Chapter 3

STOCK MARKET IN INDIA

The Battlefield
“ Market is a place where buyers and sellers come into contact
to exchange goods or services”

*The essential features *

1) Existence of buyers and sellers
2) Existence of price
3)Allocation of resources
4) Existence of regulatory mechanism.
STRUCTURE OF THE SECURITIES MARKET

Securities
Market

Equity Debt Derivatives

Market Market Market

Government Corporate
Securities Debt Money Options Futures
Market Market Market Market Market
SEBI and its Objectives

1. Tries to develop the securities market.

2. Promotes Investors’ Interest.
3. Makes rules and regulations for the securities market.

Important Functions of SEBI

1) Regulating the business in stock exchanges and any other
securities markets

2) Registering and regulating the working of the depositories

[participants], custodians of securities, foreign institutional
investors, credit rating agencies

3) Registering and regulating the working of venture capital funds

and collective investment schemes, including mutual funds;

4) ) Prohibiting fraudulent and unfair trade practices relating to

 Departments of SEBI
1)MARKET INTERMEDIARIES REGULATION AND SUPERVISION
DEPARTMENT (MIRSD)
2) MARKET REGULATION DEPARTMENT (MRD)
3) DERIVATIVES AND NEW PRODUCTS DEPARTMENT (DNPD)
4) CORPORATION FINANCE DEPARTMENT (CFD)
5) INVESTMENT MANAGEMENT DEPARTMENT (IMD)
6) INTEGRATED SURVEILLANCE DEPARTMENT (ISD)
7) INVESTIGATIONS DEPARTMENT (IVD)
8) ENFORCEMENT DEPARTMENT (EFD)
9) LEGAL AFFAIRS DEPARTMENT (LAD)
10 ) ENQUIRIES AND ADJUDICATION DEPARTMENT (EAD)
11) OFFICE OF INVESTOR ASSISTANCE AND EDUCATION
(OIAE).
12 ) GENERAL SERVICES DEPARTMENT (GSD)
13)RESEARCH AND TRAINING DEPARTMENT (RTD).
14) OFFICE OF THE CHAIRMAN (OCH)
15) THE REGIONAL OFFICES (RO’s)
 PRIMARY
EQUITY MARKET

• PUBLIC ISSUE

• RIGHTS ISSUE

• PRIVATE PLACEMENT

• PREFERENTIAL ALLOTMENT
 ISSUE TYPE OFFER PRICE DEMAND PAYMENT
Fixed Price Price at which the Demand for 100 % advance payment is
Issues securities are offered the securities required to be made by the
and would be allotted offered is investors at the time of
is made known in known only application.
advance to the after the
investors closure of the
issue

Book Building A 20 % price band is Demand for 10 % advance payment is

Issues offered by the issuer the securities required to be made by the
within which investors offered , and QIBs along with the application,
are allowed to bid and at various while other categories of
the final price is prices, is investors have to pay 100 %
determined by the available on a advance along with the
issuer only after real time application.
closure of the bidding. basis..
Reverse Book Building
The reverse book building is an efficient price discovery
mechanism of de-listing of securities, which is provided for
capturing the sell orders on online basis from the shareholders
through respective BRLM.

Secondary Market
Secondary Market refers to a market where securities are
traded after being initially offered to the public in the primary
market and/or listed on the Stock Exchange.
Listing of Securities
Listing means admission of securities of an issuer to trading
privileges (dealings) on a stock exchange through a formal
agreement. The prime objective of admission to dealings on the
exchange is to provide liquidity and marketability to securities,
as also to provide a mechanism for effective control and
supervision of trading.
 SCREEN BASED SYSTEM
The kind of screen based system adopted in India is referred to as
the open electronic order (ELOB) market system.

ELOB
• Buyers and sellers place their orders on the computer
• Computer instantly tries to match mutually compatible orders
on a price-time priority
 BUYING AND SELLING OF SHARES

• Locating a Broker

• Placement of Order

• Execution of Order

• Internet Trading
 SETTLEMENT

• Security transactions are settled through electronic

delivery facilitated by depositories

• Presently, the settlement of all trades is a rolling

settlement on a T+2 basis
 What is a Depository?

A depository is an organisation which holds securities (like

shares, debentures, bonds, government securities, mutual fund
units etc.) of investors in electronic form at the request of the
investors through a registered Depository Participant
 Circuit Breakers
In case of a 10% movement on either side of index, 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 ½ hour. In case 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 a 15% movement of either side of index, there will be a

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

In case of a 20% movement of the index, the trading will be halted

for the remainder of the day.
 Circuit filters On individual stocks

When applied to individual stocks, circuit filters are known as

price bands or price filters.

There are no circuits on the 30 stocks included in the

Sensex or the 50 included in the Nifty.

The filter bands are in the range of 2%, 5%, 10% and 20%.
 Buy back of shares

Buyback is the reverse of issue of shares by a company.

In buy back, company offers to take back its shares
owned by the investors at a specified price; this offer can
be binding or optional to the investors.