“A STUDY ON RECENT TRENDS IN ONLINE TRADING IN SECONDARY MARKET” WITH SPECIAL REFERENCE TO SHAREWEALTH SECURITIES. LTD. THRISSUR MAJOR PROJECT REPORT Submitted in partial fulfilment of the requirements for the award of the degree of Master of Business Administration (MBA) of UNIVERSITY OF CALICUT Submitted by, SANIL-M (Reg. No; SOAKMBA024) Under the guidance of Mr. MURALEEDHARAN 1
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“A STUDY ON RECENT TRENDS IN ONLINE TRADING IN SECONDARY MARKET” WITH SPECIAL REFERENCE TO SHAREWEALTH
SECURITIES. LTD. THRISSUR
MAJOR PROJECT REPORT
Submitted in partial fulfilment of the requirements for the award of the degree of
Master of Business Administration (MBA) of
UNIVERSITY OF CALICUT
Submitted by,
SANIL-M
(Reg. No; SOAKMBA024)
Under the guidance of
Mr. MURALEEDHARAN
Faculty member.
SMS KUTTIPURAM
SCHOOL OF MANAGEMENT STUDIES
UNIVERSITY OF CALICUT,KUTTIPURAM
2012
1
SCHOOL OF MANAGEMENT STUDIES
UNIVERSITY OF CALICUT
KUTTIPURAM
CERTIFICATE
This is to certify that the Project Report Entitled “A STUDY ON RECENT
TRENDS IN ONLINE TRADING IN SECONDARY MARKET ” WITH
SPECIAL REFERENCE TO SHAREWEALTH SECURITIES
LTD.THRISSUR. is a bonafide work carried out by Mr. SANIL.M, REG NO:
SOAKMBAO24 under the guidance of Mr. MURALEEDHARAN faculty in
School of management studies ,Kuttipuram, University of Calicut.
C0-ORDINATOR
SCHOOL OF MANAGEMENT STUDIES
2
UNIVERSITY OF CALICUT
KUTTIPURAM
CERTIFICATE
I hereby certify that this Project Report entitled “A STUDY ON RECENT
TRENDS IN ONLINE TRADING IN SECONDARY MARKET ” WITH
SPECIAL REFERENCE TO SHAREWEALTH SECURITIES
LTD.THRISSUR. is a bonafide work carried out by Mr. SANIL.M (REG NO:
SOAKMBAO24) student of SCHOOL OF MANAGEMENT
STUDIES ,KUTTIPURAM, UNIVERSITY OF CALICUT under my guidance
and supervision. This has not been submitted to any other university or
institution for the award of any other degree or diploma.
PLACE: MR.MURALEEDHARAN
DATE: FACULTY
SMS, KUTTIPURAM.
3
DECLARATION
I, SANIL.M hereby declare that the Project Report entitled that“A STUDY ON
RECENT TRENDS IN ONLINE TRADING IN SECONDARY MARKET ”
WITH SPECIAL REFERENCE TO SHAREWEALTH SECURITIES
LTD.THRISSUR.. ‘Is bonafide work carried out by me under the guidance and
supervision of Mr. MURALEEDHARAN.
I also declare that this report has not been submitted previously by me
fully or partially, for the award of any degree, diploma or title.
Date: SANIL.M
Place: Kuttipuram
4
ACKNOWLEDGEMENT
I feel immense gratitude to Mrs. Shalini, (Research analyst ,Sharewealth
Securities.Ltd. Thrissur) and special thanks to Mr.Subhash., Branch Head
Sharewealth Securities.Ltd. Calicut, for having given the permission for doing
my project work in Sharewealth Securities Ltd., at Thrissur. I express my
special thanks to Dr. E.K Satheesh (co-ordinator of school of Management
studies, Kuttipuram, University of Calicut) for valuable services to do this
project.
I would like to keep on record my heart full thanks and regard to my
supervising Faculty Mr.Muraleedharan. (School of Management studies,
Kuttipuram) for his encouragement, able guidance and kind co-operation,
projected at various stages of this work.
I express my special memory and feelings to my parents,
classmates and all the teachers in the department for their inspiration and help. I
take this opportunity to express my sincere and honest gratitude of all staff of
various categories who have contributed in learning through this encouragement
and guidance
SANIL.M
5
TABLE OF CONTENTS
Chapter no.
Contents Page number
Chapter-1 Introduction Scope of study Objectives of study Limitations of the study Research methodology
1112131415-16
Chapter-2 Review of literature 17-29Chapter-3 Industry profile
Company profile30-4445-52
Chapter-4 Data Analysis 53-94Chapter-5 Findings/inferences 95-96Chapter-6 suggestions &
recommendations Conclusion Bibliography/annexure
97-98
99100
LIST OF TABLES
6
Table No.
Table contents Page No.
1 Share price analysis of Banking Industry 552 Share price analysis of Capital Goods Industry 593 Share price analysis of Fast moving consumable
goods( FMCG) Industry63
4 Share price analysis of Housing Related Industry 675 Share price analysis of oil and refineries Industry 716 Share price analysis of Metal,Metal products and
mining Industry75
7 Share price analysis of Chemicals Industry 798 Share price analysis of Information Technology
Industry83
9 Share price analysis of Telecomm Industry 8710 Share price analysis of Transport Equipment
Industry91
LIST OF FIGURES
7
Fig no Figure contents Page number
1. Share price analysis of SBI 562. Share price analysis of Federal Bank. 573. Share price analysis of Punjab national
bank58
4. Share price analysis of Suzlon Energies. 605. Share price analysis of Bharat heavy
electrical ltd.61
6. Share price analysis of L&T ltd. 627. Share price analysis of Hindustan
Uniliver ltd.64
8. Share price analysis of ITCltd. 659. Share price analysis of Nestle India. 6610. Share price analysis of ACCcements 6811. Share price analysis of Ambuja cements 6912. Share price analysis of Ultratech.ltd 7013. Share price analysis of Hindustan
petroleum ltd.72
14. Share price analysis of Oil and Natural Gas Corporation ltd.(ONGC)
73
15. Share price analysis of Indian Oil ltd. 7416. Share price analysis of Steel Authority of
India.76
17. Share price analysis of Tata Steels 7718. Share price analysis of Jindal steels 7819. Share price analysis of Adithya Birla
Chemicals.80
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20. Share price analysis of Tata chemicals 8121. Share price analysis of Asian paints 8222. Share price analysis of Infosys
Technologies ltd.84
23. Share price analysis of Wipro ltd. 8524. Share price analysis of HCL Technologies
Ltd.86
25. Share price analysis of Tata communications Ltd.
88
26. Share price analysis of Bharathi Airtel Ltd. 8927. Share price analysis of Idea cellular Ltd. 9028. Share price analysis of Bajaj Auto Ltd. 9229. Share price analysis of Hero Moto Corp Ltd. 9330. Share price analysis of Maruthi-Suzuki 94
EXECUTIVE SUMMARY
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“A study on Recent Trends in online trading in secondary market” was done
from the Sharewealth Securities Ltd. Thrissur. The study was conducted to
analyse the recent trends in share prices in secondary market.This study also
analysis the risk involved in the online trading in secondary market and also
compares the share price variations of companies in different sectors.
This study was conducted among the share prices of various sectors in last six
months. During the Research , I mainly used secondary data by the way of
internet .The secondary data were also collected from the journals and company
records. The results so obtained were shown in the way of different charts.
The study reveals that certain facts relating to recent trends in online trading in
secondary market. it also shows the level of risk involved in the online trading
in secondary market. The findings of this study have help researcher and
company to understand the current market position and recent trends occurring
in the market in last few months.
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CHAPTER-1
INTRODUCTION
SCOPE OF THE STUDY
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The scope of the study confined to the areas where the research topic can be
implemented. Here in this research to study demat and online trading in
secondary market.
The report is useful to the management of the company.
It is an interesting and significant area for conducting research
Most of the people are interested to investing in securities.
Online trading become more familiar to common people
OBJECTIVES
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Primary objective:
To analyse the recent trends in online trading in secondary market in
India.
Secondary objectives:
To compare the recent fluctuations in share prices of companies in
different sectors .
To analyze the growth and future of online trading in secondary
market.
To identify risk involved in online trading.
.
LIMITATIONS OF THE STUDY
1 Time constraint is one of the serious issues. Survey will be conducted
within two months duration.
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2 Share market faces more difficulty now. So that will affect to demat and
online trading in secondary market.
3 This study will concentrate only in one company. (share wealth
securities)
4 The analysis is based only on fluctuations of share prices in 3 companies
each from 10 different industries.
1. RESEARCH METHODOLOGY:
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Type of study: Descriptive
Data collection
Sources of Data
The data are collected only through secondary method.
.Secondary data
Secondary data are collected mainly through internet, journals, and advertisements ,
broachers of the company.
RESEARCH DESIGN
1. TOOLS FOR DATA COLLECTION
Discussion with person in related steam of activities and view from
experts will be analyzed.
Secondary sources of data required for the study can be collected
from secondary sources, this include library references, technical
and subject related magazines, journals, news papers and other
previous studies.
2. SAMPLE DESIGN:
Sampling procedure:
Sample size: 30 ( 3 samples each from 10 industries).
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3. DATA ANALYSIS:
Share price variation Charts are adopt to interpret the data to
arrive the findings of the study.
Data analysis can be done by chart analysis.
Time period of work
A period of 45 days from April-1st 2012 to May -15th 2012 is used
for the project work.
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CHAPTER - 2
REVIEW OF
LITERATURE
A brief explanation about Internet:-
Internet is a world wide self governed network connecting several other smaller
network and million of computers and persons to merge sources of information.
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This technology is vast distance accelerating the pace of business forms and
revolutionizing the many companies are managed, it allow direct links to
anyone anywhere and any time to build up interactive relationship.A
combination of time and space called the internet promises to bring un
precendented changed in our lives and business Internet or net is an inter
connection of computer communication network spanning the entire globe
crossing all geographical boundaries it has redefined the method of
communication work study education, Business leisure health trade banking
commerce and what not it is virtually changing everything and we are living in
dot.com age.
Net being an interactive two way medium through various websites enables
participation by individually in business to business to consumer commerce
visit to shopping arcades, games, etc., in cyber space even the information can
be copying, down loaded and retransmitted.
The use of internet has grown 2000 percent in last decade and is correctly
growing 10 percent per month in India growth of internet is of recent times.
It is expected to bring changes in every functional area of business activity
including marketing and financial services.
It offers stock trading at a lower cost, internet can change the nature and
capacity of stock broking business in India.
E- COMMERCE:
Electronic Commerce is associated with buying and serving over computer
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communication networks, it helps conduct traditional commerce through new
way of transferring and processing of information.
Information is electronically transferred from computer to computer in an
automated way. E- Commerce refers to the paperless exchange to business
information using electronic dates interchange electronic technology, it is not
only reduce manual process and paper transaction but also helps organization
more to a fully electronic environment and change the way they operated PCs
and networking attempts to introduce banks of the tools and technologies
required for electronic commerce. The computers are either workstation of
individual office work or serves where large database and information resides.
Networks connects both categories of computer the various operating system
are the most basis programmed with is a computer it manages the resources of
the computer system in a fair and efficient manner.
Now we can enter into the concept known as “On Line Trading”.
ONLINE TRADING INFRASTRUCTURE
The emergence of online exchanges has facilitated faster transactions
by providing online trading por ta ls and brokerage houses ease and
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f lexib i l i ty . The In ternet has indeed opened up new opportunities
for conducting the business. The worldwide stock exchanges has made a
major shift from the traditional method of trading and now conduct a bulk of
its business online through its brokers and par tners . In the
developed countr ies major ly a l l the exchange t ransac t ions are
conducted online. The trend took off slowly in India and the National Stock
Exchange (NSE) and the Bombay Stock Exchange (BSE) two of the largest
exchanges in India have been conducting online trade successfully for some
time.
WHY ONLINE TRADING ENTERED LATE IN INDIA?
The Indian exchanges and brokering houses have been very slow in
moving their transactions online and the major reason has been the lot
government regulations. The initial delay was due to laying down the
specifications for creating Closed User Groups (CUGs). This issue was
resolved between the Department of Telecommunications (DoT) and the
Finance Ministry around 1998 and a f t e r t h a t s o o n c a m e t h e
o n l i n e t r a d i n g p o r t a l s l i k e I C I C I D i r e c t . c o m ,
m o t i l a l o s w a l . c o m , sharekhan. com and smartjones.com. Connectivity
related issue was perhaps the most important technological factor.
Traditionally the cost of leased lines and VSAT links has been very high and
the reliability of the links was very low. To commission the links it took a
20
long time as one had to make an application and wait for a few weeks for the
link to be up and running. Many other issues like security, backup and
recovery procedural costs also acted as deterrents in the process. Now wi th
the resolut ion of regula tory i ssues India no longer have any
press ing connect iv i ty and bandwidth issues. The entry of private
players into the broadband scenario and the government opening up the
telecom sector these issues have become almost non-existent. Security
solutions and services available in the market have matured and it doesn't
cost a pretty packet anymore to put a simple backup solution in place.
Through online trading everyday large volumes of data is being transacted.
At BSE the average daily turnover in 2001-2002 (April-March) was Rs
1244.10 crore and the number of average daily trades was Rs 5.17 lakh. To
control Online Trading RBI made regulations making it mandatory for
companies to store at least 7 years of transactional and financial data.
1. Design needs to be always-on, secure, redundant, and have adequate
backup and recovery processes.
2. For such high amounts of critical data it's natural to deploy network-based
storage like NASor SAN.
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3. Security is a vital and integral part of the design architecture. The
hardware and software elements should be built around layered security
architecture and should be held in place with a well-documented security
policy.
4. Ideally online exchanges should have 'five-nines' availability.
5.It's difficult to deploy out-of-the-box applications at exchanges as
each has a unique architecture based on factors like operations flow,
trading volumes, number of members, number of users, and number of
locations.
6. NSE has deployed NIBIS (NSE's Internet Based Information
System) for real-time dissemination of trading information over the
Internet and NEAT a client-server-based application to help its operations.
7. BSE has deployed an Online Trading system (BOLT) on a
Tandem platform which has two-tier architecture. It claims to be able to
support up to 2 million trades a day.
INDIAN EXCHANGES: NSE and BSE
22
The NSE and BSE are among the largest exchanges in the country
handling very large daily trading volumes, support large amounts of data
traffic, and have a very large nationwide network. The t rading
volume in year 2000 was huge wi th the average da i ly
turnover in the capi ta l markets segment at NSE is around Rs 2300
crore and in the derivatives segment, around Rs 1300 crore. The average
daily traffic volume was around one million trades per day in the capital
markets segment and around 50,000 t rades per day in the
der iva t ives segment and there were around 13,000 registered
users in both segments and an average of around 9500 users is
logged in at a time. At BSE the average daily turnover in 2001-2002
(April-March) was Rs 1244.10 crore and the number of average daily trades
was Rs 5.17 lakh.
THE NETWORK DESIGN
Any onl ine exchange should a lways be-on, safe , secure ,
redundant and should have adequate backup & recovery processes.
The Vice President of NSE-IT G.M Shenoy tells that the basic design
objective of NSE was to provide fair, equal and transparent access
across all NSE nationwide locations and to provide connectivity to the
trading members as soon as possible. The telecom sector is fairly liberal
23
nowadays but way back in 1993 the technology was maturing and
was very costly. The cost of lease lines was almost ten times as
much as it is today. Satellite technology was a boon since it allowed
quicker deployment than leased lines. Today NSE has the country's largest
VSAT network with over 3000 VSATs and expects to grow to more
than 4000VSATs very soon
EVOLUTION OF ONLINE TRADING:
Online trading had its origin in the US where the first E-trading of stocks began
in1983. Primarily used in the form of e-commerce to place and receive orders
forcommodities; slowly it entered the financial markets as an alternative to the
traditional system. By the late 1990’s, most of the stock exchanges had been
automated, and the“open outcry” method of trading had been slowly done away
with. Most stock exchanges began to use computers to replace the market
makers or the floor traders who execute the trade on the floor.
With the emergence and growth of the internet, the floor trader’s started taking
computer orders from brokers and executed the trade. Subsequently, when the
stock exchanges used software technology to interconnect brokers, depositories
and banks, the internet order place by clients were firs route through the stock
brokers’ computer systems where the matching of orders took place and the
trade was executed. This gradual
24
up scaling of technology has led to the rise in popularity and acceptance of
online broking as a major way of stock trading. With the book in software
technology, the online trading platform became faster and faster with a lot of
sophistication and increased security. Now the thrust is on making the entire
trading process completely seamless and risk free.
TRADING MECHANISM:
The mechanism in online trading Is the replication of trading of physical
securities through the internet in a much faster and convenient way. Basic
principles and logic of stock trading remain the same as before; only, the
investors feel more empowered and are served with plenty of information. The
diagram 1 and 2 depict both selling and buying of securities online.
There are primarily 5 components in any online trading mechanism.
1. Investor
2. broker/ E-broking firm
3. DP Accounts
4. Bank Account
5. The Exchange
The process of online trading is driven by a front-end software which the stock
exchange employs through satellite (like V-SAT) connections. This software
technology provides the necessary interface between the brokers, depositories
and the banks. The investor is required to trade through any of the approved
25
brokers, and brokers of trading members can only trade with the exchange.The
investor places the order with the broker and the broker gets the order executed
from the exchange. Each broker, who has to be a trading member, is connected
to the exchange through sophisticated software. In the same way, each investor
has to trade only through the broker and needs to have a demat account and a
broker’s account. Each investor will be given a login account and a password in
the broker’s site. Investors can log in and lace orders anytime that will be sent to
exchange and will be compared with all the orders and executed as per the
prices.
In this linear chain of investor-broker-exchange channel, there are two more
important players, viz, depositories and banks. Depositories (DP) handle the
holding and selling of demat securities. All brokers are embers and account
holders of DPs. The depositories function in liaison with the stock exchange and
act as an online store for shares and stocks. The transaction of cash is taken care
of by banks. The investor’s money is transferred to the account with the broker
and used for transactions, and similarly, the credits for the investor can be
directly to the investor’s bank account.
The whole mechanism is interconnected and the speed of transaction depends
on how well all these components operate in harmony with each other. The
technology used for interlinking these components and the security issues play a
26
major role in the speed of transactions. When these issues are addressed, the
transactions can be executed in realtime
(T+0), instead of the present T+2 days time period.
Online trading started in India in February 2000:
Online trading is of 2 categories: Discount online brokers and the other one is
the full service online broker. Discount online brokers allow one to trade via the
internet through the broker at reduced (less than offline brokerage charges)
rates. Full service online brokerage is linked to existing brokerage directly
through the internet. These brokers allow their clients to place online orders
with the option of chatting to brokers if advice is needed.
DEMATERLIZATION:
Dematerialization is the process by which physical certificates of an investor
are converted to an equipment number of securities in electronic from and
credited in the investor account with his DP. In order to dematerialize the
certificates, an investor has to first open an account with a DP and then request
for the Dematerialization Request Form, which is DP and submit the same
along with the share certificates. The investor has to ensure that he marks
“Submitted for Dematerialization” on the certificates before the shares are
handed over to the DP for demat. Dematerialization can only be done to those
certificates, which are already registered in your name and belong to the list of
securities admitted for Dematerialization at NSDL.
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Most of the active scrip’s in the market including all the scrip’s Most of the
active scrip’s in the market including all the scrip’s of S&P CNX NIFTY and
BSE SENSEX have already joined NSDL. This list is steadily increasing.
Briefly, the process is as follows: after completion of transfer, the investor gets
the option to dematerialize such shares. Investor’s willing to exercise this option
sends a Demat request along with the option letter sent by the company to his
DP. The company or its R&T agent would confirm the Demat request on its
receipt from the DP to reduce risk of loss in transit. Dematerialized shares do
not have any distinctive or certificate numbers. These shares are fungible-which
means that 100 shares of a security are the same as any other 100 shares of the
security. Odd lot shares certificates can also be dematerialized.
Dematerialization normally takes about fifteen to thirty days. To get back
dematerialized securities in the physical form, request DP for Rematerialization
of the same is made.
DEMAT ACCOUNT
What is Demat account and why it is required?
Securities and Exchange Board of India (SEBI) is a board (corporate body)
appointed by the Government of India in 1992 with its head office at Mumbai.
Its one of the function is helping the business in stock exchanges and any other
securities markets. Demat (short form of Dematerialization) is the process by
which an investor can get stocks (also called as physical certificates) converted
into electronic form maintained in an account with the Depository Participant
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(DP). DP could be organizations involved in the business of providing financial
services like banks, brokers, financial institutions etc. DP’s are like agents of
Depository. Depository is an organization responsible to maintain investor's
securities (securities can be stocks or any other form of investments) in the
electronic form. In India there are two such organizations called NSDL
(National Securities Depository Ltd.) and CDSL (Central Depository Services
India Ltd.) Investor’s wishing to open Demat account has to go DP and open the
account. Opening the Demat account is as simple as opening the bank account
with any bank. As we need bank account to save our money, make cheque
payments etc, likewise we need to open a demat account if we want to buy or
sell stocks. All stocks what we possess will show in our demat account. So we
don't have to possess any physical certificates. They are all held electronically
in our demat account. As we buy and sell the stocks, accordingly our stocks
will get adjusted in our account.
29
CHAPTER - 3
INDUSTRY PROFILE
INDUSTRY PROFILEFollowing diagram gives the structure of Indian Financial System:
30
FINANCIAL MARKET
Financial markets are helpful to provide liquidity in the system and for smooth
31
functioning of the system. These markets are the centers that provide facilities
for buying and selling of financial claims and services. The financial markets
match the demands of investment with the supply of capital from various
sources. According to functional basis financial markets are classified into two
types.
They are:
Money markets (short-term)
Capital markets (long-term)
According to institutional basis again classified in to two types. They are
Organized financial market
Non-organized financial market.
The organized market comprises of official market represented by recognized
institutions, bank and government (SEBI) registered/controlled activities and
intermediaries. The unorganized market is composed of indigenous bankers,
moneylenders, individual professional and non-professionals.
MONEY MARKET:
Money market is a place where we can raise short-term capital.
Again the money market is classified in to
Inter bank call money market
Bill market and
Bank loan market Etc.
E.g.; treasury bills, commercial papers, CD's etc.
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40
CAPITAL MARKET :
Capital market is a place where we can raise long-term capital.
Again the capital market is classified in to two types and they are
Primary market and
Secondary market.
E.g.: Shares, Debentures, and Loans etc.
P RIMARY MARKET:
Primary market is generally referred to the market of new issues or market for
mobilization of resources by the companies and government undertakings, for
new projects as also for expansion, modernization, addition, diversification and
up gradation. Primary market is also referred to as New Issue Market. Primary
market operations include new issues of shares by new and existing companies,
further and right issues to existing shareholders, public offers, and issue of debt
instruments such as debentures, bonds, etc. The primary market is regulated by
the Securities and Exchange Board of India (SEBI a government regulated
authority).
Function:
The main services of the primary market are origination, underwriting, and
33
distribution. Origination deals with the origin of the new issue. Underwriting
contract make the shares predictable and remove the element of uncertainty in
the subscription. Distribution refers to the sale of securities to the investors.
The following are the market intermediaries associated with the market:
1. Merchant banker/book building lead manager
2. Registrar and transfer agent
3. Underwriter/broker to the issue
4. Adviser to the issue
5. Banker to the issue
6. Depository
7. Depository participant.
Investors’ protection in the primary market:
To ensure healthy growth of primary market, the investing public should be
protected. The term investor protection has a wider meaning in the primary
market. The principal ingredients of investors’ protection are:
Provision of all the relevant information
Provision of accurate information and
Transparent allotment procedures without any bias.
SECONDARY MARKET
34
The primary market deals with the new issues of securities. Outstanding
securities are traded in the secondary market, which is commonly known as
stock market or stock exchange. “The secondary market is a market where
scrip’s are traded”. It is a market place which provides liquidity to the scrip’s
issued in the primary market. Thus, the growth of secondary market depends on
the primary market. More the number of companies entering the primary
market, the greater are the volume of trade at the secondary market. Trading
activities in the secondary market are done through the recognized stock
exchanges which are 23 in number including Over The Counter Exchange of
India (OTCE), National Stock Exchange of India and Interconnected Stock
Exchange of India. Secondary market operations involve buying and selling of
securities on the stock exchange through its members. The companies hitting
the primary market are mandatory to list their shares on one or more stock
exchanges in India. Listing of scrip’s provides liquidity and offers an
opportunity to the investors to buy or sell the scrip’s.
The following are the intermediaries in the secondary market:
1. Broker/member of stock exchange – buyers broker and sellers broker
2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository
6. Depository participants.
35
STOCK MARKETS IN INDIA:
Stock exchanges are the perfect type of market for securities whether of
government and semi-govt bodies or other public bodies as also for shares and
debentures issued by the joint-stock companies. In the stock market, purchases
and sales of shares are affected in conditions of free competition. Government
securities are traded outside the trading ring in the form of over the counter
sales or purchase. The bargains that are struck in the trading ring by the
members of the stock exchanges are at the fairest prices determined by the basic
laws of supply and demand.
Definition of a stock exchange:
“Stock exchange means any body or individuals whether incorporated or not,
constituted for the purpose of assisting, regulating or controlling the business of
buying, selling or dealing in securities.” The securities include:
Shares of public company.
Government securities,Bonds
History of Stock Exchanges:
The only stock exchanges operating in the 19th century were those of Mumbai
setup in 1875 and Ahmedabad set up in 1894. These were organized as
voluntary nonprofit- marking associations of brokers to regulate and protect
their interests. Before the control on securities under the constitution in 1950, it
was a state subject and the Bombaysecurities contracts (control) act of 1925
used to regulate trading in securities. Under this act, the Mumbai stock
36
exchange was recognized in 1927 and Ahmedabad in 1937. During the war
boom, a number of stock exchanges were organized. Soon after it became a
central subject, central legislation was proposed and a committee headed by
A.D.Gorwala went into the bill for securities regulation. On the basis of the
committee’s recommendations and public discussion, the securities contract
(regulation) act became law in 1956.
Functions of Stock Exchanges:
Stock exchanges provide liquidity to the listed companies. By giving quotations
to the listed companies, they help trading and raise funds from the market. Over
the hundred and twenty years during which the stock exchanges have existed in
this country and through their medium, the central and state government have
raised crores of rupees by floating public loans. Municipal corporations, trust
and local bodies have obtained from the public their financial requirements, and
industry, trade and commerce- the backbone of the country’s economy-have
secured capital of crores or rupees through the issue of stocks, shares and
debentures for financing their day-to-day activities, organizing new ventures
and completing projects of expansion, diversification and modernization. By
obtaining the listing and trading facilities, public investment is increased and
companies were able to raise more funds. The quoted companies with wide
public interest have enjoyed some benefits and assets valuation has become
easier for tax and other purposes.
37
Various Stock Exchanges in India:
At present there are 23 stock exchanges recognized under the securities
contracts
(regulation), Act, 1956. Those are:
Ahmedabad Stock Exchange Association Ltd.
Bangalore Stock Exchange
Bhubaneshwar Stock Exchange Association
Calcutta Stock Exchange
Cochin Stock Exchange Ltd.
Coimbatore Stock Exchange
Delhi Stock Exchange Association
Guwahati Stock Exchange Ltd
Hyderabad Stock Exchange Ltd.
Jaipur Stock Exchange Ltd
Kanara Stock Exchange Ltd
Ludhiana Stock Exchange Association Ltd
Madras Stock Exchange
Madhya Pradesh Stock Exchange Ltd.
Magadh Stock Exchange Limited
Meerut Stock Exchange Ltd.
Mumbai Stock Exchange
National Stock Exchange of India
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OTC Exchange of India
Pune Stock Exchange
Uttar Pradesh Stock Exchange Association
Vadodara Stock Exchange Ltd.
Out of these major stock exchanges were:
NSE(NATIONAL STOCK EXCHANGE):
The National Stock Exchange of India Limited has genesis in the report of the
High Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions
(FI’s) to provide access to investors from all across the country on an equal
footing. Based on the recommendations, NSE was promoted by leading
Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company unlike other stock
exchanges in the country. On its recognition as a stock exchange under the
Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced
operations in the Wholesale Debt Market (WDM) segment in June 1994. The
Capital Market (Equities) segment commenced operations in November 1994
and operations in Derivatives segment commenced in June 2000 NSE's mission
is setting the agenda for change in the securities markets in India. The NSE was
set-up with the main objectives of:
· Establishing a nation-wide trading facility for equities and debt instruments.
· Ensuring equal access to investors all over the country through an appropriate
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communication network.
· Providing a fair, efficient and transparent securities market to investors using
electronic trading systems.
· Enabling shorter settlement cycles and book entry settlements systems, and
· Meeting the current international standards of securities markets.
The standards set by NSE in terms of market practices and technology, have
become industry benchmarks and are being emulated by other market
participants. NSE is more than a mere market facilitator. It's that force which is
guiding the industry towards new horizons and greater opportunities.
BSE(BOMBAY STOCK EXCHANGE):
The Stock Exchange, Mumbai, popularly known as "BSE" was established in
1875 as "The Native Share and Stock Brokers Association". It is the oldest
one in Asia, even older than the Tokyo Stock Exchange, which was established
in 1878. It is a voluntary non-profit making Association of Persons (AOP) and
is currently engaged in the process of converting itself into demutualised and
corporate entity. It has evolved over the years into its present status as the
premier Stock Exchange in the country. It is the first Stock Exchange in the
Country to have obtained permanent recognition in 1956 from the Govt. of
India under the Securities Contracts (Regulation) Act 1956.The Exchange,
while providing an efficient and transparent market for trading in securities,
debt and derivatives upholds the interests of the investors and ensures redresses
of their grievances whether against the companies or its own member-brokers. It
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also strives to educate and enlighten the investors by conducting investor
education programmers and making available to them necessary informative
inputs. A Governing Board having 20 directors is the apex body, which decides
the policies and regulates the affairs of the Exchange. The Governing Board
consists of 9 elected directors, who are from the broking community (one third
of them retire ever year by rotation), three SEBI nominees, six public
representatives and an Executive Director & Chief Executive Officer and a
Chief Operating Officer. The Executive Director as the Chief Executive Officer
is responsible for the day-today administration of the Exchange and the Chief
Operating Officer and other Heads of Department assist him.
The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining
to constitution of the Executive Committee of the Exchange. Accordingly, an
Executive Committee, consisting of three elected directors, three SEBI
nominees or public representatives, Executive Director & CEO and Chief
Operating Officer has been constituted. The Committee considers judicial &
quasi matters in which the Governing Board has powers as an Appellate
Authority, matters regarding annulment of transactions, admission, continuance
and suspension of member-brokers, declaration of a member-broker as
defaulter, norms, procedures and other matters relating to arbitration, fees,
deposits, margins and other monies payable by the member-brokers to the
Exchange, etc.
Regulatory Frame Work Of Stock Exchange
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A comprehensive legal framework was provided by the “Securities
Contract Regulation Act, 1956” and “Securities Exchange Board of India
1952”. Three tier regulatory structure comprising
Ministry of finance
The Securities And Exchange Board of India
Governing bond
Members of the stock exchange:
The securities contract regulation act 1956 has provided uniform regulation
for the admission of members in the stock exchanges. The qualifications for
becoming a member of a recognized stock exchange are given below:
· The minimum age prescribed for the members is 21 years.
· He should be an Indian citizen.
· He should be neither a bankrupt nor compound with the creditors.
· He should not be convicted for fraud or dishonesty.
· He should not be engaged in any other business connected with a company.
· He should not be a defaulter of any other stock exchange.
· The minimum required education is a pass in 12th standard examination.
SECURITIES EXCHANGE BOARD OF INDIA (SEBI)
The securities and exchange board of India was constituted in 1988 under a
resolution of government of India. It was later made statutory body by the SEBI
act 1992.according
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to this act, the SEBI shall constitute of a chairman and four other members
appointed by the central government. With the coming into effect of the
securities and exchange board of India act, 1992 some of the powers and
functions exercised by the central government, in respect of the regulation of
stock exchange were transferred to the SEBI.
OBJECTIVES AND FUNCTIONS OF SEBI
· To protect the interest of investors in securities.
· Regulating the business in stock exchanges and any other securities market.
· Registering and regulating the working of intermediaries associated with
securities market as well as working of mutual funds.
· Promoting and regulating self-regulatory organizations.
· Prohibiting insider trading in securities.
· Regulating substantial acquisition of shares and take over of companies.
· Performing such functions and exercising such powers under the provisions of
capital issues (control) act, 1947and the securities to it by the central
government.
SEBI GUIDELINES TO SECONDARY MARKETS: (STOCK
EXCHANGES):
· Board of Directors of Stock Exchange has to be reconstituted so as to include
nonmembers, public representatives and government representatives to the
extent of 50% of total number of members. Capital adequacy norms have been
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laid down for the members of various stock exchanges depending upon their
turnover of trade and other factors. All recognized stock exchanges will have to
inform about transactions within 24 hrs.
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COMPANY PROFILE
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COMPANY PROFILE
Sharewealth Securities Ltd. is the first corporate member of National Stock
Exchange of India Ltd, Bombay Stock Exchange Ltd and MCX Stock
Exchange Ltd (MCX-SX) from THRISSUR, the Cultural Capital of Kerala.
Sharewealth is also a Depository Participant with CDSL (Central Depository
Services (India) Ltd). Sharewealth Securities Ltd has two group companies,