Capital Mkt Writeup 1

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CAPITAL MARKET

What is Capital Market?

The capital market is the market for securities, where companies and governments can raise

long-term funds. It is a market in which money is lent for periods longer than a year. The capitalmarket includes the stock market and the bond market. The capital markets consist of theprimary market and the secondary market. The primary market is where new stock and bondsissues are sold (underwriting) to investors. The secondary markets are where existing securitiesare sold and bought from one investor or speculator to another, usually on an exchange.A security is a negotiable instrument representing financial value. Securities are broadlycategorized into debt securities (such as banknotes, bonds and debentures), and equity securities;e.g., common stocks. The company or other entity issuing the security is called the issuer.Securities may be represented by a certificate or, more typically, by an electronic book entry.They include shares of corporate stock or mutual funds, bonds issued by corporations orgovernmental agencies, stock options or other options, limited partnership units, and various

other formal investment instruments that are negotiable.

Development of Capital Market:

The history of the capital market in India dates back to the eighteenth century when EastIndia Company securities were traded in the country. Until the end of the nineteenthcentury, securities trading were unorganized and the main trading centers were Bombay(now Mumbai) and Calcutta (now Kolkata). Of the two, Bombay was the chief tradingcentre wherein bank shares were the major trading stock. During the American Civil War(1860-61), Bombay was an important source of supply for cotton. Hence, tradingactivities flourished during the period, resulting in a boom in share prices.

Trading was at that time limited to a dozen brokers: their trading place was under abanyan tree in front of the Town Hall in Bombay. The Bombay Stock Exchange wasrecognized in May 1927 under the Bombay Securities Contracts Control Act, 1925.

The capital market was not well organized and developed during the British rule becausethe British government was not interested in the economic growth of the country. In the1950s, Century Textiles, Tata Steel, Bombay Dyeing, National Rayon, and Kohinoor

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Mills were the favorite scrips of speculators. As speculation became rempant, the stockmarket came to be known as 'Satta Bazaar'.

The 1990s will go down as the most important decade in the history of the capital market

of India. Liberalisation and globalization were the new terms coined and marketed duringthis decade. The Capital Issues (Control) Act, 1947 was repealed in May 1992. Thedecade was characterized by a new industrial policy, emergence of SEBI as a regulator ofcapital market, advent of foreign institutional investors, euro-issues, free pricing, newtrading practices, new stock exchanges, entry of new players such as private sectormutual funds and private sector banks, and primary market boom and bust.

Major capital market scams took place in the 1990s. These shook the capital market anddrove away small investors from the market. The securities scam of March 1992involving brokers as well as bankers was on of the biggest scams in the history of the

capital market. The 1991-92 securities scam revealed the inadequacies of andinefficiencies in the financial system. It was the scam, which prompted a reform of theequity market.

Securities and Exchange Board of India (SEBI) :

Overview:

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 andmore powers were given through an ordinance. Since then it regulates the market through its

independent powers.

Objectives:

As an important entity in the market it works with following objectives:

1. It tries to develop the securities market.2. Promotes Investors Interest.3. Makes rules and regulations for the securities market.

Functions:

Functions of SEBI's are as follows:

1. Regulates Capital Market2. Checks Trading of securities.3. Checks the malpractices in securities market.4. It enhances investor's knowledge on market by providing education.5. Registering & regulating the working of various intermediaries including Merchant Bankers,

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Registrars, Share Transfer Agents, Stock Brokers, sub-brokers, Bankers to the Issue, PortfolioManagers etc.6. To promote Research and Investigation7. Registration of Foreign Institutional Investors8. Prohibiting insider trading in securities, fraudulent & unfair trade practices relating to

securities market9. Regulating substantial acquisition of shares & takeover of companies

Powers:

For the purpose of regulation of the securities market, SEBI has been vested with all the powers

of a Civil Court as per Code of Civil Procedure, 1908. The powers include:

1. The discovery ,Inspection & production of any books of account & other documents2. Call information; undertake inspection, conduct inquiries & order audit of stock

exchanges, intermediaries, mutual funds or any other person associated with the

securities market.3. Levy penalties for certain offenses.4. Levy fees & other charges.5. Issue orders/directions in the interest of investors or orderly development of securities

market.6. Hear appeals by companies against the decision of stock exchanges for refusal of listing

of their securities.7. Suspend or cancel the registration of any intermediary.

Legal Framework:

1. Prohibition Against Market Manipulation:

For prohibition against market manipulation, no person shall:

1. Effect, take part in, or enter into, either directly or indirectly, transactions in securities,

with the intention of artificially raising or depressing the prices of securities & thereby

inducing the sale or purchase of securities by any person.

2. Indulge in any act, which is calculated to create a false or misleading appearance of

trading in the securities market.

3. Indulge in any act which results in reflection of prices of securities based on transactions

that are not genuine trade transactions4. Enter into a purchase or sale of any securities, not intended to effect transfer of beneficial

ownership but intended to operate only as a device to inflate, depress, or cause

fluctuations in the market price of securities.

5. Pay ,offer or agree to pay or offer, directly or indirectly , to any person any money or

moneys worth for inducing another person to purchase or sell any security with the sole

object of inflating, depressing, or causing fluctuations in the market price of securities.

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2. Prohibition On Unfair Trade Practice Relating To Securities:

No person shall:

1. In the course of his business, knowingly engage in any act, or practice which would

operate as a fraud upon any person in connection with the purchase or sale of, or any

other dealing in, any securities.

2. On his own behalf or on behalf of any person, knowingly buy,sell or otherwise deal in

securities, pending the execution of any order of his client relating to the same security

for purchase , sale or order dealings in respect of securities.Nothing contained in this

clause shall apply where according to the clients instructions, the transaction for the client

is to be effected only under specified conditions or in specified circumstances.

3. Intentionally & in contravention of any law for the time being in force delays the transfer

of securities in the name of the transferee or the dispatch of securities or connected

documents to any transferee.

4. Indulge in falsification of the books, accounts & records.

5. When acting as an agent, execute a transaction with a client at a price other than the price

at which the transaction was executed by him, whether on a stock exchange or otherwise,

or at a price other than price at which it was offset against the transaction of another

client.

Central Listing Authority (CLA):

Overview:

Central Listing Authority was proposed to be set-up by SEBI in April 2002 & it came

into existence from April 2003.It will not be a regulatory body and work under the

supervision of the SEBI. The main function of CLA will be to process applications made

by any corporate body, mutual fund or collective investment scheme for a letter of listing

on a stock exchange. It will make recommendations for listing. Obtaining a letter of

recommendation from CLA by these organizations has been made mandatory. CLA will

consist of committee members selected from different disciplines with expertise in the

areas of finance, accounting, law, investment etc.

Purpose:

To formulate common guidelines for listing of securities in the stock exchange of

the country

To bring uniformity in the due diligence process and in scrutinizing listing

applications across the stock exchanges.

Need:

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SEBI was the sole regulatory authority for the companies to meet their listing

requirements with the stock exchanges. The corporates were monitored by SEBI through

the listing agreement. Thus compliance of listing agreement was of great significance for

the companies vying to operate in capital market. As per the earlier regulations, it was

mandatory for the company to list its securities on its regional stock exchange and listing

can be done in any number of exchanges, but for each listing, the company had to pay the

requisite fees. This made difficult for small companies & they were able to list only in

small exchanges. Listing in small exchanges was also a bottleneck for the stocks of these

companies to be actively traded. Some companies adopted a different strategy by opting

for listing in the small exchanges in the initial stage and when most of the shares come

under the control of the promoters, they resorted to price rigging. This facilitate, these

companies entry into the countrys 2 national stock exchanges(BSE & NSE) .

Benefits:

1. To Stock Exchanges:

Establishment of CLA seems to be a major milestone in the Indian capital market.

Because of this authority, stock exchanges stand to gain as they would now be able to

concentrate on their major function of providing a trading & settlement platform & save

time & money in screening of listing applications as well as compliance of listing

agreements.

2. To corporate World:

Corporates stand to gain as their listing costs come down drastically because of the

elimination of independent listing fees in each of the exchanges. The cumbersome

procedure of following up the process with each exchange is also dispensed with.

3. To Investors:

Investors stand to gain because it creates a more conducive investment climate due to

better quality of listings & transparency. They would also be able to get corporate

information from a single window & they can address their grievances to a single place.

Stock Exchanges In India

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Stock Exchanges are an organized marketplace, either corporation or mutual

organisation, where members of the organisation gather to trade company stocks or other

securities. The members may act either as agents for their customers, or as principals for

their own accounts. Stock exchanges also facilitate for the issue and redemption of

securities and other financial instruments including the payment of income and dividends.

There are 23 stock exchanges in India. Among them two are national level stock

exchanges namely Bombay Stock Exchange (BSE) and National Stock Exchange of

India(NSE).The rest 21 are Regional Stock Exchanges (RSE).

Regional Stock Exchanges (RSE):

The Regional Stock Exchanges started clustering from the year 1894, when the first RSE,

the Ahmadabad Stock Exchange (ASE) was established. In the year 1908, the second in

the series, Calcutta Stock Exchange (CSE) came into existence. During the early sixties,

there were only few recognized RSEs in India namely Calcutta, Madras, Ahmadabad,

Delhi, Hyderabad and Indore. The number remained unchanged for the next two decades.

1980s was the turning point and many RSEs were incorporated. The latest is Coimbatore

Stock Exchange and Meerut Stock Exchange.

List of Regional Stock Exchanges in India

Ahmadabad Stock Exchange Bangalore Stock Exchange BhubaneswarStock Exchange Calcutta Stock Exchange Cochin Stock Exchange Coimbatore Stock Exchange Delhi Stock Exchange Guwahati Stock Exchange Hyderabad Stock Exchange Jaipur Stock Exchange Ludhiana Stock Exchange Madhya Pradesh Stock Exchange Madras Stock Exchange

Magadha Stock Exchange Mangalore Stock Exchange Meerut Stock Exchange OTC Exchange Of India Pune Stock Exchange Saurashtra Kutch Stock Exchange Uttar Pradesh Stock Exchange Vadodara Stock Exchange

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National StockExchange of India

The National Stock Exchange of India Limited or S&P CNX NIFTY (NSE) is a Mumbai-

based stock exchange. It is the largest stock exchange in India in terms of daily turnover

and number of trades, for both equities and derivative trading. The NSE's key index is the

S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market

capitalisation.

NSE is mutually-owned by a set of leading financial institutions, banks, insurance

companies and other financial intermediaries in India but its ownership and managementoperate as separate entities. There are at least 2 foreign investors NYSE Euronext and

Goldman Sachs who have taken a stake in the NSE. The National Stock Exchange of

India was promoted by leading financial institutions at the behest of the Government of

India, and was incorporated in November 1992 as a tax-paying company. In April 1993,

it was recognized as a stock exchange under the Securities Contracts (Regulation) Act,

1956. 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.

Bombay Stock Exchange (BSE):

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The Bombay Stock Exchange Limited has the greatest number of listed companies in the

world. The Bombay Stock Exchange was established in 1875. Around 6,000 Indian

companies list on the stock exchange and it has a significant trading volume. The BSE

SENSEX (SENSitive indEX), also called the "BSE 30", is a widely used market index in

India and Asia. Though many other exchanges exist, BSE and the National Stock

Exchange of India account for most of the trading in shares in India.BSE was the first in

India to introduce Equity Derivatives, to launch a Free Float Index, to have an exclusive

facility for financial training. A BSE play a pivotal role in the development of the

country's capital market.BSE is managed professionally by Board of Directors. It

provides an efficient market for the trading in equity, debt instruments and derivatives.In

2008, the average volume of business conducted on the BSE was approximately $40

billion each month. The number of shares traded each month on the BSE is in the range

of 40 - 50 million. The total market capitalization for the companies traded on the BSE is

in the area of $1.8 trillion.

DEMAT Account

Demat account is a safe and convenient means of holding securities just like a bankaccount is for funds. Today, practically 99.9% settlement (of shares) takes place on demat

mode only. Thus, it is advisable to have a Beneficiary Owner (BO) account to trade at the

exchanges. A maximum of three persons are allowed to open a joint demat account in

their names.

Bank Account Vs Demat Account

S.

No.

Basis Of

Differentiati

on

Bank Account Demat Account

1.

Form of

Holdings/De

posits

Funds Securities

2. Used for Safekeeping of money Safekeeping of shares

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3. Facilitates

Transfer of money

(without actually

handling money)

Transfer of shares

(without actually

handling shares)

4.Where to

openA bank of choice

A DP of choice (can be

a bank)

5. Requirement

of PAN

Number

MandatoryMandatory (effective

from April 01, 2006)

6.

Interest

accrual on

holdings

Interest income is

subject to the

applicable rate of

interest

No interest accruals on

securities held in

demat account

7. Minimum

balance

requirement

AQB* maintenance is

specified for certain

bank accounts

No such requirement

*AQB - Average Quarterly Balance

Benefits Of Demat Account

1. A safe and convenient way of holding securities (equity and debt instruments both).

2. Transactions involving physical securities are costlier than those involving dematerialised

securities (just like the transactions through a bank teller are costlier than ATM

transactions). Therefore, charges applicable to an investor are lesser for each transaction.

3. Securities can be transferred at an instruction immediately.

4. Increased liquidity, as securities can be sold at any time during the trading hours and

payment can be received in a very short period of time.

5. No stamp duty charges.

6. Risks like forgery, thefts, bad delivery, delays in transfer etc, associated with physical

certificates, are eliminated.

7. Pledging of securities in a short period of time.

8. Reduced paper work and transaction cost.

9. Odd-lot shares can also be traded (can be even 1 share).

10. Nomination facility available.

11. Any change in address or bank account details can be electronically intimated to allcompanies in which investor holds any securities, without having to inform each of them

separately.

12. Securities are transferred by the DP itself, so no need to correspond with the companies.

13. Shares arising out of bonus, split, consolidation, merger etc. are automatically credited

into the demat account of the investor.

14. Shares allotted in public issues are directly credited into demat account of the applicants

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in quick time.

Opening Process:

1. Choose a DP

2. Fill up an account opening form provided by DP, and sign an agreement with DP in a

standard format prescribed by the depository.

3. DP provides the investor with a copy of the agreement and schedule of charges for his

future reference.

4. DP opens the account and provides the investor with a unique account number, also

known as Beneficiary Owner Identification Number (BO ID).

Documents to be attached:

1. Passport size photographs

2. Proof of residence (POR) - Any one of Photo Ration Card with DOB / Photo Driving

License with DOB / Passport copy / Electricity bill / Telephone bill

3. Proof of identity (POI) - Any one of Passport copy / Photo Driving License with DOB /

Voters ID Card / PAN Card / Photo Ration Card with DOB

4. PAN card

Note: The agreement required to be signed by the investor details the rights and duties of theinvestor and DP.

Depository Participant (DP):

A Depository Participant can be a financial organization like banks, brokers, financial

institutions, custodians, etc., acting as an agent of the Depository to make its services

available to the investors. Each DP is assigned a unique identification number known as

DP-ID. Similar to the brokers who trade on your behalf in and outside the Stock

Exchange; a Depository Participant (DP) is the representative (agent) in the depository

system providing the link between the Company and the investor through the Depository.Depository Participant maintains investors securities account balances and intimates him

the status of your holding from time to time. According to SEBI guidelines, Financial

Institutions like banks, custodians, stockbrokers etc. can become participants in the

depository. A DP is one with whom you need to open an account to deal in electronic

form. While the Depository can be compared to a Bank, DP is like a branch of bank with

whom one can have an account.

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Agency In in Depositories:

India has chosen the concept of multi-depositories. Presently, there are two depositories

registered with SEBI:

1. National Securities Depository Limited (NSDL)2. Central Depository Service (India) Limited (CDSL)

National Securities Depository Limited (NSDL):

Both agencies are linked with each other. NSDL is a public limited company

incorporated under the Companies Act, 1956. Four renowned institutions participate in it.

Unit Trust of India (UTI), Industrial Development Bank of India (IDBI), National Stock

Exchange of India (NSE), State Bank of India (SBI).UTI is the largest mutual fund of

India and IDBI is the largest development bank, NSE is the largest stock exchange of

India and SBI is the largest commercial bank of India having clearing facility. HDFC andCitibank also share in this system. NSDL is managed by Board of directors headed by a

managing director. It is governed by its bye-laws and its business operations are regulated

by business rules. NSDL interfaces with the investors through players or business

partners. Constituents of depository compromise of clearing corporation, brokers,

clearing member, registrar and transfer agents, company or issuer, stock exchange, bank

depository participant and investors. All are electronically linked to the main depository

for the settlement of trades and to perform a daily reconciliation of all accounts held with

NSDL.

Central Depository Service (India) Limited (CDSL):

Second agency is CDSL - Central Depository Service (India) Limited. Main functions of

this agency are centralized database and accounting. Major participant in CDSL are LIC,

GIC and BSE. This agency is set up with the object to keep in mind to accelerate growth

of scrip less trading, with major thrust of individual participation and creating

competitive environment, responsible to the users interests and demands to enhance

liquidity. CDSL aims to retain the entire data of the investors in the central database of

CDSL. It has opted for it with the following objectives:

Within time information is available to issuers/registrars and share transfer agents.

Companies can monitor critical holdings, e.g., holding of FIIs, investment companies,etc., by using up the parameters through their front-end terminals.There is no other database in the system to reconcile.

No additional security or storage cost of data or critical database residing at the front-endterminals with the issuers/registrars. Recover only the annual maintenance charges.

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CDSL signed a memorandum of understanding with NSDL for inter-depository connectivity.

Presently, more than half the business of depositories is handled by this agency. Role of both

these agencies has become very vital after SEBIs declaration that there would be no deals in

physical form and only dealing to happen in market through demat accounts.

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PRIMARY MARKET

What is Primary market?

The primary market is that part of the capital marketsthat deals with the issuance of new

securities. Companies, governments or public sector institutions can obtain fundingthrough thesale of a new stockorbondissue. This is typically done through a syndicate of securities dealers.

The process of selling new issues to investors is calledunderwriting. In the case of a new stock

issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the

price of the security offering, though it can be found in the prospectus.

Features of primary markets are:

This is the market for new long term capital. The primary market is the market where the

securities are sold for the first time. Therefore it is also called New Issue Market (NIM).

In a primary issue, the securities are issued by the company directly to investors.

The company receives the money and issues new security certificates to the investors.

Primary issues are used by companies for the purpose of setting up new business or for

expanding or modernizing the existing business.

The primary market performs the crucial function of facilitating capital formation in the

economy.

The new issue market does not include certain other sources of new long term external

finance, such as loans from financial institutions. Borrowers in the new issue market may

be raising capital for converting private capital into public capital; this is known as going

public.

The financial assests sold can only be redeemed by the original holder.

Methods of issuing securities in the primary market are:

Initial public offering ,

Rights issue (for existing companies), and

Preferential issue.

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INITIAL PUBLIC OFFER

What is IPO?

An IPO is the first public offer of securities by a company since its inception. The securities

offered in IPO are generally either equity or convertible instruments. The decision to go public isa critical one as it results in dilution of ownership stake & diffusion of corporate control. An IPO

can be used both as a financing strategy & exit strategy. In a financing strategy, the main purpose

of the IPO is to raise funds for the company. An IPO can be used as an exit strategy when the

existing investors offload their equity holdings to the public.

Reasons for going public

Raising funds to finance capital expenditure programs like expansion, diversification,

modernization, etc.

Financing of increased working capital.

Financing acquisitions like a manufacturing unit, brand acquisitions, tender offers for

shares of another firm, etc.

Debt refinancing.

Exit route for the existing investors.

Advantages of going public

Facilities future funding by means of subsequent public offerings.

Enables valuation of the Company.

Provides liquidity to existing shares.

Increases the visibility & reputation of the Company.

Commands better pricing than placement with few investors.

Enables the Company to offer its shares as purchase consideration or as an exchange for

the shares of another Company.

Disadvantages of going public

Dilution of ownership stake makes Company potentially vulnerable for future takeovers.

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Involves substantial expenditure ranging between 4 to 15% depending of the size of the

issue.

Need to make continuous disclosures.

Increased regulatory monitoring.

Listing fees & documentation.

Cost of maintaining investor relations.

Takes substantial amount of management time & efforts.

Management of IPO

Eligibility norms for an IPO

1) The Companies intending to make a public issue of securities should file a draft

prospectus with the Board, through an eligible Investment Banker atleast 21 days

prior to the filing of prospectus with the Registrar of Companies.

2) Any company prohibited from accessing the Capital market under any

order/direction passed by the Board, should not make any issue of securities.

3) The Company should make an application for listing of its securities on the stock

exchange.

Pre issue obligations

1) MOU (Memorandum of Understanding)

The lead Investment Banker has to enter into a MOU with the issuer Company specifying

their mutual rights, liabilities & obligations relating to the issue.

2) Inter se Allocation of Responsibilities

If the public issue is managed by more than one Investment Banker, the rights,

obligations & responsibilities of each Investment Banker should be specified for that a

statement is signed for allocation of work. This agreement is called as Inter se Allocation

of responsibilities.

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3) Due Diligence Certificate

The lead Investment Banker should submit a Due Diligence Certificate certifying that all

suggestions & observations made by Board have been incorporated in the offer

document.

4) Undertaking

The issuer should submit an undertaking to the Board to effect the transactions in

securities by the promoter, the promoter group & the immediate relatives of the

promoter during the period between the date of filing the offer documents with the

Registrar of Companies or Stock Exchanges & the date of closure should be reported to

the stock exchanges concerned within 24 hours of the transactions.

5) List of Promoters Group

The issuer should submit to the board a list of persons who constitute the promoters

group & their individual shareholdings.

Appointment of Investment Banker & other Intermediaries

Along with the Investment Banker, other intermediaries are appointed who are duly

registered with the Board. The Investment Banker should have a valid SEBI registration

to be eligible for appointment. The criteria normally used in selection of the Investment

Banker are:

Past track record in successfully handling similar issues.

Distribution network with institutional & individual investors.

Trained manpower & skills for instrument designing & pricing.

General reputation in the market.

Good rapport with other market intermediaries.

Parties to the issue

Registrar to the issue

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Registration with SEBI is mandatory for acting as Registrar & Share Transfer Agent. A

category I Registrar can act as both Registrar to the Issue & as a Share Transfer Agent. A

category II Registrar can act as either as Registrar to the Issue or as a Share Transfer

Agent.

Functions:

1) Assist the Lead Manger in selection of Bankers & Collection Centres.

2) Data entry of the contents of all the application forms.

3) Assist the Lead Manager in obtaining stock exchange approval for the basis of

allotment.

4) Send stock invests of successful applicants for collection.

Bankers

There are no restrictions on the number of banks that can be associated with an issue.

Each Banker to the issue designated one particular branch as the Controlling Branch. The

other branches which act as collection centres are called as Collecting Branches.

Functions:

1) Open Share Application Money Account of company. All the issue proceeds are

transferred only to this account. The company cant withdraw the money from this

account till the entire process of allotment & listing is completed.

2) Refund of application money to unsuccessful applicants.

3) Acceptance of money payable on allotment & on calls.

Debenture trustees

Debenture trustees are required to obtain a certificate of Registration from SEBI.

Functions:

1) Take possession of trust property in accordance to the provisions of trust deed.

2) Resolve grievances of debenture holders.

3) Ensure that refund orders & debentures certificates are despatched on time.

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4) To ensure continuous listing of debentures.

Underwriters

When an existing shareholder of body corporate/public dont subscribe to the securities

offered to them, then the underwriter agrees to subscribe a specified number of securities

in an issue. An underwriter should have minimum net worth of Rs. 20 lakhs & total

outstanding underwriting obligation at any point of time cant exceed 20 times of

underwriters net worth. The underwriter exposed to the risk of undersubscription & for

assuming the risk they are remunerated by underwriting commission which comprise of

the face value + premium of the issue.

Brokers

Any member of any recognised stock exchanges can be appointed as Broker to the issue.

The information regarding the brokers to the issue & the rate of brokerage payable is to

be mentioned in the prospectus.

Functions:

1) Offer marketing support for the issue.

2) Disseminate information to the investors about the issue.

3) Extend underwriting support to the issue.

Advertising agencies

The success of many public issues can be attributed to savvy advertising campaign. The

role of advertising agency is of crucial importance in determining the fate of the issue.

Functions:

1) Devising of advertising & publicity strategy.

2) Designing the corporate brochure & publicity material.

3) Arranging press conferences & road shows.

4) Drafting & distribution of press releases.

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Printers

The printers are involved in the process of printing & distribution of issue related

stationery. The primary criteria in selection of printers are the cost factor & the quality ofservice.

Functions:

1) Layout & designing of offer document.

2) Designing of Form 2A (application form).

3) Printing of offer documents, application forms, posters, brochures, etc.

Auditor

The regular auditor of the company acts as the auditor for the purpose of public offer.

The auditor is has to prepare the reports for the company.

Functions:

1) Tax benefits report.

2) Certificate stating the entire amount of reservation.

3) Certificate stating the promoters contribution.

Legal Advisor

Legal Advisors are generally appointed to ensure compliance of all legal & regulatory

provisions related to the public offering.

Functions:

1) Scrutinize the offer document to ensure that there is no legally incorrect statement.

2) Provide legal advice to the company on other legal matters related to public offering.

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3) Ensure that the offer document is drawn up in accordance with the provisions of the

Companies Act, 1956, SEBI guidelines & the other statutory provisions related to

public offering.

Pre issue activities

Registration of the offer document

10 copies of the draft prospectus have to be filed with SEBI accompanied by the

documents like MOU, Undertaking, Due Diligence & Inter se Allocation of

Responsibilities. SEBI charges registration fees for the same.

Mandatory Collection Centres

The minimum number of collection centres for an issue of capital shall be four

metropolitan cities. At all such places where stock exchange is located & in the region

where the registered office of company is situated. For this purpose, the country has been

divided into four regions i.e. Eastern, Western, Southern, Northern.

Marketing of the issue

The strategy is a crucial factor in determining the success of the issue.

Timing of the issue

The timing of the issue is of crucial importance to ensure success of the issue. Timing

refers to the general sentiment prevailing in the market at the time of the issue. The

decision regarding the timing is a futuristic decision as it involves predicting the expected

market sentiment during the time of the issue.

Retail distribution

The retail distribution is an important success variable in an issue. Normally the retail

distribution is done through a network of brokers. This involves identifying the

geographical area where the Lead Manager expects the subscription flows. The brokers

who have a strong distribution network in these areas are identified. The issuer company

also conducts road shows at various places.

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Reservations of the issue

A portion of the issue can be reserved for specific class of investors. This helps in pre

selling the issue & reduces the net offer to the public. The class of investors to whomreservations can be made are as follows:

1) Mutual fund

2) Banks & financial institutions

3) Foreign institutional investors

4) Group shareholders

Advertising campaign

The main function of the advertising agencies is to give wide publicity to the issue. The

company decides on the size of the advertising budget in consultation with the Lead

Manager. Once this is decided the agency & the Lead Manager draw up a publicity

campaign.

Book building

Book building refers to the collection of bids from investors, which is based on indicative

price range, the issue price being fixed after the bid closing date. The principal

intermediaries involved in a Book building process are the company, Book Running Lead

Manager (BRLM) & Syndicate members who are intermediaries registered with SEBI &

eligible to act as underwriters. The basic difference between IPO & Book building is that

in an IPO, the Lead Manager decide the price of the issue. In Book building offer, the

Syndicate members decide the indicative price range & the investors decide the price of

the issue through a tender method.

Implications & Consequences

Underpricing

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1) Underpricing can be related to timing of the issue & prevailing market conditions

particularly in the secondary market.

2) As a result of underpricing, the promoter or the company loses the opportunity to raise

more funds.

Overpricing

1) Overpricing might leave a bad feeling in the minds of the investors.

2) Logic behind this practice could be to lend credibility to the organisation by getting

the issue oversubscribed.

Post issue activities

Post issue activities commence with the collection of subscription figures & go on till the

securities are listed on the stock exchange.

Basis of allotment

In a public issue, the Executive Director/MD of Regional Stock Exchange along with post

issue Lead Investment Manager & Registrar to the issue are responsible to ensure that the

basis of allotment is finalised in a fair & proper manner.

Reservation for Small Investors

The proportionate allotment of securities in an issue that is oversubscribed is subject to the

reservation for small investors.

Dealing with undersubscription

If the issue is not subscribed to the extent of 90%, the company was earlier forced to

refund the subscription amount. This 90% also includes the subscription from underwriters

if the issue was underwritten & the subscriptions from the promoters in case of non

underwritten issues.

SECONDARY MARKET

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What is Secondary Market?

After the securities are traded in primary market they are traded in the secondary market. Thestock exchanges along with a host of other intermediaries provide the necessary platform fortrading in secondary market and also for clearing and settlement. The securities are traded,

cleared and settled within the regulatory framework prescribed by the Exchanges and the SEBI.

Software in Trading

NEAT (National Exchange for Automated Trading NEAT system).SEBI has also allowed trading through wireless medium or Wireless Application Protocol(WAP) platform.This particularly helps those retail investors, who are mobile and want to trade from any place.ODIN software is also used by some brokers for trading.

INDICES

Index:

Measures the change in the prices of the underlying asset with respect to the prices in the

base year

Major Indices :

Sensex

Nifty

SENSEX

In 1986 BSE came out with Stock Index-SENSEX

It consists of 30 largest stock in the market

Some of the companies

Reliance, Bhel, Infosys, DLF

BSE-100 Index

Formerly known as BSE NATIONAL INDEX

Launched in 1989

It consists of 100 companies

Some of them are :-

Cipla, Gail India, ICICI BANK LTD, HP Corp ltd

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BSE 200 Index

Launched in 1994

It comprises of 200 companies

Based on current market specialisation,market performance of the companies ,volumes of

company turnover Some of the companiesAdlabs films, Bank of India, L & T Ltd

BSE-500 Index

Launched in 2005

It comprises of 500 companies ,covering the entire market

Some of the companies are:-Hindalco, M & M, Nestle Ltd

BSE MIDCAP AND SMALLCAP INDEX

Mid Cap The companies having capital from $2 billion to $10 billion comprise of the

mid cap

Small Cap The companies having capital from $300 million to $2 billion are includedin the small cap index.

Some of the companies are:-Andhra Bank,Godrej ltd,Nirma Ltd

BSE TECkIndex

BSE TECK index is composed of 21 quality stocks from the IT, Media and Telecom

sectors.

Some of them are :-Dish TV,HT media,Wipro Ltd

BSE COMSUMER GOODS INDEX

It is a part of sectoral indices

Some of the companies are:-Bharat Bijli,Godrej Ltd

BSE FMCG INDEX

Eatables, soft drinks, and cleaning materials falls in this category

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Scripts should be listed for 3 months

The Eligibility Criteria for Z group:

Scripts which fail to comply with its listing requirements.

CLEARING AND SETTLEMENT

INTRODUCTION OF T+2 ROLLING SETTLEMENTS

From April 1, 2003, the settlement cycle has been shortened from the T+3 rollingsettlementto T+2 by SEBI to facilitate still easier flow of funds and securities.

SR. NO DAY TIME DESCRIPTION OF ACTIVITY

1 T TRADE DAY

2 T+2 BY 11.00AM Custodians conform the trades. However, there isa facility for lateConfirmations

BY 1.30 PM Process and download obligation files to

brokers/custodians .

3 T+3 BY 11.00AM Pay-in of securities and funds

BY 1.30 PM Pay-out of securities and funds

SCHEDULE FOR STOCK BROKERS

SR. NO DAY TIME DESCRIPTION OF ACTIVITY

1 T TRADE DAY

2 T+2 UNTIL 10.30

AM

Accept pay-in instructions from investors intopool account

UNTIL1.30PM

Submit final pay-in files to the depository andthe clearing bank.

Rights Issue: A listed company can opt for a rights issue to raise capital. With the issued rights,

existing shareholders have the privilege to buy a specified number of new shares from the firm at

a specified price within a specified time. A rights issue is offered to all existing shareholders

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individually and may be rejected, accepted in full or accepted in part.In India, Section 81 of the

Companies Act, 1956 provides that where a company increases its subscribed capital by the issue

of new shares, either after two years of its formation or after one year of first issue of rights, have

to be initially offered to exiating share holders.

Eg.Avon Ltd has 30,00,000 shares outstanding in the market at current market price of 65 thustotal market cap is of (30,00,000*65). Now new shares worth 40 in all of 10,00,000. Thus no. of

rights is 30,00,000/10,00,000 i.e. 3. Thus for every 3 share a sharholder is given a chance to have

1 more share at 40.. The final market price is (30,00,000*65)+(10,00,000*40)/40,00,000 i.e.

58.75 final market price post issue. Total value of 3 rights is 58.75-40 i.e. 18.75. Thus 1 right is

18.75/3=6.25.

Split Share: A corporate action in which a company's existing shares are divided into multipleshares. Although the number of shares outstanding increases by a specific multiple, the totaldollar value of the shares remains the same compared to pre-split amounts, because no real value

has been added as a result of the split.

investors believe that a stock split will result in an increased share price and purchase the stockthe share price will tend to increase. Others contend that the management of a company, byinitiating a stock split, is implicitly signaling its confidence in the future prospects of thecompany.

Eg. Unitech

Bonus: A bonus share is a free share of stock given to current shareholders in a company, based

upon the number of shares that the shareholder already owns. While the issue of bonus shares

increases the total number of shares issued and owned, it does not increase the value of thecompany.

Eg. Leading real estate developer, Unitech Ltd on Monday said it has received shareholders

approval for a stock split in the ratio of 1:5 and a

12-for-1 bonus issue.

The shareholders at the extra ordinary general meeting held on Monday approved the sub-

division of the existing one equity share of Rs 10 into five equity shares of Rs two each, the

company informed the Bombay Stock Exchange.

The company would also issue bonus shares in the ratio of 12 equity shares for every 1 equity

share held, it added.

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Buyback: A program by which a company buys back its own shares from the marketplace,reducing the number of outstanding shares. This is usually an indication that the company'smanagement thinks the shares are undervalued.

Because a share repurchase reduces the number of shares outstanding (i.e. supply), it increases

earnings per share and tends to elevate the market value of the remaining shares.

Eg. Anil Dhirubhai Ambani group firm Reliance Infrastructure on Friday said its promoters willbuy back additional shares worth Rs 700 crore from existing shareholders at a maximum price ofRs 700 a share.

The buyback announcement comes within a week of the infra firm completing its Rs 796 crorebuyback from the open market. The buyback price of Rs 700 a share represents a premium of 27per cent to current market price, Reliance Infrastructure said in a fi ling to the Bombay StockExchange.

The buyback programme would remain open till mid-April 2009 and would be done throughopen market purchases on the BSE and the National Stock Exchange. Shares of the companysurged 5.36 per cent to touch a high of Rs 579.50 on the BSE.

FCCB: A type of convertible bond issued in a currency different than the issuer's domestic

currency. In other words, the money being raised by the issuing company is in the form of

a foreign currency. These types of bonds are attractive to both investors and issuers. The

investors receive the safety of guaranteed payments on the bond and are also able to take

advantage of any large price appreciation in the company's stock.

Impact in India post 30

th

September: The conversion price of their foreign currencyconvertible bonds is several times higher than their current market prices.

This leaves them with two options. One is to reset the price at current market price, a move thatcould dilute promoter holdings (since it would entail issuing more equity shares). The other is toredeem the bonds, which could increase debt obligations that are already substantial in somecases.

Bonds: In finance, a bond is a debt security, in which the authorized issuer owes the holders a

debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or torepay the principal at a later date, termed maturity. It is a formal contract to repay borrowed

money with interest at fixed intervals.Thus a bond is a loan: the issueris the borrower, the bond

holderis the lender, and the coupon is the interest. Bonds provide the borrower with external

funds to finance long-term investments, or, in the case of government bonds, to finance current

expenditure. The indebted entity (issuer) issues a bond that states the interest rate (coupon) that

will be paid and when the loaned funds (bond principal) are to be returned (maturity date).

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Principal the amount on which the issuer pays interest, and which has to be repaid at the end.

Issue price the price at which investors buy the bonds when they are first issued

Maturity date the date on which the issuer has to repay the nominal amount. As long as all

payments have been made, the issuer has no more obligations to the bond holders after thematurity date.

Coupon Rate the interest rate that the issuer pays to the bond holders. Usually this rate is

fixed throughout the life of the bond.

Indentures and Covenants An indenture is a formal debt agreement that establishes the terms

of a bond issue, while covenants are the clauses of such an agreement.

Debenture: A type of debt instrument that is not secured by physical asset or

collateral. Debentures are backed only by the general creditworthiness and reputation of the

issuer. Both corporations and governments frequently issue this type of bond in order to securecapital. A debenture is defined as a certificate of agreement of loans which is given under the

company's stamp and carries an undertaking that the debenture holder will get a fixed

return(fixed on the basis of interest rates) and the principal amount whenever the debenture

matures. An example of a government debenture would be any government-issued Treasury

bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free

because governments, at worst, can print off more money or raise taxes to pay these type of

debts.

Types:

Convertible Debentures: Convertible Debentures, which can be converted into equity shares of

the issuing company after a predetermined period of time.

Non-Convertible Debentures: Convertible Debentures, which can be converted into equity shares

of the issuing company after a predetermined period of time.

Warrants: A derivative security that gives the holder the right to purchase securities (usually

equity) from the issuer at a specific price within a certain time frame. Warrants are often

included in a new debt issue as a "sweetener" to entice investors.

Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuerto pay lower interest rates or dividends. They can be used to enhance the yield of the bond, and

make them more attractive to potential buyers. Warrants can also be used in private equity deals.

The main difference between warrants and call options is that warrants are issued and guaranteed

by the company, whereas options are exchange instruments and are not issued by the company.

Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is

measured in months.

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DERIVATIVES

A derivative is a financial instrument which derives its value from some other financial price.

This other financial price is called the underlying. A wheat farmer may wish to contract to sell

his harvest at a future date to eliminate the risk of a change in prices by that date. The price for

such a contract would obviously depend upon the current spot price of wheat. Such a transaction

could take place on a wheat forward market. Here, the wheat forward is the derivative and

wheat on the spot market is the underlying. The terms derivative contract, derivative

product, or derivative are used inter changeably.

Basic types of derivatives :

1) Future

2) Option

3) Swaps

1. FUTURES

Futures contract can simplistically be defined as an agreement to buy or sell an asset at a certain

time in the future at a certain price. Futures are firm financial agreements to deliver (sell) or take

delivery (buy) of a standardized quantity of an underlying commodity or instrument, at a pre-

established price agreed on a regulated exchange at a specified future date.

Types of Future Contracts

Commodity future : wheat corn, soyabeans or a perishable commodity like pork bellies; or even

a precious asset like gold, silver etc.

Financial futures: money market, treasure bills, notes, bonds, etc.

Currency futures: US dollar, Pound Sterling, Euro and Yen etc.

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Index future: Nifty, Sensex

Margins

A key role of the future exchange is to organize trading such that contract defaults are

minimized or even eliminated. The clearing corporation uses the fees it collects on

transactions to provide the necessary funds for this purpose. Besides, buyers and sellers are

require to deposit a margin on the contract. Thus, when a contract is entered into, both the

buyer and the seller are required to deposit initial margins, which is typically 5 to 10 percent

of the value of the contract. The exact amount is determined by the exchange and the clearing

house.

2.OPTIONS

An option gives the holder or buyer of the option the right to do so something usually to but or

sell an underlying assets at a previously agreed price at a given point in the future, without the

obligation to do so. In other words, a holder of an option has a right but not obligation to buy or

sell the underlying assets at a price, called the Strike price, during a period or on a specific date

in exchange for a payment of a premium is known as option.

Option (finance), a right to buy or sell a particular asset at a specified price, usually within a

given period of time. Most options involve buying or selling stock, commodities, or real estate,but option contracts can be written for most goods and services. Options are traded on organized

exchanges, such as the New York Stock Exchange (NYSE) and Chicago Board Options

Exchange (CBOE).

A common type of option is the stock optionthe right to buy or sell shares of stock at a

specified price within a specified period of time. Some investors trade stock options in hopes of

earning a profit. If an investor owns stock and expects the price of that stock to rise, he or she

can purchase an option contract that will increase in value if the stock price goes up.

Types of options

Options are of two types: Call option and Put option.

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A call option gives a buyer / holder a right but not an obligation to buy the underlying on

or before a specified time at a specified price (usually called strike / exercise price) and

quantity.

For example, If an investor owns stock and expects the price of that stock to rise, he or she can

purchase an option contract that will increase in value if the stock price goes up. For example,

suppose SAIL stock is selling for Rs 130 per share. An investor can buy an option for the right to

purchase 100 shares of SAIL stock within three months at Rs 130 per share by paying a fee to an

option seller. If the price of SAIL stock rises before the end of the option contract, say to Rs 140

per share, the seller is obligated to sell the buyer the stock at Rs 130 per share. The buyer can

either hold onto this stock or sell it for a profit. If the stock price falls to less than Rs 130, the

buyer is not obligated to purchase it. Most buyers choose to sell their options if they rise in value

rather than exercise themthat is, put them into effect and actually purchase the stock.

A put option gives a holder of that option a right but not an obligation to sell the

underlying on or before a specified time at a specified price and quantity. The buyer /

holder of an option pay an upfront premium to the writer / seller of an option. In other

words he pays the price of the option.

For example, an investor can buy a put option to sell 100 shares of Coca-Cola Company stock

for Rs 60 a share within three months. If the price of the stock falls, the buyer can purchase 100

shares at the new, low price and sell it to the option seller at the higher, contract price. If the

stock price falls to Rs 50, the option buyer can purchase the stock at Rs 50 per share and sell it to

the option seller, who is obligated to buy it, at Rs 60 per share. If the stock price rises to Rs 70

per share, the option buyer is not obligated to sell the stock.

Investors sometimes use options as tools for hedgingthat is, protecting against financial loss. If

an investor owns stock and expects its price to fall, he or she can purchase a put option based on

the stock. If the price does fall, the investor can sell the option to compensate for the loss in the

stocks value. In addition to options based on stock, investors can also purchase index options

that is, options based on stock indexes that measure the ups and downs of the stock market.

3.SWAPS

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The word swap literally means an exchange. A derivative or financial swap may be defined as

a contract whereby two parties known as counterparties, exchange two streams of cash flows

over a defined period of time, usually through an intermediary like a financial institution. The

nature of the cash flows to be exchanged is defined in the contract.

Swaps are the most versatile of the derivatives products. The development of the swap market

was an important milestone in the evolution of international capital markets in the 1980s. While

FRAs and futures are single period price-fixing contracts, swaps are multi-period price-fixing

contracts. Swaps were developed essentially as OTC products; but today, a number of exchange-

traded versions of swaps are available as well.

WHY FII ARE ATTRACTED TO INDIA??

GDP of trillion dollar, Growth rate of 89%, Huge man power, cost effectiveness, Fast emerging

middle class, Rate of return on investment, Cheaper valuation, Investment to GDP ratio = 35-

40%. Foreign investors are not fools to stick money into non-performing economies. They didn't

warm up between 1994 and 2003 barring the 2000 technology boom period. Now that they found

that India is hot, and it's for good reason. The reasons for being bullish about India in 2006 are

the same as they were in 2005.

The aim is to cash in on the current interest of foreign investors in emerging markets like India

rather than let them move on to greener pastures like China and the tiger economies of East Asia.

If foreign institutional investors can park their money for short-term gains in the Indian bourses,

policymakers have realised that long-term investors are also viewing this country's economy in a

favourable light.

QUARTER RESULTS

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After observing we can come to know that profit after tax growth is booming in the range of

from 20% to 60% year on year. From june, 06 to june, 07 growth has been tremendous and due

to this fii has started investing in India heavily finally which helped improve market sentiment.

After observing above chart it is shown that sales and profit are increasing in same proportion

from sept, 03 to sept, 07. direct coorelation between sales and profit shows healthy and

prosperous sign of positive

sentiments in the minds of

investors and corporate.

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From 1991 it is seen that there is boom in economy for 4-5 years than downtern for 3-4 years.

This is business cycle.ups and downs will be there. particularly from 2004 to 2008 GDP were

growing at nearly 8-8.5%.this was best among emerging economy after china, so this showed

real strength of our economy at that time. IIP also showed tremendous growth. Manufacturing

sector which has 80% weightage in GDP also showed double digit growth. All data showed

positivity for Indian inc.

From above table it shows that in 2007 there were many deals amounting to $ 65 bn. The sectors

attracting investments by Corporate India include metals, pharmaceuticals, industrial goods,

automotive components, beverages, cosmetics and energy in manufacturing; and mobile

communications, software and financial services in services, with pharmaceuticals, IT and

energy being the prominent ones among these. All the deal were from different-different sectors.

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Market cap to GDP ratio also increased from avg. 22% to more than 100% which shows area of

concern for investor. Earlier this ratio crossed 100% mark at the time of ketan parekh scam, after

that there was sudden collapsed in stock market. History repeated once again.

There was big chunk of money was coming in our market through p-notes. In march, 04, p-notes

position was 20% of net FII investments in India. But in aug, 07 this position increased, nearly

51% of net FII investment were coming through p-notes. SEBI puts restriction on p-notes and

announce to clear the position in 18 month. Very next market crashed 1800 points in the opening

and closed for one hour.

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Journey of sensex from 1000 points to 21000 points

DATE SENSEX

July 25, 1990 1000

January 3, 1992 2000

February 29, 1992 3000

March 30, 1992 4000

October 8, 1999 5000

February 11, 2000 6000

June 20, 2005 7000

September 8, 2005 8000

November 28, 2005 9000

February 6, 2006 10000

March 21, 2006 11000

April 20, 2006 12000

October 30, 2006 13000

December 5, 2006 14000

July 6, 2007 15000

September 19, 2007 16000

September 26,2007 17000

October 9, 2007 18000

October 15, 2007 19000

October 29, 2007 20000

January 8, 2008 21000

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It took 5 years to earn more 1000 points from sensex at 6000 to 7000 but it took just 5 days to

earn more 1000 points from16000 to 17000 and more 8 days to reach at 18000. On Jan 8, 2008,

sensex touched 21000 mark. After globalisation it took 20 years to reach 10000 mark, but it took

just 20 more month to double it at 21000. All indices were high. Mid-cap, small-cap, large-cap

all were booming. We had entered into highly over valuation zone. At the same time SEBI and

RBI gave permission of short selling to FII. Market cap touched 62 lakh crore. In volume trading

India was on top. Then there was sudden MARKET CRASH IN JAN 08 due to many reason like

US market recession, Weakness in global market, FII turns net sellers, Crude prices high, R-

Power IPO, Pre Budget movement. Sentiments were badly affected. Nearly 6.7 lakh crore

wiped out on Monday alone. 3000 points fall in just 6 days which comes to erosion of 12 lakhcrore from the market. To generate this amount market took nearly 3 month. People who were

making profit of one crore before one week now are in loss of 10 lakh rupees. 3-5 lakh small

investors have lost on an avg. between 4-5 lakh in that week. Tremendous panic has been created

among investor. Jan 21, 22 brokers cut off F&O position of small investor without informing

them. Investors grievances forum wrote a letter to SEBI that the policies of F&O need to be re-

examined.

Budget 2008-09, disappoints investor with increase in short term capital gain tax from 10% to

15% and no change incorporate tax. This has lead to fall in stock market. Bloomberg web site

also analyse that this was biggest fall after budget announced in India. Loan waiver of 60000crore to farmers also helped public sector banks in long run. After that, Sixth pay commission

introduced for 5.5mn government employees which will directly have Impact of 70% on profit of

government organization. Due to that there will be 25000 crore outgo from balance sheet of

government companies only because; this pay commission will be Effective from Jan 1, 2006.

This also created some negative sentiments for the profit margin of these companies.

Market crash down to 13000 from 16000 in four month and than from 13000 to 9000 in the

month of October due to collapse of major investment banks, hedge funds, insurance companies

world wide. Bankruptcy filed by Lehman Brothers and many fore closers also created big panic

in financial industry. Liquidity crunch emerged with crisis of confidence which finally lead tohammering of all large cap, mid cap, small cap companies. Funding for upcoming project also

reduced which lead to a big problem for real estate, construction companies. Mergers and

acquisition deals delayed or re-negotiated between the parties.

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The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange.

The index provides "an assessment of the price of moving the major raw materials by sea. It isbarometer for shipping companies worldwide.

Impact of 2008 financial crisis

On 20 May2008 the index reached its record high level since its introduction in 1985, reaching

11,793 points. Half a year later, on 5 December2008, the index had dropped by 94%, to 663

points, the lowest since 1986., though by 4 February2009it had recovered a little lost ground,

back to 1,316. These low rates move dangerously close to the combined operating costs of

vessels, fuel, and crews. By the end of 2008, shipping times had been already increased byreduced speeds to save fuel consumption, but lack of credit meant the reduction of letters of

credit, historically required to load cargoes for departure at ports. Debt load of future ship

construction was also a problem for shipping companies, with several major bankruptcies and

implications for shipyards. This, combined with the collapsing price of raw commodities created

a perfect storm for the world's marine commerce.

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The table shows that fund raising problem against Indian inc. in 2008 in comparison with last

year. All debt as well as equity instrument are showing down turn except right issue because if

company can not raise funds from out side than existing share holder are better option, so right

issue amount has been increased 2-3 times.

Now see the table which shows drastic fall of sensex from 21000. by observation we can come to

know that it took less than a week for falling 1000 points. this is real damage to capital market.Whole index has fall down nearly 60% from its peak level.

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Taking into a/c last 4-5 years of FII investments in India, we can come to know that in 2008 FII

turned net sellers in equity market. Heavy selling by FII also was one of the major reasons

behind crash.net profit margin also reduced. Growth of nearly 30-40% came down to just 3% Y-

O-Y bases for various sectors. In the last three years cost like staff cost, interest cost,

depreciation cost has increased and our margin has reduced.

CURRENT SCENARIO

The Business Confidence Index has fallen to 5 year

Export order cancelled 1792

Production cut down by Indian companies Commodity index to 6 years low

Hedge funds lose 170$ in 3rd quarter

2 lakh SME may turn sick

IPO market dried

Unemployment of 6lakh people

GDP slowdown to 5.3%

Cut down on Bank rates

Lowering of Inflation

Crude prices fallen down