The south Gujarat shares &shares brokers Limited (SGSSL) is a public limited company registered under company act 1956. Company established with authorized share capital of RS.3 crores and it’s paid up capital 1.27 crores. The south Gujarat shares &shares brokers Limited started its activities as an association of persons in 1992 and acted as sub brokers giving services for buying and selling of securities to the retail investors from south Gujarat, particularly in Surat. Mr. Anil Choksy, Mr. Ashok Mehta, Mr. Jagdish Patel and Mr. Paresh Javeri who are the permanent directors of the company, took initiative in forming a limited company, so as to become the member of the National Stock Exchange of India Limited. Accordingly, the company South Gujarat Shares & Share brokers Limited was registered under the companies act on the 5th January 1995. To begin with it conducted its trading business through other members of the National Stock Exchange. During the first year of its operation ending on the 31st March 1995 it suffered a loss of Rs.80000 due to heavy establishment expenses like assets purchase, maintenance, establishment, building, furniture etc The company had another poor year during 1995-96 and suffered a further loss of Rs.1.18lacs. This was mainly because the company couldn’t



procure the Nation Stock Exchange membership during the year and also because of the prevailing poor market conditions. The company obtained SEBI registration as stockbroker on the 27th February 1996 and its activities full-fledged members of the National Stock Exchange commenced on the 18th April 1996. Originally, the operations were started at Baroda since National Stock Exchange at that time was not providing connectivity in Surat. Once the NSE connectivity was made available in Surat, the operation was shifted to Surat on the 23rd July 1996. At present the location in Belgium Chamber. At Belgium Chamber the company has a large space of approximately 2700sq ft for smooth operation. Another terminal has since been installed at J.K.Towers in March 1997 to give better services to the investors. During the year ended 31st March 1997 the company has turned the corner. On the total income of Rs.45,80,000 the company made a net profit of Rs.3,75,000 and after adjusting the losses of the previous two years of Rs.1,98,000, the net profit carried to the Balance Sheet works out to be Rs.1,78,000. In 1998 company has taken approval from National Security Depository Ltd to work as depository participant (DP). In south Gujarat, SGSSL is the first company who takes the depository participant (DP). There are more than 12,000 holders which having demate account in SGSSL. The company is second largest in demate account in Surat city Company has a computer to computer link (CTCL) network, which are connected with LAN and also with WAN. In Surat City Company has



given many register sub-broker CTCL. Company also provide in outside of Surat like Hazira, Navsari, and also in Bilimora. In present condition company try to register it’s sub broker in SEBI. Now in present, company has 35 registered sub-brokers and other members if they work then company insist to take registration. In company there are 28 persons working. Company has 5 servers, in this one server connect with NSE CTCL and second with disaster management. In NSDL also their is one main server. Company provides 3 different rooms for on line trading to it’s clients and sub-broker with satellite dish, Equara cable and modem. In back office with account package of comtek also works actively with NSDL server. The company has been stressing on the delivery oriented securities trading and since inception has been consistently one of the major delivering members. The company has been diligent ensuring compliance with the securities trading and settlement regulations of the NSE. It has resulted in ensuring cleaner operations. The trading business of the company is rapidly expanding and its volumes have now crossed Rs.2.5 to 3 corers per day. The company expects the trading volume to at least double during the current year. Mr. Anil Choksy, who is the chairman and the managing director of the company, heads the operations of the company. He along with other full time directors maintains a close hand on the operations. The company has its own internal trading and settlement regulations, which are in conformity


Surat-395003.000 holders having demate a/c in SGSSL.  MILESTONES During the year ended 31st march 1997.11.58 lacks.86 lacks as against 1.  Net profit for current year is Rs.) Name of the company: “South Gujarat Shares and Share-brokers Ltd. Ring Road.  4 . Belgium Chamber.05 lacks of previous year. Opp. 2.  PROFILE OF THE COMPANY 1. These regulations ensure that the activities of the company are managed on the Cooperative basis and in the best interest of the investors and the shareholders of the company.96.  Company has 35 registered sub-brokers. Company has turned the corner.) Registered office: 3rd Floor.  The company has taken approval from NSDL to work as DP. Liner Bus stop.  Total income of company is Rs.CAPITAL MARKET IN INDIA with the NSE and SEBI regulations.  At present there are more than 12.

Bipinchandra Linewala Director 4. Kapadia Mr. Internal Auditor: P. Shashikant R. Whole time Director Director Director Mr.D. Bhadresh G.) Board of Directors: Mr. Patel and Co. Choksy Mr.CAPITAL MARKET IN INDIA 3. H. 5 . Yacoobali Chairman and M. Yadav Mr.) Bankers: Canara Bank Karnataka Bank Ltd. HDFC Bank Ltd. Aiyus M.) Auditors: Ashok Rajpara Chartered Accountants Surat. 5. Chartered Accountants Surat. Anil J.

Generally it done with ordinary share. when 22 enterprising brokers under a Banyan tree established the Bombay Stock Exchange (BSE). stocks. Over the last 125 years.They do so by converting financial assets into productive physical assets. Indian markets conform to international standards both in terms of structure and in terms of operating efficiency.CAPITAL MARKET IN INDIA CAPITAL MARKET  CONCEPT Capital market is the markets for funds which have a long or indefine maturity i. modern and efficient securities markets in Asia. debentures and bonds of corporations and securities of the government .e. Today.  THE CAPITAL/SHARE MARKET The origination of the Indian securities market may be traced back to 1875. which have a maturity period of above one year. It diverts resources from wasteful and unproductive channels to productive investment. Capital market provides a market mechanism for those who have savings and to those who need funds for productive investments. Generally capital market supplies long term and medium term securities and funds. It deal with long term funds. 6 . the Indian securities market has evolved continuously to become one of the most dynamic. Capital market generates the funds from the saver and transfer to user.

the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Foreign brokers account for 29 of these. The main functions of the Clearing Corporation are to work out (a) what counter parties owe and (b) what counter parties are due to receive on the settlement date. each exchange has a Settlement Guarantee Fund to meet with any unpredictable situation and a negligible trade failure of 0. Clearing Corporation houses of NSE and BSE respectively. are settled in dematerialized form in a T+2 rolling settlement environments. In India 99.CAPITAL MARKET IN INDIA Structure and Size of the Markets Corporation of the exchanges assumes the counter-party risk of each member and guarantees settlement through a fine-tuned risk management system and an innovative method of online position monitoring.9% of the trades. Each has fully electronic trading platforms with around 9400 participating broking outfits. Furthermore.5bn. In addition. according to the National Securities Depository. Any market that has experienced this sort of growth has an equally substantial demand for highly efficient settlement procedures. It also ensures the financial settlement of trades on the appointed day and time irrespective of default by members to deliver the required funds and/or securities with the help of a settlement guarantee fund. trades are guaranteed by the National Clearing Corporation of India Ltd (NSCCL) and Bank of India Shareholding Ltd (BOISL). The Clearing 7 . Today India has two national exchanges. There are some 9600 companies listed on the respective exchanges with a combined market capitalization near $125.003%.

the foreign investors’ only way of accessing the Indian capital markets was through listed country funds.CAPITAL MARKET IN INDIA Highlights of the highly attractive Indian capital markets Two major reasons why Indian securities are now increasingly regarded as attractive to international investors are the relatively high returns compared with more developed global markets as well as the low correlation with world markets. The success of this initiative ensured that this fund was followed by numerous others. India’s regulator. there are 498 Foreign Institutional Investors who hold 1325 subaccounts with a net investment of approximately $15bn. 8 . Transparency. marking an important contribution to economic development. the Securities Exchange Board of India (SEBI) is playing more of a development role rather than being merely a watchdog.” Asia Focus was launched by the Unit Trust of India (UTI) in London in 1986. INDIA’S SECURITIES MARKET A Brief History “The capital market is one of the most exciting sectors in the financial system. Indian companies are now also allowed to raise equity capital in the international market through the issue of GDRs. Today. However until the early 90s.

CAPITAL MARKET IN INDIA competitiveness and equal opportunity to all market participants has been the driving philosophy behind all the development and regulatory initiatives of SEBI. As if further evidence was needed of India’s willingness to embrace change. the availability of Internet trading and dual fungibles of American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) provides a clear indication of the vibrancy and dynamism of the Indian securities market. and actively campaigning for the adoption of Straight through Processing as the market standard. eliminating the manual work involved in transaction processing. index options. The availability of derivative products including index futures. individual stock futures and individual stock options re-enforces the overall attractiveness of this market to foreign and domestic investors. 9 . This makes the market place attractive for foreign and domestic investors. With SEBI recognizing the benefits of. Successful implementation of STP will considerably reduce the transaction processing cost in the market. Compared to last financial year the annual turnover grew by over 300%. The derivatives market in only two years has shown spectacular growth. the market is making significant progress towards the goal of executing and settling the transactions without any human intervention – the so called STP nirvana. Other aspects of the market such as the increasing sophistication and range of tradable financial products add to the attractiveness of the market as a whole.

While we can only buy in the Primary market. firms. we can buy and sell securities in the secondary market.CAPITAL MARKET IN INDIA  MEANING OF CAPITAL MARKET “Capital market refers to the market for rising of financial resources by the business enterprises.” Capital market is an organized market for long term funds required for meeting long term needs of business enterprises. 10 . Capital market is a wide term used to comprise all operation in the new issues market and stock market. Market comprises some who demand and other who supply these resources. While trading in the existing securities relates to the secondary market. New issues made by the companies constitute the Primary marker. It converts savings into profitable investments for industrial development. public sector units and other organization. semigovernment bodies. government.


e. Company raises it capital in the primary market though: 1). the New Issue Market. therefore. securities which were not previously availably and are offered to the investing public for the first time.CAPITAL MARKET IN INDIA  TYPES OF SECURITIES MARKET The securities market can be divided in to three part: 1. This is the physical or tangible asset through which the market functions. The market.) Long term loans market INDUSTRIAL SECURITIES MARKET The industrial securities market consists of two complementary parts i. The New Issue Market deals with new securities i.) Government securities market 3.Primary Market Primary market is the market for those securities which are issued first time in the market for the public. The corporate sector raises their capital through these above three types of securities.) Industrial securities market 2. Preference shares Debenture or Bonds. it is called New Issue Market.e. derives its name from the fact that it makes available a 12 . Primary market is a market for New issues or New financial claims. Hence. It is a market for industrial securities namely: (i) (ii) (iii) Equity shares or ordinary shares or common stock. and Secondary Market.

when existing company first offered.CAPITAL MARKET IN INDIA New Block of Securities for public subscription. In the Primary market. The stock exchange in India are regulated under the securities contracts (Regulation) Act. It facilitates capital formulation. Right Issue means. borrowers exchange new financial securities for long term funds.) Secondary Market Secondary market is the market for those securities which have already been available in the market and listed on a stock exchange. 13 . The security to existing shareholders on a Pre –emptive bases. Private placement imagine private sale of securities to small group investors. 2. This market consists of all stock exchange recognized by the Government of India. while company want to raise additional capital is called capital is called Right Issue. 1956. Companies raise ite capital in the primary market though: (i) (ii) (iii) Public Issue Right Issue Primary placement/subscription The most popular method of raising capital is sale of securities to the public by new companies is called Public Issue. The main benefit of Secondary market is securities sold and purchased continuously among investors without involvement of company.

Improvement Trusts. primary and satellite dealers. About one –third of the net demand and time liabilities of the banks are partly in government securities market mainly to meet statutory liquidity requirements and partly for investment purpose. and trusts. Long term securities are traded in this market while short term securities are traded in the money market. It is a market where Government securities are traded. Interest is payable half. insurance companies.yearly and they carry tax exemptions also. In India there are many kinds of Government Securities-short term and long term. All India and State level financial institutions and public sector enterprise are dealt in this market. Government securities are issued in denominations of RS. Participants in the G-secs Market Banks are the largest holders of G-secs. State Government. Apart from banks. State Electricity Boards. Semi –Government authorities like city Corporation. Securities issued by the Central Government. It is otherwise called Gilt-Edged securities market.CAPITAL MARKET IN INDIA GOVERNMENT SECURITIES MARKET The government securities market (G-secs) is the largest segment of the long term debt market in India. Other investor in G-secs includes mutual funds. accounting for nearly two-thirds of the issues in the primary market and more than four –fifths of the turnover in the secondary market. Port Trusts etc. and provident funds have substantial holdings of G-secs almost one-fifth of the outstanding G-secs are held by these institutions. 100. The role of brokers in marketing these securities is practically very limited and the 14 .

Long term loans market may further be classified into: (i) (ii) (iii) Term loans market Mortgages market Financial Guarantees market. The secondary market for these securities is very narrow since most of the institutional investors tend to retain these securities until maturity.R. LONG TERM LOANS MARKET Development banks and commercial banks play a significant role in this market by supplying long term loans to corporate customers. 15 . Hence this market also plays a vital role in monetary management.CAPITAL MARKET IN INDIA major participant in this market in the “commercial banks” because they hold a very substantial portion of these securities to satisfy their S. requirements. The Government securities are in many forms. These are generally: (i) (ii) (iii) Stock certificates of inscribed stock Promissory Notes carrier Bonds which can be discounted. Government securities offer a good soured of raising inexpensive finance for the Government exchequer and the interest on these securities influences the prices and yields in this market. Government securities are sold through the Public Debt Office of the RBI while Treasury Bills are sold through auctions.L.

When the properly in question is already mortgaged once to another creditor.) Mortgages Market The mortgage market refers to these centres which supply mortgage loan mainly to individual customers. This mortgages may be equitable mortgage or legal one. The mortgagee 16 . Institutions like IDBI. the mortgages transfer his interest in the specific property to the mortgagee as security.CAPITAL MARKET IN INDIA 1. IFCI. and other state financial corporations come under this category.) Term Loans Market In India . Similarly. in the first charge. ICICI. Again it may be a first charge of title deeds to properties as security whereas in the case of a legal mortgage the title in the property is legally transferred to the lender by the borrower. They also help in identifying investment opportunities. encourage new entrepreneurs and support modernization efforts. Legal mortgage is less risky. These development banks dominate the industrial finance in India. These institutions meet the growing and varied long term loans. it becomes a second charge when it is subsequently mortgaged to somebody else. The transfer of interest in a specific immovable properly to secure a loan is called mortgage. A mortgage loan is a loan against the security of immovable properly like real estate. many industrial financing institutions have been created by the Government both at the national and regional levels to supply long term and medium term loans to corporate customers directly as well as indirectly. 2.

Besides. The primary market consists of original extension of credit and secondary market has sales and re-sales of existing mortgages at prevailing prices. In such a case. These development banks raise finance through the sale of debentures which are treated as trustee securities. Guarantee acts as a security from the creditor’s point of view. 3. purchase of equipment etc. In India residential mortgages ate the most common ones. The Housing and Urban Development Corporation and the LIC play a dominant role in financing residential projects.CAPITAL MARKET IN INDIA can also further transfer his interest in the mortgaged property to another. The mortgage market may have primary market as well secondary market.) Financial Guarantees Market A guarantees market is a centre where finance is provide against the guarantee of a reputed person in the financial circle. the common forms ate: (i) (ii) Performance Guarantee Financial Guarantee 17 . it is called a sub mortgage. Though there are many types of guarantees. the liability falls on the shoulders of the guarantor. Hence the guarantor must be known to both the borrower and the lender and he must have the means to discharge his liability. the Land Development Banks provides cheap mortgages loans for the development of lands. In case the borrower fails to repay the loan. Guarantee is a contract to discharge the liability of a third party in case of his default.


Performance guarantees cover the payment of earnest money, retention money, advance payments, non-completion of contracts etc. On the other hand financial guarantees cover only financial contracts. In India, the market for financial guarantees is well organized. The financial guarantees in India relate to: (i) (ii) (iii) Deferred payments for imports and exports Medium and long term loans raised abroad Loans advanced by banks and other financial institutions.

These guarantees ate provided mainly by commercial banks, development banks, Governments both central and states and other specialized guarantee institutions like ECGC(Export Credit Guarantee Corporation) and DICGO (Deposit Insurance and Credit Guarantee Corporation). This guarantee financial service is available to both individual and corporate customers. For a smooth functioning of any financial system, this guarantee service is absolutely essential.



The changes in the regulatory framework of the capital market and fiscal policies have also resulted in newer kinds of financial instruments (securities) being introduced in the market. Also, a Jot of financial innovation by companies who are now permitted to undertake treasury operations, has resulted in newer kinds of instruments - all of which can be traded - being introduced. The variations in all these instruments depend on the tenure, the nature of security, the collateral security, the interest rate, the trading features, tax breaks and purpose of issue.

These are issued by companies and regulated under the SEBI guidelines of June 11, 1992. These are issued under a prospectus, which has to be approved by SEBI like in the case of equity issues. The rights of investors as debenture holders are governed by the Companies Act. The following is an indicative list of types of debentures:• • • • • • • Participating debentures Convertible debentures with options Zero coupon convertible notes Secured premium notes Zero interest fully convertible debentures Fully convertible debentures with interest Partly convertible debentures.



Indian development financial institutions like IDBI, ICICI, and IFCI, have been raising capital for their operations by issuing of bonds. These too are available in a large variety. These include: • • • • • • Income bonds Tax-free bonds Capital gains bonds Deep discount bonds Infrastructure bonds Retirement bonds In addition to the interest rates and maturity profiles of these instruments, the issuer institutions have been including a put/call option on especially the very long-dated bonds like deep discount bonds. Put option means investor opting to seek refund of investment from the issuer. Call option means issuer opting to refund the amount to investors. Since the tenures of some of these instruments spanned some 20 or 25 years during which the interest rate regimes may undergo a complete change, the issuer have kept the flexibility to retire the costly debt. This they do by exercising their option to redeem the securities at pre-determined periods like at the end of five or seven years. This has been witnessed in number of instruments recently much to the chagrin of investors who were looking for secure and hassle-free long-dated instruments.

Owners of preferential shares enjoy a preferential treatment over equity shareholders with regard to corporate actions like dividend. They also


Investors who own equity shares in a company are called shareholders. Preference shareholders do not have voting rights. EQUITY SHARES Equity shares represent proportionate ownership in the company. etc. Investors who own equity shares of a company are entitled to ownership rights. if Board of Directors and majority of the shareholders agree. Beneficial owners are entitled to all rights.CAPITAL MARKET IN INDIA have a right to receive their amounts before equity shareholders in case of winding up of a company. If a company is wound up for any reason. share in profits of the company. When the dematerialize their shares in a depository. They generally bear a fixed dividend. Preference shares have different features and are accordingly available as: • • • • Cumulative and non-cumulative preference shares Redeemable and non-redeemable preference shares Convertible and non-convertible preference shares Preference shares with a combination of the above features. A shareholder or a beneficial owner can exit from the ownership by selling the shares. 21 . like voting for selection of directors on the Board. they are called beneficial owners. privileges and liabilities that shareholders enjoy. Shareholders are entitled to share profit of the company in the form of "dividend" on "bonus shares". payable if the company declares dividends. An investor can become shareholder/beneficial owner of a company by purchasing shares of the company. equity shareholders may receive money from the residual funds after satisfying all other liabilities.

22 . Investors can invest in book entry form with Banks and other institutions like NSDL.CAPITAL MARKET IN INDIA GOVERNMENT SECURITIES The Central Government or State Governments issue securities periodically for the purpose of raising loans from the public. There are two types of Government Securities . An investor has to approach RBI to receive government securities in physical form. Although only corporate and institutional investors subscribe to government securities. individual investors are also permitted to subscribe to these securities. Treasury Bills have a maturity period of less than or up to one year. Dated Securities have a maturity period of more than one year. The Public Debt Office (PDO) of the Reserve Bank of India performs all functions with regard to the issue management. SHCIL. distribution of interest and redemption. NSDL facility to buy and hold government securities is convenient because of its reach and depository account opened for other securities can be used for holding government securities. and NSCCL etc. settlement of trade.Dated Securities and Treasury Bills.

Issuers have to disclose all relevant facts and information [relevant for deciding on whether to invest in those shares] in the prospectus. Prospectus also has to disclose risk factors and management perception about those risks. SEBI has prescribed the eligibility criteria for companies and instruments as well as 23 . can offer their shares to the investors in the primary market. new as well as old. size of the issue. Investor can receive shares in a public issue by writing DP-ld and Client-Id in the share application form. Companies Act was necessarily amended directing that all public issues above Rs. Investors may invest in the securities after examining the facts and information disclosed in the prospectus. Some of the commonly used processes and methods are described below. This kind of tapping the savings is called an IPO or Initial Public Offering. listing of the issue are decided by the issuer. market determines the price of issue by offering bids. Initial Public Offering (IPO) Companies. timing of the issue.CAPITAL MARKET IN INDIA  CAPITAL MARKET PROCESS There are various processes that Issuers of securities follow or utilize in order to tap the savers for raising resources. SEBI guidelines regulate various procedures involved in making a public issue but price of shares. Under this route.10 crore have to be necessarily in demat form. Private Placement Methods of raising funds directly from investors without issue of prospectus to the public are known as private placement. Large initial public offers are made through book building route.

such issues are called preferential allotments. The liquidity is provided by the stock exchange. Such offers for sale can be made to the existing shareholders by giving them a preferential treatment in allocation or the offer can be on a rights basis.CAPITAL MARKET IN INDIA procedures for private placement. The offers and bids are routed through members of the stock exchange. popularly known as a "broker". the existing holders can get by way of their right. The ability to convert value of securities into cash is called liquidity. Preferential allotments require shareholders approval in the general body meeting. Stock exchange regulates the transactions of the broker and ensures that the transactions are conducted fairly and transparently with justice to both buyers and sellers. Privately placed securities can also be listed if such placements fulfill all listing criteria. Preferential Offer/Rights Issue Companies can expand their capital by offering the new shares to their existing shareholders. i. Stock Trading An investor in securities needs assurance that they can convert their security holdings to cash to meet their cash requirements. Further. 24 . allotment of new shares in certain proportion to their earlier holding. all such offers have also to be in compliance with criteria laid down by SEBI. If the shares are offered to a few of the existing shareholders instead to all shareholders or at a price different from the price at which they are issue to all. Stock exchange is a platform where buyers and sellers of securities will match their bids and offers for securities and exchange securities with cash.e..

This facility is likely to bring about sustained changes in the trading practices. Internet Broking With the Internet becoming ubiquitous. information flows amongst them on a real time basis. are linked electronically. etc. 25 . are now shifting to the homes of investors. DPs. stockbrokers. viz. clearing corporations. It also creates an end-to-end audit trail that makes market manipulation difficult. depositories.CAPITAL MARKET IN INDIA Also the stock exchanges conduct clearing and settlement process to give securities to the buyer and cash to the seller at the end of trade. They are under the over all supervision of SEBI. The availability of securities in demat form has given a further fillip to this process. Internet trading helps security-trading houses to expand their market far and wide across the country and outside the country. Thus. which was converted from the trading hall to the computer terminals at the brokers' premises. many institutions have set up securities trading agencies that provide online trading facilities to their clients from their homes.. The investor knows exactly when and at what rate his order was processed.. clearing banks. The trading platform. stock exchanges. Stock exchanges are self-regulatory organizations. This has been possible since all the players in the securities market.

the capital market facilitates capital formation. • It provided the capital to those enterprises which can apply it profitably. Thus. The savings are invested profitably for economic development because of the services offered by capital market. • It provides proper flow of funds and brings about the rational allocation of resources through the conversion of financial assets into physical assets. It is importance due to: • It enables the investors to adopt their investment to their expectations which are constantly changing. Mobilization of investable surplus and provision of expert services to investors and companies are two significant activities undertaken by the capital market.CAPITAL MARKET IN INDIA  IMPORTANCE OF CAPITAL MARKET Capital market is important as it plays an important role in bringing rapid industrial development in a country. • It provides incentives to saving and facilitates capital formation by offering suitable rate of interest as the price of capital. productively and increase the aggregate national income. Capital market acts as a link between those who save and those who need funds and are in a position to invest them with safety and reasonable return. 26 . • It acts as a link between those who save and those who are interested in investing these savings.

CAPITAL MARKET IN INDIA • It serves as an important source for technological upgradation in industrial sector by utilizing the fund invested by the public. • Capital market supplies securities of different kinds with different maturity and yields in unable the investors to diversify their risk by wider portfolio of investment. So suitable monitory and fiscal policies can be taken by government. • The changing business conditions in the economy are immediately reflected on capital market. 27 . • It facilitated buying and selling of securities at listed price by providing continuously marketability to the investors. • The securities offered in the capital market are transferable in character. Booms and depression can be identified by capital market.

mn) CATEGORY WISE Public Issue Right Issue Amount Amount 53784 7294 65018 10413 36387 4312 649 8318 YEAR 2000/01 2001/02 2002/03 2003/ jan4 Category Wise Amount 70000 60000 50000 40000 30000 20000 10000 0 65018 53784 36387 8318 7294 10413 4312 649 2000/012001/022002/03 2003 / Jan 2004 Year Public Right (Amount in RS. mn) ISSUE TYPE 28 .CAPITAL MARKET IN INDIA CHART OF CAPITAL RAISED (Amount in RS.

mn) YEAR INSTRUMENT WISE Equities Bonds Others At par At Amount Amount (Amount) premium (Amount) 8178 24076 27040 363 1509 11213 56012 6696 1425 13144 26000 134 566 4400 4000 0 2000/01 2001/02 2002/03 2003/ jan4 29 .Issue Type CAPITAL MARKET IN INDIA 63413 70000 60000 YEAR 50000 Amount 2000/01 30000 2001/02 2002/03 20000 2003/ 10000 jan4 0 40000 33854 27223 Listed Amount 33854 30316 63413 30316 4660 1509 IPOs Amount 27223 1509 10387 4307 10387 4660 4307 2000/01 2001/02 2002/03 2003 / Jan 2004 Year Listed IPOs (Amount in RS.

CAPITAL MARKET IN INDIA Equities 25000 20000 Amount 15000 11213 13144 24076 10000 8178 5000 0 4400 1509 1425 566 2000/01 2001/02 2002/03 Year At Par 2003 / Jan 2004 At Premium 30 .

CAPITAL MARKET IN INDIA Bonds & Others 60000 50000 Amount 40000 30000 20000 10000 0 6696 363 134 4000 0 27040 26000 56012 2000/01 2001/02 2002/03 Year Bonds 2003 / Jan 2004 Others NEW ISSUE MARKET 31 .

NIM deals with ‘new’ securities I.CAPITAL MARKET IN INDIA  CONCEPT OF NEW ISSUE MARKET While discussing the concept of the new issue market. the distinction between the New Issue Market (NIM) and the stock exchanges must always be kept in mind since they differ from each other organizationally and as regards. A related aspect of these two parts is the nature of their contribution to industries financing.e.  FUNCTION OF NEW ISSUE MARKET 32 . the nature of functions performance by them. The new issue market provided the issuing company with additional fund for starting a new enterprise or for either expansion or diversification of an existing one and thus its contribution to company financing is direct. securities which were not previously available and are offered to the investing Public for the first time. The stock market on the other hand is a market for ‘old’ securities i. In the first place. those which have already been issued and have been granted stock exchange listing. The market therefore. derives its name from the fact that it makes available a new block of securities for Public Subscription.e.

the NIM should not be conceived as a platform only for the purpose of raising finance for new capital expenditure but also for expansion of existing units. Conceptually.) Market where firms go to the public for the first time through initial public offering. the main function of the new Issue market i.) 2.) A preliminary investigation undertaken by the sponsors of the issue. This involves a careful study of the technical. Now. from the operational stand-point . ii.) Origination b.) Advisory services which improve the quality of capital issues and ensure its success.) Distribution (a) Origination Origination refers to the work of investigation and analysis and processing of new proposals. The advisory services include: 33 . i. a. Market where firms which are already trade raise additional capital through seasoned equity offering.e. financial and legal aspects of the issuing companies to ensure that it warrants the backing of the issue house. In this basis the new issue market can be classified as: 1.) Underwriting c.CAPITAL MARKET IN INDIA Many function services to gives maintain resources and the main function of the New Issue market is to facilate the ‘Transfer of resource’ from serve to users. channeling of investible funds can be divided. however. economic. in to a triple service function.

If the issue is fully subscribed then there is no liability for the underwriter. to a large extent. the allocative efficiency of the market. Method of underwriting The underwriting may take under the form: 34 . ─ The timing and magnitude of issues. On the thoroughness of investigation and soundness of judgment of the sponsoring institution depends. and ─ Technique of selling The importance of the specialized services provided by the New Issue Market organization in this respect can hardly be over-emphasized. The underwriting service is required because origination it self does not guarantee the success of the issue. If a part of share issues remain unsold. the underwriter will buy the shares. ─ Method of flotation.CAPITAL MARKET IN INDIA ─ Determination of the class of security to be issued and price of the issue in terms of market conditions.) Underwriting Underwriting is an agreement whereby the underwriter promises to subscribe to a specified number of shares or debentures or a specified amount of stock in the event of public not subscribing to the issue. Thus underwriting is a guarantee for the marketability of shares. (b.

ii. Commercial.In this underwriter guarantees the sale of a specified number of shares within a specified period. ICICI.) Institutional underwriters are LIC.) Non.The underwriter in this makes outright purchase of shares and resell them to the investors.  PLAYER IN THE NEW ISSUE MARKET 35 .institutional underwriters are brokers.) Distribution The sale of securities to the ultimate investors is referred to as distribution. (c. Outright purchase:. The underwriters in India may be classified into two categories: i. The underwriters form syndicate for this purpose . and General insurance companies etc.CAPITAL MARKET IN INDIA Standing behind the Issue:. If the public do not subscribe to the specified amount of issue. Consortium method:. it is another specialized job. They guarantee shares only with a view to earn commission from the company floating the issue.Underwriting is jointly done by a group of underwriters in this method. the underwriter buys the balance in the issue.this method is adopted for large issues. which can be performed by brokers and dealers in securities who maintain regular and direct contact with the ultimate investors.

) Player for New Issue Banker of merchant:. classify and computerized them. They have to dispatch the latter of allotment. Preparation. Bank. stock invest etc. d.Underwriter may financial institution. Mutual fund. stock invest etc. b. 1. They have also be satisfy the listing requirement and get them listed on one or more or stock exchange.CAPITAL MARKET IN INDIA In the New Issue Market two type o players are exited one is player for original.Merchant bankers are issued managers rendering such service to industrial project or corporate unit as floatation of new company. and under take to mobilizes to subscription 36 . they monitor the work and keep inform them to the registrars and merchant bankers. cash.Collector banker collect the subscription in cheque. They collect applications form new issue cheque. second is player for issues both are important to play a role which is issued new share for investors.) Registrars to the Issue:. Coordinating bankers collect information on subscriptions and coordinate the collection work.] a. Broker etc. Planning and execution of new project consultancy and advise in technical financial managerial field.) Underwriters and Brokers:. c. refund order and share certificate within the time schedule.These functions are next to merchant banker. Collecting banker and coordinating banker may be the same bank or different banks.) Collecting and co-coordinating merchant:.

They send their own circulars and applications to the clients and do follow up work to market the securities. play under type of marker for new issue market. Promoters and directors Associates and friends Collaborators Mutual funds. employee.CAPITAL MARKET IN INDIA as agreed to.] Players for original The original player in the new issues are many and the more important of them are directors. Banks. SECONDARY / STOCK MARKET  STOCK MARKET OPERATIONS 37 . mailing agency are the other organization involves in the new issue market operation. So for actual and original player. RBI and Banks and are used for purchase/ sale of securities. friend. Cash and credit are parts of money and these are provided by the government. NRI etc. 2.) Printers:Advertising agency. e. own Brokers along with the net work of sub-brokers market the new issues. financial. borrowing and lending saving and any other bodies corporate or noncorporate and these funds are used for purchase of securities or lending for any purpose borrowers or the government or companies or any other issues of securities. NRI public etc. they have to make good the short fall by their subscription. Now second type of player in the new issue market also gives good role in this situational.

WAN(wide area network). online news and analysis with news on fore. Online trading and order processing system for NSE. This sub-brokers and clients are making order so quickly to stock exchange. The transactions are made fast through the screen based trading and deliveries are made very fast then physical. the exiting and high tech. but will also create an absolutely unbeatable position for the constituents in the highly competitive market. client contact to his Broker for making transaction in banking stock exchange. The first such computerized trading hub is already in place in Ahmedabad. Though the Bridge information. it provided OLRT (online real time) rate of NSE and BSE. LAM(local area network). the rate are different than the time at stock exchange for implementing them. SGSSL now introduced VSAT and cable or fax . NSE started at 1994-95. OLRT charts and technical. network of computerized trading.CAPITAL MARKET IN INDIA THE EVALUTION OF STOCK MARKET (ACCORDING TO SGSSL) FLOOR TRADING This was very old technique of transaction in securities. The totally screen based trading operations will not only provide the best possible rates. Broker makes a list of all the order of client and sends his jobber to stock exchange for the implementation of the orders. This technique has very fluctuated nature because at the time of noting the order. TRADING IN DEMATERIALISED FORM 38 . SCREEN BASED TRADING Screen Based Trading means online.

C.T. For this purpose. SGSSL is the first in India to start C.CAPITAL MARKET IN INDIA Dematerialization is the process by which physical certificate of an investors are converted to an equivalent number of securities in electronic form and credited in the investors account with DP. on the terminal.C (COMPUTER TO COMPUTER) NSE AT SGSSL DOORSSTEP Though C. C. we can get an update list of these companies form NSDL. Brokers and investors can transact business on NSE and BSE directly form the premises. on their computers through the Hub. anyone can trade on the NSE / BSE form own office.T. starting with Ahmedabad. Through. along with online technical and financial news. Most of the active scripts in the market including all the scripts of S & P CNXNIFTY and BSE SENSEX have already joined NSDL.C network and is setting up major computerized Trading Hubs in major cities in entire western India belt.  IDEA OF STOCK EXCHANGE 39 . the computer will set up the Computerized Trading Workstations (CTWs) at the brokers and investors premises.T. The CTW receive OLRT information on scrip quotation form the various able to give buy and sale orders through CTWs. which fully covered through latest communication technology and trading environment available in the country. In dematerialization form.

order-driven. telephone.m. Trading before of after official hours is called kerb trading. to 3:30 p. or through 40 . fax etc.  TRADING RING Trading on the stock exchange used to be officially done in the trading ring for five hours from 10:30 a. from Monday to Friday. Thus in ordinary sense. it’s like BAZAAR of other thing. Under electronic trading. In this BSE and NSE are most active exchange. incorporated or not.m. house is also extended from 10:30 a. to 3:30 p.m. Recognized stock exchange means a stock exchange which is for the time being recognized by central government / SEBI under section – 4 of SCRA (Securities Contract Regulation Act) 1956. maintains or provides a market place or facilities for bringing together purchase and sellers of securities and includes the market place and facilities maintained by such an exchange. Stock exchange may be recognized or unrecognized. BAZAAR of shares. known as the National Exchange for Automated Trading (NEAT) system. fully-automated.CAPITAL MARKET IN INDIA Stock exchange is an organization. which constitutes. screen-based trading system at which investor client contact his broker through telegram.m. is an on-line. association or group of persons. Trading Mechanism The trading system. anonymous. All the orders of sell and purchase of shares are executed at stock exchange. There are 23 stock exchange in all over India. nationwide.

41 . making the market transparent. to trade with one another simultaneously. but also from the personal computers in the homes of investors through the Internet and from the hand-held devices through WAP. price of security. irrespective of their geographical locations. improving the depth and liquidity of the market. It provides tremendous flexibility to the users in terms of kinds of orders that can be placed on the system. name of security for buy or sale the security and after this member/broker call the operator for punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds a matching sale or buy order from a counter party. It electronically matches orders on a strict price/time priority and hence cuts down on time. cost and risk of error.CAPITAL MARKET IN INDIA intermediary or by directly and after they tells their broker about quantity of security. It allows faster incorporation of price sensitive information into prevailing prices. as well as on fraud resulting in improved operational efficiency. It allows a large number of participants. from members without revealing their identity. thus increasing the informational efficiency of markets. The trading platform of the CM segment is accessed not only from the computer terminals from the premises of brokers spread over about 350 cities. It provides a perfect audit trail which helps to resolve disputes by logging in the trade execution process in entirety. thus providing equal access to everybody. It enables market participants to see the full market on real-time. big or small. It ensures full anonymity by accepting orders.

suitable entries are made in the concerned member’s Block Book/Pass confirmation memos.CAPITAL MARKET IN INDIA Block Book/ Sauda Book After each order is executed. This is a book of transaction executed on the floor and appropriate entries are made after every deal to record the number of shares traded. It is important to ensure that the contract note is written up on the day of the of the deal of the deal and posted to the client.and the name or code number of the other member through whom the deal was finalized. This is a poof that the contracts was executed on that day and not on any other day since prices fluctuate every day. the prices of the purchase and sale . Contract Note From the sauda book /Block book the details are transferred to contract note. 42 .

) The shares should be fully paid up 2.) The companies paid up capital should be at least RS.) The company should be a dividend paying one.) The company’s shares should have market capitalization of at least RS. The carry forward facility is not .000. those which are first listed will be. The criteria for listing in specified group have been dealt with as follow: 1. those security which have high traded volume which are included in Group A. 7.) The shares should has been actively traded while on the cash list 4. The shares which are traded on cash basis are called group shares. 5.CAPITAL MARKET IN INDIA CLASSIFICATION OF SECURITIES: Group A→ Specified shares/Specified list Group B→ Non-Specified shares/Cash list Group C→ Odd lots Group Z Group A Under this. Group B share. 5 crores. Group B Those securities which have high traded volume less than the Group A which are included in Group B.e.) The number of shareholders must be more than 20. They are also called as cash shares. only those actively traded are included. kept in Non-specified. Non-specified group split into B1 and B2 available to group B shares.) The company should have a growth potential. 6. i.10 crores. 3. 43 groups.

prescribed round lots are traded on the stock exchange..CAPITAL MARKET IN INDIA Group C Those securities which have high traded volume less than the Group B which are included in Group C. If he holds 150 shares. price of security is highly flexible) that type of securities are included the Group Z. only for odd lots deal.g. he can avail 83 shares.e. 44 .e. If he holds 250 shares.e. under Group C. Permitted securities The securities which are listed with some of the recognized stock exchanges. a shareholder who is holding 50 shares gets 17 shares which is less than the market lot and treated as an odd lot. Odd lots arise from the issue of bonus or right shares. out of which 50 is market lot and the rest of 33 shares is an odd lot. Most of the companies have fixed market lot as 50 to100. E. Anything less than the round lot (market lot) is odd lot. when permitted to be traded by those stock exchanges where they are not listed are called permitted securities. Under this. declares a bonus issue in ratio of 1:3 (Assume that market lot of company is 50). Stock exchange are now making alternative arrangement for dealing with odd lots i. Only standard trading units i. if GCLLtd. Group Z Those securities which are not follow the rules of the SEBI and which have a high volatility (i. he will get 50 bonus shares which is clearly a market lot. Such permission is granted as per rules and regulations of the stock exchange.

) Spot delivery In case of spot delivery transaction.CAPITAL MARKET IN INDIA  STOCK EXCHANGE TRANSACTION /KINDS OF DELIVERY Transaction on stock exchange are carried out on either cash basis or carry over basis. the delivery and payment are completed on the same day of contract or on the next day.) Delivery for clearing a. The securities for delivery will be delivery to the buyer within a week and the seller receive all member dues within the 45 . c. For completion of the contract.) Hand delivery c.) Hand delivery When a transaction is settled by delivery and payment on the day fixed at the time of entering into contract or within 14 days from the date of the contract.) Spot delivery b.) Delivery for Clearing All transaction in securities in the specified list are effected only through the clearing house. Carry over is permitted only in respect of Group A securities. the actual period for the send off of the securities or payment of money through post is excluded in the computation when the parties to the contract reside at different places. The types of transactions on cash basis according to arrangement for delivery are: a. b.

On the basis of price limits. Due to On Line screen based Trading above type of delivery now day can not seen because all delivery are doing on the basis of T+2 rolling settlement. In actual practice. Trading outside the trading hours are called ‘kerb dealing’. the broker requires investor to renew the order every day. on all working day from Monday to Friday and a special one hours session on Saturday. they can be divided into: 1) 2) 3) 4) 5) Nett rate orders Market rate orders Limited discretionary order Best rate order Stop loss order  EXECUTION OF ORDER Big brokers transact their business through their authorized clerks.m. 46 . Small ones carry out their business personally. Orders are executed in the Trading ring of the stock exchange which works form 10:30 a.m. usually a day.CAPITAL MARKET IN INDIA same time from the clearing house on the respective “pay-in” and “pay-out” days.  TYPES OF ORDER Order for the sale and purchase of shares are valid for a certain time period. to 3:30 p.

known as the National Exchange for Automated Trading (NEAT) system. In case the order related to a security listed in the stock exchange of the broker. This original is retained by the client and the copy returned with the client’s signatures to the broker in confirmation of that contract. fully-automated. There are certain set hours on each working day of the stock exchange when the brokers meet in the system to transact business on behalf of their clients. order-driven. telephone. 47 . anonymous. The trading system. Oral orders will be accepted by a broker only if the client is well known. the order is executed in the following manner. Acceptance of order may be communicated to the client orally or through “Order Confirmation Note”. price of security.CAPITAL MARKET IN INDIA Order may be communicated to broker either orally or in writing. The broker intimates his client of the transactions done on his behalf by sending him a ‘Contract Note’. fax etc. or through intermediary or by directly and after they tells their broker about quantity of security. is an on-line. screen-based trading system at which investor client contact his broker through telegram. name of security for buy or sale the security and after this member/broker call the operator for punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds a matching sale or buy order from a counter party. nationwide.

) Filling application farm with application money The companies issuing the shares circulate printed application form on which intending purchases has to fill in the details like. he will receive the allotment letter otherwise a refund order of the amount applied for will be received.) Receipt of response letter/refund order Depending on response the company announces an allotment procedure.] Purchase of shares purchase of shares can be divided into 2 parts. age.] Purchase of shares Sale of shares [A. (a. and specimen signatures etc. If the shares are allotted on investor’s application. The procedures are listed blow: [A. In all the recognized stock exchange in India.CAPITAL MARKET IN INDIA  MECHANISM FOR SHARE TRADING The rules and procedures for buying and selling securities are the same. ii. Some companies send share certificates with the allotment letter. namely purchase of Existing shares from the market (secondary market) and purchase of companies issuing fresh shares (primary market). Application money per share multiplied by number of shares this applied for has to be paid along with this application. name. occupation. address. 48 .) Purchase from primary market i.] [B.

The company fixed allotment money and call money per share which asks the shareholders to pay at certain intervals decided by the board of directors of that company.) Receipt of contract note When the shares are purchased a contract note is sent to the client as to the number.) Endorsement of payment on share certificate In companies where share certificates are issued before call money on those shares is received. on receipt of contract. ii. (b.) Purchase from secondary market i. the company makes an endorsement on the shares to show that how many calls have been paid by the shareholders.) Placing order with broker In the case of purchasing shares of existing companies.) Payment of allotment money and call money In. The broker will require certain sum of money as margin money to be given along with the order. iv. most companies the face value of the share is not asked for with application.e. the order must be Placed with broker.CAPITAL MARKET IN INDIA iii. Many brokers requires their client to pay the balance amount i. iii. purchase price minus margin money. rate and date of purchase.) Intimation of delivery 49 .

) Placing the order with the broker The order of sale of shares has to be placed with the broker. So it need not to Sending shares for transfer because of demate is already made.CAPITAL MARKET IN INDIA When broker receives the share certificate and transfer deed form the seller he intimates the client to take those shares and make payment in case it has been made. already done. the broker will call for balance payment and then send the shares certificate and transfer deed through registered post. Share transfer stamps have to be affixed on the back of transfer deed. In case of outstation clients. iv. “Now a day for purchases the security/share from primary and secondary market first of all investor has to open the demate account without demate account investors can not purchase the share form the market”. [B. as an individual can not sell or purchase shares at the stock exchange directly.) Sending shares for transfer The last stage is the transfer of shares in the name of the purchaser. The buyer signs in the transferee column of transfer deed.] Sale of Shares i. Thus. the share certificate and complete transfer deed are now ready which are sent at the share transfer department of company concerned. The transfer deed is filled up if not. Only member of that particular stock exchange either for themselves or an behalf of their clients. The share certificates are received duly transferred within 3 months. Usually along with the order the broker will ask 50 .

A contract note binds the broker and his client. The delivery day avoids the confusion that would arise of members could deliver on any day of their choice. iv. he must notify his broker immediately on receipt of the contract. A contract indicates the number of share sold.) Delivery of share certificate and transfer deed The share certificate and transfer deed have to be delivered by broker to broker of same stock exchange. The payment is made according to the rate appearing on the contract as the rate is calculated after deducting the commission payable to the broker. the members deliver to each other the shares they have sold and purchased. to whom he had sold the shares.) Receipt of contract note On the sale of issues contracts note. 51 . In case the client is not satisfied. The stock exchange have fixed delivery days on this day.) Receipt of payment Payment is made by the broker usually after 4 days from the day the shares have been sold and the share certificates along with valid transfer for same are given to the broker. iii. ii. member of another stock exchange of another of his clients. The seller must sign at the transferor column on the transfer deed. the dare of sale and the terms and conditions governing the sale.CAPITAL MARKET IN INDIA investor to submit the share certificate and transfer deed. the rate per share.

A long purchase is the most common type of transaction.) B. Because investor generally expect the price of security to rise over the period of time they plan to hold it. this activity is called margin trading and it is used for one basic reason i. to magnify return.) C. their return comes from any dividends or interest received during the ownership period .) Margin Trading Most security purchases do not have to be made on cash basis. plus the difference between the price at which they sell the security and the price paid to purchase it ( capital gains).e.) Long purchase The long purchase is a transaction in which investors buy securities in the hope that they will increase in value and can be sold at a later date for profit. B.CAPITAL MARKET IN INDIA  BASIC TYPE OF TRANSACTION IN STOCK EXCHANGE A. 52 . Each of basic types of orders described con be used with long transactions. The object is to buy low and sell high. This return is reduced by brokerages fees paid to purchase and sell the securities.) Long purchase Margin trading Short selling A. borrowed fund can be used instead.

II.) Maintenance Margin Maintenance margin absolute minimum amount of margin that an investor must maintain in the margin account at all times. If the value of investors holding decline. As long as the margin account remains at a level equal to or greater than maintenance margin. the related account is known as restricted account. When restricted account position is occurred an investor will receive a margin call. an investor can purchase more securities that he or she could afford on a security cash basis.) Initial Margin Maintenance Margin I.) Initial Margin Initial margin refers the minimum amount of equity that must be provided by the investors at the time of purchase any security that can be margined has a specific initial requirement. 53 . margin in his account will also drop. although these can be changed by the authorities from time to time. This call gives the investors a short period of time to find some means to bringing the equity up to maintenance level if this is not done the broker has no alternative but to sell enough of investors margin holding to bring the equity in the account up to that level.) ii. There are basically 2 types of margin requirements.CAPITAL MARKET IN INDIA If investor uses 75% margin means 75% of investment is being finance by persons own capital and the balance (25%) with borrow money. the investor is free to use the account in any way. i. When margin drops below maintenance margin level. It should be clear that with the use of margin.

CAPITAL MARKET IN INDIA Generally initial margin is set slightly higher by broker houses for added protection of both broker and their customers.17 54 .000 =50% (initial margin) A.000. 10000 RS. 20000 Debt Equity RS. 20 each. Initial margin is at 50% and maintenance margin=30%.) share price moves down to RS. 10000 = Value of securities 20. Customer’s A/C Stock (shares) RS. ii. 2 things are required: i.10.000 Margin = x 100 20.) Amount of money being borrowed. Margin formula A simple formula can be used with all types of purchases to determine the amount of margin in the transaction at any given point.) prevailing market value of securities being margin.Debt balance Margin Transactions: Buy 1000 shares of ABC scrip at RS. the maintenance margins on equity rarely change. it is also called debit balance Value of securities . So.

000 Debt Equity RS.) share price moves down to RS.000 =23.000.2% B.13 Stock (shares) RS. 3000 13.000 Margin = x 100 17. 7000 17.25 Stock (shares) RS.10. 10000 RS.000 =41.000 Margin = x 100 13.000.000. 17.09% C. 13. 10000 RS.) share price moves UP to RS.000 Debt Equity RS.000 Margin = x 100 25.000 55 . 25.000 Debt Equity RS.10.CAPITAL MARKET IN INDIA Stock (shares) RS. 15000 25. 10000 RS.10.

286. Short sales start when securities that have been borrowed from 56 . investor now has additional borrowing power he can borrow to buy shares without depositing equity of his own.14.CAPITAL MARKET IN INDIA =60% The share falling price must be absorbed by the customer’s Equity because the debt has not been repaid. C. If value of the shares move up from RS. So. It means.286. indicate at (beta) point in above Example.) Short selling Short selling is generally defined as the practice of selling borrowed securities. The maintenance margin of 30% will be reached under the following conditions: Debt balance Market value of securities = 1 – Maintenance margin 10. if value of securities/ shares move down from RS. margin moves up from 30%.30 = 14.000 = 1 – 0.286 RS.14. the broker will send a maintenance margin call requiring that the customer supplies additional funds in cash or securities in 2 to 5 days otherwise. the maintenance margin falls below 30%. the securities in his account will be sold and cash used to repay the outstanding margin loan.

Shorting against the box Shorting against the box is done after an investor has granted through an earlier long transaction by falling it with a short sale.CAPITAL MARKET IN INDIA broker are sold in the market place. he is able to protect project already made in long transaction. By doing this. Margined short sales are executed in the same margin A/C as margined long transactions. Short On Margin With short selling. the only thing that we do not have to be concerned about with a margined short sale is the accounts debit balance. An investor also own 100 equity shares would short on equal number of equity shares in same company. exclusive of statutory 57 .  TRANSACTION CHARGES The maximum brokerage chargeable by trading member in respect of trades effected in the securities admitted to dealing on the CM segment of the Exchange is fixed at 2. The only difference is that they reverse the investment process by starting the transaction with a sale and ending it with a purchase. Short sellers to make money by buying low and selling high. the short seller buys back the securities which are then returned to the lender. They are subject initial margin levels. In fact. the term margin simply indicates the size of the Equity deposit the investor must make in order to initiate the transaction. There are no borrowed funds with margined short sales.5% of the contract price. Later. when the price of the issue has declined.

A member is required to pay the exchange transaction charges at the rate of 0. SEBI turnover fee. These details are automatically recorded in the electronic trading system of the exchanges. and settlement date. The electronic system automatically generates confirmation by direct participants.15% are also observed in the market.CAPITAL MARKET IN INDIA levies like. 4 per Rs. Clearing House determines the funds/securities obligations of the trading members and ensures that trading members meet their obligations. The core processes involved in clearing and settlement are: (a) Trade Recording: The key details about the trades are recorded to provide basis for settlement. the brokerage charges as low as 0. (b) Trade Confirmation: The parties to a trade agree upon the terms of trade like security. However. This maximum brokerage is inclusive of the brokerage charged by the sub-broker which shall not exceed 1. but not the counterparty which is the Clearing house. price. and what counter-parties are due to receive on the settlement date. service tax and stamp duty. The Clearing house 58 . 1 lakh) of the turnover.5% of contract price.004% (Rs. quantity. (c) Determination of Obligation: The next step is determination of what counter-parties owe.  CLEARING & SETTLEMENT PROCEDURE While NSE/BSE other Exchange provides a platform for trading to its trading members.

The Clearing house sends electronic instructions to the clearing banks to debit member's accounts to the extent of payment obligations. Settlement is complete upon release of pay-out of funds and securities to custodians/members. They make available required securities in designated accounts with the depositories by the prescribed pay-in time. The depositories and clearing banks debit accounts of the Clearing house and credit accounts of members. The depositories move the securities available in the accounts of members to the account of the Clearing house. Likewise members with funds obligations make available required funds in the designated accounts with clearing banks by the prescribed pay-in time.CAPITAL MARKET IN INDIA interposes itself as a central counterparty between the counterparties to trades and nets the positions so that a member has security wise net obligation to receive or deliver a security and has to either pay or receive funds. The banks process these instructions. (f) Risk Management: 59 . (e) Pay-out of Funds and Securities: After processing for shortages of funds/securities and arranging for movement of funds from surplus banks to deficit banks through RBI clearing. debit accounts of members and credit accounts of the Clearing house. (d) Pay-in of Funds and Securities: The members bring in their funds/securities to the Clearing house. the Clearing house sends electronic instructions to the depositories/clearing banks to release pay-out of securities/ funds.

all securities are being traded and settled under T+3 rolling settlement. The Clearing House notifies the consummated trade details to clearing members/custodians on the trade day. undertakes on-line monitoring of members' positions and exposure in the market. (From April 1. It monitors the track record and performance of members and their net worth. trades have been under T+2 rolling settlement). 2003.CAPITAL MARKET IN INDIA A sound risk management system is integral to an efficient settlement system. Members' pay-in/pay-out obligations are determined latest by T+1 day and are forwarded to them on the same day so that they can settle their obligations on T+2 day. collects margins from members and automatically disables members if the limits are breached. Based on the affirmation. which is constantly monitored and upgraded to preempt market failures. Clearing House nets the positions of counterparties to determine their obligations. Settlement Cycles Since the beginning of the financial year 2002. 60 . The securities/funds are paid-in/paid-out on T+2 day and the settlement is complete in 3 days from the end of the trading day. The obligations are netted for a member across all securities to determine his fund obligations and he has to either pay or receive funds. It has put in place a comprehensive risk management system. A member has a security-wise net obligation to receive/deliver a security. The custodians affirm back the trades to Clearing House by T+1 day. The Clearing house ensures that trading members' obligations are commensurate with their net worth. A clearing member has to payin/pay-out funds and/or securities. This is a step towards further reducing the settlement cycle to T+1 in 2004.

2. the announcement made by the finance minister to introduce rolling settlement in200 scrips.) Facility of an exception window for the confirmations would be By 1:30 pm.m. Day 1. rolling settlement on a T+5 bases was introduced in 10 selected scrips. made available by the exchange.m.  In March 2001. By 1:3 p. SEBI announced a list of 251 scrips for compulsory rolling settlement. NO of scrips are increase under T+5 systems from 10 to 163 scrips.  From July 2001. T T+1 By 11:00 a. Processing and downloading of obligation files to brokers/ custodians Pay in of securities and funds Pay out of securities and funds Development and adoptions under rolling settlement system are as follows: In January 2000. Time Description of Activity Trade day Conformation of all trades( including custodial trades. 61 . T+2 By 11:00 a.CAPITAL MARKET IN INDIA The activity schedule for T+2 rolling settlement shall be as follows: S.No.  From May 2000. 3.

2001.  From 1 April 2002. The trades in rolling settlement are settled on at T+2 bases i. Saturday and Sundays are excluded. A tabular representation of the settlement cycle for rolling settlement is given bellow. / on the 2nd working day. Tuesday’s trades settled on Thursday and so on. the rolling settlement on a T+2 basis has since introduced for all groups of securities in the equity segment “F” and “G” groups. Typically trades taking place on Monday are settled on Wednesday.  From 1 April.e. 62 . the rolling settlement on a T+3 basis was introduced for all securities of all exchanges. rolling settlement was extended to remaining scrips on all exchanges. 2003.CAPITAL MARKET IN INDIA  From December 31. For arriving holidays.

Other T+ terms have similar meanings. 63 .CAPITAL MARKET IN INDIA Activity T+3 Rolling April 1.2002) T+2 Rolling April 1.2003) T T+1 T+1 T+2 T+2 T+1 T+3 T+4 T+5 T+5 T+6 T+8 T+9 Settlement(From Settlement(From Trading Custodial Confirmation Determination of Obligation Securities/FundsPay-in Securities/Funds Pay-out Valuation Debit Auction Bad Delivery Reporting Auction Pay-in/Pay-out Close Out Rectified Bad Delivery Payin/Pay-out Re-bad Delivery Reporting Close Out of Re-bad Delivery T T+1 T+2 T+3 T+3 T+3 T+4 T+5 T+6 T+6 T+7 T+9 T+10 T+1 means one working day after the trade day.

While stock exchange provides a platform for trading to its trading members. and what trading members are due to receive on the settlement date. (NSCCL) determines the funds/securities obligations of the trading members and ensures that trading members meet their obligations. These auctions are tenders for sale of the desired scrips in the quantities purchased but not delivered so that delivered can be effected to the buyers. Clearing. clearing corporation/Clearing House/ the National Securities Clearing Corporation Ltd. 64 . Settlement. The clearing process involves determination of what trading members owe. Clearing Corporation and depositories provide the necessary interface between custodian/ clearing members and trading members. Auctions are arranged by the stock exchange by inviting bids from members to buy the shares on behalf of the member who could not deliver the shares. clearing process is essentially the process of determination of obligations after which the obligations are recovered by settlement.CAPITAL MARKET IN INDIA  AUCTIONS Auctions are arranged for scrips which could not be delivered even on the final day. Auctions in group A is automatic when the seller fails to deliver on the appointed day and at the request of the buyer in the case of group B. So. CLEARING PROCEDURE The transactions in secondary market are processed through 3 distinct phases viz: Trading.

Clearing Procedure/Settlement Process Stock Exchange 1 8 Depositories 6 7 Clearing House 9 Clearing Banks 2 5 3 4 Custodians/ Clearing members 10 11 Explanations: 65 .CAPITAL MARKET IN INDIA The clearing and settlement process for transactions in securities is presented in the following diagram.

(8) Pay-out of securities (Clearing House advises depository to credit pool account of custodians/CMs and debit its account and depository does it). Based on the affirmation. Clearing House applies multilateral netting and determines obligations. Instructions to clearing banks to make funds available by pay-in time. Instructions to depositories to make securities available by pay-intime. (9) Pay-out of funds (Clearing House advises Clearing Banks to credit account of custodians/CMs and debit its account and clearing bank does it). (7) Pay-in of funds (Clearing House advises Clearing Banks to debit account of custodians/CMs and credit its account and clearing bank does it). Pay-in of securities (Clearing House advises depository to debit pool account of custodians/CMs and credit its account and depository does it). (11) Clearing Banks inform custodians/CMs. (10) Depository informs custodians/CMs through DPs. (3) (4) (5) (6) Download of obligation and pay-in advice of funds/securities.CAPITAL MARKET IN INDIA (1) (2) Trade details from Exchange to Clearing House (real-time and end of day trade file). FINDINGS 66 . Clearing House notifies the consummated trade details to CMs/custodians who affirm back.

settlement. ask for tips to sell and not to buy. orders confirmations are Capital market supplies securities of different kind with done within few second / minutes after punching the order. over a last couple of years. • • • • • The investor has high risk to invest in primary market When market is hyper. settlement than T+3. the mobilization of money become speedily and less time. • Due to screen based trading. try to liquidate the investment and In the case of online trading if your internet is not The investments are more safety in T+2 rolling Demat opportunity zone has shown remarkable growth security but also have higher return compare to secondary market. • buying or selling of share because nowadays demit is compulsory and account are debited and credited. No paper work is involved in in the previous trading system.CAPITAL MARKET IN INDIA • • The current trading system in the market is quick against Due to screen based trading system and T+2 Rolling It is paper less process. • different maturity and yield in unable the investor to diversify their risk by wider portfolio of investment. 67 . T+4 etc. working properly you cannot trade. And this growth is expected to continue in future because of cease less expansion of product portfolio and customer base.

CAPITAL MARKET IN INDIA CONCLUSION Capital market is the market in which investor both small and big can invest for the intention to gain the fixed interest. Through on line trading investor can save their time and contribute time in elsewhere. More recently. the investors are trust on equity market because generally. and investing long run. gold. From the study of the project we can conclude that capital market enable the investor to gain the maximum return by sort selling. investor can gain the more profit and can reduce the risk by managing the good portfolio management. income and dividend etc. compare to invest or deposit the money in other sources like bank. making an important contribution to economic developments. but even share market is more risky. The capital market is one of the most vibrant sectors in the financial system. speculation. etc. there is no speculation and number of restriction and rules govern by SEBI against speculation. 68 . From the study we can also conclude that in recent time capital market become a safety compare to old market by regulation of SEBI and compulsory demat account. and also high profit for the high investment.

So SGSSL should start a other more trading room. BIBLIOGRAPHY 69 .CAPITAL MARKET IN INDIA SUGGESTIONS • The settlement cycle should be reduced from T+2 to T+1. Those investor have physical share certificate should convert into demat by opening demat account. The SGSSL should create more awareness in their client and investor about demat and it’s benefit. Those people who want to make speculation they should go into secondary market. Small investor should watch the trend of market and should know the speculation situation after that invest. Those investor who want to take the higher risk and more return. so the speculation can be reduced. In SGSSL there is less incentive and motivation among the worker compare to other company. who should invest in primary market. Merger of NSE and BSE should be done. To make the better management SGSSL should recruit the post graduate employee or management student. So SGSSL should motivate their worker more to do worker better by special incentive scheme • • • • • • • • • • • The SGSSL should start commodity and derivative so that it can attract more investor. In the SGSSL has two Trading room. SEBI should introduce a system in which investor have full safety and which avoid the high volatility and speculation form the market. So the traffic can be avoided in the trading room.

• • - Investment Management V.CAPITAL MARKET IN INDIA • • • Naturajon • Gangadhar NSE Fact Book-2003. www.nseindia.Avadhani Web sites www.A. Ramesh 70 .bseindia. Capital Market in India Investment Management Gordon and V. SEBI BULLETIN-2004.

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