Secondary Market - NSE PPT

Slide 1

The Indian economy passes through hereNational Stock Exchange of India Ltd. Secondary markets an Overview 1 Securities Market Pre 90s

Open Out-Cry

Indian Capital Markets pre 90s Governance and ownership with brokersLack of transparencyOutdated trading and settlement systemLocalised marketsFloor based exchanges (open outcry)High cost of tradingLack of focus of risk management

ReformsHigh powered committee set up in 1991 under Mr. M. J. Pherwani, erstwhile Chairman, UTI

Committee looked into various issues :Trading and settlementGovernanceLack of an integrated markets etc.

Recommended setting up of a National Stock Exchange

OWNERSMANAGEMENTListed CompaniesMerchant BankersCustodiansMutual FundsFinancial InstitutionsBrokers (offer trading facilities to investors)Banks, Insurance Cos., Financial InstitutionsProfessionalsInvestorsDepository ParticipantsSub BrokersDEMUTUALISATIONSeperation of ownership and trading rightsParticipants Securities Markets post 90s

Savings and InvestmentsAre we taught to save? And we save. Are we taught to invest?And do we invest? Source: Chart 1: OECD Data & Saving in Asia: Issues for Rebalancing Growth. ADB Working Paper Series. ADB. Manila Chart 2: SEBI Handbook of Statistics 2009Savings vs. InvestmentShort term vs. Longer termEmergency vs. Planned OutlayLow returns vs. Beating the inflationWe are so busy saving that we forget to investWhere do I Invest?There are many options today to invest your money inBut are they all equal? SMALL SAVING SCHEMESPPFGOVT. BONDSSTOCKSMUTUAL FUNDSCORPORATE DEBTREAL ESTATEGOLDEXCHANGE TRADED FUNDSDefinitely notAll products have different risks and returnsAlways pick a product that suits your needs and expectations

But one thing needs to be taken care of Inflation

Inflation is the reduction in the purchasing power of moneySo we need to ensure more returns than inflation can eat away

The above chart shows effective value of Rupee over 2002-2009. The base is taken at 100 in year 2002Source: Inflation Data retrieved from CIA HandbookWhy Capital Markets?Historically outperformed all other asset classes CAGR of over 18%

Returns are tax efficient

Allows investments customized to personal risk appetite

Quick and easy investment and redemptionNifty has given returns of over 600% since 2001Value of investment of Rs. 1 Lac invested in Jan 2003 Figures in Lac RupeesWORLD ACCOLADESLargest exchange in notional turnover for single stock futuresFourth largest exchange in number of tradesFIRST IN INDIATo introduce nation-wide electronic trading platformTo setup clearing corporationTo propose and implement index and equity derivativesTo pioneer Internet TradingSource: World Federation of ExchangesWiki National Stock Exchange of India NSE Today Facts & FiguresMarket capitalization: around Rs. 60 lakh crores1500+ brokers250,000+ trading terminalsPresence in 2500+ citiesAverage Daily Turnover around 1.5 Lakh CroresAverage no. of trades : exceeds 80 lakhsA well established BCP Infrastructure

13Mkt cap of listed companies 68% of GDPFlagship index NIFTYMarket cap of NIFTY USD 320 bn

Equity SegmentLaunched in 19941461 listed securities, 31 permitted securitiesParticipation through primary market

Online NEAT CM system for entering orders

Market timings 9 A.M to 3.30 P.M.

Settlement between Broker and Investor

Settlement on T + 2 basis

Make Margin, Securities and Funds pay in on time

Auction in case of short/no delivery payin of securities on time

Investing in EquitiesTypes of OrdersMarket order :Buy or sell orders are to be executed immediately at current market pricesLimit order: Specify prices at which buy or sell orders are executedStop-loss orders: Sell stocks when price falls below a stipulated level, to stop further losses from accumulating or buy stock when price rise above a stipulated level.OrdersWhen any order enters the trading system, it is an active order. It tries to find a match on the other side of the books. If it finds a match, a trade is generated.

If it does not find a match, the order becomes a passive order and goes and sits in the order book.

Order matching ruleBuy side11:00 amSell Side

QuantityPriceQuantityPrice(Rs.)(Rs.)10001002000101200099500102250098150010330009725001042800963500105Best Buy Order Order with the Highest PriceBest Sell Order Order with the Lowest priceTrading screen shows the unmatched ordersOrder matching ruleBuy side11:00 amSell Side

QuantityPriceQuantityPrice(Rs.)(Rs.)10001002000101200099500102250098150010330009725001042800963500105A new Buy order for 1000 shares @ Rs. 101.50 comes in at 11:01 am. It is the active order.This Buy order will match immediately with the top sell order

Order matching ruleBuy side11:01 amSell Side

QuantityPriceQuantityPrice(Rs.)(Rs.)10001001000101200099500102250098150010330009725001042800963500105Message : Traded Quantity 1000. Traded Price Rs. 101. Traded Time : 11:01 am

Active Order matches with a Passive order and trade takes place at the Passive Order PricePrice Time PriorityBuy side11:02 amSell Side

QuantityPriceQuantityPrice(Rs.)(Rs.)10001001000101200099500102250098150010330009725001042800963500105A Buy order comes in at 11:02 am of 1000 Quantity @ Rs. 100.50It will sit on top of the Buy Side Price PriorityPrice Time PriorityBuy side11:02 amSell Side

QuantityPriceQuantityPrice(Rs.)(Rs.)1000100.5010001011000100 500102200099 1500103250098 2500104300097 3500105A Buy order comes in at 11:02 am of 1000 Quantity @ Rs. 100.50It will sit on top of the Buy Side Price PriorityPrice Time PriorityBuy side11:03 amSell Side

QuantityPriceQuantityPrice(Rs.)(Rs.)1000100.5010001011000100 500102200099 1500103250098 2500104300097 3500105A Buy order comes in at 11:03 am of 1500 Quantity @ Rs. 100.75 (Order A). Another order comes in at 11:03:01 am of 1500 Quantity @ Rs. 100.75 (Order B)Order A will sit on top of the Buy order Book Price Time PriorityPrice Time PriorityBuy side11:03 amSell Side

QuantityPriceQuantityPrice(Rs.)(Rs.)1500100.75 (A)10001011500100.75 (B)5001021000100.50 15001031000100 2500104200099 3500105Order A sits on top price time priorityMFSSLaunched in 2009

THE NEW OPTION

MFSS at NSEOnline NEATMFSS system for entering orders

Subscription and redemption facility

Option of Physical and depository settlement

Market timings 9 A.M to 3 P.M.

Real time confirmation slip

NAV of transaction day is considered

Settlement on T + 1 basis

AdvantagesSmall Investment

Professional Fund Management

Spreading Risk

SIP Systematic Investment Plan

EXCHANGE TRADED FUNDSLaunched in 2002

Gold ETFsInvest SMARTLY in gold

A smarter way to investment in GoldHave all the benefits of physical gold.Typically,You can buy just one unitIt is very easy to buyBuy it unit by unit as you want and build wealthSIMPLEYou can be assured of qualityDemat holding allows securitySAFEAccepted as collateral for loansTRUSTED1 ETF unit 1g of Gold in spot

ETFs are safe and secureThey are backed by physical gold of very high qualityJUST REMEMBERETF is easy, safe and smart way to invest in gold

A smarter way to investment in GoldNIFTY ETFLaunched in 2002Simple way to access marketsDiversified portfolioNo bias towards sectors orstocksMinimum expense ratioNifty ETF is the simple and safe way to access equity marketsNarrowBroadBroadHighLowLowLowHighLowHighLowLowMarket RatesNAV at EODMarket RatesEXPOSUREVOLATILITYCOST OF MAINTENANCECAPITAL REQPRICESTOCKSNIFTY MUTUAL FUNDNIFTY ETFDerivative SegmentLaunched in 2000Derivatives Instrument whose value is derived from an underlyingUnderlying - commodity, equity, Index, interest rate, etc. Settlement : Cash OR by delivery of underlyingTrading : on Exchange OR OTCMainly used for risk managementTypes of Derivatives : Futures, Options, Forwards, etc.

FuturesFuture contract isan agreement between two partiesa promise to deliver a specific asseton a specific future datefor a predetermined price (Futures Price)to be paid on the delivery date or later

Option contract is right to buy or sellbut not an obligation (for the buyer)stated quantitystated datestated price (Option Premium)OptionsToyota is launching a car.

Price is Rs. 0.5 million.

You can book the car by paying Rs. 50,000 [deposit]OptionsBy booking the car, what have you bought?A RIGHT to buy the car

When booking matures, can Toyota force you to buy car ?No. Toyota has only an OBLIGATION

Can you force Toyota to sell the car to you?Yes. As Buyer you have the RIGHT OptionsUse of Derivatives To hedge risks

To take a view on the future direction of the market

Leverage

Leverage in Derivatives

Derivatives Trading - NSEElectronic, anonymous , screen based, Order driven marketProducts: Futures and OptionsUnderlying: Indices & single stocksIndices: NIFTY, NFTYMCAP50, CNXIT & BANKNIFTYStocks241 single stocksCash settledNear 3 months duration contracts All contracts have an expiry date = Final Settlement DateExpiry - last Thursday of the monthContract Descriptor: FUTIDX NIFTY 30APR2012: FUTSTK ACC 30APR2012:OPTSTK ACC 30APR2012 500 CA :OPTIDX NIFTY 30APR2012 5200 PE

How to trade ?Trading @ NSEGetting StartedIt is so easy to start

Just approach any of the 36000+ branches of NSE brokers to open a Demat Account. They will also open a trading account for youAnd you are done !Now you can invest using any of the followingVia Phone (Call In Trades) # At brokers branchVia Internet

* A bank account & PAN card is assumed to be available with the client# Depending on facility provided by the broker

OPEN A DEMAT ACCOUNT*OPEN A TRADING ACCOUNTSTART INVESTINGSafety measures for Invesors

Pro-active steps for Protecting your assetsDeal only with SEBI registered Broker/Sub-BrokerAll funds and Securities movement only to and from BrokerMake sure that your transactions are executed only in your account Do not get carried away by promises of high returnDecide on Speculation Vs investingBe Clear on the risk that you are capable of taking and have clear stop loss goalsOpt for internet option only if you are computer literate

Rights and ObligationRight ToGet Unique Client Code (UCC) allotted

Get a copy of KYC and other documents executed

Get trades executed in only his/her UCC

Contract note for trades executed

Receive funds and securities on time

Statement of account

Rights and ObligationUnder Obligation To

Execute Know Your Client (KYC) documents and provide supporting documents

Pay funds and securities for settlement on time

Verify details of trades, contract notes and statement of account

Verify bank account and DP account for funds and securities movement

Investing in Equities

Investing in Equities

Investors Alert

Investors Alert

Investors Alert

Investors Alert

Investors Alert

Thank You

For more information Contact: [email protected] Visit www.nseindia.com www.nsegold.com

Sheet1SharesStock FuturesInitial priceRs.250Rs.260Initial InvestmentRs.250Rs.39Squaring up priceRs.260Rs.270Net gainRs.10Rs.10Return on investment4.00%25.64%