK INDEX
4.3 TYPES OF STOCK INDICES
4.4 INDIAN STOCK INDICES
 NIFTY
 SENSEX
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05 REVIEW OF LITERATURE
06 CONCLUSION
07 BIBILOGRAPHY

CHAPTER 1
INTRODUCTION
 WHAT IS STOCK MARKET ?
 EXPLAINING STOCKS AND STOCK MARKET
 TYPE OF STOCK
 SHAREHOLDERS
 WHY DOES COMPANY ISSUE STOCKS
 ISSUE OF STOCK
 HOW ARE SHARE PRICE SET ?
 NEED FOR STOCK MARKET
 WHY BUY STOCK ?
 ADVANTAGE AND DISADVANTAGE OF STOCK MARKET

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 INTRODUCTION

1.1 What Is the Stock Market ?

The term stock market refers to several exchanges in which shares of publicly held companies are
bought and sold. Such financial activities are conducted through formal exchanges and via over-the-
counter (OTC) marketplaces that operate under a defined set of regulations. Both “stock market”
and “stock exchange” are often used interchangeably. Traders in the stock market buy or sell shares
on one or more of the stock exchanges that are part of the overall stock market. A stock market,
equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares),
which represent ownership claims on businesses; these may include securities listed on a public
stock exchange, as well as stock that is only traded privately, such as shares of private companies

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which are sold to investors through equity crowdfunding platforms. Investment is usually made with
an investment strategy in mind.
The market in which shares of publicly held companies are issued and traded either through
exchanges or over-the-counter markets. Also known as the equity market, the stock market is one of
the most vital components of a free-market economy, as it provides companies with access to capital
in exchange for giving investors a slice of ownership in the company. The stock market makes it
possible to grow small initial sums of money into large ones, and to become wealthy without taking
the risk of starting a business or making the sacrifices that often accompany a high-paying career.
The stock market lets investors participate in the financial achievements of the companies whose
shares they hold. When companies are profitable, stock market investors make money through the
dividends the companies pay out and by selling appreciated stocks at a profit called a capital gain.
The downside is that investors can lose money if the companies
whose stocks they hold lose money, the stocks' prices goes down and the investor sells the stocks at
a loss.

Capital markets

Definition Of capital market

A capital market can be either a primary market or a secondary market. In a primary market, new
stock or bond issues are sold to investors, often via a mechanism known as underwriting. The main
entities seeking to raise long-term funds on the primary capital markets are governments (which may
be municipal, local or national) and business enterprises (companies). Governments issue only
bonds, whereas companies often issue both equity and bonds. The main entities purchasing the
bonds or stock include pension funds, hedge funds, sovereign wealth funds, and less commonly
wealthy individuals and investment banks trading on their own behalf. In the secondary market,
existing securities are sold and bought among investors or traders, usually on an exchange, over-the-
counter, or elsewhere. The existence of secondary markets increases the willingness of investors in
primary markets, as they know they are likely to be able to swiftly cash out their investments if the
need arises.A second important division falls between the stock markets (for equity securities, also

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known as shares, where investors acquire ownership of companies) and the bond markets (where
investors become creditors).

Capital markets are where savings and investments are channeled between suppliers and those in
need. Suppliers are people or institutions with capital to lend or invest and typically include banks
and investors. Those who seek capital in this market are businesses, governments, and individuals.
Capital markets are composed of primary and secondary markets. The most common capital markets
are the stock market and the bond market. They seek to improve transactional efficiencies by
bringing suppliers together with those seeking capital and providing a place where they can
exchange securities.A capital market is a financial market in which long-term debt (over a year) or
equity-backed securities are bought and sold, in contrast to a money market where short-term debt is
bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term
productive use, such as companies or governments making long-term investments.[a] Financial
regulators like Securities and Exchange Board of India (SEBI), Bank of England (BoE) and the U.S.
Securities and Exchange Commission (SEC) oversee capital markets to protect investors against
fraud, among other duties.Transactions on capital markets are generally managed by entities within
the financial sector or the treasury departments of governments and corporations, but some can be
accessed directly by the public. As an example, in the United States, any American citizen with an
internet connection can create an account with TreasuryDirect and use it to buy bonds in the primary
market, though sales to individuals form only a tiny fraction of the total volume of bonds sold.
Various private companies provide browser-based platforms that allow individuals to buy shares and
sometimes even bonds in the secondary markets. There are many thousands of such systems, most
serving only small parts of the overall capital markets. Entities hosting the systems include stock
exchanges, investment banks, and government departments. Physically, the systems are hosted all
over the world, though they tend to be concentrated in financial centres like London, New York, and
Hong Kong.
Capital markets typically involve issuing instruments such as stocks and bonds for the medium-term
and long-term. In this respect, capital markets are distinct from money markets, which refer to
markets for financial instruments with maturities not exceeding one year.Capital markets have
numerous participants including individual investors, institutional investors such as pension funds
and mutual funds, municipalities and govemments, companies and organizations and banks and
financial institutions. Suppliers of capital generally want the maximum possible return at the lowest
possible risk, while users of capital want to raise capital at the lowest possible cost. The stock
market falls under the Capital Market Structure.

The capital market is divided further into two markets:

 Primary market
 Secondary market

PRIMARY MARKET

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Definition of 'Primary Market'

"A market that issues new securities on an exchange. Companies, governments and other groups
obtain financing through debt or equity based securities. Primary markets are facilitated by
underwriting groups, which consist of investment banks that will set a beginning price range for a
given security and then oversee its sale directly to investors." Also known as "new issue marker"
(NIM). The primary markets are where investors can get first crack at a new security issuance. The
issuing company or group receives cash proceeds from the sale, which is then used to find
operations or expand the business. Exchanges have varying levels of requirements which must be
met before a security can be sold.Once the initial sale is complete, further trading is said to conduct
on the secondary market, which is where the bulk of exchange trading occurs each day. Primary
markets can see increased volatility over secondary markets because it is difficult to accurately
gauge investor demand for a new security until several days of trading have occurred.There are three
ways in which a company may raise equity capital in the primary market

PUBLIC ISSUE:
Issue of stock on a public market rather than being privately finded by the companies own
promoter(s), which may not be enough capital for the business to start up, produce, or continue
runing By issuing stock publically, this allows the public to own a part of the company, though not
be a controlling factor.

IPO: Intial Public Offer Initial public offering (IPO) or stock market launch is a type of public
offering where shares of stock in a company are sold to the general public, on a securities exchange,
for the first time. An initial public offering, or IPO, is the first sale of stock by a company to the
public. A company can raise money by issuing either debt or equity. If the company has never
issued equity to the public, it's known as an IPO.Companies fall into two broad categories: private
and public. A privately held company has fewer shareholders and its owners don't have to disclose
much information about the company. Anybody can go out and incorporate a company: just put in
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some money, file the right legal documents and follow the reporting rules of your jurisdiction. Most
small businesses are privately held. But large companies can be private too.

Did you know that IKEA, Domino's Pizza and Hallmark Cards are all privately hel!?It usually isn't
possible to buy shares in a private company. You can approach the owners about investing, but
they're not obligated to sell you anything. Public companies, on the other hand, have sold at least a
portion of themselves to the public and trade on a stock exchange. This is why doing an IPO is also
referred to as "going public."Public companies have thousands of shareholders and are subject to
strict rules and regulations.They must have a board of directors and they must report financial
information every quarter. In the United States, public companies report to the Securities and
Exchange Commission (SEC).

In other countries, public companies are overseen by governing bodies similar to the SEC. From an
investor's standpoint, the most exciting thing about a public company is that the stock is traded in
the open market, like any other commodity. If you have the cash, you can invest. The CEO could
hate your guts, but there's nothing he or she could do to stop you from buying stock.

RIGHTS ISSUES: An issue of rights to a company's existing shareholders that entitles them to
buy additional shares directly from the company in proportion to their existing holdings, within a
fixed time period. In a rights offering, the subscription price at which each share may be purchased
in generally at a discount to the current market price. Rights are often transferable, allowing the
holder to sell them on the open market. A rights issue is when a company issues its existing
shareholders a right to buy additional shares in the company.

The company will offer the shareholder a specific number of shares at a specific price. The company
will also set a time limit for the shareholder to buy the shares. The shares are often offered at a
discounted price to encourage existing shareholders to take the company up on their offer. If a
shareholder does not take the company up on their rights issue then they have the option tosell their
rights on the stock market just as they would sell ordinary shares, however their shareholding in the
company will weaken. Companies with a poor cash flow will often use a rights issue to increase
cash flow and pay off existing debts.

Rights issues however are sometimes issued by companies with healthy balance sheets in order to
find research and development projects or to purchase new companies, Discounted shares issued by
a company can be tempting but it is important to find out first the reason for the rights issue of
shares. A company, for example, may be using the rights issue as a quick cash fix to pay off debts
masking the real reason for the company's cash flow failing such as bad leadership. Caution is
advised when offered with a rights issue.

PREFERENTIAL ISSUE: A preferential issue is an issue of shares or of convertible securities

by listed companies to a select group of persons under Section 81 of the Companies Act, 1956
which is neither a rights issue nor a public issue. This is a faster way for a company to raise equity
capital. The issuer company has to comply with the Companies Act and the requirements contained
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in Chapter pertaining to preferential allotment in SEBI (DIP) guidelines which inter-alia include
pricing. disclosures in notice etc.

Preferred stock is a different class than the better-known common stock, with different
characteristics. Thus, companies have reasons for issuing preferred stock that may differ from the
reasons they "go public" by issuing common stock to everyday investors. Preferred stock is still
considered equity--an ownership stake, rather than debt -- but it offen functions more like a bond
than a share. Preferred stock is so named because, on a company's hierarchy of debts, it is favored
over common stock - that is, its owners are paid before owners of common shares. However,
preferred stock normally does not convey voting rights to owners as common shares do. Preferred
stocks attract investors looking for dividends, which provide owners with a fixed rate of return
rather than returns that rise and fall with the stock market.

Thus, à acts more like a bond with its usually fixed payout. Preferred shares also provide the
company with flexibility for other nondividend-related reasons. For instance, they provide issuers
with an extra ownership option in addition to common stock and bonds. addition, because these
shares are a cut above common stock, they can be used as incentives during transactions because
they offer more security to the buyer and a fiscal guarantees to the seller.

SECONDARY MARKET

Definition of 'Secondary Market'

"A market where investors purchase securities or assets from other investors, rather than from
issuing companies themselves. The national exchanges such as the NATIONAL STOCK
EXCHANGE and the BOMBAY STOCK EXCHANGE are secondary markets." Secondary markets
exist for other securities as well, such as when finds, investment banks, or entities such as Fannie
Mae purchase mortgages from issuing lenders. In any secondary market trade, the cash proceeds go

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to an investor rather than to the underlying company/entity directly A newly issued IPO will be
considered a primary market trade when the shares are first purchased by investors directly from the
underwriting investment bank; after that any shares traded will be on the secondary market, between
investors themselves.

In the primary market prices are often set beforehand, whereas in the secondary market only basic
forces like supply and demand determine the price of the security.In the case of assets like
mortgages, several secondary markets may exist, as bundles of mortgages are often re-packaged into
securities like GNMA Pools and re-sold to investors. In the secondary market, securities are sold by
and transferred from one investor orspeculator to another. It is therefore important that the
secondary market be highly liquid (originally, the only way to create this liquidity was for investors
and speculators to meet at a fixed place regularly, this is how stock exchanges originated.

As a general rule, the greater the number of investors that participate in a given marketplace, and the
greater the centralization of that marketplace, the more liquid the market. Fundamentally, secondary
markets mesh the investor's preference for liquidity (ie., the investor's desire not to tie up his or her
money for a long period of time, in case the investor needs it to deal with unforeseen circumstances)
with the capital user's preference to be able to use the capital for an extended period of time.
Accurate share price allocates scarce capital more efficiently when new projects are financed
through a new primary market offering, but accuracy may also matter in the secondary market
because:
1) price accuracy can reduce the agency costs of management, and make hostile takeover a less
risky proposition and thus move capital into the hands of better managers, and 2) accurate share
price aids the efficient allocation of debt finance whether debt offerings or institutional borrowing.

1.2 EXPLAINING STOCKS AND STOCK MARKET

At some point, just about every company needs to raise money, whether to open up a West Coast
sales office, build a factory, or hire a crop of engineers. In each case, they have two choices:

1) Borrow the money, or

2) raise it from investors by selling them a stake (issuing shares of stock) in the company.

When you own a share of stock, you are a part owner in the company with a chim (however small it
may be) on every asset and every penny in earnings. Individual stock buyers rarely think like
owners, and it's not as if they actually have a say in how things are done. Nevertheless, it's that
ownership structure that gives a stock its value. If stockowners didn't have a chim on earnings, then
stock certificates would be worth no more than the paper they're printed on. As a company's
earnings improve, investors are willing to pay more for the stock. Over time, stocks in general have
been sold investments.

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That is, as the economy has grown so mtoo have corporate camnings, and so have stock prices.
Since 1926, the average large stock has returned close to 10% a year. If you're saving for retirement,
that's a pretty good deal much better than U.S. savings bonds, or stashing cash under your mattress.
Of course, "over time" is a relative term. As any stock investor knows, prolonged bear markets can
decimate a portfolio.Since World War II. Wall Street has endured several bear markets --defined as
a sustained decline of more than 20% in the value of the Dow Jones Industrial Average. Bull
markets eventually follow these downturns, but again, the term "eventually" offers small sustenance
in the midst of the downdraft.The point to consider, then, is that investing must be considered a
long-term endeavor if it is to be successful. In order to endure the pain of a bear market, you need to
have a stake in the game when the tables turn positive.

1.3 WHY DOES COMPANY ISSUE STOCKS?

Why would the founders share the profits with thousands of people when they could keep profits to
themselves? The reason is that at some point every company needs to "raise money". To do this,
companies can either borrow it from somebody or raise by selling part of the company. which is
known as issuing stock. A company can borrow by taking a loan from a bank or by issuing bonds.
Both methods come under "debt financing". On the other hand, issuing stock is called "equity
financing". Issuing stock is advantageous for the company because it does not require the company
to pay back the money or make interest payments along the way. All that the shareholders get in
return for their money is the hope that the shares will someday be worth more than what they paid
for them. The first sale of a stock, which is issued by the private company itself, is called the initial
public offering (IPO). It is important that you understand the distinction between a company
financing through debt and financing through equity. When you buy a debt investment such as a
bond, you are guaranteed the return of your money (the principal) along with promised interest
payments. This isn't the case with an equity investment. By becoming an owner, you assume the risk
of the company not being successful - just as a small business owner isn't guaranteed a return,
neither is a shareholder. Shareholders cam a lot if a company is successful, but they also stand to
lose their entire investment if the company isn't successful

1.4 TYPES OF STOCKS

There are two main types of stocks: common stock and preferred stock.

Common Stock

Common stock is, well common. When people talk about stocks they are usually referring to this
type. In fact, the majority of stock is issued is in this form. We basically went over features of
common stock in the last section. Common shares represent ownership in a company and a claim
(dividends) on a portion of profits. Investors get one vote per share to elect the board members, who

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oversee the major decisions made by management. Over the long term, common stock, by means of
capital growth, yiekls higher returns than almost every other investment. This higher return comes at
a cost since common stocks entail the most risk. If a company goes bankrupt and liquidates, the
common shareholders will not receive money until the creditors, bondholders and preferred
shareholders are paid.

Preferred Stock

Preferred stock represents some degree of ownership in a company but usually doesn't come with
the same voting rights. (This may vary depending on the company) With preferred shares, investors
are usually guaranteed a fixed dividend forever. This is different than common stock, which has
variable dividends that are never guaranteed. Another advantage is that in the event of liquidation,
preferred shareholders are paid off before the common shareholder (but still after debt holders).
Preferred stock may also be callable, meaning that the company has the option to purchase the
shares from shareholders at anytime for any reason (usually for a premium).Some people consider
preferred stock to be more like debt than equity. A good way to think of these kinds of shares is to
see them as being in between bonds and common shares.

Common and preferred are the two main forms of stock; however, it's also possible for companies to
customize different classes of stock in any way they want. The most common reason for this is the
company wanting the voting power to remain with a certain group; therefore, different classes of
shares are given different voting rights. For example, one class of shares would be held by a select
group who are given ten votes per share while a second class would be issued to the majority of
investors who are given one vote per share.When there is more than one class of stock, the classes
are traditionally designated as Class A and Class B. Berkshire Hathaway (ticker: BRK), has two
classes of stock. The different forms are represented by placing the letter behind the ticker symbol in
a form like this: "BRKa, BRKb" or "BRK.A, BRK.B"

1.5 SHAREHOLDERS

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Definition of Shareholder

"Any person, company or other institution that owns at least one share of a company's stock.
Shareholders are a company's owners. They have the potential to profit if the company does well,
but that comes with the potential to lose if the company does poorly. A shareholder may also be
referred to as a "stockholder""

Unlike the owners of sole proprietorships or partnerships, corporate shareholders are not personally
liable for the company's debts and other obligations. Also, corporate shareholders do not play a
major role in running the company. The board of directors and executive management perform that
function Common stockholders are, however, able to vote on corporate matters, such as who sits on
the board of directors and whether a proposed merger should go through (preferred stockholders
usually do not have voting rights). They also benefit when the company performs well and its share
price increases, and they have the right to trade their shares on a stock exchange, which makes stock
a highly liquid investment. Shareholders do have rights, which are defined in the corporation's
charter and bylaws.

They can inspect the company's books and records, sue the corporation for misdeeds of the directors
and officers, and if the company liquidates, they have a right to a share of the proceeds. However,
creditors, bondholders and preferred stockholders have precedence over common stockholders in a
liquidation. Shareholders also have a right to receive a portion of any dividends the company
declares. Shareholders can attend the corporation's annual meeting to learn about the company's
performance, vote on who sits on the board of directors and other matters. They can also listen to the
meeting via conference call and vote by proxy through the mail or online. To learn more about a
company's policies toward shareholders, consult the company's corporate governance policies.

1.6 ISSUE OF STOCK

Corporations issue shares of stock to raise money for their business. The shares that are issued
represent the amount of money invested by the shareholders in the company. Shareholders have an
ownership stake in the company and enjoy certain rights such as voting rights and the receipt of
dividends. Therefore it is very important to consider how to issue stock when organizing your
corporation

Determine how much stock the corporation will be authorized to issue. The Articles of Incorporation
will set out the maximum number of shares that the corporation can issue to potential shareholders.
This does not mean that the corporation must issue all of those shares. New corporations will kely
hold back shares so that, if necessary, it can raise capital at a later date.Set forth the value of the
shares that will be issued. The value of each share should be proportionate to the company's net
worth. The shares may be marked with a par amount

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establishing the minimam amount that the shares can be purchased from the corporation or with a no
par amount having no set price for purchase of the share of stock. The corporation must receive
consideration of some value for each share issued.
Determine the class of the shares to be issued. A corporation will generally issue common stock or
preferred stock where holders of common stock would get a dividend following those of preferred
stock.

Determine how many shares the corporation will initially issue. Generally this depends on the size
of the corporation. In a small corporation the initial shares may be based upon the contribution that
the shareholders are making to the business. This may be the most important factor when issuing
stocks as the original owner or largest contributor may want to have controlling (51%) interest in the
company. There is no requirement on the number of shares that have to be issued. The corporation
may issue as few as I share of stock. There may be an issue as to the amount of capitalization that
the corporation needs. Some states may require that the corporation have a minimum amount of
assets, know as capitalization, before starting its operation.

1.7 HOW ARE SHARE PRICES SET?

When a company goes public though an initial public offering (IPO), an investment bank evaluates
the company's current and projected performance and health to determine the value of
the IPO for the business. The bank can do this by comparing the company with the IPO of
another similar company, or by calculating the net present value of the firm. The company and the
investment bank will meet with investors to help determine the best IPO price through a series of
road shows. Finally, after the valuation and road shows, the firm must meet with the exchange,
which will determine if the IPO price is fair. Once trading starts, share prices are largely determined
by the forces of supply and demand. A company that demonstrates long-term earnings potential may
attract more buyers, thereby enjoying an increase in share prices. A company with a poor outlook,
on the other hand, may attract more sellers than buyers, which can result in lower prices. In general
prices rise during periods of increased demand - when there are more buvers than sellers. Prices fall
during periods of increased supply when there are more sellers than buyers. A continuous rise in
prices is known as an uptrend, and a continuous drop in prices in called a downtrend. Sustained
uptrends form a "bull" market and sustained downtrends are called "bear" markets.

Other factors can affect prices and cause sudden or temporary changes in price. Some examples of
this include earnings reports, political events, financial reports and economic news. Not all news or
reports affect all securities. For example, the stocks of companies engaged in the gas and oil industry
may react to the weekly petroleum status report from the U.S. Energy Information Administration
(the "EIA report").

Stock prices can also be driven by what is known as herd instinct, which is the tendency for people
to mimic the action of a larger group. For example, as more and more people buy a stock. pushing
the price higher and higher, other people will jump on board, assuming that all the other investors
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must be right (or that they know something not everyone else knows). There may be no fundamental
or technical support for the price increase, yet investors continue to buy because others are doing so
and they are afraid of missing out. This is one of many phenomena studied under the umbrella of
behavioral finance.

1.8 NEED OF STOCK MARKET

Stock market is an important part of the economy of a country. The stock market plays a play a
pivotal role in the growth of the industry and commerce of the country that eventually affects the
economy of the country to a great extent. That is reason that the government, industry and even the
central banks of the country keep a close watch on the happenings of the stock market. The stock
market is important from both the industry's point of view as well as the investor's point of view.
Whenever a company wants to raise funds for further expansion or settling up a new business
venture, they have to either take a loan from a financial organization or they have to issue shares
through the stock market. In fact the stock market is the primary source for any company to raise
funds for business expansions.

If a company wants to raise some capital for the business it can issue shares of the company that is
basically part ownership of the company. To issue shares for the investors to invest in the stocks a
company needs to get listed to a stocks exchange and through the primary market of the stock
exchange they can issue the shares and get the funds for business requirements. There are certain
rules and regulations for getting listed at a stock exchange and they need to fulfill some criteria to
issue stocks and go public. The stock market is primarily the place where these companies get listed
to issue the shares and raise the find. In case of an already listed public company, they issue more
shares to the market for collecting more funds for business expansion. For the companies which are
going public for the first time, they need to start with the Initial Public Offering or the IPO. In both
the cases these companies have to go through the stock market.

This is the primary function of the stock exchange and thus they play the most important role of
supporting the growth of the industry and commerce in the country. That is the reason that a rising
stock market is the sign of a developing industrial sector and a growing economy of the country. Of
course this is just the primary function of the stock market and just an half of the role that the stock
market plays. The secondary function of the stock market is that the market plays the role of a
common platform for the buyers and sellers of these stocks that are listed at the stock market. It is
the secondary market of the stock exchange where retail investors and institutional investors buy and
sell the stocks. In fact it is these stock market traders who raise the fund for the businesses by
investing in the stocks.

For investing in the stocks or to trade in the stock the investors have to go through the brokers of the
stock market. Brokers actually execute the buy and sell orders of the investors and settle the deals to
keep the stock trading alive. The brokers basically act as a middle man between the buyers and
sellers. Once the buyer places a buy order in the stock market the brokers finds a seller of the stock
and thus the deal is closed. All these take place at the stock market and it is the demand and supply
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of the stock of a company that determines the price of the stock of that particular company. So the
stock market is not only providing the much required finds for boosting the business, but also
providing a common place for stock trading. It is the stock market that makes the stocks a liquid
asset unlike the real estate investment. It is the stock market that makes it possible to sell the stocks
at any point of time and get back the investment along with the profit. This makes the stocks much
more liquid in nature and thereby attracting investors to invest in the stock mark

1.9 WHY BUY STOCK?

Ownership has its privileges As a shareholder, you have some basic rights. You can vote for or
against the candidates who've been nominated to the company's board of directors. They're the
people who set company policy and choose the chief executive who runs the business. You can also
vote for or against proposals the directors or other shareholders make to influence what happens at
the company and how it is managed. You also have the right to sell your stock at any time- although
you may choose to hold onto it for years. Let's be honest. Shareholder rights aren't the reason you
buy stock. The reason is to make money by investing in companies you believe will make money. In
the language of investing, you're seeking a positive return.
Here are some ideas that may help you have a positive return: The company that issued the stock
may pay a dividend, or portion of its earnings, to its shareowners on a regular basis. You can
reinvest the dividends to build your portfolio or you can use it as income. A stock's price may go up
while you own it. If it does, you can sell some or all of your shares for a profit if you want to
remember one right of ownership is the right to sell or you can hold onto it, which increases the
value of your portfolio. Investing in stock has risks, though. You may have a negative return in
some years rather than a positive one. That could reduce your income and the value of your
portfolio. Here are some of the possible risks you face:

Companies aren't required to pay a dividend even if they have a profit. And companies that
normally pay a dividend may reduce it or eliminate it entirely if times are tough. It's their decision,
though investors don't like it. Sometimes stock prices go down instead of up, so you could lose
money if you sold when your stock's price dropped. (Why do prices go down? Sometimes the whole
stock market loses steam Sometimes a company has a rough patch. Sometimes investors get nervous
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and sell.) If a company goes out of business, as some do, you could lose everything you'd invested in
its stock-if you hadn't sold your shares in time. If you can lose money, why would you risk buying
stock? The reason is that over time, stocks as a group though not every stock on its own has
produced higher returns than other types of investments. Of course, there are no guarantees that the
particular stocks you pick will produce higher returns, or any return at all on your investment.

1.10 ADVANTAGES AND DISADVANTAGES OF STOCK MARKET

FLOTATION

Even if your business is suited to flotation, it may not be the right choice for you. Being a public
company can present a range of benefits to your business, but there are also issues that might require
careful consideration.

The benefits of stock market flotation could include: giving access to new capital to develop the
business
⚫ making it easier for you and other investors including venture capitalists to realise their
investment allowing you to offer employees extra incentives by granting share options - this can
encourage and motivate your employees to work towards long-term goals
⚫ placing a value on your business increasing your public profile, and providing reassurance to your
customers and suppliers allowing you to do business -eg acquisitions by using quoted shares as
currency creating a market for the company's shares However, you should also consider the
following potential problems:
⚫ Market fluctuations your business may become vulnerable to market fhctations beyond your
control - including market sentiment, economic conditions or developments in your sector.
⚫ Cost-the costs of flotation can be substantial and there are also ongoing costs of being a public
company, such as higher professional fees. • Responsibilities to shareholders in return for their
capital, you will have to consider shareholders' interests when running the company which may
differ from your own objectives.
⚫ The need for transperancy -public companies must comply with a wide range of additional
regulatory requirements and meet accepted standards of corporate governance including
transperancy, and needing to make announcements about new developments.
⚫ Demands on the management team-managers could be distracted from running the business
during the flotation process and through needing to deal with investors afterwards.
⚫ Investor relations to maximise the benefits of being a public company and attract further investor
interest in shares, you will need to keep investors informed.
⚫ Employees may become demotivated if shares are only offered to selected employees, there could
be resentment. Shareholding employees could feel that there is little left to work for if they are
sitting on valuable shares.

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 CHAPTER 2
EMERGENCE OF THE STOCK EXCHANGES

 NATIONAL STOCK EXCHANGE (NSE)

 BOMBAY STOCK EXCHANGE (BSE)
 OVER THE COUNTER EXCHANGE OF INDIA
 OPERATIONAL FEATURES OF BSE AND NSE:
 The Role of the Stock Exchange in the Economy

2.1 NATIONAL STOCK EXCHANGE (NSE)

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The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and
towns across the country. NSE was set up by leading institutions to provide a modem, fidly
automated screen-based trading system with national reach. The Exchange has brought about
unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that
serve as a model for the securities industry in terms of systems, practices and procedures.

NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure,
market practices and trading volumes. The market today uses state-of-art information technology to
provide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed
several innovations in products & services viz. demtualisation of stock exchange governance, screen
based trading, compression of settlement cycles, dematerialisation and electronic transfer of
securities, securities lending and borrowing. professionalisation of trading members, fine-tuned risk
management systems, emergence of clearing corporations to assume counterparty risks, market of
debt and derivative instruments und intensive use of information technology

The National Stock Exchange of India Ltd. (NSE) located in the financial capital of India. Mumbai
National Stock Exchange (NSE) was established in the mid 1990s as a demaalsed electronic
exclunge. NSE provides a modern, fully automated screen-based trading system, with over two lakh
trading terminals,

through which investors in every nook and comer of Indiacan trade. NSE has a market capitalisation
of more than US$1.5 trillion and Number of securities (equities segment) available for trading are
3,091 as on June 2014,Though a number of other exchanges exist, NSE and the Bombay Stock
Exchange are the two most significant stock exchanges in India, and between them are responsible
for the vast majority of share transactions. NSE flagship index, the S&P CNX NIFTY, is used
extensively by investors in India and around the world to take exposure to the Indian equities
market. NSE was started by a clutch of leading Indian financial institutions at the behest of the

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Government of India to bring transparency to the Indian market, and has a diversified shareholding
comprising domestic and global investors. The domestic investors includes Life Insurance
Corporation of India, GIC, State Bank of India and Infrastructure Development Finance Company
(IDFC) Lid, while the foreign investors include MS Strategic (Mauritius) Limited. Citigroup
Strategic Holdings Mauritius Limited, Tiger Global Five Holdings and Norwest Venture Partners X
FIl-Mauritius. It offers trading clearing and settlement services in equity, debt and equity
derivatives. It is India's largest exchange, globally in cash market trades, in currency trading and
index options. As on June 2013, NSE has 1673 VSAT terminals and 2720 leaselines, spread over
more than 2000 cities across India.

The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock
exchange in 1993 under the Securities Contracts (Regilation) Act, 1956, when Mr. P V Narasimha
Rao was the Prime Minister of India and Dr. Manmohan Singh was the Finance Minister. NSE
commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital
market (Equities) segment of the NSE commenced operations in November 1994, while operations
in the Derivatives segment commenced in June 2000.

History

National Stock Exchange was incorporated in the year 1992 to bring about transparency in the
Indian equity markets. Instead of trading memberships being confined to a group of brokers, NSE
ensured that anyone who was qualified, experienced, and met the minimum financial requirements
was allowed to trade. In this context, NSE was ahead of its time when it separated ownership and
management of the exchange under SEBI's supervision.

Stock price information that could earlier be accessed only by a handful of people could now be
seen by a client in a remote location with the same ease. The paper-based settlement was replaced by
electronic depository-based accounts and settlement of trades was always done on time. One of the
most critical changes involved a robust risk management system that was set in place, to ensure that
settlement guarantees would protect investors against broker defaults.

NSE was set up by a group of leading Indian financial institutions at the behest of the Government
of India to bring transparency to the Indian capital market. Based on the recommendations laid out
by the Pherwani committee, NSE was established with a diversified shareholding comprising
domestic and global investors. The key domestic investors include Life Insurance Corporation, State
Bank of India, IFCI Limited, IDFC Limited and Stock Holding Corporation of India Limited. Key
global investors include Gagil FDI Limited, GS Strategic Investments Limited, SAIF II SE
Investments Mauritius Limited, Aranda Investments (Mauritius) Pte Limited, and PI Opportunities
Fund I.
The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock
exchange in 1993 under the Securities Contracts (Regulation) Act, 1956, when P. V. Narasimha Rao
was the Prime Minister of India and Manmohan Singh was the Finance Minister. NSE commenced
operations in the Wholesale Debt Market (WDM) segment in June 1994. The capital market
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(equities) segment of the NSE commenced operations in November 1994, while operations in the
derivatives segment commenced in June 2000. NSE offers trading, clearing and settlement services
in equity, equity derivative, debt, commodity derivatives, and currency derivatives segments.

It was the first exchange in India to introduce an electronic trading facility thus connecting the
investor base of the entire country. NSE has 2500 VSATs and 3000 leased lines spread over more
than 2000 cities across India.NSE was also instrumental in creating the National Securities
Depository Limited (NSDL) which allows investors to securely hold and transfer their shares and
bonds electronically. It also allows investors to hold and trade in as few as one share or bond

This not only made holding financial instruments convenient but more importantly, eliminated the
need for paper certificates and greatly reduced incidents involving forged or fake certificates and
fraudulent transactions that had plagued the Indian stock market. The NSDL's security, combined
with the transparency, lower transaction prices, and efficiency that NSE offered, greatly increased
the attractiveness of the Indian stock market to domestic and international investors.

Trading at NSE

 Fully automated screen-based trading mechanism

 Strictly follows the principle of an order-driven market Trading members are linked through
a communication network
 This network allows them to execute trade from their offices
 The prices at which the buyer and seller are willing to transact will appear on the screen
 When the prices match the transaction will be completed A confirmation slip will be printed
at the office of the trading member

Advantages of trading at NSE Integrated network for trading in stock market of

India

 Fully automated screen based system that provides higher degree of transparency
 Investors can transact from any part of the country at uniform prices
 Greater fictional efficiency supported by totally computerized network.

Markets

NSE offers trading and investment in the following segments

Equity
 Equity
 Indices
 Mutual fund
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  Exchange-traded funds
 Initial public offerings
 Security Lending and Borrowing etc.
Derivatives
 Equity Derivatives (including Global Indices like S&P 500, Dow Jones and FTSE)
 Currency derivatives
 Commodity Derivatives
 Interest rate futures

Debt
 Corporate bonds

Equity Derivatives
The National Stock Exchange of India Limited (NSE) commenced trading in derivatives with the
launch of index futures on 12 June 2000. The futures and options segment of NSE has made a global
mark. In the Futures and Options segment, trading in the NIFTY 50 Index, NIFTY IT index, NIFTY
Bank Index, NIFTY Next 50 index, and single stock futures are available. Trading in Mini Nifty
Futures & Options and Long term Options on NIFTY 50 are also available.The average daily
turnover in the F&O Segment of the Exchange during the financial year April 2013 to March 2014
stood at ₹1.52236 trillion (US$19 billion).

On 29 August 2011, National Stock Exchange launched derivative contracts on the world's most-
followed equity indices, the S&P 500 and the Dow Jones Industrial Average. NSE is the first Indian
exchange to launch global indices. This is also the first time in the world that futures contracts on
the S&P 500 index were introduced and listed on an exchange outside of their home country, the
USA. The new contracts include futures on both the DJIA and the S&P 500 and options on the S&P
500.
On 3 May 2012, the National Stock exchange launched derivative contracts (futures and options) on
FTSE 100, the widely tracked index of the UK equity stock market. This was the first of its kind
index of the UK equity stock market launched in India. FTSE 100 includes the 100 of largest UK-
listed blue-chip companies and has given returns of 17.8 percent on investment over three years. The
index constitutes 85.6 per cent of UK's equity market cap.

On 10 January 2013, the National Stock Exchange signed a letter of intent with the Japan Exchange
Group, Inc. (JPX) on preparing for the launch of NIFTY 50 Index futures, a representative stock
price index of India, on the Osaka Securities Exchange Co., Ltd. (OSE), a subsidiary of JPX.
Moving forward, both parties will make preparations for the listing of yen-denominated NIFTY 50
Index futures by March 2014, the integration date of the derivatives markets of OSE and Tokyo
Stock Exchange, Inc. (TSE), a subsidiary of JPX. This is the first time that retail and institutional
investors in Japan will be able to take a view on the Indian markets, in addition to current ETFs, in
their own currency and in their own time zone. Investors will therefore not face any currency risk,
because they will not have to invest in dollar-denominated or rupee-denominated contracts.
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In August 2008, currency derivatives were introduced in India with the launch of Currency Futures
in USD–INR by NSE. It also added currency futures in Euros, Pounds, and Yen. The average daily
turnover in the F&O Segment of the Exchange on 20 June 2013 stood at ₹419.2616 billion (US$5.3
billion) in futures and ₹273.977 billion (US$3.4 billion) in options, respectively.

Interest Rate Futures

In December 2013, exchanges in India received approval from market regulator SEBI for launching
interest rate futures (IRFs) on a single GOI bond or a basket of bonds that will be cash-settled.
Market participants have been in favor of the product being cash-settled and being available on a
single bond. NSE will launch the NSE Bond Futures on 21 January on highly liquid 7.16 percent
and 8.83 percent 10-year GOI bonds. Interest Rate Futures were introduced in India by NSE on 31
August 2009, exactly one year after the launch of Currency Futures. NSE became the first stock
exchange to get approval for interest-rate futures, as recommended by the SEBI-RBI committee.

Debt Market

On 13 May 2013, NSE launched India's first dedicated debt platform to provide a liquid and
transparent trading platform for debt-related products.
The Debt segment provides an opportunity for retail investors to invest in corporate bonds on a
liquid and transparent exchange platform. It also helps institutions that are holders of corporate
bonds. It is an ideal platform to buy and sell at optimum prices and help Corporates to get adequate
demand when they are issuing the bonds.

2.2 BOMBAY STOCK EXCHANGE (BSE)

The Bombay Stock Exchange is the oldest exchange in Asia. It traces is history to 1855, when four
Gujarati and one Parsi stockbroker would gather under banyan trees in front of Mumbals Town Hall.
The beation of these meetings changed many times as the number of brokers constantly increased.

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The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization
known as "The Native Shure & Stock Brokers Association".

On 31 August 1957, the BSE became the first stock exchange to be recognized by the Indian
Government under the Securities Contracts Regulation Act. In 1980, the exchange moved to the
Phiroze Jeejeebloy Towers at Dalal Street. Fort area. In 1986, it developed the BSE SENSEX index,
giving the BSE a means to measure overall performance of the exchange.
2000, the BSE used this index to open its derivatives market, trading SENSEX fitures contracts. The
development of SENSEX options along with equity derivatives followed in 2001 and 2002,
expanding the BSE's trading platform. Established in 1875, BSE Ltd. (formerly known as Bombay
Stock Exchange Ltd, and established as "The Native Share and Stock Brokers' Association") is one
of Asia's fastest stock exchanges, with a speed of 200 microseconds and one of India's leading
exchange groups. BSE is a corporatized and demutualised entity, with a broad shareholder-base that
includes two leading global exchanges, Deutsche Bourse and Singapore Exchange, as strategic
partners. BSE provides an efficient and transparent market for trading in equity, debt instruments,
derivatives, and mutual funds. It also has a platform for trading in equities of smill-and-medium
enterprises (SME). Over the past 139 years, BSE has facilitated the growth of the Indian corporate
sector by providing an efficient capital-raising platform

More than 5000 companies are listed on BSE, making it the world's top exchange in terms of listed
members. The companies listed on BSE Ltd. command a total market capitalization of USD 1.51
Trillion as of May 2014, is also one of the world's leading exchanges (3rd largest in March 2014) for
Index options trading (Source: World Federation of Exchanges).

BSE also provides a host of other services to capital market participants, including risk
management, ekaring, settlement, market data services, and education. It has a global reach with
customers around the world and a nation-wide presence. BSE systems and processes are designed to
safeguard market integrity, drive the growth of the Indian capital market, and stimulate innovation
and competition across all market segments. BSE is the first exchange in India and the second in the
world to obtain an ISO 9001:2000 certification and the Information Security Management System
Standard BS 7799-2-2002 certification for its On-Line trading System (BOLT). It operates one of
the most respected capital market educational institutes in the country (the BSE Institute Lad). BSE
also provides depository services through its Central Depository Services Ltd. (CDSL) armBSE's
popular equity index - the S&P BSE SENSEX (Formerly SENSEX) is India's most widely tracked
stock market benchmark index. It is traded internationally on the EUREX as well as leading
exchanges of the BRCS nations (Brazil, Russia, China and South Africa). On Tuesday, 19 February
2013 BSE has entered into Strategic Partnership with S&P DOW JONES INDICES and the
SENSEX has been renamed as "S&P BSE SENSEX".

History

Bombay Stock Exchange was started by Premchand Roychand in 1875.While BSE Limited is now
synonymous with Dalal Street, it was not always so. In the 1850s, five stock brokers gathered
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together under a Banyan tree in front of Mumbai Town Hall, where Horniman Circle is now
situated.A decade later, the brokers moved their location to another leafy setting, this time under
banyan trees at the junction of Meadows Street and what was then called Esplanade Road, now
Mahatma Gandhi Road. With a rapid increase in the number of brokers, they had to shift places
repeatedly. At last, in 1874, the brokers found a permanent location, the one that they could call
their own. The brokers group became an official organization known as "The Native Share & Stock
Brokers Association" in 1875.
The Bombay Stock Exchange continued to operate out of a building near the Town Hall until 1928.
The present site near Horniman Circle was acquired by the exchange in 1928, and a building was
constructed and occupied in 1930. The street on which the site is located came to be called Dalal
Street in Hindi (meaning "Broker Street") due to the location of the exchange.

On 31 August 1957, the BSE became the first stock exchange to be recognized by the Indian
Government under the Securities Contracts Regulation Act. Construction of the present building, the
Phiroze Jeejeebhoy Towers at Dalal Street, Fort area, began in the late 1970s and was completed
and occupied by the BSE in 1980. Initially named the BSE Towers, the name of the building was
changed soon after occupation, in memory of Sir Phiroze Jamshedji Jeejeebhoy, chairman of the
BSE since 1966, following his death.

In 1986, the BSE developed the S&P BSE SENSEX index, giving the BSE a means to measure the
overall performance of the exchange. In 2000, the BSE used this index to open its derivatives
market, trading S&P BSE SENSEX futures contracts. The development of S&P BSE SENSEX
options along with equity derivatives followed in 2001 and 2002, expanding the BSE's trading
platform.

On 12 March 1993, a car bomb exploded in the basement of the building during the 1993 Bombay
bombings.Historically an open outcry floor trading exchange, the Bombay Stock Exchange switched
to an electronic trading system developed by Cmc ltd. in 1995. It took the exchange only 50 days to
make this transition. This automated, screen-based trading platform called BSE On-Line Trading
(BOLT) had a capacity of 8 million orders per day.

The BSE is also a Partner Exchange of the United Nations Sustainable Stock Exchange initiative,
joining in September 2012.
BSE established India INX on 30 December 2016. India INX is the first international exchange of
India.
BSE became the first stock exchange in the country to launch commodity derivatives contract in
gold and silver in October 2018.

Advantages of trading at BSE

 Historically an open outery floor trading exchange, the Bombay Stock Exchange switched to
an electronic trading system developed by CMC Ltd in 1995.

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  It took the exchange only fifty days to make this transition. This automated, screen-based
trading platform called BSE On-line trading (BOLT) had a capacity of 8 million orders per
day.
 The BSE has also introduced the world's first centralized exchange-based internet trading
system, BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE
platform

2.3 OVER THE COUNTER EXCHANGE OF INDIA (OTCEI)

The OTC Exchange Of India (OTCEI), also known as the Over-the-Counter Exchange of India. is
based in Mumbai, Maharashtra. An electronic stock exchange based in India that is comprised of
small and medium-sized firms looking to gain access to the capital markets. Like electronic
exchanges in the U.S. such as the Nasdaq, there is no central place of exchange and all trading is
done through electronic networks, It is India's first exchange for small companies, as well as the first
screen-based nationwide stock exclunge in India. OTCEI was set up to access high-technology
enterprising promoters in raising finance for new product development in a cost-effective manner
and to provide a transparent and efficient trading system to investors.

OTCEI is promoted by the Unit Trust of India, the Industrial Credit and Investment Corporation of
India, the Industrial Development Bank of India. the Industrial Finance Corporation of India. and
other institutions, and is a recognised stock exchange under the SCR Act. OTC Exchange Of India
abo known as Over-the-Country Exchange of India or OTCEI was set up to access high-technology
enterprising promoters in raising finance for new product development in a cost effective manner
and to provide transparent and efficient trading system to the investors.

The OTC Exchange Of India was founded in 1990 under the Companies Act 1956 and was
recognized by the Securities Contracts Regulation Act, 1956 as a stock exchange.
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Features of OTCEL

 Introduced Screen Based trading for the first time in Indian Stock market

 Trading takes place through a network of computers of over the counter (OTC) dealers
located at several places, linked to central OTC computers.

 All the activities of OTC trading process was fully computerized.

Services of OTC Exchange of India

OTC Exchange Of India introduced certain new concepts in the Indian trading system

 screen based nationwide trading known as OTCEI Automated Securities Integrated

 System or OASIS
 Market Making
 Sponsorship of companies Trading done in share certificates
 Weekly Settlement Cycle Short Selling
 Demat trading through National Securities Depository Limited for convenient paperless
 Trading Tie-up with National Securities Clearing Corporation Ltd for Clearing

2.4 OPERATIONAL FEATURES OF BSE AND NSE:

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The leading stock exchanges in India have developed iself to a large extentsince its emergence.
These stock exchanges aim at offering the investors andtraders better transparency, genuine
settlement cycle, honest transaction and toreduce and solve investor grievances if any. Please Note:
The researcher hasnot covered all the operational features of both the stock exchanges, but hastaken
into consideration only the ones which are important to understand thethesis. The aim to describe
these operational features is for betterunderstanding of the working of stock exchanges. This is done
for the purposeof easy understanding from the reader's point of view. Let us see and understand is
general operational features.

A. Market Timings:

 Trading on the equities segment takes place on all

 days of the week (except Saturdays and Sundays and holidays declared
 by the Exchange in advance). The market timings of the equities segment are:
 Normal Market Open: 09:55 hours Nomal Market Close: 15:30 hours
 The Post Closing Session is held between 15.50 to 16.00 hours

B. Automated Trading System:

Today our country has an advancedtrading system which is a fully automated screen based trading
system. This system adopts the principle of an order driven market as opposedto a quote driven
system

1. NSE operates on the National Exchange for Automated Trading (NEAT) system
2. BSE operates on the BSE's Online Trading" (BOLT) system
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 3. Order Management in Automated Trading System:

The trading system provides complete flexibility to members in the kinds of orders that can be
placed by them. Orders are first mambered and time-stamped on receipt and then immediately
processed for potential match. Every order has a distinctive order number and a unique time stamp
on it. If a match is not found, then the orders are stored indifferent books'. Onders are stored in
price-time priority in variousbooks in the following sequence: Best Price, Within Price, by time
priority.

C. Order Conditions in Automated Trading System

A TradingMember can enter various types of orders depending upon his/her requirements. These
conditions are broadly classified into three categories:

 Time Related Condition

 Price Related Condition
 Quantity Related Condition

Time Conditions

 Day Order - A Day order, as the name suggests, is an order which is valid for the day on
which it is entered. If the order is not matched during the day, the order gets cancelled
automatically at the end of the trading day.

 GTC Order - Good Till Cancelled (GTC) order is an order that remains in the system
until its cancelled by the Trading Member. It will therefore be able to span trading days if it
does not get matched. The maximum number of days a GTC order can remain in the system
is notified by the Exchange from time to time.

 GTD - A Good Till Days/Date (GTD) order alkows the Trading Member to specify the
days/date up to which the order should stay in the system. At the end of this period the order
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 will get flushed from the system. Each day date counted is a calendar day and inclusive of
holidays. The days/date counted are inclusive of the daydate on which the order is placed.
The maximum number of days a GTD order can remain in the system is notified by the
Exchange from time to time.

 IOC - An Immediate or Cancel (IOC) order allows a Trading Member to buy or sell a
security as soon as the order is released into the market, failing which the order will be
removed from the market. Partial match is possible for the order, and the unmatched portion
of the onder is cancelled immediately.

Price Conditions

o Limit Price/Order - An order that allows the price to be specified while entering the
order into the system.

o Market Price/Order- An order to buy or sell securities at the best price obtainable at the
time of entering the order.

o Stop Loss (SL) Price/Order - The one that allows the Trading Member to place an
order which gets activated only when the market price of the relevant security reaches or
crosses a threshold price. Until then the order does not enter the market.A sell order in the
Stop Loss book gets triggered when the last traded price in the normal market reaches or fall
below the trigger price of the order. A buy order in the Stop Loss book gets triggered when
the last traded price in the normal market reaches or exceeds the trigger price of the order. Eg
If for stop loss buy order, the trigger is 93.00, the limit price is 95.00 and the market (last
traded) price is 90.00, then this order is released into the system once the market price
reaches or exceeds 93.00. This order is added to the regular lot book with time of triggering
as the time stamp, as a limit order of 95,00

Quantity Conditions:

 Disclosed Quantity (DQ)- An order with a DQ condition allows the Trading Member to
disclose only a part of the order quantity to the market. For example, an order of 1000 with a

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 disclosed quantity condition of 200 will mean that 200 is displayed to the market at a time.
After this is traded, another 200 is automatically released and so on till the fall order is
executed. The Exchange may set a minimum disclosed quantity criteria from time to time.

 MF- Minimum Fill (MF) - onders allow the Trading Member to specify the minimum
quantity by which an order should be filled. For example, an order of 1000 units with
minimum fill 200 will require that each trade be for at least 200 units. In other words there
will be a maximum of 5 trades of 200 each or a single trade of 1000. The Exchange may lay
down norms of MF from time to time.

 AON-All Or None (AON) - All or None orders allow a Trading Member to impose the
condition that only the full order should be matched against. This may be by way of multiple
trades. If the fall order is not matched it will stay in the books till matched or cancelled.
Note: Currently, AON and MF orders are not available on the system as per SEBI directives.

D. Market Segments

The Exchange operates the following sub-segments in the Equities segment:

Rolling Settlement
In a rolling settlement, each trading day is considered as a trading period and trades executed during
the day are settled based on the net obligations for the day. At NSE, trades in rolling settlement are
settled on a T+2 basis ie, on the 2nd working day. For arriving at the settlement day all intervening
holidays, which include bank holidays, NSE holidays, Saturdays and Sundays are excluded.
Typically trades taking place on Monday are settled on Wednesday, Tuesday's trades settled on
Thursday and so on.

Limited Physical Market

Pursuant to the directive of SEBI to provide an exit route for small investors holding physical
shares in securities mandated for compulsory dematerialised settlement, the Exchange has provided
a facility for such trading in physical shares not exceeding 500 shares. This market segment is
referred to as 'Limited Physical Marker (small window). The Limited Physical Market was
introduced on June 7, 1999.

Limited Physical Market-Salient Features

 Trading is conducted in the Odd Lot market (market type_0') with Book Type OL' and series
TT.
 Order quantities should not exceed 500 shares
 The base price and price bands applicable in the Limited Physical Market are same as those
applicable for the corresponding Normal Market on that day.

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  Trading hours are the same as that of the normal market and order entry during the pre-open
and post-close sessions are not allowed.
 Settlement for all trades would be done on a trade-for-trade basis and delivery obligations
arise out of each trade.
 Orders get nutched when both the price and the quantity match in the buy and sell order
Orders with the same price and quantity match on time priority Le. orders which have come
into the system before will get matched first.
 All Good-till-cancelled (GTC)/Good-till-date (GTD) orders placed and remaining as
outstanding orders in this segment at the close of market hours shall remain available for
next trading day. All orders in this segment, including GTC GTD orders, will be purged on
the last day of the settlement.
 Trading Members are required to ensure that shares are duly registered in the name of the
investorts) before entering orders on their behalf on a trade date.

2.5 The Role of the Stock Exchange in the Economy

Stock exchanges play a vital role in the functioning of the economy by providing the backbone to a
modem nation's economic infrastructure. Stock exchanges help companies raise money to expand.
They also provide individuals the ability to invest in companies. Stock exchanges provide order and
impose regulations for the trading of stocks. Finally, stock exchanges and all of the companies that
are associated with the stock exchanges provide hundreds of thousands of jobs.

Business Expansion
Stock exchanges provide companies the ability to raise capital to expand their businesses. When a
company needs to raise money they can sell shares of the company to the public. They accomplish
this by listing their shares on a stock exchange. Investors are able to buy shares of public offerings
and the money that is raised from the investors is used by the company to expand operations, buy
another company or hire additional workers. All of this leads to increased economic activity which
helps drive the economy.

Widespread Investing
Stock exchanges allow any person to invest in the greatest companies in the world. Investors. both
large and small, use the stock exchanges to buy into a company's fiture. Investing would not be
possible for the average person if there was not a centralized place to trade stocks. The ability for the
average person to invest in these companies leads to increased wealth for the investors. This
mcreased wealth then leads to additional economic activity when the investors spend their money.

Direct Jobs
The stock exchanges and all of the companies that serve the stock exchanges such a brokerage firms,
investment banks and financial news organizations employ hundreds of thousands of people. Most

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of the jobs related to stock exchanges are well paying and career orientated jobs. As a result, the
employees of these firms are able to help spur economic activity

Warning
If the stock exchanges do not fully carry out their duty of overseeing the stock trading process the
investing public will lose faith in the fimess and safety of the stock market. If this happens then all
of the economic activity that the stock exchanges create will decrease and this will lead to an overall
drop in economic activity. The stock exchanges must be sure that investors are not taken advantage
of and that investors continue to have confidence in the system the stock exchanges created.

Profit sharing
They help both casual and professional stock investors, to get their share in the weath of profitable
businesses.

Corporate governance
Stock exchanges impose stringent rules to get listed in them. So listed public companies have better
management records than privately held companies.

Creating investment opportunities for small investors

Small investors can also participate in the growth of large companies, by buying a small mamber of
shares,

Goverment capital raising for development projects

They help govemment to rise fund for developmental activities through the issue of bonds. An
investor who buys them will be lending money to the government, which is more secure, and
sometimes enjoys tax benefits also.

Barometer of the economy

They maintain the stock indexes which are the indicators of the general trend in the economy. They
also regulate the stock price fluctuations.

Mobilizing savings for investment

They help public to mobilize their savings to invest in high yielding economic sectors, which results
in higher yield, both to the individual and to the national economy.

3.1 MERITS OF OWNING STOCKS

Earn dividends

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Dividends are nothing but a part of company's profits distributed to its share holders. The company's
management may declare dividends either in between a financial year (called interim dividends) or
at the end of the francial year (called final dividends). However, it is not mandatory for the
companies to pay dividends. It can use the profits for uberative uses like expansion. The decision to
pay or not to pay dividends is taken at the annual meeting by the majority voting of the shareholders.
Blue-chip companies (large companies) generally are consistent dividend payers.

Capital appreciation

As the company expands and grows, it acquires more assets and makes more profit. As a result,
the value of its business increases. This, in turn, drives up the value of the stock. So when you sell,
you will receive a premium over what you paid. This is known as capital gain and this is the main
reason why people invest in stocks. They am capital appreciation Receive bonus shares For the time
being, let us understand that bomas shures are Free shares are given to you Later on we will discuss
about bonus shares in detail

• Rights issue
A company may require more finds to expand it's business and for that, it may need more funds. I
such cases, the company can issue further shares to the public. However, before approaching the
public, the existing shareholders will be given a chance to subscribe to more shares if they wart.
That's called a rights issue. This is done in order to ensure that the existing shareholders maintain the
same degree of control in the company. Thus you can maintain the participation in the company
profits.

Stocks can be pledged

Stocks are considered as assets and hence, banks accept shares as security for raising kans Should
there be an an emergency, shares can quickly pledged to mise finds. Apart from that. Brokerage
firms allow you to borrow money from their account based on the current share holding you have in
your demat account maintained with them. If you want to utilize a sudden surprise opportunity in
markets, but if you don't have the cash right now, you can adopt this

High liquidity Stocks are highly liquid. It can be converted into cash in no time. With online trading,
all it takes is the click of button to sell you holdings. You can receive your cash in two days.

Capital appreciation or dividends? The above mentioned income sources may not be present in
every company you buy. For example if you're buying company that has a huge potential to grow, it
may not pay it's surpas as dividends. Instead, it will be used for further growth. In such cases, huge
capital appreciation may happen. So depending upon your investment strategy, you'll have to choose
what you want It's always wise to go for capital appreciation rather than dividends.

3.2 DEMERITS OF OWNING STOCKS

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⚫ Since common stock represents ownership of a business, stockholders are the last to get paid, like
all other owners. A company must first pay its employees, suppliers, creditors, maintain its facilities
and pay its taxes. Any money left can then be distributed among its owners.

⚫ While shareholders are company owners, they do not enjoy all of the rights and privileges that the
owners of privately held companies do. For example, they cannot normally walk in and demand to
review in detail the company's books.

⚫ Investors in a company may not know all that there is to know about the company. This limited
information can sometimes cause investment decision-making to be difficult.

⚫ Stock prices tend to be volatile. Prices can be erratic, rising and declining quickly. Such declines
often cause investors to panic and sell, which actully only serves to lock in their losses.

⚫ Stock values can sometimes change for no apparent reason, which can be quite frustrating for the
investor who is trying to anticipate the stock's behavior based on the actual perkomace of the
company.

3.3 WHAT IS TRADING OF STOCKS?

Most stocks are traded on exchanges, which are places where buyers and sellers meet and decide on
a price. Some exchanges are physical locations where transactions are carried out on a trading floor.
You've probably seen pictures of a trading floor, in which traders are wildly throwing their arms up,
waving, yelling, and signaling to each other. The other type of exchange is virtual composed of a
network of computers where trades are made electronically.

The purpose of a stock market is to facilitate the exchange of securities between buyers and sellers,
reducing the risks of investing Just imagine how difficult it would be to sell shares if you had to call
around the neighborhood trying to find a buyer. Really, a stock market is nothing more than a super-
sophisticated farmers market linking buyers and sellers.

3.4 WHO IS A STOCKBROKER?

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Definition of Stockbroker

1. An agent that charges a fee or commission for executing buy and sell orders submitted by an
investor.
2. The firm that acts as an agent for a customer, charging the customer a commission for its services.

A stockbroker is an individual/organization who are specially ven license to participate in the

securities market on behalf of clients. The stockbroker has the role of an agent. When the
Stockbroker acts as agent for the buyers and sellers of securities, a commission is charged for
this service. As an agent the stock broker is merely performing a service for the investor. This means
that the broker will buy for the buyer and sell for the seller, each time making sure that the best price
is obtained for the client. An investor should regard the stockbroker as one who provides valuable
service and information to assist in making the correct investment decision. They are adequately
qualified to provide answers to a number of questions that the investor might need answers to and to
assist in participating in the regonal market. Here are some questions which arise in the minds of the
investors before the take help of the brokers for investing their money in a particular company.

Are they governed by any Rules and Regulations?

Of course, yes. Stock brokers are governed by SEBI Act, 1992, Securities Contracts (Regulation)
Act, 1956, Securities and Exchange Board of India [SEBI (Stock brokers and Sub brokers) Rules
and Regulations, 1992], Rules, Regulations and Bye laws of stock exchange of which he is a
member as well as various directives of SEBI and stock exchange issued from time to time. Every
stock broker is required to be a member of a stock exchange as well as registered with SEBI.
Examine the SEBI registration number and other relevant details can be found out from the
registration certificate issued by SEBI.

How do I know whether a broker is registered or not?

Every broker displays registration details on their website and on all the official documents. You
can confirm the registration detail on SEBI website. The SEBI website provides the details of all
registered brokers. A broker's registration number begins with the letters "INB" and that of a sub
broker with the letters "INS". What are the documents to be signed with stock broker? Before start
of trading with a stock broker, you are required to finish your details such as name,address, proof of
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address, etc, and execute a broker client agreement. You are also entitled to a document called "Risk
Disclosure Document", which would give you a fair idea about the risks associated with securities
market. You need to go through all these documents carefully.

SUB BROKERS
According to the BSE website - "Sub-broker" means any person not being a member of a Stock
Exchange who acts on behalf of a member-broker as an agent or otherwise for assisting the investors
in buying, selling or dealing in securities through such member-brokers. All Sub-brokers are
required to obtain a Certificate of Registration from SEBI without which they are not permitted to
deal in securities. SEBI has directed that no broker shall deal with a person who is acting as a sub-
broker unless he is registered with SEBI and it shall be the responsibility of the member-broker to
ensure that his chents are not acting in the capacity of a sub-broker unless they are registered with
SEBI as a sub-broker. It is mandatory for member-brokers to enter into an agreement with all the
sub-brokers. The agreement lays down the rights and responsibilities of member-brokers as well as
sub-brokers.

3.5 STOCK BROKERS IN INDIA.

There are a number of broking houses all over India. Many of them have International presence too.
Following are some of the leading Stock Broking firms in India. • Indianfoline

 ICICI direct
 Share khan
 India bulls
 Geoje Securities
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  HDFC
 Reliance Money
 Angel Broking

Investors have to check the broker's terms and conditions and decide about opening a trading
account. Only Govt. tax rates like, security transaction tax, stamp duty and service tax are uniform
other charges like brokerage for delivery trades, intraday trades, minimum transaction charge,
statement charges, DP charges, annual maintenance charges etc., may vary from one broker to
another

3.6 ROLE OF STOCK BROKER IN A STOCK MARKET

When you plan to start investing in a stock market, the first thing you have to do is to choose a stock
broker. It is just like choosing a car you think is most suitable for you. You can thoroughly research
the whole market in order to find the best car for you but require a medium or a venue to execute the
actual transaction. The same strategy is needed when you want to buy stock in a stock market. You
can select a company to invest in by conducting detailed research about its fiature prospects but you
still need to have a broker to make the final transaction and purchase its stock from the stock market.

A stock broker acts as the agent of an investor and represents his clients to buy or sell stocks,
derivatives and other securities. The term stock broker applies to companies that deal in securities as
well as to is employees who are technically working for the brokerage and are its registered
representatives. Most stock brokers work far away from stock trading floors. The primary role of a
stock broker is to execute transactions on behalf of his clients by buying and selling securities in the
stock market.

As a representative of his clients, a stock broker seeks the best deals to buy and sell stock. They
usually deal in all types of securities and also handle derivatives, such as commodity fiatures. They
also advise their clients about when to make transactions and guide them about what to look for in
market dealings. However, they are not licensed investment advisor and therefore, you should
always consult Your Personal Financial Mentor before making any financial investment decision in
a stock market. After completion of the transaction, they forward related information to their clients
and make transfer arrangements of stock certificates or other paperwork.Stock brokerage firms and
individual stock brokers are regulated by the Securities and Exchange Commission and other
specific markets. An individual broker must pass a test administered by concemed regulatory
authorities and must complete his registration through brokerage firms, which in some cases require
registration with a concerned securities commission.

Stock brokers are paid commissions which usually consist of a percentage of a value of the trade
transaction in a stock market. Brokerage firms are also known as discount brokers as they offer trade
transactions at a single price. They provide recommendations only on those investments that meet
financial goals and needs of a client. A stock broker provides advisory services for investing in a
stock market and in return, an investor pays a fixed fee to them. They also offer special features,
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such as check writing, interest-bearing accounts, credit cards and direct deposits and hence, play a
role of providing these limited banking services. Margin interest payments are charged to investors
for borrowing against the brokerage account for investment in a stock market. They also take service
charges from their clients for performing administrative tasks, such as for handling Individual
Retirement Account (IRA) and for mailing stocks in the form of certificates. They can also purchase
options, exchange traded finds (ETFs), bonds, shares, mutual finds, and other investments on your
behalf.

3.7 METHOD OF TRADING IN STOCK EXCHANGES AND THE TYPES OF

BROKERS

A stock exchange is a corporation or orginization that provides trading facilities for stockbrokers
and traders. Instruments traded on stock exchanges include stocks, investment trusts, commodities,
options, mutual funds, unit trusts and bonds. Only members can trade on an exchange.

Specialists

A member of an exchange who acts as the market maker to facilitate the trading of a given
stock.The specialist holds un inventory of the stock, posts the bid and ask prices, manages limit
orders and executes trades. Specialists are also responsible for managing large movements by
trading out of their own inventory. If there is a large shift in demand on the buy or sell side, the
specialist will step in and sell out of their inventory to meet the demand until the gap has been
narrowed. Before we address this question, let's review what specialists do. Specialists are people on
the trading floor of an exchange, such as the NYSE, who hold inventories of particular stocks. A
specialist's job is not only to match buyers and sellers, but also to keep an inventory for him or
herself that can be used to shift the market during a period of illiquidity. The job of the specialist
originated in 1872, when it was recognized that there was a need for a new system of continuous
trading before ths, each stock had a set time during which it could be traded, Under the new system
brokers began to deal in a specific stock to remain at one location on the floor of the exchange.
Eventually, the role of these brokers evolved into that of the 'specialist' It is the specialist's job to act
in a way that benefits the public above all. Every specialist accomplishes this by filling the four vital
roles of auctioneer, catalyst. agent and principal

Let's take a closer look at what a specialist does in fulfilling each of these roles:
⚫ Auctioneer - Shows best bids and offers, becoming a 'market maker
⚫ Catalyst - Keeps track of the interests of different buyers and sellers and continually updates them

Agent -Places electronically routed orders on behalf of clients. Floor brokers can leave an order with
a specialist, freeing themselves up to take on other orders. Specialists then take on the
responsibilities of a broker. Principal-Acts as the major party to a transaction. Since specialists are
responsible for keeping the market in equilibrium, they are required to execute all customer orders
ahead of their own

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Stock brokers/Financial Advisers
Stockbrokers, financial advisers, certified financial planners and registered representatives buy and
sell stocks on behalf of their clients and customers. They must pass certain written exams in order to
carry out trades and adhere to ethical standards. A stockbroker is someone who can buy or sell
stock, fitures or currencies in your behalf. There are many good stock broking firms around.
Professional brokers spend a lot of time watching the markets; their systems provide them with most
up to date information on any stock. Remember, though that your destiny is in your hands not your
stockbroker. Don't go blaming your stockbroker if the market turns around on you. The market will
do what i has to do, and all that is under your control is your own money management skills. There
are several types of stockbrokers: (Internet broker, discount broker, fill service brokers).

Internet brokers: This web site explains how to trade and do it yourself. It is the cheapest way, no
advise given by stockbrokers but you get access to all the tools. You are on your own take the time
to leam the trick of the trade and practice i Discount broker. You pay small fee but cheaper than a
full service broker. They only take your buy or sell order.Full service broker. More expensive as
they will provide you with their educated advise about the order you want them to execute. They
also provide any other information you wish to know. Remember to always double check or confirm
your order with your broker, NEVER assume the person on the other side has heard you correctly.

Day Traders
Day traders are individuals who buy and sell securities for their own accounts. Day traders will
trade quickly-making purchases and sales on the same day. Day trading is defined as the buying and
selling of a security within a single trading day. This can occur in any marketplace, but is most
common in the foreign-exchange (forex) market and stock market. Typically, day traders are well
educated and well finded. They utilize high amounts of leverage and short-term trading strategies to
capitalize on small price movements in highly liquid stocks or currencies. Day traders serve two
critical functions in the marketplace: they keep the markets running efficiently vin arbitrage and they
provide much of the markets' liquidity (especially in the stock market). This article will take an
objective look at day trading, who does it and how it is done. (Did you know there are schools that
teach day trading? See "The Best Day Trading School.") Characteristics of a Day Trader This article
will focus on professional day traders - that is, those who trade for a living not simply as a hobby or
for a "gambling high." These traders are typically well-established in the field and have in-depth
knowledge of the marketplace. Here are some of the prerequisites to day trading:

Knowledge and Experience in the Marketplace: Individuals who attempt to day trade without an
understanding of market fundamentals often end up losing money. Sufficient Capital One cannot
expect to make money day trading Day traders use only risk capital, which they can afford to lose.
Not only does this protect them from financial nin, but it also helps eliminate emotion from their
trading. A large amount of capital is often necessary to capitalize effectively on intra-day price
movements. A Strategy: A trader needs an edge over the rest of the market. There are several
different strategies that day traders utilize, including swing trading, arbitrage and trading news,

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among others. These strategies are refined until they produce consistent profts and effectively limit
losses.

Casual Traders
A casual trader is a person who tries to build up a portfolio by buying and selling securities for his
own account over a period of time. Technology has simplified the process and given the casual
trader much of the same information and tools available to professional traders. Casual trading is a
newly developed variant of financial trading. It consists of the same principles carried out in trading
rooms but molves the use of trading platforms that can be operated from the trader's residence.
Casual trading is a general name for all trading actions that are carried out by individuals without the
use of a mediator. They can be found in stock exchange, foreign exchange, commodities and other
markets.

Online Trading
Online trading is available to any person that has an account at an online trading firm. A person can
enter trades from a personal computer and set price limits and targets, Commissions are offen much
less than at a full-service brokerage firm. The act of placing buy/sell orders for financial securities
and/or currencies with the use of a brokerage's internet-based proprietary trading platforms. The use
of online trading increased dramatically in the mid- to late-'90s with the introduction of affordable
high-speed computers and internet connections. The use of online trades has increased the manber of
discount brokerages because internet trading allows many brokers to further cut costs and part of the
savings can be past on to customers in the form of lower commissions.

3.8 BULLS AND BEARS

The two most commonly used terms in stock markets.

A common story is that the terms "Bull market' and 'Bear market are derived those animals attack.
Bulls are supposed to be aggressive and attacking while bears would wait for the prey to come down
from the way Another story is that long back, bear trappers would first trade in the market and fix a
price for bear skins, which they actually didn't own. Once the price is fixed, they would go hunting
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for bear skins. So eventually even if the prices go down, they will still be able to sell if for a high
price. This term eventually was used to describe short sellers and speculators who sell what they do
not own and buy when the price comes down and makes money in the process.

What are Bears?

Definition of 'Bear Market

A market condition in which the prices of securities are falling and widespread pessimism causes the
negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling
continues, pessimism only grows. Although figures can vary for many, a downtum of 20% or more
in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard &
Poor's 500 Index (S&P 500), over at least a two-month period. is considered an entry into a bear
market.

Bear: An operator who expects the share price to fall. A bear market is the opposite of a bull market.
When the prices of stocks moves crushes rapidly cracking previous lows, you may assume that it's a
bear market. Generally markets must fall by more than 20% to confirm that it' a bear market.

Bear Market: A weak and filling market where buyers are absent.

What are Bulls?

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Definition of "Ball Market

A francial market of a group of securities in which prices are rising or are expected to rise. The term
"bull market" is most often used to refer to the stock market, but can be applied to anything that is
traded, such as bonds, currencies and commodities.

Bull : An operator who expects the share price to rise and takes position in the market to sell at a
later date. When the prices of stocks moves up rapidly emacking previous highs, you may assume
that it's a bull market. If there are many bullish days in a row you can consider that as a "bull market
run. Technically a bull market is a rise in value of the market by at least 20%

Bull Market: A rising market where buyers far outnumber the sellers A bull market is one where
prices are rising, whereas a bear market is one where prices are falling. The two terms are also used
to describe types of investors.

A stock market bull is someone who has a very optimistic view of the market, they may be stock-
holders or maybe investors who aggressively buy and sell stocks quickly. A bear investor, on the
other hand, is pessimistic about the market and may make more conservative stock choices.
Sometimes, the terms are used to refer to specific finds or stocks. Bear market finds, for example,
are those that are falling and firing poorly. Investors sometimes refer to bull stocks to describe
securities that are aggressively rising and making their investors money. Knowing what is meant by
the bear and bull market can help you understand whether the market is currently rising or falling.
There is no need to get fidened by a bear market indicator, however, as experts agree that the market
is cyclical. When prices start filling, they will eventually rise too.

What Drives Bear and Bull Markets?

The stock market is affected by many economic factors. High employment levels, strong economy,
and stable social and economic conditions generally build investor confidence and encourage
investors to put their money in the stock market. Often, this can bolster bull markets. Also, new
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technologies and companies that encourage investors to put their money in stocks can create bull
markets. For example, in the 1990s, the dot com craze encouraged many investors to put their
money in stocks that they felt would keep increasing. In some cases, a bullish market is simply self-
perpetuating Since the market is doing well, it only encourages investors to invest more money or to
start investing.

On the other hand, discouraging economic or social political changes in a society can push the
market down. Sudden instability or unemployment or even fears of unemployment caused by wars
and other problems can start to make investors more conservative and therefore lead to bear markets.
Of course, again this becomes a self-perpetuating trend. As the economy slows down, companies
begin downsizing Increased unemployment makes people far less willing to gamble on the stock
market. Sometimes, a panic caused by dire predictions about the market can ako create bearish
conditions.

How To Predict Bear and Bull Markets? The easiest way to predict both types of markets is to
realize that what goes up must come down. That is, if the market is rising, then you know that at
some point it will start to fall again. Similarly, if the market is currently falling, you can be certain
that eventually it will pick up again. There are no precise ways to predict either bull or bear markets,
although general social economic situations can help you to determine what will happen A country
which wages a war will experience bullish market conditions as government contracts create more
jobs and boost investor confidence if their expectation is to win. Sudden international crises push the
market downward and create bearish conditions. News is very often a good indicator of where
investors are headed. The reports will inform about loss of imvestor confidence as well as sudden
economic downturns that may affect the market. If you notice from stock market research that
several indexes have changed by 15% to 20%, you can be sure that market direction is changing.
When you notice such changes, it is time to sit up and take notice. You may be headed for a bullish
or bearish market.

Market Conditions In Both Cases

While referring to markets is either bull or bear is very general, there are certain types of specific
markets conditions that exist in both markets. For example, a bullish market is offen accompanied
by a sudden increase demand for securities and smaller supplies of the same securities. This is
because more investors are willing to buy securities while fewer wish to sell This, of course, only
pushes prices higher. The very opposite is true in a bearish market. The investor's behavior is
another condition prevalent in both markets. In bullish markets, there's a sudden increase interest in
the stock market. More people are hopeful about possible profits on the stock market and most
people are optimistic about economic conditions. In a bearish market, investors are not very
confident and therefore invest less. Investing During Bear and Bull Markets New investors often
assume that they need to avoid investing during bear markets, and invest heavily during bull
markets. This is not the case. Experienced investors know that you need to be able to invest in any
sort of market condition, provided that you do so wisely. Each investor has a different strategy for
dealing with a bull market or bearish markets. Many investors try to take advantage of bull markets

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by buying stocks as soon as the market gets bullish, and then starting to sell when prices seem to
have reached their peak. The difficulty, of course, is that it is almost impossible to tell when the
trend is beginning and when it will peak. In general, investors can take more chances with the
market during a bullish phase. Since overall prices will rise, the chances of making a profit are good.

In bearish market conditions, prices are falling and the possibility of loss is pretty good. What is
worse, it is not always possible to tell when bearish conditions will end. Therefore, if you invest
during such market conditions, you may have to suffer some losses before bullish times return and
you're able to realize a profit. For this reason, many investors decide on short selling or fixed income
securities and other more conservative types of investment. Defensive stocks are another good
option that remain stable during bearish conditions. On the other hand, some investors see bearish
market conditions as an ideal time to invest in more stocks. Since many people are selling off their
stocks -- including vakable blue-chip stocks at low prices, it is possible to set up long-term
investments that will prove vakable during bullish times.

3.9 BULLISH AND BEARISH BEHAVIOUR

The terms bullish and bearish are often used to describe the conditions in the market or the
sentiment of investors. They are very important terms and are used in nearly all types of trading.
from currencies to stocks. Traders can take advantage of both bullish and bearish markets if they
have sufficient knowledge of the market conditions that are associated with these cycles. When
traders understand the meaning of bearish and bullish and are able to identify the cycles, they will
know how to profit off of any market condition.

Investors and Markets

An investor with bearish sentiment believes that a rise in the valse of asset prices presents an
excellent opportunity to trade these assets and get out of the market. On the other hand, investors
with bullish sentiment wait until prices are low before entering the market with the hope that prices
will increase and they will then trade their stocks to make a profit. Traders can generate profits in
both bearish and bullish market cycles. When a rise is suspected in the markets, bullish investors
either purchase assets or hold onto long-term investments. Below is an illustration of investor
sentiment

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3.10 WHAT IS A STOCK CHART

In technical analysis, charts are similar to the charts that you see in any business setting. A chart is
simply a graphical representation of a series of prices over a set time frame. For example, a chart
may show a stock's price movement over a one-year period, where each point on the graph
represents the closing price for each day the stock is traded:

Figure 1

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Figure 1 provides an example of a basic chart. It is a representation of the price movements of a
stock over a 1.5 year period. The bottom of the graph, running horizontally (x-axis), is the date or
time scale. On the right hand side, running vertically (y-axis), the price of the security is shown By
booking at the graph we see that in October 2004 (Point 1), the price of this stock was around $245,
whereas in June 2005 (Point 2), the stock's price is around $265. This tells us that the stock has risen
between October 2004 and June 2005

Chart Properties
There are several things that you should be aware of when looking at a chart, as these factors can
affect the information that is provided. They include the time scale, the price scale and the price
point properties used.

The Time Scale

The time scale refers to the range of dates at the bottom of the chart, which can vary from decades
to seconds. The most frequently used time scales are intraday, daily, weekly, monthly, quarterly and
annually. The shorter the time frame, the more detailed the chart. Each data point can represent the
closing price of the period or show the open, the high, the low and the close depending on the chart
used. Intraday churts plot price movement within the period of one day. This means that the time
scale could be as short as five minutes or could cover the whole trading day from the opening bell to
the closing bell Daily charts are comprised of a series of price movements in which each price point
on the chart is a full day's trading condensed into one point. Again, each point on the graph can be
simply the closing price or can entail the open, high, low and close for the stock over the day. These
data points are spread out over weekly, monthly and even yearly time scales to monitor both short-
term and intermediate trends in price movement. Weekly, monthly, quarterly and yearly charts are
used to analyze longer term trends in the movement of a stock's price.
Each data point in these graphs will be a condensed version of what happened over the specified
period. So for a weekly chart, each data point will be a representation of the price movement of the
week. For example, if you are looking at a chart of weekly data spread over a five-year period and
cach data point is the closing price for the week, the price that is plotted will be the closing price on
the last trading day of the week, which is usually a Friday The Price Scale and Price Point Properties
The price scale is on the right-hand side of the chart. It shows a stock's current price and compares it
to past data points. This may seem like a simple concept in that the price scale goes from lower
prices to higher prices as you move along the scale from the bottom to the top. The problem,
however, is in the structure of the scale itself. A scale can either be constructed in ancar (arithmetic)
or kugarithmic way, and both of these options are available on most charting services.
If a price scale is constructed using a linear scale, the space between each price point (10, 20, 30,
40) is separated by an equal amount. A price move from 10 to 20 on a linear scale is the same
distance on the chart as a move from 40 to 50. In other words, the price scale measures moves in
absolute terms and does not show the effects of percent change.

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Figure 2

If a price scale is in logarithmic terms, then the distance between points will be equal in terms of
percent change. A price change from 10 to 20 is a 100% increase in the price while a move from 40
to 50 is only a 25% change, even though they are represented by the same distance on a linear scale.
On a logarithmic scale, the distance of the 100% price change from 10 to 20 will not be the same as
the 25% change from 40 to 50. In this case, the move from 10 to 20 is represented by a larger space
one the chart, while the move from 40 to 50, is represented by a smaller space because, percentage-
wise, it indicates a smaller move. In Figure 2, the logarithmic price scale on the right leaves the
same amount of space between 10 and 20 as it does between 20 and 40 because these both represent
100% increases,

3.11 TYPES OF STOCK CHARTS

There are four main types of charts that are used by investors and traders depending on the
information that they are seeking and their individual skill levels. The chart types are: the line chart,
the bar chart, the candlestick chart and the point and figure chart. In the following sections, we will
focus on the S&P 500 Index during the period of Jamary 2006 through May 2006. Notice how the
data used to create the charts is the same, but the way the data is plotted and shown in the charts is
different.

Line Chart

The most basic of the four charts is the line chart because it represents only the closing prices over a
set period of time. The line is formed by connecting the closing prices over the time frame. Line
charts do not provide visual information of the trading range for the individual points such as the
high, low and opening prices. However, the closing price is often considered to be the most
important price in stock data compared to the high and low for the day and this is why it is the only
value used in line charts.

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 Figure 1: A line chart

Bar Charts

The bar chart expands on the line churt by adding several more key pieces of information to each
data point. The chart is made up of a series of vertical lines that represent each data point. This
vertical line represents the high and low for the trading period, along with the closing price. The
close and open are represented on the vertical line by a horizontal dash. The opening price on a bar
chart is illustrated by the dash that is located on the left side of the vertical bar. Conversely. the close
is represented by the dash on the right. Generally, if the lett dash (open) is lower than
the right dash (close) then the bar will be shaded black, representing an up period for the stock,
which means it has gained value. A bar that is colored red signals that the stock has gone down in
value over that period. When this is the case, the dash on the right (close) is lower than the dash on
the left (open).

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 Figure 2: A bar chart

Candlestick Charts

The candlestick chart is similar to a bar chart, but it differs in the way that it is visually constructed.
Similar to the bar chart, the candlestick abo has a thin vertical line showing the period's trading
range. The difference comes in the formation of a wide bar on the vertical line, which illustrates the
difference between the open and close. And, like bar charts, candlesticks abo rely heavily on the use
of colors to explain what has happened during the trading period. A major problem with the
candlestick color configuration, however, is that different sites use different standards; therefore, it
is important to understand the candlestick configuration used at the chart site you are working with.
There are two color constructs for days up and one for days that the price filk. When the price of the
stock is up and closes above the opening trade, the candlestick will usually be white or clear. If the
stock has traded down for the period, then the candlestick will usually be red or black, depending on
the site. If the stock's price has closed above the previous day's close but below the day's open, the
candlestick will be black or filled with the color that is used to indicate an up day.

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 Figure 3: A candlestick chart

Point and Figure Charts

The point and figure chart is not well known or used by the average investor but it has had a long
history of use dating back to the first technical traders. This type of chart reflects price movements
and is not as concerned about time and vokime in the formulation of the points. The point and figure
chart removes the noise, or insignificant price movements, in the stock, which can distort traders'
views of the price trends. These types of charts also try to neutralize the skewing effect that time has
on chart analysis. (For further reading, see Point And Figure Charting)

Figure 4: A point and Figure chart

4.1 REGULATORS IN THE INDIAN STOCK MARKET

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The two main important regulators in Indian Stock Market are: Reserve Bank Of India Securities
Exchange Board Of India

RESERVE BANK OF INDIA

Reserve Bank of India is the apex monetary Institution of India. It is also called as the central bank
of the country.

The Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of
the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was initially
established in Calcutta but was permanently moved to Mumbai in 1937. The Central Office is where
the Governor sits and where policies are formulated. Though originally privately owned, since
nationalization in 1949, the Reserve Bank is filly owned by the Government of India. It acts as the
apex monetary authority of the country. The Central Office is where the Governor sits and is where
policies are formulated. Though originally privately owned, since nationalization in 1949, the
Reserve Bank is fully owned by the Government of India. The preamble of the reserve bank of India
is as follows: to regulate the issue of Bank Notes and keeping of reserves with a view to securing
monetary stability in India and generally to operate the currency and credit system of the country to
its advantage."
The RBI plays an important part in the Development Strategy of the Government of India. It is a
member bank of the Asian Clearing Union. The general superintendence and direction of the RBI is
entrusted with the 21-member Central Board of Directors: the Governor, 4 Deputy Governors, 2
Finance Ministry representatives, 10 govemment-nominated directors to represent important
elements from India's economy, and 4 directors to represent local boards headquartered at Mumbai,
Kolkata, Chennai and New Delhi. Each of these local boards consist of 5 members who represent
regional interests, as well as the interests of co-operative and indigenous banks.

SECURITIES AND EXCHANGE BOARD OF INDIA

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SEBI Act, 1992: Securities and Exchange Board of India (SEBI) was first established in the year
1988 as a non-statutory body for regulating the securities market. It became an autonomous body in
1992 and more powers were given through an ordinance. Since then regulates the market through its
independent powers.

FUNCTIONS

The Preamble of the Securities and Exchange Board of India describes the basic functions of the
Securities and Exchange Board of India as "to protect the interests of investors in securities and to
promote the development of and to regulate the securities market and for matters connected there
with or incidental there to

SEBI has to be responsive to the needs of three groups, which constitute the market:

 The issuers of securities

 The investors
 The market intermediaries.

SEBI has three functions rolled into one body:

⚫ quasi-legislative, quasi-judicial and quasi-executive.

It dratts regulations in its legislative capacity, à conducts investigation and enforcement action in is
executive function and it passes rulings and orders in its judicial capacity. Though this makes a very
powerful, there is an appeal process to create accountability. There is a Securities Appellate Tribunal
which is a three-member tribunal. A second appeal les directly to the Supreme Court. SEBI has
taken a very proactive role in streamlining disclosure requirements to international standards

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For the discharge of its functions efficiently. SEBI has been vested with the following powers:
1. To approve by-laws of stock exchanges SEBI
2. To require the stock exchange to amend their by-laws.
3. Inspect the books of accounts and call for periodical returns from recognized stock
exchanges.
4. Inspect the books of accounts of a financial intermediaries
5. compel certain companies to list their shares in one or more stock exchanges.
6. Registration brokers.

4.2 WHAT IS A STOCK INDEX?

STOCK INDEX

The stock index function as an indicator of the general economic scenario of a country/region/
sector. If the stock market indices are growing it indicates that the overall general economy of the
country is stable and that the investors have faith in the growth story of the economy. If however,
there is a plunge in the stock market index over a period of time, it indicates that the economy of the
country is in troubled waters. It'a also an indication of what the corporates in that country are facing

A stock index is created by selecting a group of high performing stocks. For example -The FTSE
100 (the stock index of London stock exchange) is constructed from the top 100 companies trading
in the London stock exchange. If the FTSE 100 records a jump over a period of time, it indicates
that most of the top 100 companies in England are doing well at that point of time and that the
investors are positive about putting their money in England.

4.3 TYPES OF STOCK INDICES

There are different types of indices and FTSE 100 was just an example. Stock indices can be
constructed -

 For the entire world (global indices)



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  For an entire continent (regional indices -for example S&P Latin america 40) For an entire
country (national indices-for example Sensex & NIFTY for India)

 For a particular sector in a country-(sectoral indices-for example BSE BANKEX which

tracks top banking companies in India)

 For any other theme/group of economy/companies you want to track. (example: Dow Jones
Islamic world market index)

The MSCI global and the S & P Global 100 are examples of world stock indices which tracks the
largest companies in the world irrespective of their country of origin. The MSCI global id an index
with over 6000 stocks included from different parts of the developed world. It specifically excludes
companies from emerging economies.When stock indices are constructed to track the performance
of the economy of a country (ke Sensex in India), it called a national index. Imrespective of the type
of index, the purpose of any index is the same. It provides to the public, a quick view of how the
economy (based on which the index is constructed) is functioning A sudden side in indices denotes
that the investors have lost faith. There could be several reasons for that like poor economic reforms,
high inflation, high borrowing costs, amendments in laws that not well received by the business
community, downgrades by world credit rating agencies, scams, corruption.. the last is end
less.These indices also serve as benchmarks for measuring performance of find managers or for
measuring the performance of an individual's stock portfolio.

CONSTRUCTION OF STOCK INDEX

A stock index can be calculated in two ways-

 By considering the price of the component stocks alone. This method is called the price-
weighted method.
 By considering the market vake or size of the company called the capitalization weighted
method.

To conclude, stock indices are barometers to measure general economic performance of an

particular country/sector. It's updated every second throughout on every trading so as to reflect the
exact picture of the economy. It's also a permanent record of the history of markets - it's highs and
lows, booms and crashes.As said before our national indices are NIFTY which is followed for use
and sensex which is followed for bse, I will be further explaining NIFTY and sensex in short

4.4 INDIAN STOCK INDICES

There are two main indices of the Indian stock market:

 NIFTY
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  SENSEX

NIFTY

NIFTY is a major stock index in India introduced by the National stock exchange NIFTY was
coined for the two words "National' and 'FIFTY". The word fifty is used because; the index consists
of 50 actively traded stocks from various sectors.So the NIFTY index is a bit broader than the
Sensex which is constructed using 30 actively traded stocks in the BSE NIFTY is calculated using
the same methodology adopted by the BSE in calculating the Sensex -but with three differences.
They are:
 The base year is taken as 1995
 The base value is set to 1000
 NIFTY is calculated on 50 stocks actively traded in the NSE 50 top stocks are selected from
24 sectors.

The CNX NIFTY, also called the NIFTY 50 or simply the NIFTY, is National Stock Exchange of
India's benchmark index for Indian equity market. NIFTY is owned and managed by India Index
Services and Products Ltd. (ISL), which is a wholly owned subsidiary of the NSE Strategic
Investment Corporation Limited. IISL is India's first specialized company focused upon the index as
a core product. IISI has a marketing and licensing agreement with Standard & Poor's for co-
branding equity indices. 'CNX' in its name stands for 'CRISIL NSE Index. CNX NIFTY has shaped
up as a largest single financial product in India, with an ecosystem comprising: exchange traded
funds (onshore and offshore), exchange-traded fitures and options (at NSE in India and at SGX and
CME abroad), other index funds and OTC derivatives (mostly offshore). The CNX NIFTY covers
22 sectors of the Indian economy and offers investment managers exposure to the Indian market in
one portfolio. During 2008-12, CNX NIFTY 50 Index share of NSE market capitalisation fell from
65% to 29%[1] due to the rise of sectoral indices like CNX Bank, CNX IT, CNX Mid Cap, etc. The
CNX NIFTY 50 Index gives 29.70% weightage to financial services, 0.73% weightage to industrial
manufacturing and nil weightage to agricultural sector.

The CNX NIFTY index is a free float market capitalisation weighted index. The index was initially
calculated on full market capitalisation methodology. From June 26, 2009, the computation was
changed to free float methodology. The base period for the CNX NIFTY index is November 3,
1995, which marked the completion of one year of operations of National Stock Exchital Market
Segment. The base value of the index has been set at 1000, and a base capital of Rs 2.06 trillion. The
CNX NIFTY Index was developed by Ajay Shah and Susan Thomas. The CNX NIFTY currently
consists of the following 50 major Indian companies: Kindly Note, post expiration of agreement
between IISI. and Standard and Poor's Financial Service LLC (S&P) on 31st Jan 2013, index is
addressed as CNX NIFTY Index. (Formerly, S&P CNX NIFTY Index)

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 List of stocks in Nifty 50

 Adani Ports Sez Ltd  Asian Paints Ltd

 Apollo Hospitals Ltd  Axis Bank Ltd

 Bajaj Auto Ltd  Bajaj Finance Ltd

 Bajaj Finserv Ltd  Bharat Petroleum Ltd

 Bharti Airtel Ltd  Infosys Ltd

 Britannia Industries Ltd  Itc Ltd

 Cipla Ltd  Jsw Steel Ltd

 Coal India Ltd  Kotak Mahindra Bank Ltd

 Divis Laboratories Ltd  Lt Larsen Toubro Ltd

 Dr Reddys Laboratories Ltd  Mahindra Mahindra Ltd

 Eicher Motors Ltd  Maruti Suzuki Ltd

 Grasim Industries Ltd  Nestle India Ltd

 Hcl Technologies Ltd  Ntpc Ltd

 Hdfc Bank Ltd  Oil Natural Gas Corporation

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 Ltd

 Hdfc Life Insurance Ltd  Power Grid Corporation Of

India Ltd

 Hero Motocorp Ltd  Reliance Industries Ltd

 Hindalco Industries Ltd  Sbi Life Insurance Ltd

 Hindustan Unilever Ltd  Shree Cement Ltd

 Icici Bank Ltd  State Bank Of India Ltd

 Indian Oil Corporation Ltd  Sun Pharmaceutical Ltd

 Indusind Bank Ltd  Tata Consumer Products Ltd

 Tata Motors Ltd  Tata Steel Ltd

 Tcs Tata Consultancy Services  Tech Mahindra Ltd

Ltd

 Titan Ltd  Ultratech Cement Ltd

 Upl United Phosphorus Ltd  Wipro Ltd

SENSEX

The BSE SENSEX (also known as the S&P Bombay Stock Exchange Sensitive Index or simply
SENSEX) is a free-float market-weighted stock market index of 30 well-established and financially
sound companies listed on the Bombay Stock Exchange. The 30 constituent companies which are
some of the largest and most actively traded stocks, are representative of various industrial sectors of
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the Indian economy. Published since 1 January 1986, the S&P BSE SENSEX is regarded as the
pulse of the domestic stock markets in India. The base value of the SENSEX was taken as 100 on 1
April 1979 and its base year as 1978–79. On 25 July 2001 BSE launched DOLLEX-30, a dollar-
linked version of the SENSEX.

Etymology
The term Sensex was coined by Deepak Mohoni, a stock market analyst in 1989.BSE Sensitive
Index then was at about 750 points. it is a portmanteau of the words Sensitive and Index

Calculation

The BSE has some reviews and modifies its composition to be sure it reflects current market
conditions. The index is calculated based on a free float capitalisation method, a variation of the
market capitalisation method. Instead of using a company's outstanding shares it uses its float, or
shares that are readily available for trading. Free Floating capital implies total capitalization less
Directors shareholding. As per free float capitalisation methodology, the level of index at any point
of time reflects the free float market value of 30 constituent stocks relative to a base period. The
market capitalisation of a company is determined by multiplying the price of its stock by the number
of shares issued by corporate actions, replacement of scrips. The index has increased by over twenty
five times from June 1990 to the present. Using information from April 1979 onwards, the long-run
rate of return on the S&P BSE SENSEX works 18.6% per annum.

Constituents

See also: List of BSE SENSEX companies

Exchange Date
# Symbol Companies Sector
ticker Added

21 December
1 500820 ASIANPAINT.BO Asian Paints Paints
2015
Banking -
2 532215 AXISBANK.BO Axis Bank
Private
3 532977 BAJAJ-AUTO.BO Bajaj Auto Automobile
Finance 24 December
4 500034 BAJFINANCE.BO Bajaj Finance
(NBFC) 2018
Finance
5 532978 BAJAJFINSV.BO Bajaj Finserv
(Investment
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 )
Telecommu
6 532454 BHARTIARTL.BO Bharti Airtel
nications
Dr Reddy's Pharmaceuti
7 500124 DRREDDY.BO
Laboratories cals
IT Services
HCL
8 532281 HCLTECH.BO &
Technologies
Consulting
Finance
9 500010 HDFC.BO HDFC
(Housing)
Banking -
10 500180 HDFCBANK.BO HDFC Bank
Private
Hindustan
11 500696 HINDUNILVR.BO Unilever FMCG
Limited
Banking -
12 532174 ICICIBANK.BO ICICI Bank
Private
Banking - 18 December
13 532187 INDUSINDBK.BO IndusInd Bank
Private 2017
IT Services
14 500209 INFY.BO Infosys &
Consulting
Cigarettes &
15 500875 ITC.BO ITC Limited
FMCG
Kotak
Banking -
16 500247 KOTAKBANK.BO Mahindra 19 June 2017
Private
Bank
Engineering
Larsen & &
17 500510 LT.BO
Toubro Constructio
n
Mahindra &
18 500520 M&M.BO Automobile
Mahindra
19 532500 MARUTI.BO Maruti Suzuki Automobile
20 500790 NESTLEIND.BO Nestlé India FMCG 23 Dec 2019
Power
21 532555 NTPC.BO NTPC generation/
Distribution
Oil
Oil and
exploration
22 500312 ONGC.BO Natural Gas
and
Corporation
Production
Power Grid Power
23 532898 POWERGRID.BO Corporation of generation/ 20 June 2016
India Distribution
24 500325 RELIANCE.BO Reliance Conglomera

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 Industries
te
Limited
State Bank of Banking -
25 500112 SBIN.BO
India Public
Pharmaceuti 8 August
26 524715 SUNPHARMA.BO Sun Pharma
cals 2011
Tata IT Services
27 532540 TCS.BO Consultancy &
Services Consulting
IT Services
Tech
28 532755 TECHM.BO &
Mahindra
Consulting
Titan Diamond &
29 500114 TITAN.BO 23 Dec 2019
Company Jewellery
UltraTech
30 532538 ULTRACEMCO.BO Cement 23 Dec 2019
Cement

5. REVIEW OF LITERATURE

Gupta (1972) in his book has studied the working of stock exchanges in India and has given a
number of suggestions to improve its working. The study highlights the' need to regulate the volume
of speculation so as to serve the needs of liquidity and price continuity. It suggests the enlistment of
corporate securities in more than one stock exchange at the same time to improve liquidity. The
study also wishes the cost of issues to be low, in order to protect small investors

Panda (1980) has studied the role of stock exchanges in India before and after independence. The
study reveals that listed stocks covered four-fifths of the joint stock sector companies. Investment in
securities was no longer the monopoly of any particular class or of a small group of people. It
attracted the attention of a large number of small and middle class individuals. It was observed that a
large proportion of savings went in the first instance into purchase of securities already issued.

Gupta (1981) in an extensive study titled `Return on New Equity Issues' states that the investment
performance of new issues of equity shares, especially those of new companies, deserves separate
analysis. The factor significantly influencing the rate of return on new issues to the original buyers is
the `fixed price' at which they are issued. The return on equities includes dividends and capital
appreciation. This study presents sound estimates of rates of return on equities, and examines the
variability of such returns over time.

Jawahar Lal (1992) presents a profile of Indian investors and evaluates their investment decisions.
He made an effort to study their familiarity with, and comprehension of financial information, and
the extent to which this is put to use. The information that the companies provide generally fails to
meet the needs of a variety of individual investors and there is a general impression that the
company's Annual Report and other statements are not well received by them.
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L.C.Gupta (1992) revealed the findings of his study that there is existence of wild speculation in the
Indian stock market. The over speculative character of the Indian stock market is reflected in
extremely high concentration of the market activity in a handful of shares to the neglect of the
remaining shares and absolutely high trading velocities of the speculative counters. He opined that,
short- term speculation, if excessive, could lead to "artificial price". An artificial price is one which
is not justified by prospective earnings, dividends, financial strength and assets or which is brought
about by speculators through rumours, manipulations, etc. He concluded that such artificial prices
are bound to crash sometime or other as history has repeated and proved.

Nabhi Kumar Jain (1992) specified certain tips for buying shares for holding and also for selling
shares. He advised the investors to buy shares of a growing company of a growing industry. Buy
shares by diversifying in a number of growth companies operating in a different but equally fast
growing sector of the economy. He suggested selling the shares the moment company has or almost
reached the peak of its growth. Also, sell the shares the moment you realise you have made a
mistake in the initial selection of the shares. The only option to decide when to buy and sell high
priced shares is to identify the individual merit or demerit of each of the shares in the portfolio and
arrive at a decision.

Pyare Lal Singh (1993) in the study titled, Indian Capital Market - A Functional Analysis, depicts
the primary market as a perennial source of supply of funds. It mobilises the savings from the
different sectors of the economy like households, public and private corporate sectors. The number
of investors increased from 20 lakhs in 1980 to 150 lakhs in 1990 (7. 5 times). In financing of the
project costs of the companies with different sources of financing, the contribution of the securities
has risen from 35.01% in 1981 to 52.94% in 1989. In the total volume of the securities issued, the
contribution of debentures / bonds in recent years has increased significantly from 16. 21% to
30.14%.

Sunil Damodar (1993) evaluated the 'Derivatives' especially the 'futures' as a tool for short-term risk
control. He opined that derivatives have become an indispensable tool for finance managers whose
prime objective is to manage or reduce the risk inherent in their portfolios. He disclosed that the
over-riding feature of 'financial futures' in risk management is that these instruments tend to be most
valuable when risk control is needed for a short- term, i.e., for a year or less. They tend to be
cheapest and easily available for protecting against or benefiting from short term price. Their low
execution costs also make them very suitable for frequent and short term trading to manage risk,
more effectively.

R.Venkataramani (l994) disclosed the uses and dangers of derivatives. The derivative products can
lead us to a dangerous position if its full implications are not clearly understood. Being off balance
sheet in nature, more and more derivative products are traded than the cash market products and
they suffer heavily due to their sensitive nature. He brought to the notice of the investors the 'Over
the counter product' (OTC) which are traded across the counters of a bank. OTC products (e.g.
Options and futures) are tailor made for the particular need of a customer and serve as a perfect
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hedge. He emphasised the use of futures as an instrument of hedge, for it is of low cost.

Amanulla & Kamaiah (1995) conducted a study to examine the Indian stock market efficiency by
using Ravallion co integration and error correction market integration approaches. The data used are
the RBI monthly aggregate share indices relating five regional stock exchanges in India, viz
Bombay, Calcutta, Madras, Delhi, Ahmedabad during 1980-1983. According to the authors, the co
integration results exhibited a long-run equilibrium relation between the price indices of five stock
exchanges and error correction models indicated short run deviation between the five regional stock
exchanges. The study found that there is no evidence in favour of market efficiency of Bombay,
Madras, and Calcutta stock exchanges while contrary evidence is found in case of Delhi and
Ahmedabad.

Pattabhi Ram.V. (1995) emphasised the need for doing fundamental analysis and doing Equity
Research (ER) before selecting shares for investment. He opined that the investor should look for
value with a margin of safety in relation to price. The margin of safety is the gap between price and
value. He revealed that the Indian stock market is an inefficient market because of the absence of
good communication network, rampant price rigging, and the absence of free and instantaneous flow
of information, professional broking and so on. He concluded that in such inefficient market, equity
research will produce better results as there will be frequent mismatch between price and value that
provides opportunities to the long-term value oriented investor. He added that in the Indian stock
market investment returns would improve only through quality equity research.

Karajazyk (1995) investigated one measure of financial integration between equity markets. He used
a multifactor equilibrium Arbitrage pricing theory to define risk and to measure deviations from the
“Law of one price”. He applied the integration measure to equities traded in 24 countries (four
developed and 20 emerging). He found that the measure of market segmentation tends to be much
larger for emerging markets than for developed markets, which flows into or out of the emerging
markets. The measure tends to decrease over time, which is consistent with growing levels of
integration. Large values of adjusted mis-pricing occur around periods in which capital controls
change significantly. Finally, he found asymmetric integration relationship; stock markets of
developed nations are more integrated than those of emerging nations.

Debjit Chakraborty (1997) in his study attempts to establish a relationship between major economic
indicators and stock market behaviour. It also analyses the stock market reactions to changes in the
economic climate. The factors considered are inflation, money supply, and growth in GDP, fiscal
deficit and credit deposit ratio. To find the trend in the stock markets, the BSE National Index of
Equity Prices (Natex) which comprises 100 companies was taken as the index. The study shows that
stock market movements are largely influenced by, broad money supply, inflation, C/D ratio and
fiscal deficit apart from political stability.

Redel (1997) concentrated on the capital market integration in developing Asia during the period
1970 to 1994 taking into variables such as net capital flows, FDI, portfolio equity flows and bond
flows. He observed that capital market integration in Asian developing countries in the 1990‟s was a
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consequence of broad-based economic reforms, especially in the trade and financial sectors, which
is the critical reason for economic crises which followed the increased capital market integration in
the 1970s in many countries will not be repeated in the 1990s. He concluded that deepening and
strengthening the process of economic liberalization in the Asian developing countries is essential
for minimizing the risks and maximizing the benefits from increased international capital market
integration.

Avijit Banerjee (1998) reviewed Fundamental Analysis and Technical Analysis to analyse the
worthiness of the individual securities needed to be acquired for portfolio construction. The
Fundamental Analysis aims to compare the Intrinsic Value (I.V.) with the prevailing market price
(M.P) and to take decisions whether to buy, sell or hold the investments. The fundamentals of the
economy, industry and company determine the value of a security. If the 1.V is greater than the
M.P., the stock is under priced and should be purchased. He observed that the Fundamental Analysis
could never forecast the M.P. of a stock at any particular point of time. Technical Analysis removes
this weakness. Technical Analysis detects the most appropriate time to buy or sell the stock. It aims
to avoid the pitfalls of wrong timing in the investment decisions. He also stated that the modern
portfolio literature suggests 'beta' value p as the most acceptable measure of risk of scrip. The
securities having low P should be selected for constructing a portfolio in order to minimise the risks.

Madhusudan (1998) found that BSE sensitivity and national indices did not follow random walk by
using correlation analysis on monthly stock returns data over the period January 1981 to December
1992.

Arun Jethmalani (1999) reviewed the existence and measurement of risk involved in investing in
corporate securities of shares and debentures. He commended that risk is usually determined, based
on the likely variance of returns. It is more difficult to compare 80 risks within the same class of
investments. He is of the opinion that the investors accept the risk measurement made by the credit
rating agencies, but it was questioned after the Asian crisis. Historically, stocks have been
considered the most risky of financial instruments. He revealed that the stocks have always
outperformed bonds over the long term. He also commented on the 'diversification theory'
concluding that holding a small number of non-correlated stocks can provide adequate risk
reduction. A debt-oriented portfolio may reduce short term uncertainty, but will definitely reduce
long-term returns. He argued that the 'safe debt related investments' would never make an investor
rich. He also revealed that too many diversifications tend to reduce the chances of big gains, while
doing little to reduce risk. Equity investing is risky, if the money will be needed a few months down
the line. He concluded his article by commenting that risk is not measurable or quantifiable. But risk
is calculated on the basis of historic volatility. Returns are proportional to the risks, and investments
should be based on the investors' ability to bear the risks, he advised.

Suresh G Lalwani (1999) emphasised the need for risk management in the securities market with
particular emphasis on the price risk. He commented that the securities market is a 'vicious animal'
and there is more than a fair chance that far from improving, the situation could deteriorate. Bhanu
Pant and Dr. T.R.Bishnoy (2001) analyzed the behaviour of the daily and weekly returns of five

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Indian stock market indices for random walk during April 1996 to June 2001.They found that Indian
Stock Market Indices did not follow random walk.

Nath and Verma (2003) examine the interdependence of the three major stock markets in south Asia
stock market indices namely India (NSE-Nifty) Taiwan (Taiex) and Singapore (STI) by employing
bivariate and multivariate co integration analysis to model the linkages among the stock markets, No
co -integration was found for the entire period (daily data from January 1994 to November
2002).They concluded that there is no long run equilibrium.

Debjiban Mukherjee (2007) made a comparative Analysis of Indian stock market with International
markets. His study covers New York Stock Exchange (NYSE), Hong Kong Stock exchange (HSE),
Tokyo Stock exchange (TSE), Russian Stock exchange (RSE), Korean Stock exchange (KSE) from
various socio- politico-economic backgrounds. Both the Bombay Stock exchange (BSE) and the
National Stock Exchange of Indian Limited (NSE) have been used in the study as a part of Indian
Stock Market. The main objective of this study is to capture the trends, similarities and patterns in
the activities and movements of the Indian Stock Market in comparison to its international
counterparts. The time period has been divided into various eras to test the correlation between the
various exchanges to prove that the Indian markets have become more integrated with its global
counterparts and its reaction are in tandem with that are seen globally. The various stock exchanges
have been compared on the basis of Market Capitalization, number of listed securities, listing
agreements, circuit filters, and settlement. It can safely be said that the markets do react to global
cues and any happening in the global scenario be it macroeconomic or country specific (foreign
trade channel) affect the various markets.

Juhi Ahuja (2012) presents a review of Indian Capital Market & its structure. In last decade or so, it
has been observed that there has been a paradigm shift in Indian capital market. The application of
many reforms & developments in Indian capital market has made the Indian capital market
comparable with the international capital markets. Now, the market features a developed regulatory
mechanism and a modern market infrastructure with growing market capitalization, market liquidity,
and mobilization of resources. The emergence of Private Corporate Debt market is also a good
innovation replacing the banking mode of corporate finance. However, the market has witnessed its
worst time with the recent global financial crisis that originated from the US sub-prime mortgage
market and spread over to the entire world as a contagion. The capital market of India delivered a
sluggish performance.

6. CONCLUSION

Stock Market is the mitigation of risk through the spreading of investments across multiple entities,
which is achieved by the pooling of a number of small investments into a large bucket. Stock
Market is the most suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed portfolio at a relatively low cost. The review of literature has
brought to light that

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You can make a lot of money mvesting in stocks or trading in the stock market, but it is not
something for the new investors. Care must be taken when it comes to stock investments. The
investor must have a solid understanding of stocks and how they trade in the market or risk losing
money in a volatile type of investment.

 Having stock in a company means you are an owner. How many shares of stock you have
determines the extent of that ownership. As part owner, you receive dividends and have
voting rights. .

 A stock represents equity, while a bonds is a debt. Bonds are low-risk investment vehicles
with guaranteed returns, while stocks involves more risk. This is why stocks have a higher
rate of return compared to bonds.

 In investing, the riskier the investment the bigger the chance of making more
money.Investing in stocks can make you lots of money if you invest in the right
company.However, you can lose all of it too.

 There are two main types of stocks: common and preferred. Stocks can be further classified
into different classes depending on the company.The stock market is a place where people go
to trade stocks. Two of the most important stock exchanges in India are the National Stock
Exchange and the Bombay Stock

 Purchase of stocks are commonly done through a brokerage. You can also get a dividend
reinvestment plan (DRIP). . Stocks are volatile. Prices change according to supply and
demand. Many people have different opinions on why stock prices move the way they do.
One of the most important factors that influence prices is earnings.

 Learning how to read stock tables or a stock quote is a must if you are planning to be a
serious investor in stocks. It is not hard to read a stock quote once you know what the
different terms and symbols stand for. The bull phases carmod decent returns and the bear
phases incurred loss. The outlook for India is remarkably good. Bank, corporate and personal
balance sheets are strong Corporations are experiencing high profits. The stock market is at a
record high. Commodity markets are at their strongest. Lead manufacturing sectors such as
software, textiles and steel have yielded dividends. Spices exports have reached beyond the
targets.

 In the bull phases volatilities were lower than bear phases. Always remember the old stock
market saying:

 "Bulls make money, bears make money.but pigs get slaughtered!". This will perhaps save
you many times from losing on your investment.

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8. BIBILOGRAPHY

http://www.investopedia.com/terms/s/stock.asp
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