Capital Market in India with respect to BSE & NSESIP project
report to be submitted in partial fulfillment of the requirements
for the PGDM
By Nishant Seth20142032
Company Guide: Mr. B. Sanjeev
Post Graduate Diploma in Management ProgrammeUnder the guidance
ofGaurav Sarin
DELHI SCHOOL OF BUSINESSNEW DELHI
ACKNOWLEDGEMENT
I wish to express my sincere gratitude to Mr. B. Sanjeev for
giving me the opportunity to do my summer industrial training at
his highly esteemed Organization.I am extremely thankful to my
Faculty Guide Prof. Gaurav Sarin, Delhi School of Business to give
me suggestions during my Training.I am also thankful to all others
who helped me directly or indirectly towards the completion of my
works. (NISHANT SETH)
DECLARATION
I hereby declare that this report on Capital Market in India
with respect to BSE. I declare that this project is the result of
my own effort and has not been submitted to any other institution
for the award of any Degree or diploma.
CONTENTS S. NO. CONTENTSPAGE NO.
CHAPTER 1.CAPITAL MARKET5-13
1.1FACTORS AFFECTING CAPITAL MARKET14-16
1.2INVESTMENT17-20
1.3SECURITIES AND EXCHANGE BOARD OF INDIA21-23
1.4STOCK EXCHANGE24-26
1.5BOMBAY STOCK EXCHANGE27-28
1.6NATIONAL STOCK MARKET29
1.7LUDHIANA STOCK EXCHANGE30-35
CHAPTER 2.OBJECTIVE OF THE RESEARCH36
CHAPTER 3.RESEARCH METHODOLOGY37
3.1RESEARCH DESIGN37
3.2SAMPLIING SIZE AND GESIGN37
3.3DATA COLLECTION37
3.4AREA OF STUDY37
3.5ANALYSIS THE DATA38-51
3.6LIMITATIONS52
CHAPTER 4.RESULT AND DISCUSSION53
CHAPTER 5.SUGGESTIONS 54
CHAPTER 6.PREFERENCE55
CHAPTER 7.QUESTIONNAIRE56-57
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. A nation's capital
market includes such financial institutions as banks, insurance
companies, and stockexchanges that channel long-term investment
funds to commercial andindustrial borrowers. Unlike the money
market, on which lending is ordinarily short term, the capital
market typically finances fixed investments like those in buildings
and machinery.
Nature and Constituents: The capital market consists of number
of individuals and institutions (including the government) that
canalize the supply and demand for longterm capital and claims on
capital. The stock exchange, commercial banks, co-operative banks,
saving banks, development banks, insurance companies, investment
trust or companies, etc., are important constituents of the capital
markets. The capital market has three important Components, namely
the suppliers of loanable funds, the borrowers and the
Intermediaries who deal with the leaders on the one hand and the
Borrowers on the other.
The Indian capital market is more than a century old. Its
history goes back to 1875, when 22 brokers formed the Bombay Stock
Exchange (BSE). Over the period, the Indian securities market has
evolved continuously to become one o the most dynamic, modern, and
efficient securities markets in Asia. Today, Indian market confirms
to best international practices and standards both in terms of
structure and in terms of operating efficiency .Indian securities
markets are mainly governed by a) The Companys Act1956, b) the
Securities Contracts (Regulation) Act 1956 (SCRA Act), and c) the
Securities and Exchange Board of India (SEBI) Act, 1992. A brief
background of these above regulations are given belowa) The
Companies Act 1956 deals with issue, allotment and transfer of
securities and various aspects relating to company management. It
provides norms for disclosures in the public issues, regulations
for underwriting, and the issues pertaining to use of premium and
discount on various issues.b) SCRA provides regulations for direct
and indirect control of stock exchanges with an aim to prevent
undesirable transactions in securities. It provides regulatory
jurisdiction to Central Government over stock exchanges, contracts
in securities and listing of securities on stock exchanges.c) The
SEBI Act empowers SEBI to protect the interest of investors in the
securities market, to promote the development of securities market
and to regulate the security market.The Indian securities market
consists of primary (new issues) as well as secondary (stock)
market in both equity and debt. The primary market provides the
channel for sale of new securities, while the secondary market
deals in trading of securities previously issued. The issuers of
securities issue (create and sell) new securities in the primary
market to raise funds for investment. They do so either through
public issues or private placement. There are two major types of
issuers who issue securities. The corporate entities issue mainly
debt and equity instruments (shares, debentures, etc.), while the
governments (central and state governments) issue debt securities
(dated securities, treasury bills). The secondary market enables
participants who hold securities to adjust their holdings in
response to changes in their assessment of risk and return. A
variant of secondary market is the forward market, where securities
are traded for future delivery and payment in the form of futures
and options. The futures and options can be on individual stocks or
basket of stocks like index. Two exchanges, namely National Stock
Exchange (NSE) and the Stock Exchange, Mumbai (BSE) provide trading
of derivatives in single stock futures, index futures, single stock
options and index options. Derivatives trading commenced in India
in June 2000In the beginning of the twentieth century, the
industrial revolution was on the way in India with the Swadeshi
Movement; and with the inauguration of the Tata Iron and Steel
Company Limited in 1907, an important stage in industrial
advancement under Indian enterprise was reached.
There are two major indicators of Indian capital market- SENSEX
& NIFTY:The Sensex is an "index". What is an index? An index is
basically an indicator. It gives you a general idea about whether
most of the stocks have gone up or most of the stocks have gone
down. The Sensex is an indicator of all the major companies of the
BSE. The Nifty is an indicator of all the major companies of the
NSE.If the Sensex goes up, it means that the prices of the stocks
of most of the major companies on the BSE have gone up. If the
Sensex goes down, this tells you that the stock price of most of
the major stocks on the BSE have gone down. Just like the Sensex
represents the top stocks of the BSE, the Nifty represents the top
stocks of the NSE. Just in case you are confused, the BSE, is the
Bombay Stock Exchange and the NSE is the National Stock Exchange.
The BSE is situated at Bombay and the NSE is situated at Delhi.
These are the major stock exchanges in the country. There are other
stock exchanges like the Calcutta Stock Exchange etc. but they are
not as popular as the BSE and the NSE. Most of the stock trading in
the country is done though the BSE & the NSE . Besides Sensex
and the Nifty there are many other indexes. There is an index that
gives you an idea about whether the mid-cap stocks go up and down.
This is called the BSE Mid-cap Index. There are many other types of
index.Unless stock markets provide professionalized service, small
investors and foreign investors will not be interested in capital
market operations. And capital market being one of the major source
of long-term finance for industrial projects, India cannot afford
to damage the capital market path. In this regard NSE gains vital
importance in the Indian capital market but if we see the sensex
& nifty graph there is a great variation.
Indian Financial Market consists of the following markets:
Capital Market/ Securities Marketo Primary capital marketo
Secondary capital market Debt MarketPrimary capital market- A
market where new securities are bought and sold for the first
time
Types of issues in Primary market Initial public offer (IPO) (in
case of an unlisted company), Follow-on public offer (FPO), Rights
offer such that securities are offered to existing shareholders,
Preferential issue/ bonus issue/ QIB placement Composite issue,
that is, mixture of a rights and public offer, or offer for sale
(offer of securities by existing shareholders to the public for
subscription).
Secondary Market: In the secondary market the investors buy /
sell securities through stock exchanges. Trading of securities on
stock exchange results in exchange of money and securities between
the investors. Secondary market provides liquidity to the
securities on the exchange(s) and this activity commences
subsequent to the original issue. For example, having subscribed to
the securities of a company, if one wishes to sell the same, it can
be done through the secondary market. Similarly one can also buy
the securities of a company from the secondary market. A stock
exchange is the single most important institution in the secondary
market for providing a platform to the investors for buying and
selling of securities through its members. In other words, the
stock exchange is the place where already issued securities of
companies are bought and sold by investors. Thus, secondary market
activity is different from the primary market in which the issuers
issue securities directly to the investors. Traditionally, a stock
exchange has been an association of its members or stock brokers,
formed for the purpose of facilitating the buying and selling of
securities by the public and institutions at large and regulating
its day to day operations. Of late however, stock exchanges in
India now operate with due recognition from Securities and Exchange
Board of India (SEBI) / the Government of India under the
Securities Contracts (Regulation) Act, 1956. The stock exchanges
are either association of persons or are formed as companies. There
are 24 recognized stock exchanges in India out of which one has not
commenced its operations.Out of the 23 remaining stock exchanges,
currently only on four stock exchanges, the trading volumes are
recorded. Most of regional stock exchanges have formed subsidiary
companies and obtained membership of Bombay Stock Exchange, (BSE)
or National Stock Exchange (NSE) or both. Members of these stock
exchanges are now working as sub-brokers of BSE / NSE brokers.
Securities listed on the stock exchange(s) have the following
advantages: The stock exchange(s) provides a fair market place. It
enhances liquidity. Their price is determined fairly. There is
continuous reporting of their prices. Full information is available
on the companies. Rights of investors are protected.
Settlement cycles:Settlement is the process whereby the trader
who has made purchases of scrip makes payment and the seller
selling the scrip delivers the securities. This settlement process
is carried out by Clearing Houses for the stock exchanges. The
Clearing House acts like an intermediary in every transaction and
acts as a seller to all buyers and buyer to all sellers.
Significance of Capital MarketsA well functioning stock market
may help the development process in an economy through the
following channels:1. Growth of savings,2. Efficient allocation of
investment resources,3. Better utilization of the existing
resources.In market economy like India, financial market
institutions provide the avenue by which long-term savings are
mobilized and channelled into investments. Confidence of the
investors in the market is imperative for the growth and
development of the market. For any stock market, the market Indices
is the barometer of its performance and reflects theprevailing
sentiments of the entire economy. Stock index is created to provide
investors with the information regarding the average share price in
the stock market. The ups and downs in the index represent the
movement of the equity market. These indices need to represent the
return obtained by typical portfolios in the country. Generally,
the stock price of any company is vulnerable to three types of
news: Company specific Industry specific Economy specificAn all
share index includes stocks from all the sectors of the economy and
thus cancels out the stock and sector specific news and events that
affect stock prices, (law of portfolio diversification) and reflect
the overall performance of the company/equity market and the news
affecting it.The most important use of an equity market index is as
a benchmark for a portfolio of stocks. All diversified portfolios,
belonging either to retail investors or mutual funds, use the
common stock index as a yardstick for their returns. Indices are
useful in modern financial application of derivatives. Capital
Market Instruments some of the capital market instruments are:
Equity Preference shares Debenture/ Bonds ADRs/ GDRs
Derivatives
SharesThe total capital of a company may be divided into small
units called shares. For example, if the required capital of a
company is US $5,00,000 and is divided into 50,000 units of US $10
each, each unit is called a share of face value US $10. A share may
be of any face value depending upon the capital required and the
number of shares into which it is divided. The holders of the
shares are called share holders. The shares can be purchased or
sold only in integral multiples. Equity shares signify ownership in
a corporation and represent claim over the financial assets and
earnings of the corporation. Shareholders enjoy voting rights and
the right to receive dividends; however in case of liquidation they
will receive residuals, after all the creditors of the company are
settled in full. A company may invite investors to subscribe for
the shares by the way of: Public issue through prospectus Tender/
book building process Offer for sale Placement method Rights
issue
StocksThe word stock refers to the old English law tradition
where a share in the capital of the company was not divided into
shares of fixed denomination but was issued as one chunk. This
concept is no more prevalent, but the word stock continues. The
word joint stock companies also refers to this
tradition.Debentures/ BondsThe term Debenture is derived from the
Latin word debere which means to owe a debt. A debenture is an
acknowledgment of debt, taken either from the public or a
particular source. A debenture may be viewed as a loan, represented
as marketable security. The word bond may be used interchangeably
with debentures. Debt instruments with maturity more than 5 years
are called bondsYieldsMost common method of calculating the yields
on debt instrument is the yield to maturity method, the formula is
as under: YTM = coupon rate + prorated discount / (face value +
purchase price)/2Preference sharesPreference shares are different
from ordinary equity shares. Preference share holders have the
following preferential rights(i) The right to get a fixed rate of
dividend before the payment of dividend to the equity holders.(ii)
The right to get back their capital before the equity holders in
case of winding up of the company.IPOConditions for IPO: (all
conditions listed below to be satisfied) Net tangible assets of 3
crore in each of the preceding 3 full years, of which not more than
50% are held in monetary assets: Track record of distributable
profits for 3 out of the immediately preceding 5 years: Net worth
of 1 crore in each of the preceding three full years; Issue size of
proposed issue + all previous issues made in the same financial
year does not exceed 5 times its pre-issue net worth as per the
audited balance sheet of the preceding financial year; In case of
change of name within the last one year, 50% of the revenue for the
preceding 1 full year earned by it from the activity indicated by
the new name.
DerivativesA derivative picks a risk or volatility in a
financial asset, transaction, market rate, or contingency, and
creates a product the value of which will change as per changes in
the underlying risk or volatility. The idea is that someone may
either try to safeguard against such risk (hedging), or someone may
take the risk, or may engage in a trade on the derivative, based on
the view that they want to execute. The risk that a derivative
intends to trade is called underlying. A derivative is a financial
instrument, whose value depends on the values of basicunderlying
variable. In the sense, derivatives is a financial instrument that
offers return based on the return of some other underlying asset,
i.e the return is derived from another instrument.The best way will
be take examples of uncertainties and the derivatives that can be
structured around the same. Stock prices are uncertain - Lot of
forwards, options or futures contracts are based on movements in
prices of individual stocks or groups of stocks. Prices of
commodities are uncertain - There are forwards, futures and options
on commodities. Interest rates are uncertain - There are interest
rate swaps and futures. Foreign exchange rates are uncertain -
There are exchange rate derivatives. Weather is uncertain - There
are weather derivatives, and so on.
DERIVATIVES PRODUCTSSome significant derivatives that are of
interest to us are depicted in the accompanying graph:Major types
of derivatives
FUTURES, FORWARDS AND OPTIONSAn option is different from futures
in several ways. At practical level, the option buyer faces an
interesting situation. He pays for the options in full at the time
it is purchased. After this, he only has an upside. There is no
possibility of the options position generating any further losses
to him. This is different from futures, where one is free to enter,
but can generate huge losses. This characteristic makes options
attractive to many market participants who trade occasionally, who
cannot put in the time to closely monitor their futures position.
Buying put options is like buying insurance. To buy a put option on
Nifty is to buy insurance which reimburses the full amount to which
Nifty drops below the strike price of the put option. This is
attractive to traders, and to mutual funds creating guaranteed
return products.
FORWARDSA forward contract is an agreement to buy or sell an
asset on a specified date for a specified price. One of the parties
to the contract assumes a long position and agrees to buy the
underlying asset on a certain specified future date for a certain
specified price. The other party assumes a short position and
agrees to sell the asset on the same date forthe same price, other
contract details like delivery date, price and quantity are
negotiated bilaterally by the parties to the contract. The forward
contracts are normally traded outside the exchange.
FUTURESFutures contract is a standardized transaction taking
place on the futuresexchange. Futures market was designed to solve
the problems that exist in forward market. A futures contract is an
agreement between two parties, to buy or sell an asset at a certain
time in the future at a certain price, but unlike forward
contracts, the futures contracts are standardized and exchange
traded To facilitate liquidity in the futures contracts, the
exchange specifies certain standard quantity and quality of the
underlying instrument that can be delivered, and a standard time
for such a settlement. Futures exchange has a division or
subsidiary called a clearing house that performs the specific
responsibilities of paying and collecting daily gains and losses as
well as guaranteeing performance of one party to other. A futures'
contract can be offset prior to maturity by entering into an equal
and opposite transaction. The standardized items in a futures
contract are: Quantity of the underlying Quality of the underlying
The date and month of delivery The units of price quotation and
minimum price change
OPTIONSAn option is a contract, or a provision of a contract,
that gives one party (the option holder) the right, but not the
obligation, to perform a specified transaction with another party
(the option issuer or option writer) according to the specified
terms. The owner of a property might sell another party an option
to purchase the property any time during the next three months at a
specified price. For every buyer of an option there must be a
seller. The seller is often referred to as the writer. As with
futures, options are brought into existence by being traded, if
none is traded, none exists; conversely, there is no limit to the
number of option contracts that can be in existence at any time. As
with futures, the process of closing out options positions will
cause contracts to cease to exist, diminishing the total number.
Thus an option is the right to buy or sell a specified amount of a
financial instrument at a pre-arranged price on or before a
particular date. There are two options which can be exercised: Call
option, the right to buy is referred to as a call option. Put
option, the right to sell is referred as a put option.
FACTORS AFFECTING CAPITAL MARKET IN INDIA
The capital market is affected by a range of factors . Some of
the factors which influence capital market are as follows:-
A)Performance of domestic companies:-The performance of the
companies or rather corporate earnings is one of the factors which
has direct impact or effect on capital market in a country. Weak
corporate earnings indicate that the demand for goods and services
in the economy is less due to slow growth in per capita income of
people . Because of slow growth in demand there is slow growth in
employment which means slow growth in demand in the near future.
Thus weak corporate earnings indicate average or not so good
prospects for the economy as a whole in the near term. In such a
scenario the investors ( both domestic as well as foreign ) would
be wary to invest in the capital market and thus there is bear
market like situation. The opposite case of it would be robust
corporate earnings and its positive impact on the capital
market.
B) Environmental Factors :-Environmental Factor in Indias
context primarily means- Monsoon . In India around 60 % of
agricultural production is dependent on monsoon. Thus there is
heavy dependence on monsoon. The major chunk of agricultural
production comes from the states of Punjab , Haryana & Uttar
Pradesh. Thus deficient or delayed monsoon in this part of the
country would directly affect the agricultural output in the
country. Apart from monsoon other natural calamities like Floods,
sunami, drought, earthquake, etc. also have an impact on the
capital market of a country. The Indian Met Department (IMD) on
24th June stated that India would receive only 93 % rainfall of
Long Period Average (LPA). This piece of news directly had an
impact on Indian capital market with BSE Sensex falling by 0.5 % on
the 25th June . The major losers wereautomakers and consumer goods
firms since the below normal monsoon forecast triggered concerns
that demand in the crucial rural heartland would take a hit. This
is because a deficient monsoon could seriously squeeze rural
incomes, reduce the demand for everything from motorbikes to soaps
and worsen a slowing economy.
C) Macro Economic Numbers :-The macro economic numbers also
influence the capital market. It includes Index of Industrial
Production (IIP) which is released every month, annual Inflation
number indicated by Wholesale Price Index (WPI) which is released
every week, Export Import numbers which are declared every month,
Core Industries growth rate ( It includes Six Core infrastructure
industries Coal, Crude oil, refining, power, cement and finished
steel) which comes out every month, etc. This macro economic
indicators indicate the state of the economy and the direction in
which the economy is headed and therefore impacts the capital
market in India. A case in the point was declaration of core
industries growth figure.
D) Global Cues :-In this world of globalization various
economies are interdependent and interconnected. An event in one
part of the world is bound to affect other parts of the world ,
however the magnitude and intensity of impact would vary. Thus
capital market in India is also affected by developments in other
parts of the world i.e. U.S. , Europe, Japan , etc.Global cues
includes corporate earnings of MNCs, consumer confidence index in
developed countries, jobless claims in developed countries, global
growth outlook given by various agencies like IMF, economic growth
of major economies, price of crude oil, credit rating of various
economies given by Moodys, S & P, etc.
E) Political stability and government policies:-For any economy
to achieve and sustain growth it has to have political stability
and pro- growth government policies. This is because when there is
political stability there is stability and consistency in
governments attitude which is communicated through various
government policies. The vice- versa is the case when there is no
political stability .So capital market also reacts to the nature of
government, attitude of government, and various policies of
thegovernment.
F) Growth prospectus of an economy:-When the national income of
the country increases and per capita income of people increases it
is said that the economy is growing. Higher income also means
higher expenditure and higher savings. This augurs well for the
economy as higher expenditure means higher demand and higher
savings means higher investment. Thus when an economy is growing at
a good pace capital market of the country attracts more money from
investors, both from within and outside the country and vice
-versa. So we can say that growth prospects of an economy do have
an impact on capital markets.
G) Investor Sentiment and risk appetite :-Another factor which
influences capital market is investor sentiment and their risk
appetite .Even if the investors have the money to invest but if
they are not confident about the returns from their investment ,
they may stay away from investment for some time.At the same time
the investors have low risk appetite , which they were having in
global and Indian capital market some four to five months back due
to global financial meltdown and recessionary situation in U.S.
& some parts of Europe , they may stay away from investment and
wait for the right time to come.
What is Investment ?
MeaningIn simple terms, Investment refers to purchase of
financial assets. While Investment Goods are those goods, which are
used for further production.
Investment implies the production of new capital goods, plants
and equipments
Different types of Investment available in IndiaIn this article
you will find many available options to make an investment. A
number of options are available today for a person to invest his
money and make a decent return. Lets take a skim through all those
schemes.1. Financial Assests (that can not be traded)A number of
financial assets can not be traded with a third party. Such schemes
are listed below. Bank Deposits: Its simple and every one knows
about it. Post Office Savings Provident Funds Chit Funds Company
Deposits 2. BondsBonds are debt securities or long term debt
instruments. An authorized issuer of bond promises the person who
hods the bond to pay interest on particular periods and to return
the principal after a fixed period (at the time of maturity of the
bond). Different types of bonds are; Government Securities
Government Agency Securities PSU Bonds Private Debt Securities
Preference Shares 3. StocksStocks represent ownership. A person who
holds stocks of a particular company is treated as one of the many
owners of the company and deserves a share of the net profit that
company earns after all expenses. Stocks is one of the best
investment options available and at the same time it demands
knowledge about many fundamentals to make a decent return.
Different types of stocks (as classified by financial analysts)
Growth Stocks Value Stocks Blue Chip Stocks Income Stocks 5. Mutual
FundsMutual Funds are a better investment option for those who cant
find time to learn about stock market and its trends or those who
dont understand its working correctly.Mutual funds are usually
managed by a Private financial company or a Bank. Different types
of mutual funds are; Stock based schemes Fixed income schemes
Monthly income schemes Tax saving schemes Hybrid schemes Balance
schemes Sector schemes Floating rate schemes 6. InsuranceInsurance
is also a form of investment. Different types of insurance
investments are; Endowment assurance policy Money back policy Whole
Life policy Term assurance policy Unit Linked Policy ULIP
7. Financial DerivativesThese are financial instruments that are
formed from value addition of the financial assets used for
investment. Two types are there; Options Futures
SECURITIES AND EXCHANGE BOARD OF INDIAIt was formed officially
by the Government of India in 1992 with SEBI Act 1992 being passed
by the Indian Parliament. SEBI is headquartered in the business
district of Bandra Kurla Complex complex in Mumbai, and has
Northern, Eastern, Southern and Western regional offices in New
Delhi, Kolkata, Chennai and Ahmedabad.Controller of Capital Issues
was the regulatory authority before SEBI came into existence; it
derived authority from the Capital Issues (Control) Act,
1947.Initially SEBI was a non statutory body without any statutory
power. However in 1995, the SEBI was given additional statutory
power by the Government of India through an amendment to the
Securities and Exchange Board of India Act 1992. In April, 1998 the
SEBI was constituted as the regulator of capital markets in India
under a resolution of the Government of India.The SEBI is managed
by six members, i.e. by the chairman who is nominated by central
government & two members, i.e. officers of central ministry,
one member from the RBI & the remaining two are nominated by
the central government. The office of SEBI is situated at Mumbai
with its regional offices at Kolkata, Delhi & Chennai.
FUNCTIONS AND RESPONSIBILITIESSEBI 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 drafts regulations in its legislative
capacity, it conducts investigation and enforcement action in its
executive function and it passes rulings and orders in its judicial
capacity. Though this makes it very powerful, there is an appeals
process to create accountability. There is a Securities Appellate
Tribunal which is a three-member tribunal. A second appeal lies
directly to the Supreme Court.SEBI has enjoyed success as a
regulator by pushing systemic reforms aggressively and successively
(e.g. the quick movement towards making the markets electronic and
paperless rolling settlement on T+2 basis). SEBI has been active in
setting up the regulations as required under law.SEBI has also been
instrumental in taking quick and effective steps in light of the
global meltdown and the Satyam fiasco. It had increased the extent
and quantity of disclosures to be made by Indian corporate
promoters. More recently, in light of the global meltdown,it
liberalised the takeover code to facilitate investments by removing
regulatory structures. In one such move, SEBI has increased the
application limit for retail investors to Rs 2 lakh, from Rs 1 lakh
at present.
POWERSFor the discharge of its functions efficiently, SEBI has
been invested with the necessary powers which are:1. to approve
bylaws of stock exchanges. 2. to require the stock exchange to
amend their bylaws. 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. SEBI
Committees1. Technical Advisory Committee 2. Committee for review
of structure of market infrastructure institutions 3. Members of
the Advisory Committee for the SEBI Investor Protection and
Education Fund 4. Takeover Regulations Advisory Committee 5.
Primary Market Advisory Committee (PMAC) 6. Secondary Market
Advisory Committee (SMAC) 7. Mutual Fund Advisory Committee 8.
Corporate Bonds & Securitization Advisory Committee 9. Takeover
Panel 10. SEBI Committee on Disclosures and Accounting Standards
(SCODA) 11. High Powered Advisory Committee on consent orders and
compounding of offences 12. Derivatives Market Review Committee 13.
Committee on Infrastructure Funds
STOCK EXCHANGEMeaningStock Exchange (also called Stock Market or
Share Market) is one important constituent of capital market. Stock
Exchange is an organized market for the purchase and sale of
industrial and financial security. It is convenient place where
trading in securities is conducted in systematic manner i.e. as per
certain rules and regulations.It performs various functions and
offers useful services to investors and borrowing companies. It is
an investment intermediary and facilitates economic and industrial
development of a country.Stock exchange is an organized market for
buying and selling corporate and other securities. Here, securities
are purchased and sold out as per certain well-defined rules and
regulations. It provides a convenient and secured mechanism or
platform for transactions in different securities. Such securities
include shares and debentures issued by public companies which are
duly listed at the stock exchange, and bonds and debentures issued
by government, public corporations and municipal and port trust
bodies.Stock exchanges are indispensable for the smooth and orderly
functioning of corporate sector in a free market economy. A stock
exchange need not be treated as a place for speculation or a
gambling den. It should act as a place for safe and profitable
investment, for this, effective control on the working of stock
exchange is necessary. This will avoid misuse of this platform for
excessive speculation, scams and other undesirable and anti-social
activities.
Definitions of Stock Exchange
"Stock exchanges are privately organized markets which are used
to facilitate trading in securities."The Indian Securities
Contracts (Regulation) Act of 1956, defines Stock Exchange as,"An
association, organization or body of individuals, whether
incorporated or not, established for the purpose of assisting,
regulating and controlling business in buying, selling and dealing
in securities."
Features of Stock ExchangeCharacteristics or features of stock
exchange are:-1. Market for securities : Stock exchange is a
market, where securities of corporate bodies, government and
semi-government bodies are bought and sold. 2. Deals in second hand
securities : It deals with shares, debentures bonds and such
securities already issued by the companies. In short it deals with
existing or second hand securities and hence it is called secondary
market. 3. Regulates trade in securities : Stock exchange does not
buy or sell any securities on its own account. It merely provides
the necessary infrastructure and facilities for trade in securities
to its members and brokers who trade in securities. It regulates
the trade activities so as to ensure free and fair trade 4. Allows
dealings only in listed securities : In fact, stock exchanges
maintain an official list of securities that could be purchased and
sold on its floor. Securities which do not figure in the official
list of stock exchange are called unlisted securities. Such
unlisted securities cannot be traded in the stock exchange. 5.
Transactions effected only through members : All the transactions
in securities at the stock exchange are effected only through its
authorised brokers and members. Outsiders or direct investors are
not allowed to enter in the trading circles of the stock exchange.
Investors have to buy or sell the securities at the stock exchange
through the authorised brokers only. 6. Association of persons : A
stock exchange is an association of persons or body of individuals
which may be registered or unregistered. 7. Recognition from
Central Government : Stock exchange is an organised market. It
requires recognition from the Central Government. 8. Working as per
rules : Buying and selling transactions in securities at the stock
exchange are governed by the rules and regulations of stock
exchange as well as SEBI Guidelines. No deviation from the rules
and guidelines is allowed in any case. 9. Specific location : Stock
exchange is a particular market place where authorised brokers come
together daily (i.e. on working days) on the floor of market called
trading circles and conduct trading activities. The prices of
different securities traded are shown on electronic boards. After
the working hours market is closed. All the working of stock
exchanges is conducted and controlled through computers and
electronic system. 10. Financial Barometers : Stock exchanges are
the financial barometers and development indicators of national
economy of the country. Industrial growth and stability is
reflected in the index of stock exchange.
BOMBAY STOCK EXCHANGE LIMITEDBombay Stock Exchange Limited is
the oldest stock exchange in Asia with a rich heritage. Popularly
known as "BSE", it was established as "The Native Share & Stock
Brokers Association" in 1875. It is the first stock exchange in the
country to obtain permanent recognition in 1956 from the Government
of India under the Securities Contracts (Regulation) Act, 1956.The
Exchange's pivotal and pre-eminent role in the development of the
Indian capital market is widely recognized and its index, SENSEX,
is tracked worldwide. Earlier an Association of Persons (AOP), the
Exchange is now a demutualised and corporatised entity incorporated
under the provisions of the Companies Act, 1956, pursuant to the
BSE(Corporatisation and Demutualisation) Scheme, 2005 notified by
the Securities and Exchange Board of India (SEBI).
With demutualisation, the trading rights and ownership rights
have been de-linked effectively addressing concerns regarding
perceived and real conflicts of interest. The Exchange is
professionally managed under the overall direction of the Board of
Directors.The Board comprises eminent professionals,
representatives of Trading Members and the Managing Director of the
Exchange. The Board is inclusive and is designed to benefit from
theparticipation of market intermediaries.In terms of organisation
structure, the Board formulates larger policy issues and exercises
over-all control. The committees constituted by the Board are
broad-based.The day-to-dayoperations of the Exchange are managed by
the Managing Director and a management team of professionals. The
Exchange has a nation-wide reach with a presence in 417 cities and
towns of India. The systems and processes of the Exchange are
designed to safeguard market integrity and enhance transparency in
operations. During the year 2004-2005, the trading volumes on the
Exchange showed robust growth.The Exchange provides an efficient
and transparent market for trading in equity, debt instruments and
derivatives. The BSE's On Line Trading System (BOLT) is a
proprietory system of the Exchange and is BS 7799-2-2002 certified.
The surveillance and clearing & settlement functions of the
Exchange are ISO 9001:2000 certified.
NATIONAL STOCK EXCHANGE
THE National Stock Exchange of India is a stock Exchange that is
located in Mumbai, Maharashtra. The National Stock Exchange
basically function in three market sections, that is, (CM) the
Capital Market Section); F&Q (The Future and Options Market
Sections) and WDM (Wholesale Debt Market Segment). It is important
place where the trading of shares, debt etc takes place.It was in
year 1992 that the National stock Exchange was for the first time
incorporated in India. It was not regarded as a stock exchange at
once. Rather, the national Stock exchange was incorporated as a tax
paying company and had got the recognition of a stock exchange only
in year 1993 the recognition was given under the provisions of the
Securities Contracts (Regulation) Act, 1956.The National Stock
exchange is highly active in the field of market capitalization and
thus aiming it the ninth largest stock exchange in the said field.
Similarly, the trading of the stock exchange in equities and
derivatives is so high that it has resulted in high turnovers and
thus making it the largest stock exchange in India.It is the stock
exchange wherein there is the facility of electronic exchange
offering investors. This facility is available in almost types of
equitable transactions such as equities, debentures, etc. it is
also the largest stock exchange if calculated in the terms of
traded values.
OBJECTIVE OF REAEARCH:-
The main objective of the study or research is to know about the
perception of investors about Stock market.1. To study the
investors perception regarding stock market.
2. To identify the main reasons for investing in stock
market.
3. To identify which type of groups and sector is preferred most
by the investors.
RERSEARH METHODOLOGY:- Research is totally based on primary
data. Secondary data can be used only for the reference. Research
has been done by primary data collection, and primary data has been
collected by meeting with the investors. Data collection has been
done through by giving structured questionnaire. This study will be
based on convenience sampling.RESEARCH DESIGN :- Research Design is
Descriptive.SAMPLING SIZE AND DESIGN:- Sample size has been taken
by convenience sampling. This research requires the survey of
different investors. Sample size for this research is 100.DATA
COLLECTION:- Data will be collected through questionnaire. Research
is totally based on primary data. Secondary data can be used only
for the reference. Research has been done by primary data
collection, and primary data has been collected by meeting with the
investors. Data collection has been done through by giving
structured questionnaire.AREA OF STUDY:- Ludhiana and Fatehgarh
sahib.
ANALYSIS OF THE RESEARCH
Q.1 Do you invest in stock market? (A) yes (B) No Figure
no.1ResponseFrequencyPercentage
Yes1280%
No0320%
Total15100%
Graph:1
Interpretation:- Above Graph shows that 80% respondents are
invested in stock market and remaining 20% are the opportunity for
stock market.
Q.2 If you want to invest or if you invest then In which of the
following do you invest?(Tick more than one if applicable) (A)
Equity (B) Derivatives (C) Mutual funds (D) OthersFigure
no.2ResponseFrequencyPercentage
Equity960%
Derivatives427%
Mutual fund213%
Others00%
Total15100%
Graph:2
Interpretation:- Above Graph shows that 60% investors are
satisfied with investing in equity, 27% in Derivatives and 13% are
investing in Mutual fund.
Q.3 Which sector you prefer for investment in stock market? (A)
Government (B) Non Government (C) Semi GovernmentFigure
no.3ResponseFrequencyPercentage
Government320%
Non Government960%
Semi Government320%
Total15100%
Graph:3
Govt. Non Govt. Semi Govt.
Interpretation:- Above Graph shows that 20% investors prefer to
Government sector, 60% prefer to Non Government sector and 20%
prefer to Semi Government sector.
Q. 4 How many shares do you have? (A) 1-10 (B) 10-50 (C) 50-100
(D) More than 100Figure no.4ResponseFrequencyPercentage
1-1018%
10-50650%
50-100 325%
More than 100217%
Total12100%
Graph:4
1-10 10-50 50-100 Above 100
Interpretation:- Above Graph shows that 8% investors have 1-10
shares, 50% investors are those who have 10-50 shares, 25% have
50-100 Shares and only 17% investors have more than 100 shares.
Q.5 Your returns are mostly in (A) Profit (B) LossFigure
no.5ResponseFrequencyPercentage
Profit758%
Loss542%
Total12100%
Graph:5
Interpretation:- Above Graph shows that 58% investors said that
their returns are in profit but 42% are dissatisfied with investing
in stock market.
Q. 6 Who suggest you to invest in stock market? (A) Family
member (B) Relatives (C) By own (D) BrokersFigure
no.6ResponseFrequencyPercentage
Family member 00%
Relatives217%
By own 866%
Brokers217%
total12100%
Graph:6
Family Relative By own Brokers
Interpretation:- Above Graph shows that 17% investors are
suggested by relatives, 66% are invested by own, 17% are forced by
brokers.
Q.7 What Percentage amount of your income do you invest in Stock
market (A) 10-20% (B) 20-30% (C) 30-40% (D) Above 40%Figure
no.7ResponseFrequencyPercentage
10-20% 217%
20-30%541%
30-40% 325%
Above 40%217%
Total12100%
Graph:7
10-20% 20-30% 30-40% Above 40%
Interpretation:- Above Graph shows that 17% investors are those
who invest their 10-20% income in stock market, 41% invest 20-30%
income, 25% invest 30-40% income and 17% are those who invest their
more than 40% parts of income in stock market.
Q.8 What do you consider the most important while investing in
stock market? (A) Profit (B) Capital appreciation (c) Tax benefit
(D) Other ( specify)Figure no.8ResponseFrequencyPercentage
Profit650%
Capital appreciation 217%
Tax benefit 325%
Other18%
Total12100%
Graph:8
Profit Capital Tax Other
Interpretation:- Above Graph shows that 50% investors main
motive is profit to invest in stock market, 17% invest for capital
appreciation, 25% invest for tax benefit and 8% are those who
invest for other purpose like saving motive etc.
Q.9 For whom you did invest in stock market? (A) Self (B) Child
(C) Wife (D) Other (please specify) Figure no.
9ResponseFrequencyPercentage
Self541%
Child217%
Wife325%
Other217%
total12100%
Graph:9
Self Child Wife OtherInterpretation:- Above Graph shows that 41%
are invested for themselves, 17% invested for their children, 25%
invested for their wives and 17% those who invest for their parents
and relatives.
Q. 10 According to you what is the better form to keep the
security? (A) Physical form (B) Demat formFigure
no.10ResponseFrequencyPercentage
Physical form 00%
Demat form12100%
Total12100%
Graph:10
Interpretation:- Above Graph shows that every investor want to
keep his shares in Demat form, no one is ready to prefer physical
form.
Q. 11 Are you satisfied with your investment? (A) yes (B)
NoFigure no.11ResponseFrequencyPercentage
Yes758%
No542%
Total12100%
Graph:11
Interpretation:- Above Graph shows that 58% investors are
satisfied with their investment and 42% are dissatisfied with their
investments.
Q.12 Do you think investment in stock market is more risky than
others? (A) Yes (B) No Figure no.12ResponseFrequencyPercentage
Yes1083%
No217%
Total12100%
Graph:12
Interpretation:- Above Graph shows that mostly 83% investors
thought that investment in stock market is risky than others but
17% are in the favor of stock market.
Q.13 Do you go through all the details before making a final
choice? (A) yes (B) NoFigure no.13ResponseFrequencyPercentage
Yes12100%
No00%
Total12100%
Graph:13
Interpretation:- Above Graph shows that 100% investors take the
complete information before taking the decision of investment in
stock market.
Q. 14 If you did not invest in stock market then what will be
the other option? (A) Insurance (B) Saving (C) Property (D)
OthersFigure no.14ResponseFrequencyPercentage
Insurance 325%
Saving18%
Property759%
Others18%
Total12100%
Graph:14
Interpretation:- Above Graph shows that 25% investors said that
if they did not invested in stock market then they prefer to
insurance, 8% call for savings, 59% prefer to property and 8% said
that they prefer to other options like shops etc.
Limitations:1 Time limitation2 Research has been done only in
Ludhiana and Fatehgarh Sahib City.3 Investors did not disclose
their secrets data and strategies. 4 Possibility of Error in data
collection.5 Possibility of Error in analysis of data due to small
sample size.
RESULTS
1. Mostly investors prefer to Equity share and Non Government
sector for investment in stock market.
2. Majority of the investors are satisfied with their
investments.
3. Investors are not forced by any other for investing in stock
market, they take their decisions by own.
4. Investors invest large amount of their income in stock market
for earn more profit.
5. They thought that Demat form is better than physical
form.
6. Investors are thought that investment in stock market is very
risky.
7. Every investor want full information about the plans before
investment
SUGGESTIONS 1. More and more advertising should be used by
companies to tap the investors.
2. Service of stock market should be improve.
3. Procedure to get membership should be made easily
assessable.
4. More and more benefits should be given.
5. Security should be increased in investment.
6. Brokers have need to give the full information to the
investors.
REFERENCE:-
Sites-http://en.wikipedia.org/wiki/Stock_markethttp://www.nse-india.com/http://www.capitalmarket.com/http://www.investopedia.com/terms/c/capitalmarkets.asphttp://www.moneycontrol.com/sensex/bse/sensex-live
Books-How to Make Money in Stocks William ONeilTechnical
Analysis of the Financial Markets John J. MurphyThe Intelligent
Investor Benjamin Graham
QUESTIONNAIRE Name.Age. Gender.OccupationQ.1 Do you invest in
stock market? (A) yes (B) NoQ.2 If you want to invest or if you
invest then In which of the following do you invest?(Tick more than
one if applicable) (A) Equity (B) Derivatives (C) Mutual funds (D)
OthersQ.3 Which sector you prefer for investment in stock market?
(A) Government (B) Non Government (C) Semi GovernmentQ. 4 How many
shares do you have? (A) 1-10 (B) 10-50 (C) 50-100 (D) More than
100Q.5 Your returns are mostly in (A) Profit (B) LossQ. 6 Who
suggest you to invest in stock market? (A) Family member (B)
Relatives (C) By own (D) BrokersQ.7 What Percentage amount of your
income do you invest in Stock market (A) 10-20% (B) 20-30% (C)
30-40% (D) Above 40%Q.8 What do you consider the most important
while investing in stock market? (A) Profit (B) Capital
appriciation (c) Tax benefit (D) Other ( specify)Q.9 For whom you
did invest in stock market? (A) Self (B) Child (C) Wife (D) Other
(please specify) Q. 10 According to you what is the better form to
keep the security? (A) Physical form (B) Demat formQ. 11 Are you
satisfied with your investment? (A) yes (B) NoQ.12 Do you think
investment in stock market is more risky than others? (A) Yes (B)
No Q.13 Do you go through all the details before making a final
choice? (A) yes (B) NoQ. 14 If you did not invest in stock market
then what will be the other option? (A) Insurance (B) Saving (C)
Property (D) OthersQ.15 Do you want any improvement in the policies
of stock market, Please give Suggestion.
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