Bombay Stock Exchange

The roots of the stock exchange, Mumbai can be traced back to 1875, when the shares and

stockbroker association (non profit organization) was established. BSE is the oldest stock exchange in

Asia and is very important stock Exchange in Indian capital market. After liberalization, the stock

exchange, Mumbai has witnessed a huge increase its operation on par with international standards.

The board of governor pf BSE comprises 9 elected directors (1 third of them retire every year by

rotation) and executive director, 3 government nominees, a reserve bank of India nominee a five

public representative. A president, vice president and honorary treasurer are annually elected from

among the elected director by the governing board following the election of directors. Executive

director work as the chief executive officer and is responsible for day to day administration of stock

exchange. INTRODUCTION

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as

"The Native Share and Stock Brokers Association", as a voluntary non-profit making

association. It has evolved over the years into its present status as the premier Stock

Exchange in the country. It may be noted that the Stock Exchanges is the oldest one in

Asia, even older than the Tokyo Stock Exchange, which was founded in 1878.

The Exchange, while providing an efficient and transparent market for trading in

securities, upholds the interests of the investors and ensures redressal of their grievances,

whether against the companies or its own member-brokers. It also strives to educate and

enlighten the investors by making available necessary informative inputs and conducting

investor education programmes.

A Governing Board comprising of 9 elected directors (one third of them retire every year

by rotation), two SEBI nominees, a Reserve Bank of India nominee, six public

representatives and an Executive Director is the apex body, which decides the policies

and regulates the affairs of the Exchange.

The Executive Director as the Chief Executive Officer is responsible for the day-to-day

administration of the Exchange.

The average daily turnover of the Exchange during the year 2000-2001 (April-March),

was Rs.3984.19 crores and average number of daily trades was 5.69 lakhs. However, the

average daily turnover of the Exchange during the year 2001- 2002 has declined to Rs.

1244.10 crores and number of average daily trades during the period to 5.17 lakhs. The

ban on all deferral products like BLESS and ALBM in the Indian capital Markets by

SEBI w.e.f. July 2, 2001, abolition of account period settlements, introduction of

Compulsory Rolling Settlements in all scrips traded on the Exchanges w.e.f. December

31, 2001, etc. have adversely impacted the liquidity and consequently there is a

considerable decline in the daily turnover at the Exchange.

An example of a bond. Securities analysts may carry out research on bonds, stocks and any other type of security. Securities research is a discipline within the financial services industry. Securities research professionals are known most generally as "analysts," "research analysts," or "securities analysts;" all the foregoing terms are synonymous. Securities analysts are commonly divided between the two basic kinds of securities: equity analysts (researching stocks and their issuers) and fixed income analysts (researching bond issuers). However, there are some analysts who cover all of the securities of a particular issuer, stocks and bonds alike.

 

Securities analysts are usually further subdivided by industry specialization - among the industries with the most analyst coverage are biotechnology, financial services, energy, and computer hardware, software and services. Fixed income analysts are also often subdivided by asset class - among the fixed income asset classes with the most analyst coverage are convertible bonds, high yield bonds (see high-yield debt), and distressed bonds (see distressed securities). (Although technically not securities, syndicated bank loans typically fall within the domain of fixed income analysts, and are covered, as if they were bonds, by reference to the industry of their borrowers or asset class in which their credit quality would place them.)

 

In the broadest terms, securities analysts seek to develop, and thereafter communicate to investors, insights regarding the value, risk, and volatility of a covered security, and thus assist investors to decide whether to buy, hold, sell, sell short, or simply avoid the security in question or derivative securities (see: derivative). To gather the information required to do so, securities analysts review periodic financial disclosures (such as made by United States-listed issuers to the S.E.C.) of the issuer and other relevant companies, read industry news and use trading history and industry information databases, interview managers and customers of the issuer, and (sometimes) perform their own primary research.

Demat Trading

A depository holds securities in dematerialized form. It maintains ownership records of

securities in a book entry form and also effects transfer of ownership through book entry.

SEBI has introduced some degree of compulsion in trading and settlement of securities in

dematerialized form. While the investors have a right to hold securities in either physical

or demat form, SEBI has mandated compulsory trading and settlement of securities in

dematerialized form. This was initially introduced for institutional investors and was later

extended to all investors. Starting with 12 scrips on January 15, 1998, all investors are

required to mandatorily trade in dematerialized form in respect of 2,335 securities as at

end-June, 2001.

Since the introduction of the depository system, dematerialization has progressed at a fast

pace and has gained acceptance among the participants in the market. All actively traded

scrips are held, traded and settled in demat form. The details of progress in

dematerialization in two depositories, viz., NSDL and CDSL., are presented as below:

In a SEBI working paper titled ‘Dematerialization: A Silent Revolution in the Indian

Capital Market’ released in April 2000, it has been observed that India has achieved a

very high level of dematerialization in less than three years’ time, and currently more

than 99%of trades settle in demand form. Competition and regulatory developments

facilitated reduction in custodial charges and improvements in qualities of service

standards. The paper observes that one imminent and apparent immediate benefit of

competition between the two depositories is fall in settlement and other charges.

Competition has been driving improvement in service standards. Depository facility

has effected changes in stock market microstructure. Breadth and depth of investment

culture has further got extended to interior areas of the country faster. Explicit transaction

cost has been falling due to dematerialization. Dematerialization substantially contributed

to the increased growth in the turnover. Dematerialization growth in India is the quickest

among all emerging markets and also among developed markets excepting for the U.K

and Hong Kong.

NSE INTRODUCTION

The National Stock Exchange (NSE) is India's leading stock exchange covering around

400 cities and towns all over India. NSE introduced for the first time in India, fully

automated screen based trading. It provides a modern, fully computerized trading system

designed to offer investors across the length and breadth of the country a safe and easy

way to invest or liquidate investments in securities.

Sponsored by the industrial development bank of India, the NSE has been co-sponsored

by other development/ public finance institutions, LIC, GIC, banks and other financial

institutions such as SBI Capital Market, Stockholding corporation, Infrastructure leasing

and finance and so on. India has had a history of stock exchanges limited in their

operating jurisdiction to the cities in which they were set up.

NSE started equity trading on November 3, 1994 and within a short span of 1 year

became the largest exchange in India in terms of volumes transacted. Trading volumes in

the equity segment have grown rapidly with average daily turnover increasing from Rs.7

crores in November 1994 to Rs.6797 crores in February 2001 with an average of 9.6 lakh

trades on a daily basis. During the year 2000-2001, NSE reported a turnover of Rs.13,

39,510 crores in the equities segment accounting for 45% of the total market.

The NSE represented an attempt to overcome the fragmentation of regional markets by

providing a screen-based system, which transcends geographical barriers. Having

operationalised both the debt and equity markets, the NSE is planning for a derivative

market, which will provide futures and options in equity. Its main objectives has been to

set up comprehensive facilities for the entire range of securities under a single umbrella,

namely,

To set up a nation wide trading facility for equities, debt instruments and

hybrids;

To ensure equal access to investors across the country through an appropriate

communication network;

To provide a fair, efficient and transparent securities market to investors using

the electronic trading system;

To ensure shorter settlement cycles and book entry settlement systems; and

To meet the current international standards prevalent in the securities

Industry/markets.

THE STRUCTURE OF MARKET

PRIMARY MARKET AND SECONDARY MARKET

PRIMARY MARKET: It’s a place where the investor have the first opportunity to

subscribe to newly issued securities. It is the market where the securities are created.

Companies sell their new stocks or bonds for the first time to the public in this

market. It is otherwise called as initial public offering(IPO). An IPO comes into

existence when the private companies sells its stock to the public for the first time.

The mmost important faeturesof primary markets is the public buys the securities

directly from the issuing companies.

SECONDAY MARKET:-

The secondary market is that’s segment of capital market where the outstanding

securities are traded. From the investor point of view the secondary markets imparts

liquidity to long term to the long term securities held by them by providing an auction

market for this securities. The secondary market operates through the medium of

stock exchange which regulates the trading activity in this market and ensures a

measure of safety and fair dealing to the investors. The striking feature of secondary

market is that the investor trades among themselves. It does not include issuing

companies and investor trade previously traded securities. Secondary markets are of

two types

1. Auction market: - all individual and institution assemble the trade securities at one

area and announces the price at which they are willing to purchase or buy.

2. Dealer market: - individuals or companies will specialize in specific securities and

buy or sell according to the demand of market. Over the counter market our

grouped under dealer market g\has the demand and supply for the particular stock

is not enough to meet the requirement of different investor.

DIFFERENT TYPES OF STOCKS:

COMMON STOCKS: generally when people talk about stock they refer to common

stock. Majority of the stock is preferred common stocks. Common stock or shares

represent the ownerships in the company and their holder has the right ton claim a

portion of profit. Common stock yields higher returns when compared to any other

investment. if a company goes bankrupt, the common shareholder will receive money

until the creditors, debtors and the preferred shareholders are paid.

PREFERRED STOCK: They represent some degree of preference of ownership in

the company. With preferred shares investors are usually guaranteed a fixed dividend.

The most advantageous feature of proffered stock is that in the event of liquidation

the preferred shareholder are paid off before common shareholder. The company has

the option to purchase shares from the shareholder at any time.

GROWTH STOCK: Growth stocks are the stocks that can be expected to the

experience high rates of growth in operation or earning. This growth rates are to a

large extent higher then the market averages. These companies usually reinvest there

earnings instead of distributing them as dividend to support there high growth rates.

The price of growth stock as well as there return on there stocks tends to be higher

then the income stocks. They do not fit well wit a speculative approach calling for

high current cash flow from investment and high degree of investment principle

stability

.

VALUE STOCK: These are stock of companies which are considered undervalued

because they may be in an industries that is out of favors, they may be experiencing

management turmoil or they may be restructuring the business operation. These

stocks tend to have lower price earnings and price to book ratio then growth stocks

do. Therefore there prices are cheap compared to prices required to be paid for

growth stocks.

Every person takes care to streamline his current income in such a manner that inflows exceed the schedule outflow. The surplus is either saves or invested in avenue which promises subject some returns in year to come.The investment decision are based on investors future plan and his expectation from life like buying house, planning for child marriage etc therefore the investor evaluates the risk inherent in the venture. Risk associated with an investment is broadly of three type’s business financial risk and liquidity risk. Based on three broad parameters, the investors evaluate various investment opportunities available in the financial system.An individual or institution invest in various programmed and in one of that is equity.