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


86 lacks as against 1.000 holders having demate a/c in SGSSL. Surat-395003.CAPITAL MARKET IN INDIA with the NSE and SEBI regulations. Company has turned the corner.) Name of the company: “South Gujarat Shares and Share-brokers Ltd.96.  PROFILE OF THE COMPANY 1. Opp.  Total income of company is Rs.05 lacks of previous year.  Company has 35 registered sub-brokers.  At present there are more than 12.  The company has taken approval from NSDL to work as DP. 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.  4 . 2.  Net profit for current year is Rs. Liner Bus stop.) Registered office: 3rd Floor. Ring Road.11. Belgium Chamber.  MILESTONES During the year ended 31st march 1997.58 lacks.

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

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

Foreign brokers account for 29 of these. In addition. Furthermore. according to the National Securities Depository.9% of the trades. 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.5bn. 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. There are some 9600 companies listed on the respective exchanges with a combined market capitalization near $125. the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). are settled in dematerialized form in a T+2 rolling settlement environments. The Clearing 7 . Clearing Corporation houses of NSE and BSE respectively. trades are guaranteed by the National Clearing Corporation of India Ltd (NSCCL) and Bank of India Shareholding Ltd (BOISL). Today India has two national exchanges. Any market that has experienced this sort of growth has an equally substantial demand for highly efficient settlement procedures. each exchange has a Settlement Guarantee Fund to meet with any unpredictable situation and a negligible trade failure of 0. Each has fully electronic trading platforms with around 9400 participating broking outfits.003%.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. In India 99.

However until the early 90s. 8 . Transparency. Indian companies are now also allowed to raise equity capital in the international market through the issue of GDRs. Today. INDIA’S SECURITIES MARKET A Brief History “The capital market is one of the most exciting sectors in the financial system. India’s regulator. marking an important contribution to economic development. there are 498 Foreign Institutional Investors who hold 1325 subaccounts with a net investment of approximately $15bn. 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.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 foreign investors’ only way of accessing the Indian capital markets was through listed country funds. The success of this initiative ensured that this fund was followed by numerous others.

With SEBI recognizing the benefits of. Successful implementation of STP will considerably reduce the transaction processing cost in the market. 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. eliminating the manual work involved in transaction processing. The availability of derivative products including index futures. As if further evidence was needed of India’s willingness to embrace change. 9 . and actively campaigning for the adoption of Straight through Processing as the market standard. The derivatives market in only two years has shown spectacular growth. index options. Compared to last financial year the annual turnover grew by over 300%. individual stock futures and individual stock options re-enforces the overall attractiveness of this market to foreign and domestic investors. This makes the market place attractive for foreign and domestic investors. 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. the market is making significant progress towards the goal of executing and settling the transactions without any human intervention – the so called STP nirvana.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.

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


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

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

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

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. Long term loans market may further be classified into: (i) (ii) (iii) Term loans market Mortgages market Financial Guarantees market. 15 . Government securities are sold through the Public Debt Office of the RBI while Treasury Bills are sold through auctions. 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. The secondary market for these securities is very narrow since most of the institutional investors tend to retain these securities until maturity.L. These are generally: (i) (ii) (iii) Stock certificates of inscribed stock Promissory Notes carrier Bonds which can be discounted. The Government securities are in many forms.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. requirements. Hence this market also plays a vital role in monetary management.

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

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


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


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

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

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

Privately placed securities can also be listed if such placements fulfill all listing criteria. such issues are called preferential allotments. the existing holders can get by way of their right. Preferential allotments require shareholders approval in the general body meeting. The offers and bids are routed through members of the stock exchange. The ability to convert value of securities into cash is called liquidity. 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. Preferential Offer/Rights Issue Companies can expand their capital by offering the new shares to their existing shareholders. Further. Stock exchange is a platform where buyers and sellers of securities will match their bids and offers for securities and exchange securities with cash. all such offers have also to be in compliance with criteria laid down by SEBI.CAPITAL MARKET IN INDIA procedures for private placement. The liquidity is provided by the stock exchange. allotment of new shares in certain proportion to their earlier holding.. Stock Trading An investor in securities needs assurance that they can convert their security holdings to cash to meet their cash requirements.e. i. 24 . 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. 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. popularly known as a "broker".

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

• It provides incentives to saving and facilitates capital formation by offering suitable rate of interest as the price of capital. Mobilization of investable surplus and provision of expert services to investors and companies are two significant activities undertaken by the 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. Thus. • It acts as a link between those who save and those who are interested in investing these savings. 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 . productively and increase the aggregate national income.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. the capital market facilitates capital formation. The savings are invested profitably for economic development because of the services offered by capital market. • It provided the capital to those enterprises which can apply it profitably.

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

CAPITAL MARKET IN INDIA CHART OF CAPITAL RAISED (Amount in RS. mn) ISSUE TYPE 28 . 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) 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 .

those which have already been issued and have been granted stock exchange listing. derives its name from the fact that it makes available a new block of securities for Public Subscription. 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.e. A related aspect of these two parts is the nature of their contribution to industries financing. In the first place. the nature of functions performance by them. The stock market on the other hand is a market for ‘old’ securities i.e. NIM deals with ‘new’ securities I. The market therefore. 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.CAPITAL MARKET IN INDIA  CONCEPT OF NEW ISSUE MARKET While discussing the concept of the new issue market.  FUNCTION OF NEW ISSUE MARKET 32 .

Conceptually.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. from the operational stand-point . The advisory services include: 33 . however. financial and legal aspects of the issuing companies to ensure that it warrants the backing of the issue house. 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.) A preliminary investigation undertaken by the sponsors of the issue. the main function of the new Issue market i.) Distribution (a) Origination Origination refers to the work of investigation and analysis and processing of new proposals. Now.) Underwriting c.) Market where firms go to the public for the first time through initial public offering. In this basis the new issue market can be classified as: 1.) Advisory services which improve the quality of capital issues and ensure its success. ii. a.) Origination b.) 2.e. Market where firms which are already trade raise additional capital through seasoned equity offering. i. in to a triple service function. This involves a careful study of the technical. channeling of investible funds can be divided. economic.

) 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. 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. If the issue is fully subscribed then there is no liability for the underwriter. (b. Method of underwriting The underwriting may take under the form: 34 . Thus underwriting is a guarantee for the marketability of shares. ─ The timing and magnitude of issues. If a part of share issues remain unsold. the underwriter will buy the shares. The underwriting service is required because origination it self does not guarantee the success of the issue. ─ 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. the allocative efficiency of the market. to a large extent.

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

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

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

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

T. Through.C network and is setting up major computerized Trading Hubs in major cities in entire western India belt.T.T.C (COMPUTER TO COMPUTER) NSE AT SGSSL DOORSSTEP Though C. on their computers through the Hub. Most of the active scripts in the market including all the scripts of S & P CNXNIFTY and BSE SENSEX have already joined NSDL. starting with Ahmedabad. The CTW receive OLRT information on scrip quotation form the various able to give buy and sale orders through CTWs. along with online technical and financial news. In dematerialization form. 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. For this purpose. C.C. which fully covered through latest communication technology and trading environment available in the country. anyone can trade on the NSE / BSE form own office. the computer will set up the Computerized Trading Workstations (CTWs) at the brokers and investors premises. on the terminal.  IDEA OF STOCK EXCHANGE 39 . 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.

BAZAAR of shares. from Monday to Friday. In this BSE and NSE are most active exchange. it’s like BAZAAR of other thing. which constitutes. Under electronic trading. 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. 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. house is also extended from 10:30 a. or through 40 . to 3:30 p. screen-based trading system at which investor client contact his broker through telegram.m.m. Stock exchange may be recognized or unrecognized. to 3:30 p. All the orders of sell and purchase of shares are executed at stock exchange. Trading before of after official hours is called kerb trading. nationwide. There are 23 stock exchange in all over India. known as the National Exchange for Automated Trading (NEAT) system. incorporated or not. telephone. is an on-line. Trading Mechanism The trading system. 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. fully-automated.m. order-driven.m. anonymous.CAPITAL MARKET IN INDIA Stock exchange is an organization. Thus in ordinary sense. association or group of persons.

making the market transparent. 41 . It ensures full anonymity by accepting orders. It provides a perfect audit trail which helps to resolve disputes by logging in the trade execution process in entirety. big or small. to trade with one another simultaneously. It enables market participants to see the full market on real-time. but also from the personal computers in the homes of investors through the Internet and from the hand-held devices through WAP. 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. thus increasing the informational efficiency of markets. It allows a large number of participants. as well as on fraud resulting in improved operational efficiency. It allows faster incorporation of price sensitive information into prevailing prices. from members without revealing their identity. price of security. irrespective of their geographical locations. It provides tremendous flexibility to the users in terms of kinds of orders that can be placed on the system. improving the depth and liquidity of the market. thus providing equal access to everybody.CAPITAL MARKET IN INDIA intermediary or by directly and after they tells their broker about quantity of security. 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.

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

) The companies paid up capital should be at least RS.) The shares should has been actively traded while on the cash list 4. 43 groups.) The company should be a dividend paying one. Group B share. 6.) The number of shareholders must be more than 20.10 crores. Non-specified group split into B1 and B2 available to group B shares. Group B Those securities which have high traded volume less than the Group A which are included in Group B. 5 crores. The carry forward facility is not .e.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. those which are first listed will be. only those actively traded are included.000.) The shares should be fully paid up 2. kept in Non-specified. 5. i. those security which have high traded volume which are included in Group A. 3. The shares which are traded on cash basis are called group shares.) The company’s shares should have market capitalization of at least RS. They are also called as cash shares.) The company should have a growth potential. 7. The criteria for listing in specified group have been dealt with as follow: 1.

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

) Hand delivery c. For completion of the contract.) Delivery for clearing a.) Delivery for Clearing All transaction in securities in the specified list are effected only through the clearing house. The types of transactions on cash basis according to arrangement for delivery are: a. the delivery and payment are completed on the same day of contract or on the next day.) 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 In case of spot delivery transaction. b.) Spot delivery b. 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. c. Carry over is permitted only in respect of Group A securities.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 securities for delivery will be delivery to the buyer within a week and the seller receive all member dues within the 45 .

the broker requires investor to renew the order every day. Orders are executed in the Trading ring of the stock exchange which works form 10:30 a. Small ones carry out their business personally. usually a day. 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. to 3:30 p.CAPITAL MARKET IN INDIA same time from the clearing house on the respective “pay-in” and “pay-out” days. 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. On the basis of price limits. on all working day from Monday to Friday and a special one hours session on Saturday.m.  TYPES OF ORDER Order for the sale and purchase of shares are valid for a certain time period. Trading outside the trading hours are called ‘kerb dealing’. 46 .m. In actual practice.

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. In case the order related to a security listed in the stock exchange of the broker. order-driven. or through intermediary or by directly and after they tells their broker about quantity of security. The trading system. 47 . This original is retained by the client and the copy returned with the client’s signatures to the broker in confirmation of that contract. known as the National Exchange for Automated Trading (NEAT) system. Acceptance of order may be communicated to the client orally or through “Order Confirmation Note”. 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. fax etc. screen-based trading system at which investor client contact his broker through telegram. anonymous. nationwide. is an on-line. The broker intimates his client of the transactions done on his behalf by sending him a ‘Contract Note’. fully-automated. the order is executed in the following manner. price of security. Oral orders will be accepted by a broker only if the client is well known.CAPITAL MARKET IN INDIA Order may be communicated to broker either orally or in writing. telephone.

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

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

The transfer deed is filled up if not.] Sale of Shares i.) Sending shares for transfer The last stage is the transfer of shares in the name of the purchaser. So it need not to Sending shares for transfer because of demate is already made. Only member of that particular stock exchange either for themselves or an behalf of their clients. The buyer signs in the transferee column of transfer deed. The share certificates are received duly transferred within 3 months. Usually along with the order the broker will ask 50 . the share certificate and complete transfer deed are now ready which are sent at the share transfer department of company concerned. iv.) Placing the order with the broker The order of sale of shares has to be placed with the broker.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. as an individual can not sell or purchase shares at the stock exchange directly. Thus. In case of outstation clients. [B. already done. Share transfer stamps have to be affixed on the back of transfer deed. “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”. the broker will call for balance payment and then send the shares certificate and transfer deed through registered post.

) 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.CAPITAL MARKET IN INDIA investor to submit the share certificate and transfer deed. The seller must sign at the transferor column on the transfer deed.) Receipt of contract note On the sale of issues contracts note. to whom he had sold the shares. member of another stock exchange of another of his clients. iii. the rate per share. A contract indicates the number of share sold. The stock exchange have fixed delivery days on this day. In case the client is not satisfied.) 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 dare of sale and the terms and conditions governing the sale. ii. iv. The delivery day avoids the confusion that would arise of members could deliver on any day of their choice. the members deliver to each other the shares they have sold and purchased. 51 . he must notify his broker immediately on receipt of the contract. 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. A contract note binds the broker and his client.

) B. this activity is called margin trading and it is used for one basic reason i. plus the difference between the price at which they sell the security and the price paid to purchase it ( capital gains). Each of basic types of orders described con be used with long transactions.) C.) Long purchase Margin trading Short selling A. to magnify return. The object is to buy low and sell high. borrowed fund can be used instead.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. 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. B. 52 . Because investor generally expect the price of security to rise over the period of time they plan to hold it.CAPITAL MARKET IN INDIA  BASIC TYPE OF TRANSACTION IN STOCK EXCHANGE A. A long purchase is the most common type of transaction. This return is reduced by brokerages fees paid to purchase and sell the securities.

II. 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.) Initial Margin Maintenance Margin I.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. the related account is known as restricted account. There are basically 2 types of margin requirements. i. When restricted account position is occurred an investor will receive a margin call. although these can be changed by the authorities from time to time. As long as the margin account remains at a level equal to or greater than maintenance margin. It should be clear that with the use of margin.) Maintenance Margin Maintenance margin absolute minimum amount of margin that an investor must maintain in the margin account at all times. When margin drops below maintenance margin level. margin in his account will also drop.) 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.) ii. If the value of investors holding decline. an investor can purchase more securities that he or she could afford on a security cash basis. 53 .

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.) Amount of money being borrowed. the maintenance margins on equity rarely change.000 =50% (initial margin) A.000. So. 10000 RS.000 Margin = x 100 20.Debt balance Margin Transactions: Buy 1000 shares of ABC scrip at RS.CAPITAL MARKET IN INDIA Generally initial margin is set slightly higher by broker houses for added protection of both broker and their customers. Customer’s A/C Stock (shares) RS. 10000 = Value of securities 20.) share price moves down to RS.) prevailing market value of securities being margin. 2 things are required: i. 20 each. Initial margin is at 50% and maintenance margin=30%. ii. it is also called debit balance Value of securities .10.17 54 . 20000 Debt Equity RS.

10.09% C. 3000 13.10. 13. 17.000 Debt Equity RS.000 =41. 10000 RS.000 55 .) share price moves UP to RS.000. 10000 RS.000 Margin = x 100 25. 7000 17.10. 15000 25.2% B.000. 25.000 =23.000.CAPITAL MARKET IN INDIA Stock (shares) RS.) share price moves down to RS. 10000 RS.000 Margin = x 100 17.000 Debt Equity RS.000 Margin = x 100 13.13 Stock (shares) RS.000 Debt Equity RS.25 Stock (shares) RS.

if value of securities/ shares move down from RS. 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.) Short selling Short selling is generally defined as the practice of selling borrowed securities.14. the maintenance margin falls below 30%. margin moves up from 30%. So.000 = 1 – 0. 286. The maintenance margin of 30% will be reached under the following conditions: Debt balance Market value of securities = 1 – Maintenance margin 10. the securities in his account will be sold and cash used to repay the outstanding margin loan.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. C.30 = 14. If value of the shares move up from RS.286 RS. It means.286.CAPITAL MARKET IN INDIA =60% The share falling price must be absorbed by the customer’s Equity because the debt has not been repaid. indicate at (beta) point in above Example.

the term margin simply indicates the size of the Equity deposit the investor must make in order to initiate the transaction.5% of the contract price.CAPITAL MARKET IN INDIA broker are sold in the market place. when the price of the issue has declined. 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. he is able to protect project already made in long transaction. Margined short sales are executed in the same margin A/C as margined long transactions. the short seller buys back the securities which are then returned to the lender. exclusive of statutory 57 . Short On Margin With short selling. The only difference is that they reverse the investment process by starting the transaction with a sale and ending it with a purchase. 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. They are subject initial margin levels. By doing this. Later.  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. In fact. Short sellers to make money by buying low and selling high. There are no borrowed funds with margined short sales.

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

Likewise members with funds obligations make available required funds in the designated accounts with clearing banks by the prescribed pay-in time. The depositories move the securities available in the accounts of members to the account of the Clearing house. debit accounts of members and credit accounts of the Clearing house. The depositories and clearing banks debit accounts of the Clearing house and credit accounts of members. (d) Pay-in of Funds and Securities: The members bring in their funds/securities to the Clearing house. The banks process these instructions. They make available required securities in designated accounts with the depositories 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. Settlement is complete upon release of pay-out of funds and securities to custodians/members. The Clearing house sends electronic instructions to the clearing banks to debit member's accounts to the extent of payment obligations. the Clearing house sends electronic instructions to the depositories/clearing banks to release pay-out of securities/ funds. (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. (f) Risk Management: 59 .

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

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

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

63 . Other T+ terms have similar meanings.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.CAPITAL MARKET IN INDIA Activity T+3 Rolling April 1.

While stock exchange provides a platform for trading to its trading members. So. clearing process is essentially the process of determination of obligations after which the obligations are recovered by settlement. Settlement. (NSCCL) determines the funds/securities obligations of the trading members and ensures that trading members meet their obligations. 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 corporation/Clearing House/ the National Securities Clearing Corporation Ltd. Clearing. CLEARING PROCEDURE The transactions in secondary market are processed through 3 distinct phases viz: Trading. 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. and what trading members are due to receive on the settlement date. 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. 64 .CAPITAL MARKET IN INDIA  AUCTIONS Auctions are arranged for scrips which could not be delivered even on the final day. 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.

CAPITAL MARKET IN INDIA The clearing and settlement process for transactions in securities is presented in the following diagram. 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 .

(10) Depository informs custodians/CMs through DPs. Based on the affirmation. Clearing House notifies the consummated trade details to CMs/custodians who affirm back. (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). (11) Clearing Banks inform custodians/CMs. Clearing House applies multilateral netting and determines obligations. (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). FINDINGS 66 . Pay-in of securities (Clearing House advises depository to debit pool account of custodians/CMs and credit its account and depository does it). 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). (8) Pay-out of securities (Clearing House advises depository to credit pool account of custodians/CMs and debit its account and depository does it). Instructions to clearing banks to make funds available by pay-in time.

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. ask for tips to sell and not to buy. • buying or selling of share because nowadays demit is compulsory and account are debited and credited. • Due to screen based trading.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. No paper work is involved in in the previous trading system. • different maturity and yield in unable the investor to diversify their risk by wider portfolio of investment. And this growth is expected to continue in future because of cease less expansion of product portfolio and customer base. T+4 etc. the mobilization of money become speedily and less time. settlement. settlement than T+3. 67 . • • • • • The investor has high risk to invest in primary market When market is hyper. over a last couple of years. orders confirmations are Capital market supplies securities of different kind with done within few second / minutes after punching the order. working properly you cannot trade.

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

BIBLIOGRAPHY 69 . In the SGSSL has two Trading room. so the speculation can be reduced. So SGSSL should start a other more 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 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. The SGSSL should create more awareness in their client and investor about demat and it’s benefit. Those investor who want to take the higher risk and more return.CAPITAL MARKET IN INDIA SUGGESTIONS • The settlement cycle should be reduced from T+2 to T+1. 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 the traffic can be avoided in the trading room. Small investor should watch the trend of market and should know the speculation situation after that invest. Those investor have physical share certificate should convert into demat by opening demat account. In SGSSL there is less incentive and motivation among the worker compare to other company. Those people who want to make speculation they should go into secondary market.

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

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