Nse Versus Bse

Project Report on

Comparative study of NSE & BSE

MiniProject

(2009-11) Bach

Submitted By

Melbin Maria Noble

Under the guidance of Prof. Dr.K.Gopalakrishanan Nair 

DEPARTMENT OF BUSINESS ADMINISTRATION

COLLEGE OF ENGINEERING

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TRIVANDRUM

DEPARTMENT OF BUSINESS ADMINISTRATION

COLLEGE OF ENGINEERING

TRIVANDRUM

2010

Certificate s

Certified that this report of the Mini project titled “ Comparative study of BSE & NSE ” is a bonafide record of the work done by Melbin Maria Noble in this department as part of the Mini Project work to be done in the third semester of MBA in Dept. of Business Administration, College of engineering, TVM.

Dr.K.Gopalakrishanan Nair, Prof. S. Sivakumar

Dept. of Business HOD, Dept. of Business

Administration, Administration,

College of engineering, College of Engineering,

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TVM. TVM

ACKNOWLEDGEMENT

We would like to place on record our deep sense of gratitude to Prof. S.

Sivakumar, HOD, Dept. of Business Administration, College of engineering,

TVM for his invaluable help and guidance to shape this project in a symmetric

way.

We also express our hearty gratitude to Dr.K.Gopalakrishanan Nair, for his

opinion of intelligence, support and guidance which has resulted in the successful

culmination of this project work.

We also express our sincere thanks to the 50 participants of market survey

for providing us with adequate information for the completion of this project.

Trivandrum, Melbin Maria Noble.

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December 6th, 2010.

Index Introduction 6 History of Stock Market 7 Market participants 8

Importance of stock market 8

Function and purpose 8

Relation of the stock market to the modern financial system 9

The stock market, individual investors, and financial risk 9 The behavior of the stock market 10

Irrational behavior 10

Stock market index 13 Derivative instruments 13 Leveraged strategies 14 New issuance 14 Investment strategies 14 Stock Markets in India 16

Introduction 16 History of the Indian Stock Market - The Origin 17

Bombay stock exchange 20o Prominent position 20

o several firsts 21

o investor education 21

o milestones 22

o sensex 23

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National stock exchange 25 Origins 25

Innovations 26 Markets 26 Milestones 27

Comparison of Trade Value of NSE & BSE 29 Comparison of Market Capitalisation at NSE & BSE 30 Investers stock exchange preference 31 Reasons for prefering nse the most 32 Growth of sensex and nifty last 15 years 33 Invester’s preference for analyzing market 34 Client satisfaction 35 Invester’s selction for most secured investment 36 Conclusion 37 Questionnaire 38 References 41

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Introduction A stock market or equity market is a public (a loose network of economic transactions, not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

The size of the world stock market was estimated at about $36.6 trillion at the start of October 2008. The total world derivatives market has been estimated at about $791 trillion face or nominal value, 11 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.

The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The largest stock market in the United States, by market cap, is the New York Stock Exchange, NYSE. In Canada, the largest stock market is the Toronto Stock Exchange. Major European examples of stock exchanges include the London Stock Exchange, Paris Bourse, and the Deutsche Börse. Asian examples include the Tokyo Stock Exchange, the Hong Kong Stock Exchange, the Shanghai Stock Exchange, and the Bombay Stock Exchange. In Latin America, there are such exchanges as the BM&F Bovespa and the BMV.

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History of Stock MarketIn 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. Because these men also traded with debts, they could be called the first brokers. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze, and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an informal meeting, but actually, the family Van der Beurze had a building in Antwerp where those gatherings occurred; the Van der Beurze had Antwerp, as most of the merchants of that period, as their primary place for trading. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam.

In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in government securities during the 14th century. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits – or losses. In 1602, the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds.

The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. The Dutch "pioneered short selling, option trading, debt-equity swaps, merchant banking, unit trusts and other speculative instruments, much as we know them". There are now stock markets in virtually every developed and most developing economies, with the world's biggest market being in the United States, United Kingdom, Japan, India, China, Canada, Germany, France, South Korea and the Netherlands.

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Market participantsA few decades ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, usually with long family histories to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions.

The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees. (They then went to 'negotiated' fees, but only for large institution.)

However, corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'.

Importance of stock marketFunction and purposeThe stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up-and-coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development.

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Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'être of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction.

The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

Relation of the stock market to the modern financial systemThe financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing, flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process.

Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth, compared to less than 20 percent in the 2000s. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds, hedge funds, insurance investment of premiums, etc.

The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance, permitting a higher proportion of shares to bonds. Similar tendencies are to be found in other industrialized countries. In all developed economic systems, such as the European Union, the United States, Japan and other developed nations, the trend has been the same: saving has moved

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away from traditional (government insured) bank deposits to more risky securities of one sort or another.

The stock market, individual investors, and financial riskRiskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).

With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.

This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. Buffett began his career with $100, and $100,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century.

The behavior of the stock marketFrom experience we know that investors may 'temporarily' move financial prices away from their long term aggregate price 'trends'. (Positive or up trends are referred to as bull markets; negative or down trends are referred to as bear markets.) Over-reactions may occur—so that excessive optimism (euphoria) may

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drive prices unduly high or excessive pessimism may drive prices unduly low. Economists continue to debate whether financial markets are 'generally' efficient.

According to one interpretation of the efficient-market hypothesis (EMH), only changes in fundamental factors, such as the outlook for margins, profits or dividends, ought to affect share prices beyond the short term, where random 'noise' in the system may prevail. (But this largely theoretic academic viewpoint—known as 'hard' EMH—also predicts that little or no trading should take place, contrary to fact, since prices are already at or near equilibrium, having priced in all public knowledge.) The 'hard' efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987, when the Dow Jones index plummeted 22.6 percent—the largest-ever one-day fall in the United States.

This event demonstrated that share prices can fall dramatically even though, to this day, it is impossible to fix a generally agreed upon definite cause: a thorough search failed to detect any 'reasonable' development that might have accounted for the crash. (But note that such events are predicted to occur strictly by chance, although very rarely.) It seems also to be the case more generally that many price movements (beyond that which are predicted to occur 'randomly') are not occasioned by new information; a study of the fifty largest one-day share price movements in the United States in the post-war period seems to confirm this.

However, a 'soft' EMH has emerged which does not require that prices remain at or near equilibrium, but only that market participants not be able to systematically profit from any momentary market 'inefficiencies'. Moreover, while EMH predicts that all price movement (in the absence of change in fundamental information) is random (i.e., non-trending), many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer. Various explanations for such large and apparently non-random price movements have been promulgated. For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop-loss limits and Value at Risk limits, theoretically could cause financial markets to overreact. But the best explanation seems to be that the distribution of stock market prices is non-Gaussian (in which case EMH, in any of its current forms, would not be strictly applicable).

Other research has shown that psychological factors may result in exaggerated (statistically anomalous) stock price movements (contrary to EMH which assumes such behaviors 'cancel out'). Psychological research has demonstrated that people are predisposed to 'seeing' patterns, and often will perceive a pattern in what is, in

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fact, just noise. (Something like seeing familiar shapes in clouds or ink blots.) In the present context this means that a succession of good news items about a company may lead investors to overreact positively (unjustifiably driving the price up). A period of good returns also boosts the investor's self-confidence, reducing his (psychological) risk threshold.

Another phenomenon—also from psychology—that works against an objective assessment is group thinking. As social animals, it is not easy to stick to an opinion that differs markedly from that of a majority of the group. An example with which one may be familiar is the reluctance to enter a restaurant that is empty; people generally prefer to have their opinion validated by those of others in the group.

In one paper the authors draw an analogy with gambling. In normal times the market behaves like a game of roulette; the probabilities are known and largely independent of the investment decisions of the different players. In times of market stress, however, the game becomes more like poker (herding behavior takes over). The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically.

The stock market, as with any other business, is quite unforgiving of amateurs. Inexperienced investors rarely get the assistance and support they need. In the period running up to the 1987 crash, less than 1 percent of the analyst's recommendations had been to sell (and even during the 2000 – 2002 bear market, the average did not rise above 5 %%). In the run up to 2000, the media amplified the general euphoria, with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. (And later amplified the gloom which descended during the 2000 – 2002 bear market, so that by summer of 2002, predictions of a DOW average below 5000 were quite common.)

Irrational behaviorSometimes the market seems to react irrationally to economic or financial news, even if that news is likely to have no real effect on the fundamental value of securities itself. But this may be more apparent than real, since often such news has been anticipated, and a counterreaction may occur if the news is better (or worse) than expected. Therefore, the stock market may be swayed in either direction by press releases, rumors, euphoria and mass panic; but generally only briefly, as more experienced investors (especially the hedge funds) quickly rally to take advantage of even the slightest, momentary hysteria.

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Over the short-term, stocks and other securities can be battered or buoyed by any number of fast market-changing events, making the stock market behavior difficult to predict. Emotions can drive prices up and down, people are generally not as rational as they think, and the reasons for buying and selling are generally obscure. Behaviorists argue that investors often behave 'irrationally' when making investment decisions thereby incorrectly pricing securities, which causes market inefficiencies, which, in turn, are opportunities to make money. However, the whole notion of EMH is that these non-rational reactions to information cancel out, leaving the prices of stocks rationally determined.

Stock market indexThe movements of the prices in a market or section of a market are captured in price indices called stock market indices, of which there are many, e.g., the S&P, the FTSE and the Euronext indices. Such indices are usually market capitalization weighted, with the weights reflecting the contribution of the stock to the index. The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment.

Derivative instrumentsFinancial innovation has brought many new financial instruments whose pay-offs or values depend on the prices of stocks. Some examples are exchange-traded funds (ETFs), stock index and stock options, equity swaps, single-stock futures, and stock index futures. These last two may be traded on futures exchanges (which are distinct from stock exchanges—their history traces back to commodities futures exchanges), or traded over-the-counter. As all of these products are only derived from stocks, they are sometimes considered to be traded in a (hypothetical) derivatives market, rather than the (hypothetical) stock market.

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Leveraged strategiesStock that a trader does not actually own may be traded using short selling; margin buying may be used to purchase stock with borrowed funds; or, derivatives may be used to control large blocks of stocks for a much smaller amount of money than would be required by outright purchase or sale.

Short sellingIn short selling, the trader borrows stock (usually from his brokerage which holds its clients' shares or its own shares on account to lend to short sellers) then sells it on the market, hoping for the price to fall. The trader eventually buys back the stock, making money if the price fell in the meantime and losing money if it rose. Exiting a short position by buying back the stock is called "covering a short position." This strategy may also be used by unscrupulous traders in illiquid or thinly traded markets to artificially lower the price of a stock. Hence most markets either prevent short selling or place restrictions on when and how a short sale can occur. The practice of naked shorting is illegal in most (but not all) stock markets.

Margin buyingIn margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to rise. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks' value. In the United States, the margin requirements have been 50 %% for many years (that is, if you want to make a $1000 investment, you need to put up $500, and there is often a maintenance margin below the $500).

A margin call is made if the total value of the investor's account cannot support the loss of the trade. (Upon a decline in the value of the margined securities additional funds may be required to maintain the account's equity, and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position. The investor is responsible for any shortfall following such forced sales.)

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Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929. Before that, speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks purchased. Other rules may include the prohibition of free-riding: putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock), but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in the interim).

New issuanceGlobal issuance of equity and equity-related instruments totaled $505 billion in 2004, a 29.8 %% increase over the $389 billion raised in 2003. Initial public offerings (IPOs) by US issuers increased 221 %% with 233 offerings that raised $45 billion, and IPOs in Europe, Middle East and Africa (EMEA) increased by 333 %%, from $ 9 billion to $39 billion.

Investment strategiesOne of the many things people always want to know about the stock market is, "How do I make money investing?" There are many different approaches; two basic methods are classified as either fundamental analysis or technical analysis. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings, business trends, general economic conditions, etc. Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. One example of a technical strategy is the Trend following method, used by John W. Henry and Ed Seykota, which uses price patterns, utilizes strict money management and is also rooted in risk control and diversification.

Additionally, many choose to invest via the index method. In this method, one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as the S&P 500 or Wilshire 5000). The principal aim of this strategy is to maximize diversification, minimize taxes from too frequent trading, and ride the general trend of the stock market (which, in the U.S., has averaged nearly 10 %%/year, compounded annually, since World War II).

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Stock Markets in India

IntroductionStock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock).

Let us take an example for a better understanding of how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i.e. high demand) and very few people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co.Ltd. in the market, its price will fall down.

In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors dont have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet.

History of the Indian Stock Market - The OriginOne of the oldest stock markets in Asia, the Indian Stock Markets have a 200 years old history.

18th Century

East India Company was the dominant institution and by end of the century, busuness in its loan securities gained full momentum

1830's Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader

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1840's Recognition from banks and merchants to about half a dozen brokers

1850's Rapid development of commercial enterprise saw brokerage business attracting more people into the business

1860's The number of brokers increased to 60

1860-61 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the "Share Mania" in India

1862-63 The number of brokers increased to about 200 to 250

1865 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)

Pre-Independance Scenario - Establishment of Different Stock Exchanges

1874 With the rapidly developing share trading business, brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business.

1875 "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay

1880's Development of cotton mills industry and set up of many others

1894 Establishment of "The Ahmedabad Share and Stock Brokers' Association"

1880 - 90's Sharp increase in share prices of jute industries in 1870's was followed

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by a boom in tea stocks and coal

1908 "The Calcutta Stock Exchange Association" was formed

1920 Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers.

1923 When recession followed, number of brokers came down to 3 and the Exchange was closed down

1934 Establishment of the Lahore Stock Exchange

1936 Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange

1937 Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies

1940 Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established

1944 Establishment of "The Hyderabad Stock Exchange Limited"

1947 "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited"

Post Independance Scenario (Regulations) Act, 1956. The Exchanges that were recognized under the Act The depression witnessed after the Independance led to closure of a lot of exchanges in the country. Lahore Estock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other

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Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts were:

1. Bombay2. Calcutta3. Madras4. Ahmedabad5. Delhi6. Hyderabad7. Bangalore8. Indore

Many more stock exchanges were established during 1980's, namely:

1. Cochin Stock Exchange (1980)2. Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982)3. Pune Stock Exchange Limited (1982)4. Ludhiana Stock Exchange Association Limited (1983)5. Gauhati Stock Exchange Limited (1984)6. Kanara Stock Exchange Limited (at Mangalore, 1985)7. Magadh Stock Exchange Association (at Patna, 1986)8. Jaipur Stock Exchange Limited (1989)9. Bhubaneswar Stock Exchange Association Limited (1989)10.Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989)11.Vadodara Stock Exchange Limited (at Baroda, 1990)12.Coimbatore Stock Exchange13.Meerut Stock Exchange

At present, there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. There was a sharp increase in number of Exchanges, listed companies as well as their capital.

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BOMBAY STOCK EXCHANGEThe oldest stock exchange in Asia (established in 1875) and the first in the country to be granted permanent recognition under the Securities Contract Regulation Act, 1956, Bombay Stock Exchange Limited (BSE) has had an interesting rise to prominence over the past 135 years.

While BSE is now synonymous with Dalal Street, it was not always so. The first venues of the earliest stock broker meetings in the 1850s were in rather natural environs - under banyan trees - in front of the Town Hall, where Horniman Circle is now situated. A decade later, the brokers moved their venue to another set of foliage, this time under banyan trees at the junction of Meadows Street and what is now called Mahatma Gandhi Road. As the number of brokers increased, they had to shift from place to place, but they always overflowed to the streets. At last, in 1874, the brokers found a permanent place, and one that they could, quite literally, call their own. The new place was, aptly, called Dalal Street ( Brokers' Street).

In 2002, the name "The Stock Exchange, Mumbai" was changed to Bombay Stock Exchange. Subsequently on August 19, 2005, the exchange turned into a corporate entity from an Association of Persons (AoP) and renamed as Bombay Stock Exchange Limited.

BSE, which had introduced securities trading in India, replaced its open outcry system of trading in 1995, with the totally automated trading through the BSE Online trading (BOLT) system. The BOLT network was expanded nationwide in 1997.

Prominent Position

The journey of BSE is as eventful and interesting as the history of India's securities market. In fact, as India's biggest bourse, in terms of listed companies and market capitalisation, BSE has played a pioneering role in the development of the Indian securities market. It is surely BSE's pride that almost every leading corporate in India has sourced BSE's services in capital raising and is listed with BSE.

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Even in terms of an orderly growth, much before the actual legislations were enacted, BSE had formulated a comprehensive set of Rules and Regulations for the securities market.. It had also laid down best practices which were adopted subsequently by 23 stock exchanges which were set up after India gained its independence.

BSE, as a brand, has been and is synonymous with the capital market in India. Its SENSEX is the benchmark equity index that reflects the health of the Indian economy.

Several Firsts

At par with the international standards, BSE has in fact been a pioneer in several areas. It has several firsts to its credit even in an intensely competitive environment.

First in India to introduce Equity Derivatives

First in India to launch a Free Float Index

First in India to launch US$ version of BSE SENSEX

First in India to launch Exchange Enabled Internet Trading Platform

First in India to obtain ISO certification for a stock exchange

'BSE On-Line Trading System’ (BOLT) has been awarded the globally    recognised the Information Security Management System standard    BS7799-2:2002.

First to have an exclusive facility for financial training

First in India in the financial services sector to launch its website in Hindi and Gujarati

Shifted from Open Outcry to Electronic Trading within just 50 days

First bell-ringing ceremony in the history of the Indian capital markets (listing ceremony of Bharti Televentures Ltd.on     February 18,2002)

Investor Education

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An equally important accomplishment of BSE is its nationwide investor awareness campaign - "Safe Investing in the Stock Market" - under which awareness campaigns and dissemination of information through print and electronic medium is undertaken across the country. BSE also actively promotes the securities market awareness campaign of the Securities and Exchange Board of India..

Milestones9th Jul 1875 The Native Share & Stock Broker's Association formed

31st Aug 1957 BSE granted permanent recognition under Securities Contracts (Regulation) Act (SCRA)

2nd Jan 1986 SENSEX, country's first equity index launched (Base Year:1978-79 =100)

10th Jul 1987 Investor's Protection Fund (IPF) introduced

3rd Jan 1989 BSE Training Institute (BTI) inaugurated

25th Jul 1990 SENSEX closes above 1000

1st May 1992 SEBI Act established ( An Act to protect, develop and regulate the securities market)

14th Mar 1995 BSE On-Line Trading (BOLT) system introduced

1997 BSE On-Line Trading (BOLT) system expanded nation-wide

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22nd Mar 1999 Central Depository Services Ltd.(CDSL) set up with other financial institutions

11th Oct 1999 SENSEX closed above 5000

9th Jun 2000 Equity Derivatives introduced

1st Apr 2003 T+2 settlement Introduced

8th Aug 2005 Incorporation of Bombay Stock Exchange Limited

7th Feb 2006 SENSEX closed above 10000

4th Jan 2010 Market time changed to 9.0 a.m. - 3.30 p.m.

SensexThe BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index composed of 30 stocks that started January 1, 1986. The Sensex is regarded as the pulse of the domestic stock markets in India. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around fifty per cent of the market capitalisation of the BSE. The base value of the sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79.

At a regular intervals, the Bombay Stock Exchange (BSE) authorities review and modify its composition to be sure it reflects current market conditions. The index is calculated based on a free-float capitalization method; a variation of the market cap method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trading. The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors.

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Initially, the index was calculated based on the ‘full market capitalization’ method. However this was shifted to the free float method with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice.

As per free float capitalization methodology, the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. The Market Capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. This Market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free float factor is also referred as adjustment factor. Free float factor represent the percentage of shares that are readily available for trading.

The Calculation of Sensex involves dividing the free float market capitalization of 30 companies in the index by a number called Index divisor.The Divisor is the only link to original base period value of the Sensex. It keeps the index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scrips, etc.

The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation.

NATIONAL STOCK EXCHANGE24

The National Stock Exchange (NSE) is a stock exchange located at Mumbai, India. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading. NSE has a market capitalization of around 7,262,507 crore (US$ 1,648.59 billion) (October 2010) and was expected to become the biggest stock exchange in India in terms of market capitalization by 2009 end, although this has not yet occurred. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalisation.

NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In October 2007, the equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%.

Origins

The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000.

Innovations

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NSE has remained in the forefront of modernization of India's capital and financial markets, and its pioneering efforts include:

Being the first national, anonymous, electronic limit order book (LOB) exchange to trade securities in India. Since the success of the NSE, existent market and new market structures have followed the "NSE" model.

Setting up the first clearing corporation "National Securities Clearing Corporation Ltd." in India. NSCCL was a landmark in providing innovation on all spot equity market (and later, derivatives market) trades in India.

Co-promoting and setting up of National Securities Depository Limited, first depository in India

Setting up of S&P CNX Nifty. NSE pioneered commencement of Internet Trading in February 2000, which

led to the wide popularization of the NSE in the broker community. Being the first exchange that, in 1996, proposed exchange traded derivatives,

particularly on an equity index, in India. After four years of policy and regulatory debate and formulation, the NSE was permitted to start trading equity derivatives

Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in India.

NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBC-TV18.

NSE.IT Limited, setup in 1999 , is a 100% subsidiary of the National Stock Exchange of India. A Vertical Specialist Enterprise, NSE.IT offers end-to-end Information Technology (IT) products, solutions and services.

Markets

Currently, NSE has the following major segments of the capital market:

Equity Futures and Options Retail Debt Market Wholesale Debt Market Currency futures Mutual fund Stocks lending & borrowing

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August 2008 Currency derivatives were introduced in India with the launch of Currency Futures in USD INR by NSE. Currently it has also launched currency futures in EURO, POUND & YEN. Interest Rate Futures was introduced for the first time in India by NSE on 31 August 2009, exactly after one year of the launch of Currency Futures.

NSE became the first stock exchange to get approval for Interest rate futures as recommended by SEBI-RBI committee, on 31 August 2009, a futures contract based on 7% 10 Year GOI bond (NOTIONAL) was launched with quarterly maturities.

Milestones

November 1992 Incorporation April 1993 Recognition as a stock exchange May 1993 Formulation of business plan June 1994 Wholesale Debt Market segment goes live November 1994 Capital Market (Equities) segment goes live April 1995 Establishment of NSCCL, the first Clearing Corporation October 1995 Became largest stock exchange in the country April 1996 Commencement of clearing and settlement by NSCCL April 1996 Launch of S&P CNX Nifty November 1996 Setting up of National Securities Depository Limited, first depository in India, co-promoted by NSE December 1996 Commencement of trading/settlement in dematerialised securities July 1998 Launch of NSE's Certification Programme in Financial Market August 1998 CYBER CORPORATE OF THE YEAR 1998 award February 1999 Launch of Automated Lending and Borrowing Mechanism January 2000 Launch of NSE Research Initiative February 2000 Commencement of Internet Trading June 2000 Commencement of Derivatives Trading (Index Futures) December 2000 Commencement of WAP trading June 2001 Commencement of trading in Index Options July 2001 Commencement of trading in Options on Individual Securities November 2001 Commencement of trading in Futures on Individual Securities January 2002 Launch of Exchange Traded Funds (ETFs) October 2002 Launch of NSE Government Securities Index

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January 2003 Commencement of trading in Retail Debt Market June 2003 Launch of Interest Rate Futures August 2003 Launch of Futures & options in CNXIT Index August 2008 Launch of Currency Derivatives November 2009 Launch of Mutual Fund Service System October 2010 Launch of 5-minute special pre-open trading session, a mechanism under which investors can bid for stocks before the market opens.

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Comparison of Trade Value of NSE & BSE

264

809 BSE

NSE

29

Comparison of Market Capitalisation at

NSE & BSE

16271588

BSE

NSE

Investers Stock Exchange Preference30

NSE59%

BSE36%

Others5%

NSE

BSE

Others

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Reasons for Prefering NSE the most

Liquidity Brand Value Trust Divesified services0

5

10

15

20

25

30

35

40

45

50

32

Growth of Sensex and Nifty last 15 years

0

5000

10000

15000

20000

25000Sensex

Nifty

33

Invester’s preference for analyzing market

44%

6%14%

36%

Sensex

Nifty

Both of them

Others also

Client Satisfaction

34

NSE BSE Equal in both0

5

10

15

20

25

Invester’s Selction for

35

most secured investment

38%

4%40%

18%

Bank

Stock Market

Real Estate

Others

Conclusion 

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Stock market is something which you cannot predict what is going to happen

in the market tomorrow without proper analyzes of market. So, it is always

preferable to go for some professional help if you wish to invest in the Indian

stock market. You should also be acquainted with the concept of NSE and BSE.

Bombay Stock Exchange and National Stock Exchange are both major stock

exchange in India. But there is a difference between NSE and BSE. Investors put

their money in the stock market in order to reap huge benefits from their

investment. But nobody can predict the market as we have already discussed. Also

the growth of these two stock exchanges are decided by our country’s growth. But

you should be aware that it requires a lot of patience.

QuestionnaireName:

Place:

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1. What is your occupation

a) student b) government servant

c) private employee d) businessman

2. Your age group?

a) below 20 b)21-30

c)30-40 d) above 40

3. Sex

a) male b) female

4. Are you an invester in any kind of investment?

a) yes b) no

5. Are you an invester in any stock market?

a) yes b) no

6. Which stock exchange in India you prefer the most for investing?

a) NSE b) BSE C)others

7. What is the reason for that?

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a) liquidity b) brand value of exchange

c) trust in the exchange d) more diversified services

8. Wheather the Indian stock market is more profitable or not

comparing to foreign exchanges?

a) Yes b) no

9. Which of the following investment is more secure?

a) stock market b) bank

c) Real estate d) others

10. From which stock exchange you get better satisfaction?

a) NSE b) BSE

c) equal satisfaction

11. Which index You are using for analyzing the market trends?

a) Sensex b) Nifty

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c) both of them d) others also

12. Any other suggestions?

Referenceswww.bseindia.com

www.nseindia.com

www.wikipedia.org

http://www.sharetipsinfo.com

http://wiki.answers.com

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http://in.answers.yahoo.com

www.sebi.gov.in

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