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Chapter IV

MARKET & FINANCIAL PERFORMANCE OF BOMBAY STOCK EXCHANGE

4.1 Introduction (profile of BSE): The Bombay Stock Exchange (BSE) whose official name is 'The Stock

Exchange, Mumbai, was previously called 'The Stock Exchange, Bombay'. It is the oldest one in Asia, even older than the Tokyo Stock Exchange. It holds 5th and 2nd rank in the world in term of size of exchange by transactions and listed companies respectively.1 The BSE was formally established as the 'Native Share and Stock Brokers' Association in 1875, and is still an association of persons. It is a voluntary non-profit making association of persons and is converted into demutualised and corporate entity. The BSE was modeled on London Stock Exchange. It is the first stock exchange in the country to have permanent recognition in 1956 from the Government of India under Securities Contracts (Regulation) Act, 1956. The present chapter deal with a study of A) Profile of Bombay Stock Exchange, B) Market and Financial Performance of BSE Presently, BSE and NSE are prominent main stock exchanges of India. BSE is the first stock exchange in India and second stock exchange all over the world to obtain an ISO 9001:2000 certification. Thus, with a rich heritage, now BSE spanning three centuries in its 133 years of existence and it has reached about 400 cities in India.

4.2 Brief History / Origin

The history of Indian stock market is found in the origin of Bombay Stock Exchange. In 18th century, East India Company was the dominant institution and by the end of the century, business in its loan securities gained full momentum. In 1840, the six enterprising people saw good potential in the

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business of stocks and shares and were recognised by banks and merchants. In 1860, the number of brokers increased to 60, where the broker met between the Old Fort Walls and Old Mercantile Bank. Later, they found Dalal Street, a place where they could conveniently assemble. Seth Premchand Roychand was their leader and he shared his knowledge of business with the Bombay brokers.

In 1860-61, the American Civil War broke out which caused a stoppage of cotton supply from United State of America; marking the beginning of the 'Share Mania' in India. Europe turned to India and specially Bombay where cotton was farmed in abundance. Thus, there was a huge inflow of capital at this time into India (Bombay). During 1862-63, the number of brokers increased to about 200 to 250. The period 1868-1875 was hard for stock market brokers & they realized the effect of public dealing and formed an informal association for protecting there character, status and interest of native shares and stockbrokers.

At a meeting of brokers held in February 1887, they formally established themselves into a society, a sort of a private institution, known as 'The Native Share and Stock Broker' association. The proper deed of a private institution, known as 'The Native share and stock Broker' association. The proper deed of association and declaration of trust were executed on 3rd December 1887. Which are the present constitution and organisation of the Bombay Stock Exchange. From the beginning of the association, Mr. Chunilal Motilal was the president and he continued in office till 1896. The other members, who played a prominent part in founding the bazaar besides the then president, were Messers. Premchand Roychand, Somarayen Nararayen, C. N. Kanga, B. B. Kanga and Shapooraj Broach who succeeded Mr. Chunilal Motilal in 1896 as the president of the association.

Sir Phiroze Jeejeebhay was another individual/personality who dominated the stock market scene from 1946 to 1980. His word was law and he had a great deal in influencing over both brokers and the Government. He was a good regulator and solved many crises due to his wisdom and practicality. The BSE's present building which is an icon of the Indian capital market is called P. J. Tower in his memory.

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The year 2005 has been watershed for BSE. Under the BSE (C&D) Scheme -2005 notified by SEBI on May 20, 2005, the exchange converted itself from an association of Persons (AOP) to a company registered under the Company Act 1956. The due date was August 19, 2005. This is very important landmark in the history of the exchange, which is known as the oldest in Asia. This transformation which is in line with what various stock exchanges have done internationally.

4.2.1 Aims and the Strategic objective of BSE2 The present stock exchange was formerly established by brokers by forming a society of themselves called themselves called the Native share and stock Broker's Association. The deed of the association was signed and Article X V of the deed laid down the primary objects of the Association so as; to support and protect stocks and securities in Bombay to promote honorable practice to suppress malpractices, to settle disputes among brokers, to decide courtesy in conducting brokerage business.

1. To promote, develop and maintain a well-regulated market for dealing in securities.

2. To safeguard the interest of members and the investing public having dealing on the exchange.

3. To promote industrial development in the country through efficient resource mobilization by way of investment in corporate securities.

4. To establish and promote honorable and just practices in securities transactions.

5. Meeting the current international standards of securities market.

4.2.2 Organization/Management

A Governing Board of BSE has 20 directors, who decide the policies and regulates the affairs of the exchange. The Governing Board consists of 9 elected directors, who are from broking community (one third of them retire every year by rotation), three SBI nominees, six public representatives and an Executive Director and Chief Executive Officer and a Chief Operating Officer.

2 Working of Stock Exchange, Mumbai (2003): p.26.

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The Executive Director as the Chief Executive Officer is responsible for the day-to-day administration of the exchange and he is assisted by the Chief Operating Officer and other Heads of Departments.

There are five Chief General Managers viz. Department of Investors Services, Inspection and Membership, Economic, Research and Publications, HRD and General Administration, Internal Audit and ED's Office. Besides, there are eight General Managers, viz. BSE Service Centres, Information Technology, Derivative and Debt Market, Legal, Surveillance, Account and Finance, Secretary, Department of Corporate Services.

4.2.3 Market Segments

The BSE is premier stock exchange in India, which works in 3 different segments namely Capital Market (CM) segment, Wholesale Debt Market (WDM) segment and Future and Options (F & O) segment. The Capital Market segment of BSE provides an efficient and transparent platform for trading of equities, preference shares, debentures, warrants, exchange traded funds as well as retail government securities.

The Wholesale Debt Market segment provides the trading platform for the trading of a wide range of fixed income securities which include state and central government securities, treasury bills, state development loans, bonds issued by public sector undertaking, floating rate bonds, index bonds, commercial papers, certificate of deposit, corporate debentures, SLR and Non-SLR bonds issued by financial institutions and units of mutual funds.

Future and Option segment of BSE provides the trading of wide range of derivatives like index future, index option, stock future and future on interest rates. But BSE hold less market share of this segment in the country.

4.2.4 Trading Technology

The trading on the BSE is carried out by its member brokers and their authorized assistant from their Trading Work Station (TWS) in their offices through a screen based online trading system called Bombay Stock Exchange Online Trading System (BOLT). BOLT was introduced in March 1995 and has completely replaced the open outcry system of trading on the trading floor by June 1995. The BOLT system accepts two-way quotes from jobbers and

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market and limit orders from brokers who have received such order from their investors. Then, it matches them according to the matching logic specified for this system.

BOLT is an architecture as a two-tier system. TWS is connected directly to the back-end server. It acts as a communication server as well as the Central Trading Engine (CTE). In addition to the above, other services like information dissemination, index computation, position monitoring is also provided in the system.

The BOLT displays the touchline and market view on the screen. The touchline for a particular stocks show the best bid and offer prices that are currently available in the market along with number of shares placed for sale or purchase.

4.3. Trading and Settlement

Equity shares of the companies are listed under A Group, BGroup, S Group (Indo next), T Group (based on surveillance action), TS group (based on surveillance action), Z Group.

Table No. 4.1: Trading & Settlement Cycle Day Activity

T Trading on BOLT and daily downloading of statements showing details of transaction and margins at the end of each trading day. Downloading of provisional securities and funds obligation statements by Trading Members Give up* entry by the Trading Members / Confirmation By the custodians Trading Members can modify the unconfirmed give up entry upto 11:00am.

T+1 Conformation of give up data by the custodians up to 1pm Downloading of final securities and funds obligation statements by Trading members/ Custodians

T+2 Pay in / Pay out : Pay in of funds and demat securities by 11am. The trading members to ensure availability of funds in their designated clearing back account and securities in their demat pool/ Principal Accounts by 10:30am. In case of delivery of securities in physical from, the trading members have to deliver the securities to the Clearing House in special closed pouches along with the relevant details like distinctive numbers, script code, quantity etc, on a floppy between 9:30am to 10:30am. Pay out of funds and securities by 1:30pm. Auction on BOLT between 2:00pm to 2:45pm Auction Report Downloads to Trading Members between 3:00pm to 3:15pm

T+3 Auction Pay- in and Pay out of funds and securities after 11am Source : BSES certification on securities market published by BSE Training institute ltd , P.214 . *Transfer of trading members obligations to custodians.

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The clearing House of the exchange is an independent company called BOI shareholding Bank of India and stock Exchange Mumbai for handling the clearing and settlement operation of funds and securities on behalf of exchange. The Bank of India holds 51% equity of this company of the balance 49% is held by the stock exchange Mumbai. For the purpose of settlement of the trades done on the exchange, the clearing and settlement Dept. of the Exchange liaises with clearing House on a day to day basis.

4.4 Market Indices

A stock market index is to serve as a barometer of the equity market. It is created to provide investors with the information regarding the average share price movement in the stock market. The ups and down in the index represent the movement of equity market.

4.4.1 SENSEX

The Bombay stock Exchange Ltd in 1986 came out with a stock 'index' that has subsequently become the barometer of Indian stock market. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. It is a basket of 30 constituent stocks representing a sample of large liquid and representative companies. The index is widely reported in both domestic and international markets through print as well as electronic media.

1 Date of Launch & Calculated Method

Launched on January 1, 1985 and on full market Capitalization Method.

2 Base Year 1978-79

3 Base Index Value 100

4 Calculation Method Effective from September 1, 2003, calculation Method Shifted to free- float Market Capitalization.

5 Number of scrips 30

6 Index calculated Frequency

Real Time

Source : BSE Training Institute Ltd., published Module Book 'BSE Certification on Securities Markets, p. 62.

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4.4.2 Scrip Selection for SENSEX3

1. Listing History : The scrip should have a listing history of at one month (previously 3 months) at BSE, if full Market capitalization of a newly listed company ranks among top 10 in the list of BSE universe.

2. Trading Frequency : The scrip should have been traded on each and every trading day in the last three months.

3. Final Rank : The scrip should figure in the top 100 companies listed by final rank. The final rank is arrived at by assigning 75% weightage to the rank on the basis of three-month average full market capitalization and 25% weightage to the including rank based on three month average daily turnover and three month average impact cost.

4. Market Capitalization Weightage : The weightage of each scrip in Sensex based on three-month average free float market capitalization should be at least 0.5% of the index.

5. Industry Representation : Scrip selection would generally take into account a balanced representation of the listed companies in the universe of BSE.

6. Track Record : The company should have an acceptable track record.

4.4.3 SENSEX Calculation Methodology

Sensex is regarded to be the pulse of the Indian stock market. It is calculated using the "free-float market capitalization" methodology. As per this methodology, the level of index at any point of time reflects the free-float market value of 30 component stock 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 further multiplied by the free-float factor to determine the free-float market capitalization. The base period of Sensex is 1978-79 and the base value is 100 points. This is often indicated by the notation 1978-79 is 100. The calculation of Sensex involves dividing the free-float market capitalization of 30 companies in the index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the Sensex. It keeps the

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index comparable, over time & it is the adjustment point for all index adjustment arising out of corporate action, replacement of scrips etc. During market hours, prices of the index scrips, at which latest trades are executed, are used by trading system to calculate Sensex every 15 second and disseminated in real time.4

4.4.4 Free-float Methodology

Free-float market capitalization is that proportion of total shares issued by the company that are readily available for trading in the market. It generally excludes promoters holding, government holdings, strategic holding and other locked-in shares that will not come to the market for trading in the normal course.

Free-Float Factors of Companies

The exchange determines the free-float factor for each company based on the detailed information submitted by the companies in the prescribed form. Free-float factor is a multiple with which the total market capitalization of a company is adjusted to arrive at the free-float market capitalization, it is round-off to the higher multiple of 5 and each company is categorized into one of the 20 bands given below. A free-float factor of say 0.55 means only 55% of the market capital.

Table No 4.2: Free Float Bands

% Free-float

Free-float

Factor

Free-float

Factor

Free-float

Factor

% Free-float

Free-float

Factor % Free-

float Free-float

Facto >0-5% 0.05 >25-30 0.30 >50-55 0.55 >75-80 0.80 >0-10% 0.10 >30-35 0.35 >55-60 0.60 >80-85 0.85

>10-15% 0.15 >35-40 0.40 >60-65 0.65 >85-90 0.90 >15-20% 0.20 >40-45 0.45 >65-70 0.70 >90-95 0.95 >20-25% 0.25 >45-50 0.50 >70-75 0.75 >95-100 1.00 Source : SENSEX, Free Float Benchmark published by BSE p.08

4 SENSEX, The Free Float Bench mark, BSE, p.5

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Table No. 4.3 : Sectoral weightage of Sensex component companies Sectoral weightage of Sensex

component companies % as on 2009 Auto 03

Capital Goods 09 Diversified 01

Finance 23 FMCG 10

Health Care 01 Housing related 02

IT 15 Metal 04

Oil & Gas 18 Power 05

Telecom 09 Total 100

Source : SENSEX Free float Benchmark published by BSE pg no 04

It is observed that ,as on 2009 finance sector has weightage of 23%, in Sensex component companies followed by oil & gas 18%,while Health care & diversified sector has weightage of 01% respectively.

4.4.5 Other BSE Indices

Apart from Sensex, BSE maintains and publish other indices to cater to the varied needs of market participants. They are

SunilTypewritten textGraph no. 4.1

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Table No 4.4: Specification of various indices of BSE BSE 100 BSE 200 BSE 500 BSE Mid Cap & Small Cap BSE PSU

Base Year 1983-84 1989-90 Feb. 1, 1999 2002-03 Feb. 1, 1999 Date of Launch Jan. 3, 1989 May 27, 1994 Aug. 1999 April 11, 2008 Jan. 4, 2001 Base Index Value

100 100 1000 1000 1000

Method of Calculation

Free float market

capitalization

Free float market

capitalization

Free float market

capitalization

Free float market

capitalization Full market

capitalization

Number of Scrips 100 200 500

Variable to 15% & 5%

market capitalization

coverage

The index is sub-set of BSE-500 Index are

included in the index& number are

variable Calculation Frequency Real time Real time Real time Real time Real time

Source : BSE Training Institute Ltd., published Module Book 'BSE Certification on Securities Markets, p. 71

4.5 Demutualization of BSE

Historically, stock exchanges were setup as a non-profit organization owned by their member brokers. BSE is no exception. However, on several occasion in the past, conflict of interest has arisen at BSE because members of the exchange who own the exchange enjoy trading rights. Further, the broker managed stock exchanges are relatively slow and reluctant to change. This has proved at times detrimental to the interest of stakeholders. In recent years, there has been a move towards corporate service provider model. Demutualization involving separation of trading rights from ownership and management control has been followed in the case of NSE, OTCEI.

According to gazette notification issued on May 20, 2005, BSE being an association of persons with no profit objective is required to acquire a corporate form of organization. The role of brokers will be constrained. The trading members cannot have voting rights in excess of 5%. The number of brokers on the governing board will not exceed a quarter of total strength. SEBI will have overriding power to appoint directors. The chief executive is expected to be a stock market professional and will be an ex-officio director. The stock exchanges clearing house will be handed over to an independent

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clearing corporation with approval of SEBI. The exchange will be known as Bombay Stock Exchange Ltd.5

4.6 BSE Surveillance

One of the important objectives of the exchange is to promote and inculcate honourbale and just practices of trading in securities and to discourage malpractices. As the securities transactions are prone to a variety of manipulations, the exchange has instituted a strong surveillance mechanism to protect market integrity. SEBI has directed the stock exchanges in 1995 to setup a separate surveillance department with staff exclusively assigned to surveillance functions. The exchange has accordingly setup a surveillance department to keep a close watch on price movement of scrips & detect market manipulations like price rigging, etc.

The Bombay Stock Exchange has developed an Online Real Time (OLRT) surveillance system known as BSE On-line Surveillance System (BOSS), which was commenced from July 15, 1999 with the main objective of detecting potential market abuses at nascent stage to reduce the ability of the market participants to influence the price and volumes of the scrips traded at the exchange, to improve the risk management system and to strengthen the self regulatory mechanism at the exchange.

4.7 Risk Management at BSE

With the expansion of BOLT by the BSE, it has also increased the risk of defaults by the member brokers in meeting their settlement obligations. As a result, the risk management system has assumed greater importance. As per the guidelines of SEBI, the BSE has taken various risk management measures as explained below in order to maintain the safety of the market.

to improve the risk management system and to strengthen the self regulatory mechanism at the exchange.

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New Delhi, p.4.

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4.7 Risk Management at BSE

With the expansion of BOLT by the BSE, it has also increased the risk of defaults by the member brokers in meeting their settlement obligations. As a result, the risk management system has assumed greater importance. As per the guidelines of SEBI, the BSE has taken various risk management measures as explained below in order to maintain the safety of the market.

4.7.1 Base Minimum Capital (BMC) All active, individuals, partnership firms and corporate members of BSE are required to maintain a Base Minimum Capital (BMC) of Rs. 10 lakhs with the exchange in the prescribed manner. All times and the composite corporate member brokers are required to maintain BMC in multiple of the membership right held by them. The BMC as prescribed by SEBI, is required to be kept in the form of cash (minimum 12.5%), fixed deposit receipts(s) of banks(s) (Minimum 12.5%) and balance in the form of eligible shares or bank guarantee(s). 4.7.2 Additional Capital

The member brokers are also allowed to deposit Additional Capital (AC) over the above BMC with the exchange for availing of higher intra-day trading limit (i.e. gross purchase - gross sale) and gross exposure limit (i.e. scripwise cumulative net outstanding purchases + cumulative net outstanding sales) 4.7.3 Intra-Day Trading Limit (IDTL) The exchange has prescribed an intra-day trading limit (i.e. gross purchase + gross sales) of 33.33 times of BMC (Rs. 10 lakhs) + contribution towards TGF (Rs. 10 lakhs) as aforesaid + effective AC deposited by the member brokers with the exchange. While watching their compliance with the intra-day trading limit, the exchange, as a precautionary measure provides on line warning to the member brokers when they reaches 70%, 80% and 95% of their respective intra-day trading limit. However, when member brokers cross 100% of this intra-day trading limit, a message is flashed on his BOLT TWSS which stating that 'Capital Adequacy Limit Violated' and immediately all his

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BOLT TWSS get deactivated and re-activated only after they deposit AC (Additional Capital) to cover their turnover in excess of the intra-day limit. 4.7.4 Gross Exposure Limit (GEL) SEBI has prescribed a ceiling on the gross exposure (i.e. scrip wise cumulative net outstanding purchase + cumulative net outstanding sales) of member brokers at 15 times of the BMC (Rs. 10 lakhs) + contribution towards Trade Guarantee Fund (Rs. 10 lakhs) + effective AC deposited by them with the exchange. The member brokers, as a pro-active measure, are also flashed warning BOLT TWSS as soon as they reach 70%, 80% and 95% of their respective gross exposure limits and when member broker cross 100% of the gross exposure limit, a message is flashed on the BOLT TWSS stating 'Gross Exposure Limit Exceeded and the BOLT becomes deactivated.

A fine of Rs. 5000/- is recovered, if member broker fail to deposit the AC to cover his turnover in excess of gross exposure limit on the same day of violation limit.

4.8 Margins

In order to contain the risk arising out of the transactions, the exchange has a well designed risk management system which inter-alia includes recovery of margins from the member brokers. The exchange accordingly imposes various kinds of margins on the member brokers based on their outstanding exposures in the market.

4.8.1 VaR Margins (VaR) All scrips are traded and settled under CRS on T+2 basis. As mandated by SEBI, the Value at Risk (VaR) margining system is internationally accepted as the best margining system and is applicable on the outstanding position of member brokers in all these scrips.

VaR margins on scrips are calculated depending on the group to which the scrips being : Group I : stocks which have been traded at least 80% ( 5%) of the days for the previous 18 months and have impact cost of less than or equal to 1%, Group II : stock which have been traded at least 80% ( 5%) of days for the previous 18 month & have the impact cost of more than 1%.Group III-Stock not satisfying the criteria of trading for at least 80%( 5%)

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of trading are placed in Group III. For scrips in Group I, the VaR margin in scrip VaR (3.5 sigma) computed in manner specified for the scrips on which stock future are traded. For scrips in Group II, the VaR margin is higher of the scrip VaR (3.5 sigma) or three times of the Sensex VaR scaled by root 3, for scrips in Group III, the VaR margin is equal to five times the Sensex VaR scaled up by root 3. Further for the purpose of determining the margin for Groups II & III, the minimum Sensex VaR is taken at 5%.6

4.8.2 Market to Market Margin (MTM) In addition to VaR margin the member brokers are required to pay MTM margin. For the purpose of computation of MTM margin, the system at the end of each trading day, nets off the quantities and outstanding values of transactions for each scrips at the member broker level across the T day T-1 day's transactions. The net quantity for each scrip is multiplied with closing price of T day to arrive at the net value. The difference between these two values, i.e. net value of scrip at the trade rate and net value of scrip at the closing rate on T day is the MTM profit/loss in the scrip.

4.9 Trade Guarantee Fund (TGF) SEBI stipulated that the exchange should introduce a system of guaranteeing settlement of trades or setup a clearing corporation to ensure that market equilibrium is not disturbed in case of payment default by any member broker. The BSE has formulated a scheme to guarantee settlement of benefited transactions of member brokers, which is part of settlement system. The basic objective behind TGF is to guarantee settlement of bonafied transactions, to inculcate confidence in the minds of participants, and to protect the investors interest. The scheme of TGF has come into force with effect from May 12, 1997.

The scheme is managed by the Defaulters Committee, which is a Standing Committee constituted by exchange, the constitution of which is approved by SEBI. 60% of member of this committee are non-brokers and nomination of non-brokers on this committee is approved by SEBI.

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The temporary refundable advances for a stipulated period are given by the Defaulters Committee from TGF to the member brokers, who fail to meet their settlement obligation subject to certain conditions and payment of interest at 0.07% per day on the outstanding amount. During the period of advances, the BOLT TWSs of the member brokers, to whom the advances has been granted from TGF, are kept de-activated. If a member broker fails to repay the advance within the stipulated period, he is declared as defaulter by the Governing Board on the basis of recommendations of the Defaulters Committee.

All active member brokers in the cash segment are required to make an initial contribution of Rs. 10000/- in cash to the fund and also contribute Rs.0.10 for every Rs. 1 lakh of gross turnover in all groups of scrips. The exchange had made an initial contribution of Rs. 60 crores in the cash to the fund. The active member brokers are required to maintain a base minimum capital of Rs.10 lakh each with the exchange.

4.10 BSE Family

4.10.1 Central Depository Service Limited (CDSL) The Central Depository Service Limited was setup on February 1999, which offers trading in dematerialized form. The depository, which has an equity capital of Rs. 100 crores, is promoted by Bombay Stock Exchange, Bank of India, SBI, Bank of Baroda and HDFC Bank.

4.10.2 Indian Clearing Corporation Limited (ICCL) Indian Clearing Corporation Limited was incorporated in 2007 by Bombay Stock Exchange Ltd. as its wholely owned subsidiary company to carry out clearing and settlement activities for the trades executed on exchange platform and to ensure effective risk management pleasantly, ICCL is carrying out clearing and settlement activities for mutual fund segment and debt segment of BSE.

4.10.3 Market Place Technologies Pvt. Ltd.

It is a subsidiary of BSE & is a leading provider of cutting edge IT solution which focuses on exchange traded equities, derivatives and commodities markets in India. It is founded and managed by a team of

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professionals. Market place has been instrumental in setting up and operating India's largest stock exchange.

4.10.4 CDSL Venture Limited (CVL) It is a wholly owned subsidiary of CDSL Ltd., a leading depository in the country. CVL has in place a stringent policy and systems to ensure confidentiality of data. Strong electronic and physical security measures ensure security of confidential data.

4.10.5 BSE Training Institute Ltd. (BTIL) It is wholly owned subsidiary of BSE. BTIL conducts various

certifications in cash market, derivatives, options trading and fundamental analysis etc.

4.11. Redressal of Investors Grievances and Arbitration Procedure

The investors dealing in the primary market and secondary market may have grievances against intermediaries like issuer, member brokers etc. The BSE has setup a separate department called "Department of Investor Service" to redress the grievances of investor against the companies as well as its own members. The exchange also assists in arbitration process both between investors and members inter-se.

In case of complaints against companies, against non-receipt of dividend, balance sheet, shares lodged for transfer received to the Department of Investors Services send it to companies and direct them to resolve them within 15 days. If a company fails to resolve the total number of pending case against it and exceeds 25 and if the complaints are pending for more than 45 days, a show cause notice is issued to a company. After issue, if they fail to resolve then scrip of company is shifted to 'Z' group.

It has set up an exclusive trading facility in 1989, that has now emerged as a leading facility in financial and securities market training in India. It is a wholly subsidiary of the Bombay Stock Exchange Ltd.

4.12 Market Halt7

The modalities of market halt are as under :

7 SEBI circular Ref. No. SMDRPD/Policy/ Cir-37/2001 dated the June 28, 2001.

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Movement of either BSE Sensex or the NSE S & P CNX Nifty whichever is breached earlier would trigger the market wide circuit breakers.

In case of 10% movement of either of these indices, there would be a 1-hour market halt if the movement takes place before 1 p.m. In case the movement takes place at or after 1 p.m. but before 2.30 p.m. there will be a trading halt for VI hours. In case if the movement takes place at or after 2.30 p.m. there will be no trading halt at the 10% level and the market will continue trading.

In case of 15% movement either of the index, there will be a 2-hour market halt if the movement takes place before 1.00p.m. If the 15% trigger is reached on or after 1.00p.m. but before 2.00p.m. there will be a 1-hour halt. If the 15% trigger is reached on or after 2.00p.m. the trading will halt for the remaining of the day.

In case of a 20% movement of either index, the trading will be halted for the remaining hours of the day.

4.13 Market performance of BSE

4.13.1 Companies listed on BSE

India has highest number of companies listed in the stock market out of this about 72% of companies are listed on BSE only. Following table No. 4.5 shows no. of companies listed and delisted on BSE during the study period.

Table no 4.5 : Companies listed on BSE Year No. of listed Companies

New Companies Listed

companies Delisted

1991-1992 2861 NA NA 1992-1993 3585 NA NA 1993-1994 4702 NA NA 1994-1995 5603 1114 8 1995-1996 5832 3032 215 1996-1997 5853 511 313 1997-1998 5849 46 23 1998-1999 5815 15 35 1999-2000 5869 44 22 2000-2001 5782 97 51 2001-2002 5650 22 62 2002-2003 5528 25 72 2003-2004 4731 29 1160 2004-2005 4781 54 859 2005-2006 4821 98 93 2006-2007 4887 116 57 2007-2008 4929 117 54 2008-2009 4942 73 59

Source: compiled from various annual reports of BSE from 1991-2009

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Table no 4.5 shows number of companies newly listed & delisted during the study period of 1991 to 2009. During 1991- 92 number of companies listed on BSE was 2861 which has increased to 5832 in 1995-96 & decreased to 5782 in 2000-01 & further decreased to 4781 in 2004-05. In 2008-09, number of companies listed on BSE was 4942.

It was seen that in the year 1995-96, there were highest number of new companies listed on BSE. While in the year 1998-99 there was lowest number of companies newly listed on BSE. As on 2008-09, 4942 newly companies were listed on BSE.

It is also seen that, during 2003-04 there were highest number of companies i.e. 1160 companies delisted on BSE.

4.13.2 Fresh capital listed on BSE:

Fresh capital listed on BSE is classified into 3 parts: equity, preference, debentures & bonds. Following table summarized fresh capital listed on BSE during the study.

Table 4.6 : Fresh Capital Listed on BSE

Year

Fresh Capital Listed

Total Rs. Cr Equity (Rs. Cr) Preference (Rs. Cr)

Debentures/ Bonds/Others

( Rs. Cr) 1991-1992 2045.8 -- 258.6(11.25) 2304.4 1992-1993 5537.3(83.58) 0.60(0.00) 1086.2(16.39) 6624.1 1993-1994 8775.8(53.69) 50.02(0.30) 7517.1(45.99) 16343 1994-1995 11971.06(97.42) -- 316.4(2.57) 12287.5 1995-1996 9689.0(81.9) 2.36(0.01) 2125.2(17.98) 11816.6 1996-1997 4391.2(93.40) 9.56(0.20) 300.8(6.38) 4701.6 1997-1998 3164.7(91.33) -- 300.0(8.66) 3464.7 1998-1999 1821.8(100) -- -- 1821.8 1999-2000 1399.9(86.1) 57.2(3.5) 167.0(10.2) 1624.1 2001-2002 2545.2(93.73) -- 170(6.2) 2715.2 2002-2003 962.7(100) -- -- 962.7 2003-2004 2142.79(67.5) -- 1030.3(32.46) 3173.1 2004-2005 9934.3(54.48) 69.8(0.37) 8229.9(45.12) 18234.2 2005-2006 8540.4(80.34) 53.3(0.53) 1297.8(13.11) 9891.5 2006-2007 4254.8(86.99) 46.0( ) 2080.0(12.69) 3384.9 2007-2008 11927.2(96.10) -- 491.4(0.39) 12418.6 Average 85.94 0.3 15.51 -

Source : Data is compiled from BSE's Annual Reports from 1994 to 2009 Figures in brackets indicates % to total.

Table no. 4.6 presents performance of BSE in listing fresh capital on BSE. It is observed that during 1991-92 to 2008-09 In case of the percentagewise share of which instruments the equity instruments accounted

103

on an average 85.94%, preferential capital and debentures accounted on an average 0.3%& 15.51% respectively, to the total fresh capital listed on BSE during. Equity instrument listed highest amount of capital i.e. Rs. 11971.06 crores in 1994-95, while lowest amount i.e. Rs. 962.7 crores in 2002-03. Preferential shares listed highest amount of capital i.e. 69.8 crores in 2004-05 whereas lowest amount i.e. 0.60 crores in 1992-93. Debentures accounted highest amount of capital i.e. 8229.9 crores in 2004-05 while it recorded lowest amount of capital i.e. Rs.316.4 crores in 1994-95.

4.14 Capital Listed through further Issues of Existing Companies

Capital listed through further issues of existing companies is classified into equity, preference & debentures/bonds & others. Below Presented table no. 4.7 furnished the trends in capital listed through further issues of existing companies.

Table No 4.7 : Capital listed through further issues of existing companies

Year Equity (Rs Cr) Preference (Rs Cr) Debenture/

Bonds/Others(Rs Cr)

Total Rs. Cr

1991-1992 1122.0(36.5) 3.6(0.1) 1947(63.4) 3070.6 1992-1993 3640.8(48) 1.0(0.01) 3941.3(51.9) 7583.2 1993-1994 2276.(45.48) NA 2728.6(54.5) 5004.6 1994-1995 7085.1(66.8) 67.94(0.64) 3454.6(32.5) 10606 1995-1996 5744.0(58.20) 67.4(0.67) 4057.8(41.10) 9869.2 1996-1997 4404.5(41.92) 154.4(1.46) 5945.6(56.59)* 10504.5 1997-1998 2802.9(24.9) 448.0(3.99) 7976.5(71.04)* 11227.4 1998-1999 2328.7(22.29) 564.1(5.40) 7549.5(72.29) 10442.3 1999-2000 4340.1(48.54) 100.4(1.11) 4516.0(50.4) 8956.6 2000-2001 4175..1(56.08) 51.18(0.68) 3218.2(43.2) 7444.5 2001-2002 1588.9(48.56) 26.0(0.79) 1655.3(50.61) 3270.3 2002-2003 3960.05(52.54) 10.0(0.1) 3567.7(47.32) 7537.76

104

2003-2004 4745.0(11.22) 479.0(2.2) 16333.4(75.76) 21557.9 2004-2005 4327.0(10.27) 775.9(1.83) 37022.5(87.88) 42125.5 2005-2006 6621.9(20.49) 702.9(2.1) 25105.1(77.41) 32430 2006-2007 10095.8(22.37) 1175.5(2.63) 33848.7(75.7) 45120.1 2007-2008 8762.1(18.24) 5722.9(12.00 33528(69.26) 48013.3

AVERAGE 37.2% 1.7% 61%

Source : Data is compiled from BSEs Annual Reports from 1994-2009 Note : Figures in parentheses shows percentage share to Total Capital

Capital listed through further issue of existing companies on equity segment of BSE is depicted in Table No. 4.7. It is observed that, existing companies raised highest amount of debenture and bond capital i.e. Rs. 37022.5 crores in 2004-05 while lowest amount i.e. Rs 1947.0 crores in 1991-92. Thus, on average existing companies raise 61% of debenture and bonds capital on BSE during study the period.

Existing companies on an average raised 37.2% equity capital during 1991-92 to 2008-09. Equity shares of existing companies raised highest amount of capital listed. Rs. 10095.8 crores in 2006-07 while lowest amount i.e. Rs. 1122.0 crores in 1991-92. Preferential shares accounted lowest share to the total capital listed capital by existing company on BSE. i.e. 1.7%. It accounted highest amount i.e. Rs. 5722.9 crores in 2007-08 whereas lowest amount i.e. 1.0 crores in 1992-93.

The most striking aspect of capital issue of existing companies is that out of total capital listed, the bonds and debentures accounted larger share than preference and equity capital. On an average 61% of total listed capital by bonds and debenture, equity capital accounted on an average of 37.2%. The fewer (lesser) amount i.e. an average of 1.7% listed capital came from preferential shares.

4.15 Annual Turnover of various Market segment of BSE

To study the trends in turnover of BSE, it is classified into 3 segments i.e. annual turnover of capital market segment, annual turnover of debt market segment & annual turnover of derivative market segment. Following table

105

shows trends in annual turnover of various market segments of BSE during the study period.

Table 4.8: Trends in Annual Turnover of various Segments of BSE

Year Annual Turnover of CM(Rs crore)

Annual Turnover of debt segment(Rs

crore) Annual Turnover

of Derivative Segment(Rs crore)

1992-93 45696 - - 1993-94 84536 - - 1994-95 67749 - - 1995-96 50064 - - 1996-97 124190 - - 1997-98 207113 - - 1998-99 310750 - -

1999-2000 686428 - - 2000-01 1000032 - 1673 2001-02 307292 280.62 1922 2002-03 314073 4930 2478 2003-04 503053 926 12452 2004-05 518715 5557 16112 2005-06 816075 3594 9 2006-07 956185 NA 59004 2007-08 1578857 1932 242309 2008-09 1100074 NA 12268

Source : SEBI Handbook Statistics on Indian Securities Market, 2009, p. 36 & 47

It is clear from the above table no 4.8 that the increasing trend is observed in case of annual turnover of capital market segment of BSE from1992-93 to 2000-01 i.e. it increased from Rs 45696 crores to Rs. 1000032 crores, but trend reversed in 2001-02 i.e. Rs. 307292 crores. Thereafter there was an increasing trend in the annual turnover of the cash market segment of the BSE. In the year 2007-08 it increased to Rs. 1578857 crores but during 2008-09 there was a decline in the cash market turnover of BSE and it stood at Rs. 1100074 crores.

Annual turnover of debt market segment do not hold any particular pattern but it is observed that in 2004-05 debt market recorded highest level of turnover i.e. Rs. 5557 crores, while it was lowest i.e. Rs. 280.62 crores in 2001-02.

It is also observed that there is an increasing trend in case of annual turnover of derivative segment of BSE from 2000-01 to 2008-09. It was Rs.

106

1673 crores in 2000-01, it dipped to Rs. 9 crores in 2005-06 thereafter which increased to Rs. 59004 Crores in 2006-07 & stood at Rs. 12268 crores in 2008-09. The macro economic factors that were responsible for reduction in market Capitalization also affected the average turnover.

4.16 Average Daily Turnover of Capital Market Segment of BSE

Trading value is a key element to measure supply and demand and it is the primary indicator of a new price trend. When a stock moves up in price, usually in high volumes, it could indicate that investors are accumulating the stocks. When a stock moves down in price on usually heavy volume, major selling would be the reason.

Table no 4.9 : Average Daily Turnover of CM Segment ( Rs. crores) Year Average Daily Turnover Average Trade Size

1992-93 238 3632 1993-94 388 6887 1994-95 293 3450 1995-96 216 2922 1996-97 517 8022 1997-98 849 10585 1998-99 1249 8770

1999-2000 2735 9270 2000-01 3984 7002 2001-02 1244 240602 2002-03 1251 22226 2003-04 1981 24806 2004-05 2050 21849 2005-06 3251 30911 2006-07 3840 27618 2007-08 6290 29771 2008-09 4527 20342

Source: compiled from SEBI Handbook of Statistics on Indian Securities Market 2009, p.36

The average daily turnover and average trade size of capital market segment of BSE is presented in Table No. 4.9. The average daily turnover was very high in the year 2007-08 i.e. Rs. 6290 crores and it was very low in 1995-96 i.e. Rs. 216 crores. In the year 2001-02, the market experienced bearish trend. The average trade size of BSE highest in 2003-04 i.e. Rs.24806 crores, whereas it was lowest i.e. Rs.2922 crores in 1995-96. It is

107

concluded from the above table that the average trade size of BSEs daily turnover was very high in 2007-08 i.e. Rs.29771 crores.

4.17 Groupwise Distribution of Market Turnover on BSE

The Bombay Stock Exchange, India's leading stock exchange has classified equity scrips into categories: A, B, B2, S, T, TS and Z to provide guidance to the investors. The classification is on the basis of several factors like market capitalization, trading volumes, track records, profit, dividends, share holding pattern and some qualitative aspects. 'A' group is a category where there is a facility for carry forward (Badala) to the next settlement cycle. These companies are with fairly good growth record in terms of dividend and capital appreciation. The scrips in this group are classified on the basis of equity, capital, market capitalization, number of years of listing, public share holding and trading volume etc.

T, TS,& Z Groups securities ,Which are traded on the exchange on

Trade on trade basis are generated on gross basis (i.e. without netting of purchase & sell transactions in a scrip). Debentures /Bonds issued by companies are listed under F group (i.e. fixed income securities). While govt. Securities are listed under G Group. S Group consist of B1 & B2 Groups.

Thus group A, B, S, T, TS & Z are indicating equity turnover, F group

indicates debt segment & G group indicate turnover of G- Securities .

Annual Distribution of Turnover of BSE among different groups is

summarized into following table.

108

Table No. 4.10 : Annual Turnover Distribution of Different Groups Year A Group B Group S Group T Group Z Group F Group

1997-1998 197015.1 10097.3 - - - 280.6 1998-1999 24354.04 18501.2 -- - - 15.6 1999-2000 611555.6 69450.1 - - 145.6 85.6 2000-2001 908946.1 78274.8 - - 4.57 42.9 2001-2002 281968.8 24344.8 - - 17 82.6 2002-2003 266650.6 47303.6 - - 22.5 94.9 2003-2004 437851 63209.8 - 989.5 321.2 245.5 2004-2005 398860.9 106541.8 5597.8 6335.8 1158.9 220.1 2005-2006 482429.3 272596.4 46697.4 12146.3 1934.7 269.9 2006-2007 552460.1 346204.6 48662.7 7895.9 791.2 170.13 2007-2008 859285.5 648226.6 53904 15723.3 1480.7 235.7 2008-2009 896782 179181.2 20276.97 1773.1 407.18 753.13 Average 493179.9 155327.68 35027.77 7477.3 628.355 208.055 % share 73.83 23.26 2.18 0.56 0.078 0.03

Source : Data is compiled from BSEs Annual Reports from 1994-2009

Table No. 4.10 presents distribution of annual turnover among different groups. Annual turnover of 'A' group was Rs. 197015.1 crores in 1997-98, which increased to Rs. 896782.0 crores in 2008-09. 'B' group accounted an annual turnover of Rs. 10097.3 crores, which increased to Rs. 648226.6 crores in 2007-08, and then it declined to Rs. 179181.20 crores in 2008-09. The annual turnover of 'S' group recorded Rs. 5597.8 crores in 2004-05, then it declined to Rs. 53904 crores in 2007-08. 'T' group recorded annual turnover of Rs. 989.5 crores in 2003-04, which increased to Rs. 15723.3 crores in 2007-08, but declined to Rs. 1773.10 crores in 2008-09. 'Z' group accounted annual turnover of Rs. 145.6 crores, in 1999-2000 which increased to Rs. 1934.7 crores in 2005-06, which declined to Rs. 407.18 crores in 2008-09. During 1997-98 'F' group recorded Rs. 280.6 crores, it recorded to Rs. 753.13 crores in 2008-09.

It is concluded that during 1997-98 to 2008-09 'A' group accounted 73.83% to total turnover of BSE, 'B' group recorded 23.26%, 'S' group accounted 2.18%, 'T' group 0.56% whereas 'Z' group and 'F' group accounted 0.078% and 0.03% respectively to the total turnover.

109

4.18 Delivery Ratio

It represents the percentage of delivery (in physical form) to traded quantity. Generally, delivery ratio rising means lesser speculations. Following table presents delivery ratio of BSE during the study period

Table No. 4.11 : BSE's Delivery Ratio ( In Term of Physical Shares)

Year Number of

Trades (lakh)

Traded Quantity (Rs.

Lakh) Delivered

Quantity (Rs. Lakh)

% of Delivered Quantity to

Traded Quantity 1992-93 126 35031 NA NA 1993-94 123 75834 NA NA 1994-95 196 107248 44696 41.68 1995-96 171 77185 26773 34.67 1996-97 155 80926 21188 26.18 1997-98 196 85877 24360 28.37 1998-99 354 129272 50570 39.12

1999-2000 740 208635 93312 45.2 2000-01 1428 258511 86684 33.53 2001-02 1277 122196 57668 31.65 2002-03 1413 221401 69893 31.67 2003-04 2005 389806 133240 34.54 2004-05 2374 477171 187519 39.3 2005-06 2643 664467 300653 45.25 2006-07 3462 560780 229685 40.96 2007-08 5303 986009 361628 36.68 2008-09 5408 739601 196630 26.59

Average 35.69 Source : SEBI Handbook Statistics on Indian Securities Market , 2009 p.40.

The BSE's delivery ratio in relation to turnover in physical form is furnished in Table No. 4.11. It is seen that delivery ratio in term of number of shares was more than 40% in the year 1994-95, 1999-2000, 2005-06 and 2006-07. Delivery ratio is highest in 1994-95 i.e. 41.68% whereas it was lowest i.e. 26.18% in 1996-97.Thus, delivery ratio of BSE oscillating in the ranges of 25% to 46% during the study period.

4.19 Concentration of Market

To study security wise concentration of BSEs turnover, securities listed on BSE is classified into five groups, those are TOP-5, TOP-10, TOP-25, TOP-50, TOP-100. The percentage share of N securities in turnover of BSE is presented into following table.

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4.19.1 Percentage Share of Top 'N' Securities in Turnover of Cash Segment of BSE

Table No. 4.12 : Percentage Share of Top 'N' Securities in Turnover of Cash Segment of BSE(%)

Year TOP 5 TOP 10 TOP 25 TOP 50 TOP 100 1996-1997 72.87 81.68 88.1 91.06 93.41 1997-1998 67.9 79.91 89 93.72 96.83 1998-1999 48.8 64.51 81.07 89.4 95.35 1999-2000 36.95 55.1 77.75 87.29 92.95 2000-2001 49.99 70.35 87.7 94.04 97.45 2001-2002 30.67 43.95 66.24 81.66 91.51 2002-2003 37.72 53.27 74.38 86.19 93.26 2003-2004 30.76 43.55 60.89 74.53 85.93 2004-2005 25.48 39.11 52.61 64.23 75.93 2005-2006 16.78 23.75 35.55 45.55 57.71 2006-2007 15.31 23.86 40.2 55.01 70.05 2007-2008 16.31 25.68 41.76 55.84 77.44 2008-2009 18.54 29.75 49.02 66 79.62 AVERAGE 34.54 46.90 62.82 73.73 83.56 Source: : SEBI Handbook Statistics on Indian Securities Market , 2009 p. 45

The distribution of turnover among top 'N' securities is summarized in table No. 4.12. It is observed that, on an average Top 5 securities accounted for 34.54% of total turnover in capital market segment of BSE during 1996-97 to 2008-09. The Top '10' and Top '25' securities accounted for on an average of 46.90% and 62.82% respectively, whereas top '50' securities accounted for 73.73% and top 100 securities accounted for on an average of 83.56% of the total turnover of capital market segment of BSE during the same period.

It is concluded that, top '100' securities accounted large share of total turnover of capital market segment of BSE followed by top '50', '25' and '10' securities. While top '5' securities accounted lesser share of total turnover of capital market segment of BSE.

4.19.2 Member wise Concentration of Market

Member wise concentration of BSE turnover is presented into following table.

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Table No. 4.13: Percentage Share of Top 'N' Members in Turnover of Cash Segment at BSE (%)

Year Members TOP 5 TOP 10 TOP 25 TOP 50 TOP 100 1992-1993 5.73 10.39 22.3 36.4 56.37 1993-1994 6.15 10.58 21.05 35.3 55.93 1994-1995 4.59 8.46 17.85 29.59 48.17 1995-1996 7.23 12.23 24.06 37.88 55.62 1996-1997 11.82 18.28 31.32 45.55 64.17 1997-1998 13.73 21.06 33.75 47.75 65.21 1998-1999 9.78 16.04 28.31 44 64.3 1999-2000 8.42 14.3 25.9 40.74 59.98 2000-2001 7.87 15.56 25.7 40.4 59.9 2001-2002 8.45 14.78 28.83 45.3 65.75 2002-2003 13.65 20.78 35.79 52.85 72.55 2003-2004 14.3 22.13 37.98 54.08 73.32 2004-2005 14.46 22.84 38.65 53.44 72.14 2005-2006 14.83 24.02 39.21 54.94 72.13 2006-2007 15.1 24.01 40.41 56.37 73.57 2007-2008 14.38 22.77 39.46 55.74 73.56 2008-2009 14.33 21.73 38.21 55.75 73.32 Average 10.81 17.64 31.10 46.24 65.05

Source : Handbook of Statistics on the Indian Securities Market, 2009, p. 45.

The distribution of turnover among top 'N' members is summarized in Table No. 4.13. It is observed that, on average top 5 members accounted for 10.81% of total turnover in capital market segment of BSE during 1996-97 to 2008-09. The top '10' and '25' members accounted for on an average of 17.24% and 31.10% respectively. Whereas top '50' members accounted for 46.64% and top '100' members accounted for on an average of 65.05% of the total turnover of capital market segment of BSE during the same period. It is concluded that top 100 members accounted large share of total turnover of capital market segment of BSE followed by top 50, 25 and 10 members. While top 5 members accounted less share of total turnover of capital market segment of BSE. 4.20 Trading Frequency of Listed Stock at BSE Trading frequency of listed stock is an indicator of liquidity. Table No. 4.14 summarises trading frequency of listed stocks. It is clear that the companies traded on BSE for more than 100 days increase significantly during 1999-00 to 2008-09 except in the year 2001-02. In 1999-00, the companies traded on BSE for more than 100 days was 27.56%, in1999-2000 which increased to 87.22% during 2008-09.

112

Table No. 4.14 : Trading Frequency of Listed Stocks Trading

Frequency

Above

100

91-

100

81-

90

71-

80

61-

70

51-

60

41-

50

31-

40

21-

30

11-

20

1-10

TOTAL

1999-00

NST 2210 110 95 110 121 108 167 160 214 262 4463 8020

% to

Total 27.56 1.37 1.18 1.37 1.51 1.35 2.08 2 2.67 3.27 55.65 100

2000-01

NST 1556 98 97 98 117 133 113 131 241 287 1016 4027

% to

Total 40.64 2.5 2.47 2.5 2.98 3.39 2.88 3.34 6.14 7.31 25.87 100

2001-02

NST 1238 93 113 197 579 402 315 299 360 427 1324 5347

% to

Total 23.15 1.74 2.11 3.68 10.83 7.52 5.89 5.59 6.73 7.99 24.76 100

2002-03

NST 1815 63 51 54 68 74 75 53 86 105 235 2679

% to

Total 67.7 2.4 1.9 2 2.5 2.8 2.8 2 3.2 3.9 8.8 100

2003-04

NST 1960 65 54 49 46 58 61 56 52 63 146 2610

% to

Total 75.1 2.49 2.07 1.88 1.76 2.22 2.34 1.95 1.99 2.41 5.59 100

2004-05

NST 2368 36 37 35 32 50 34 41 68 63 142 2906

% to

Total 81.49 1.24 1.27 1.2 1.1 1.72 1.17 1.41 2.34 2.17 4.89 100

2005-06

NST 2630 22 19 21 27 30 25 32 43 52 148 3049

% to

Total 86.26 0.72 0.72 0.69 0.89 0.98 0.82 1.05 1.41 1.71 4.85 100

2006-07

NST 2673 30 25 31 35 30 22 22 30 50 149

% to

Total 86.31 0.97 0.81 1 1.13 0.97 0.71 0.71 0.97 1.61 4.81

2007-08

NST 2668 17 18 18 18 18 15 15 33 43 103 3166

% to

Total 90.59 0.54 0.57 0.57 0.57 0.57 0.47 0.47 0.04 0.36 3.25 100

2008-09

NST 2831 29 32 21 24 25 33 34 32 38 147 3246

% to

Total 87.22 0.89 0.99 0.65 0.74 0.77 1.02 1.05 0.99 1.77 4.53 100

Average

NST 2194 56.3 54.1 63.4 106.7 92.8 86.6 84.3 115.9 142 787.3 -

% to

Total 67 1.49 1.4 1.56 2.32 2.22 2.02 1.96 2.65 3.25 14.3 -

Source : Data is compiled from various issues of ISMR. Note: NST - Number of Scripts Traded

Trading took place for 91 to 100 days in case of 1.37% of companies in 1999-00 which increased to 2.49% of companies in 2003-04, then after it declined to 0.54% of companies in 2007-08 and remained at 0.89% of companies in 2008-09. The companies traded for more than 81 to 90 days was 1.18% in 1999-2000, which increased marginally to 2.07% in 2003-04, then declined to 0.99% during 2008-09. Trading took place for 71 to 80 days in case of 1.37% of companies in 1999-2000, 1.88% of companies in 2003-04 which declined to 0.65% of companies in 2008-09. Trading took place for 61

113

to 70 days during 1998-99 was 1.51% of companies which increased marginally to 1.76% of companies in 2003-04 and declined to 0.57% of companies in 2007-08 & stood at 0.74% in 2008-2009. The companies available for 51 to 60 days accounted 1.35% of companies during 1999-2000 which increased to 2.22% of companies in 2003-04 then dropped to 0.57% of companies in 2007-08 it stood at 0.77% in 2008-09. Trading took place for 41 to 50 days in case of 2.08% of companies traded during 1999-2000; it increased marginally to 2.34% in 2003-04 then declined to 1.02% of companies in 2008-09.

The companies available for trading of 31 to 40 days accounted 2.0% of companies in 1999-2000, it accounted 1.95% of companies in 2003-04 whereas declined to 1.05 % in 2008-09.During the year 1999-2000, the companies available for trading for 21 to 30 days was 2.67% of companies, which declined to 1.99% in 2003-04 to 0.99% in 2008-09. Trading took place for 11 to 20 days in case of 3.27% of companies during the year 1999-2000. It dropped to 2.41% of companies in 2003-04 which decreased to 1.77% of companies in 2008-09. The companies traded on BSE for 1 to 10 days during 1999-2000 was 55.65% which dropped significantly to 5.59% of companies in 2003-04, Further it declined to 4.53% of companies in 2008-09.

It is concluded that during the study period, on an average 67% of companies traded for more than 100 days followed by 14.3% traded for 1 to 10 days where as only 1.40% companies traded for 81-90 days.

4.21 Product wise turnover on the derivatives segment of BSE Index future, stock future, index option, stock option these are products

of equity derivatives segments of BSE. Following table shows development of equity derivatives segment during the study period.

114

Table No 4.15 : Product wise Turnover on the Derivative Segment of BSE (Turnover in Rs. crore) Year

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

2006-

07

2007-

08

2008-

09

Ave

rage

INDEX

FUTURE

No of

contract 77743 89552 111324 246443 449630 89 1638 7157078 515915

turnover

Rs. 1673 1276 1811 6572 13600 5 55491 234660 12250

% share in

total

Turnover

100 66.3 73 54.4 84.4 55.5 94 96.8 99.8 78

STOCK

FUTURE

No of

contract - 17951 25842 128193 6725 12 142433 295117 300

turnover

Rs. - 452 644 5171 213 1 3515 7609 9

% share in

total

Turnover

- 23.5 25.9 42.8 1.3 11.1 5.9 3.1 0.07 14

INDEX

OPTION

No of

contract - 2415 43 1 75275 100 2 1161 373

turnover

Rs. - 84 1 0 2298 3 0 39 9

% share in

total

Turnover

- 4.3 0.04 0 14.2 33.3 0 0.01 0.07 6.5

INDEX

OPTION

No of

contract - 5105 802 7621 89 2 6 15 0

turnover

Rs. - 114 21 331 2 0 0 0 0

% share in

total

Turnover

- 5.9 0.8 2.7 0.01 0

1.17

Total

No. of

contract 77743 105527 138037 382258 531719 203 1545169 7453371 515588 -

Turnover

Rs. 1673 1922 2478 12074 16112 9 59006 242309 12268 -

Average Daily

Turn over

8.08

(207)

7.7

(247)

9.8

(251)

47.5

(254)

63.6

(253)

0.03

(251)

236.9

(249)

965.3

(251)

50.4

(243) -

Source: SEBI; Handbook Statistics on Indian Securities Market , 2009 p.46 & 47 Note : Figures in brackets indicates trading day

Looking at the product wise turnover on the derivative segment of BSE, it is seen in Table No.4.15 that Index future which accounted for highest percentage of turnover among the various products i.e. average turnover 78% during 2000-01 to 2008-09 followed by stock future account on an average of 14% during same period. While Index option and stock option recorded 6.5% and 1.17% respectively to the total turnover of derivative segment of BSE.

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In the year 2008-09, turnover volume of derivative segment dropped due to the global slowdown in the derivatives segment as an aftereffect of the sub-prime crises in USA.

4.21 Financial performance of BSE

Financial performance of BSE indicates health of any institution & it also indicates is BSE in the position of introducing further development programmes. To study the financial performance of BSE, following parameters are selected: a) Capital structure of BSE, b) Working Capital of BSE, c) Fixed Assets & Long term funds of BSE, d) Total Assets an Total Liabilities of BSE, e) Profitability of BSE. 4.21.1 Capital Structure of BSE

Capital of BSE is classified into share capital, reserves & surplus, secured & unsecured deposits and others. Following Table discloses the capital structure of BSE during the Study period of 1991 to 2009.

Table No. 4.16 : Working Capital of BSE

Year Share Capital(Rs) %

change Reserves & Surplus(Rs) % change

Deposits Secured & Unsecured ( Rs) % change

1991 41481997 - - - 51125029 - 1992 43881997 5.79 192573861 40007912 -21.74 1993 44481997 1.37 459769118 138.75 38926036 -2.70 1994 2713911997 6001.15 545486042 18.64 27034160 -30.55 1995 586681999

-78.38 669275702 22.69 24052284 -11.03 1996 709084651 20.86 783360101 17.05 18970408 -21.13 1997 717834651 1.23 867953539 10.80 11063533 -41.68 1998 800586938 11.53 992079779 14.30 5140657 -53.54 1999 977881286 22.15 1191415351 20.09 243000 -95.27 2000 1535155757 56.99 242500000 -79.65 436793348 179650.35 2001 2833946963 84.60 5000000 -97.94 999970244 128.93 2002 2921487786 3.09 3388600522 67672.01 1647920815 64.80 2003 3141046426 7.52 3578893613 5.62 894193802 -45.74 2004 3296847558 4.96 4119858905 15.12 117611377 -86.85 2005 3446767571 4.55 8440373594 104.87 11756685 -90.00 2006 6770000

-99.80 9265732619 9.78 65179590 454.40 2007 6550000

-3.25 10050513067 8.47 - -100.00 2008 7802222 19.12 15583554239 55.05 12250751 - 2009 102377772 1212.16 17179519832 10.24 1853402 -84.87

Source : Data is compiled from Annual Reports of BSE form 1991 to 2009.

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The Table No. 4.16 shows the capital structure of Bombay Stock Exchange.

A) Share Capital Share capital of BSE was increased continuously from 1991 to 2005

i.e. from Rs. 41481997 to Rs.3446767571 even though it declined in 2006 & in 2006. But pursuant to the BSE (corporatisation and demutualization) scheme 2005, the exchange had to allot 1000 equity shares of Re.1/- each of those card base members of the BSE whose names appeared on Register of Members under Rule 64 of the erstwhile BSE Rules, Bye-laws and Regulations. As on 31st March 2007, out of the total 735000 equity shares of each of Re. 1/- the exchange has allotted 6950000 equity shares against 695 membership rights and allotted 677000 equity shares against 677 membership rights as on 31st March 2006. As on March 2008, share capital increased to Rs. 7802222 and it further increased to Rs.102377772 in 2009.

B) Reserves and Surplus From March 1992 to March 2000 reserves and surplus increased from Rs. 192573861 to Rs.242500000 In 2001, it declined to Rs.5000000 in 2001. Thereafter, it increased steadily & it stood at Rs17179519832 on 2009.

C) Secured and Unsecured Deposits As on 31st March 2002, Secured and Unsecured Deposits accounted highest amount i.e. Rs.1647920815 whereas on 31st March 2007 it remained nil. It is observed that secured and unsecured deposits do not hold any particular pattern.

4.21.2 Working Capital of BSE

Working Capital is current assets minus current liabilities. To understand liquidity position of the BSE the study of working capital position & current ratio is very significant.

Every company needs working capital to prosper and to grow. Therefore, every company should maintain satisfactory level of working capital. Any change in the working capital has an effect on cash flow into or away from the business.

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Table No. 4.17: Working Capital of BSE

Year Current Assets (Rs) Current

Liabilities(Rs) Working

Capital(Rs) Current Ratio CAWC

1991 332783461 298591526 34191935 1.11 9.73 1992 2731246094 2646337259 84908835 1.03 32.17 1993 1519116374 1630593200 -111476826 0.93 -13.63 1994 908207391 738527016 169680375 1.23 5.35 1995 1173370235 842157927 331212308 1.39 3.54 1996 2097684947 1319855754 777829193 1.59 2.70 1997 2377681334 1458493995 919187339 1.63 2.59 1998 2116613304 2039371769 77241535 1.04 27.40 1999 5470621090 5536733458 -66112368 0.99 -82.75 2000 11624775956 15671977636 -4047201680 0.74 -2.87 2001 9934004706 6730536320 3203468386 1.48 3.10 2002 7422748981 3383439318 4039309663 2.19 1.84 2003 4388406897 2078515271 2309891626 2.11 1.90 2004 2971653922 2678845092 292808830 1.11 10.15 2005 5643512640 3962266467 1681246173 1.42 3.36 2006 42249266561 15523802657 26725463904 2.72 1.58 2007 3008798635 6044931815 -3036133180 0.50 -0.99 2008 377453807 8599780321 -8222326514 0.04 -0.05 2009 16829257085 9148540829 7680716256 1.84 2.19 Source : Data is compiled from the Annual Reports of BSE. Current Ratio = Current Assets / Current Liabilities, Working capital= CA-CL CAWC = Current Assts / Working Capital

Table No. 4.17 gives the state of working capital of BSE, current ratio & current assets to working capital ratio. BSE's current assets consist of sundry debtors, cash and bank balances, loans and advances etc. The value of current assets was Rs.332783461 in 1991 & it stood at Rs.16829257085 in 2009. Current liabilities comprise of sundry creditors, income received in advance and tax liabilities. The value of current liabilities is increasing continuously. It was Rs. 298591526 in the beginning and it increased to Rs.9148540829 in the year 2009. Working capital was very high in 2006 i.e. Rs.26725463904. But in 1993, 2000, 2007 & 2008 BSE accounted negative working capital because current liabilities are more than current assets. Standard current ratio is 2:1 i.e. 2 is current assets & 1(one) is current liabilities. It means CA should twice than CL. It is a test of short term solvency (liquidity). Higher the ratio indicates sound financial of a company. In the year

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1991 to 2001, in 2004 &2005& from 2007to 2009 current ratio is lower than standard ratio (2:1). For the year 2002, 2003, & in 2006 current ratio is higher than standard ratio.

The CAWC was ratio very high in 1992 i.e. 32.17 whereas less in the year 2008 i.e. -0.05. It is also seen that CAWC ratio is negative in the year 1993, 1999, 2000, 2007, 2008 because working capital is negative during these years,

4.21.3 Fixed Assets and Long Term Funds of BSE

Fixed assets are purchased for continued and long term use in earning profit in a business. BSE's fixed assets include buildings, land, computer systems, telephone systems, vehicles, furniture and fixtures. Long term funds include share capital, reserves and surplus and unsecured deposits.

Table No. 4.18: Fixed Assets and Long Term Funds of BSE

Year Fixed Assets (Rs) Long Term Funds

(Rs) FAR 1991 200980281 63784801 3.15 1992 191554934 206529858 0.93 1993 299658977 52392015 5.72 1994 319226826 840687039 0.38 1995 543802677 1277471701 0.43 1996 578590967 1509553752 0.38 1997 517769384 1595667190 0.32 1998 550359700 1797299715 0.31 1999 450467454 2169539637 0.21 2000 626043193 38383158501 0.02 2001 995855393 5900521291 0.17 2002 691849354 6310331338 0.11 2003 458219339 6720183039 0.07 2004 385936261 7416949463 0.05 2005 412273147 8290255641 0.05 2006 639653408 9337682209 0.07 2007 571145960 10057463067 0.06 2008 907587097 15596359330 0.06 2009 749613255 17283751006 0.04

Source : Data is compiled from Annual Reports of BSE from 1991 to 2009. FAR = Fixed Assets / Long Term Funds

Table No. 4.18 discloses the position of fixed assets and long term funds of BSE and fixed assets ratio of BSE during study period. FAR Ratio

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indicates long term financial strength of the company. It indicates long term solvency (liquidity) of a company. The standard FAR ratio depends upon nature & types of business. In the year 1991 &1993 fixed assets are 3 times & five times greater than long term funds respectively. It shows investment in the fixed assets has been increasing in these years. For the year 1992 & from 1994 to 2009 investment in FA is Less than long term funds. It means since 2003 investment in fixed assets has been reducing.

4.21.4 Total Assets and Total Liabilities of BSE:

The total assets and total liabilities of the business show the financial health of organization. The total assets of BSE consist of current assets and fixed assets and total liabilities consist of unsecured loans & secured loans & liabilities.

Table No. 4.19 : Total Assets and Total Liabilities of BSE

Year Total Assets (Rs) Total Liabilities

(Rs) SOR 1991 547660390 329483312 1.66 1992 2922801029 2922801029 1.00 1993 2173770351 2173770351 1.00 1994 1582429215 765561176 0.48 1995 2122167912 866210211 0.41 1996 2831270914 1338826162 0.47 1997 3055345718 1469557528 0.48 1998 3837179143 2044512426 0.53 1999 7706273095 5536976458 0.72 2000 20189343834 16108770984 0.80 2001 13635784855 7730506564 0.57 2002 3690833347 4304688242 1.17 2003 5179295957 2972709073 0.57 2004 7241809010 2901955518 0.40 2005 6617651677 3974023152 0.60 2006 21812963210 15588982247 0.71 2007 14627695596 6044931815 0.41 2008 22629702384 8612031072 0.38 2009 12215796183 9150394231 0.75

Source : Data is compiled from Annual Reports of BSE from 1991 to 2009. FAR = Fixed Assets / Long Term Funds

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Table No. 4.19 exhibits the status of the total assets and liabilities of BSE. Solvency ratio indicates that whether BSE is in position to meet its short term and long term obligations. A steady increase in value of total assets reduces the solvency ratio. In the year 1991-1993 &2002 SOR is above one (1) it means TL are more than TA. In the year 1992 &1993 TA are equals to TL, therefore SOR is one. From the year 1994 (except 2002) TA are greater than TL therefore SOR is less than one. Thus SOR trends of BSE indicates is in position to meet its short term &long term obligations.

4.21.5 Profitability of BSE

Profitability denotes the surplus generating capacity of any enterprise. Profit is an incentive to shareholder, managers & perspective investors. Operating profit means profit before interest & tax. Capital employed means fixed assets plus working capital. Following Table No. 4.20 depicts profitability of BSE during the period under review.

Table No. 4.20 : Profitability of BSE

Year Operating Profit (Rs) %

change Capital

Employed (Rs) %

change ROCE 1991 69794594 - 235172216 -- 0.30 1992 112947159 0.61 276463770 5.00 0.41 1993 267195257 1.36 411135963 5.38 0.65 1994 85716924 -0.67 488907201 2.89 0.18 1995 120839660 0.41 875014985 3.66 0.14 1996 103968288 -0.14 1356420160 1.77 0.08 1997 82052517 -0.21 1436956723 7.81 0.06 1998 3829353 -0.95 62601235 3.03 0.06 1999 155299165 39.55 384255088 9.81 0.40 2000 522681573 2.37 -3421158487 -2.32 --- 2001 56005254 -0.89 4199323779 3.59 0.01 2002 281363119 29.28 4731159017 2.68 0.06 2003 207534288 0.09 2768111019 1.24 0.07 2004 512324736 0.28 678745091 8.86 0.75 2005 595888507 0.29 2093519320 4.54 0.28 2006 816192442 -0.73 -14470652593 -3.30 --- 2007 1001593912 0.23 -2464987220 -1.18 --- 2008 1967883064 1.00 -7314739417 -1.20 --- 2009 2660224166 0.33 8430329511 1.58 0.32

Source : Data is compiled from Annual Reports of BSE from 1991-2009 ROCE : Operating Profit/Capital Employed, ROCL :Return on Capital Employed

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In the year 1993, 2004 & 2005 BSE making more profit as compared to other years. In these years ROCE remains between 0.64 to 3.4. For the rest of years it is lower i.e. between 0.02 to 0.40.In the year 2001, 2006, 2007 & 2008 capital employed is negative so cannot find out ROCE but still BSE getting operating profit.

Conclusion

BSE is an oldest stock exchange in Asia with a rich heritage. Now spanning three centuries in its 133 years of existence. What is now popularly known as BSE was established as "The Native Shares & Stock Brokers Association" in 1875. It is seen that out of total companies listed on BSE 72% of companies are listed on BSE only. BSE's debt segment and equity derivative segment are not developed as capital market segment of BSE. BSE's delivery ratio in term of physical shares oscillates between the range of 25% to 46%. The BSE contributed very little share of total derivative market. FII are continuously pumping their money into the Indian stock market and on BSE, but there are fluctuations in their investment. About turnover of BSE Group-A shares and specified shares accounted larger part of BSE's total annual turnover.

About the concentration of market, Top-100 securities and Top-100 members accounted largest percentage of total turnover of BSE's cash market segment. In case of trading frequency, companies traded on BSE for more than 100 days increase significantly during the study period of 1991-1992 to 2008-09.

Looking into product wise turnover of derivative segment of BSE, index future which accounted for highest percentage of turnover among the various products of equity derivative segment of BSE. In case of fresh capital listed on BSE, preferential instruments listed highest amount of capital than equity instruments and debentures and bonds. It is also observed that average daily turnover of specified shares is greater than average daily turnover of non-specified shares.