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Nse Versus Bse

Nse Versus Bse

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Published by: Melbin Maria Noble on Dec 06, 2010
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  • Introduction
  • History of Stock Market
  • Market participants
  • Importance of stock market
  • Function and purpose
  • Relation of the stock market to the modern financial system
  • The behavior of the stock market
  • Stock market index
  • Derivative instruments
  • Leveraged strategies
  • Stock Markets in India
  • Prominent Position
  • Several Firsts
  • Investor Education
  • Milestones
  • Origins
  • Innovations
  • Markets

Project Report on

MiniProject (2009-11) Bach

Submitted By Melbin Maria Noble

Under the guidance of Prof. Dr.K.Gopalakrishanan Nair




Certificate s
Certified that this report of the Mini project titled ´ Comparative study of BSE & NSE µ is a bonafide record of the work done by Melbin Maria Noble in this department as part of the Mini Project work to be done in the third semester of MBA in Dept. of Business Administration, College of engineering, TVM.
Dr.K.Gopalakrishanan Nair,
Dept. of Business Administration, College of engineering, TVM.

Prof. S. Sivakumar
HOD, Dept. of Business Administration, College of Engineering, TVM


We would like to place on record our deep sense of gratitude to Prof. S. Sivakumar, HOD, Dept. of Business Administration, College of engineering, TVM for his invaluable help and guidance to shape this project in a symmetric way.

We also express our hearty gratitude to Dr.K.Gopalakrishanan Nair, for his opinion of intelligence, support and guidance which has resulted in the successful culmination of this project work.

We also express our sincere thanks to the 50 participants of market survey for providing us with adequate information for the completion of this project.

Trivandrum, December 6th, 2010.

Melbin Maria Noble.


y y y y

Introduction History of Stock Market Market participants Importance of stock market 
Function and purpose  Relation of the stock market to the modern financial system  The stock market, individual investors, and financial risk  The behavior of the stock market  Irrational behavior

6 7 8 8
8 9 9 10 10

y y y y y y

Stock market index Derivative instruments Leveraged strategies New issuance Investment strategies Stock Markets in India
Introduction History of the Indian Stock Market - The Origin

13 13 14 14 14 16
16 17

y Bombay stock exchange
o Prominent position o several firsts o investor education o milestones o sensex

20 21 21 22 23

y National stock exchange 
Origins  Innovations  Markets  Milestones

25 26 26 27

y y y y y y y y y y y Comparison of Trade Value of NSE & BSE Comparison of Market Capitalisation at NSE & BSE Investers stock exchange preference Reasons for prefering nse the most Growth of sensex and nifty last 15 years Invester¶s preference for analyzing market Client satisfaction Invester¶s selction for most secured investment Conclusion Questionnaire References 29 30 31 32 33 34 35 36 37 38 41 5 .

The value of the derivatives market. is the New York Stock Exchange. Asian examples include the Tokyo Stock Exchange. which traditionally refers to an actual value. not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price. the Hong Kong Stock Exchange. Paris Bourse. the largest stock market is the Toronto Stock Exchange.6 trillion at the start of October 2008. 6 . The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The total world derivatives market has been estimated at about $791 trillion face or nominal value.e. the vast majority of derivatives 'cancel' each other out (i. Moreover. Many such relatively illiquid securities are valued as marked to model. 11 times the size of the entire world economy. and the Deutsche Börse. rather than an actual market price. In Latin America. these are securities listed on a stock exchange as well as those only traded privately. NYSE. and the Bombay Stock Exchange.Introduction A stock market or equity market is a public (a loose network of economic transactions. The size of the world stock market was estimated at about $36. cannot be directly compared to a stock or a fixed income security.. by market cap. In Canada. Major European examples of stock exchanges include the London Stock Exchange. because it is stated in terms of notional values. The largest stock market in the United States. there are such exchanges as the BM&F Bovespa and the BMV. a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). the Shanghai Stock Exchange.

Verona. There are now stock markets in virtually every developed and most developing economies. much as we know them". China. United Kingdom. with the world's biggest market being in the United States. an informal meeting. the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. but actually. merchant banking. Because these men also traded with debts. Bankers in Pisa. South Korea and the Netherlands. they could be called the first brokers. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze. 7 . This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. option trading. In 1602. debt-equity swaps. the family Van der Beurze had a building in Antwerp where those gatherings occurred. as most of the merchants of that period. as their primary place for trading. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. institutionalizing what had been. which let shareholders invest in business ventures and get a share of their profits ± or losses. Genoa and Florence also began trading in government securities during the 14th century. until then. France. In the middle of the 13th century. It was the first company to issue stocks and bonds. Germany.History of Stock Market In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. Canada. and in 1309 they became the "Brugse Beurse". The Dutch "pioneered short selling. India. Japan. the Van der Beurze had Antwerp. The Dutch later started joint stock companies. Venetian bankers began to trade in government securities. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam. unit trusts and other speculative instruments.

Market participants A few decades ago. In fact. such as wealthy businessmen. This allows businesses to be publicly traded. or raise additional capital for expansion by selling shares of ownership of the company in a public market. for instance. Importance of stock market Function and purpose The stock market is one of the most important sources for companies to raise money.) However. worldwide. markets have become more "institutionalized". Thus. This is an attractive feature of investing in stocks. compared to other less liquid investments such as real estate. the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor. buyers and sellers are largely institutions. usually with long family histories to particular corporations. Share prices also affect the wealth of households and their consumption. tend to be associated with increased business investment and vice versa. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. buyers and sellers were individual investors. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity. Rising share prices. the stock market is often considered the primary indicator of a country's economic strength and development. Over time. corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'. (They then went to 'negotiated' fees. but only after the large institutions had managed to break the brokers' solid front on fees. and can influence or be an indicator of social mood. central banks tend to keep an eye on the control and 8 . Therefore. but only for large institution. The rise of the institutional investor has brought with it some improvements in market operations. An economy where the stock market is on the rise is considered to be an upand-coming economy.

either directly or through mutual funds. A portion of the funds involved in saving and financing. flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. insurance investment of premiums. deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. in general. Exchanges also act as the clearinghouse for each transaction. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance. etc. Financial stability is the raison d'être of central banks.g. on the smooth operation of financial system functions. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. Similar tendencies are to be found in other industrialized countries. Relation of the stock market to the modern financial system The financial system in most western countries has undergone a remarkable transformation. in Sweden. such as the European Union.. the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another. mutual funds. 9 . One feature of this development is disintermediation. The general public's heightened interest in investing in the stock market. the United States. permitting a higher proportion of shares to bonds. meaning that they collect and deliver the shares. e. has been an important component of this process. pension funds. Japan and other developed nations. In the 1970s. In all developed economic systems. hedge funds. compared to less than 20 percent in the 2000s.behavior of the stock market and. In this way the financial system contributes to increased prosperity. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. and guarantee payment to the seller of a security.

Over the years he has built himself a multi-billion-dollar fortune.. and market strategists are all overtaking each other to get investors' attention. individual investors. Economists continue to debate whether financial markets are 'generally' efficient. or have acquired other 'risky' investments (such as 'investment' property.e. i. in marked contrast to the stability of (government insured) bank deposits or bonds. individual investors. and $100. real estate and collectables). Television commentators. This is something that could affect not only the individual investor or household. Stock prices skyrocket with little reason. and people who have turned to investing for their children's education and their own retirement become frightened. the noise level in the stock market rises. This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. The following deals with some of the risks of the financial sector in general and the stock market in particular. then plummet just as quickly. With each passing year. 10 . (Positive or up trends are referred to as bull markets.) Over-reactions may occur²so that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. negative or down trends are referred to as bear markets. are exchanging questionable and often misleading tips. investors find it increasingly difficult to profit. Yet. analysts. immersed in chat rooms and message boards.000 from seven limited partners consisting of Buffett's family and friends. despite all this available information. Sometimes there appears to be no rhyme or reason to the market. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century. only folly. Buffett began his career with $100. The behavior of the stock market From experience we know that investors may 'temporarily' move financial prices away from their long term aggregate price 'trends'. This is certainly more important now that so many newcomers have entered the stock market. financial writers. Stock prices fluctuate widely.The stock market. and financial risk Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. but also the economy on a large scale. At the same time.

. and the use of certain strategies. while EMH predicts that all price movement (in the absence of change in fundamental information) is random (i. For instance. where random 'noise' in the system may prevail. in fact. But the best explanation seems to be that the distribution of stock market prices is nonGaussian (in which case EMH. This event demonstrated that share prices can fall dramatically even though. contrary to fact. since prices are already at or near equilibrium. Other research has shown that psychological factors may result in exaggerated (statistically anomalous) stock price movements (contrary to EMH which assumes such behaviors 'cancel out'). it is impossible to fix a generally agreed upon definite cause: a thorough search failed to detect any 'reasonable' development that might have accounted for the crash. having priced in all public knowledge.According to one interpretation of the efficient-market hypothesis (EMH). (Something like seeing familiar shapes in clouds or ink blots. although very rarely.) It seems also to be the case more generally that many price movements (beyond that which are predicted to occur 'randomly') are not occasioned by new information. Psychological research has demonstrated that people are predisposed to 'seeing' patterns. only changes in fundamental factors. (But this largely theoretic academic viewpoint²known as 'hard' EMH²also predicts that little or no trading should take place. such as the outlook for margins. many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer. but only that market participants not be able to systematically profit from any momentary market 'inefficiencies'. Moreover. However. ought to affect share prices beyond the short term. when the Dow Jones index plummeted 22. (But note that such events are predicted to occur strictly by chance. in any of its current forms. Various explanations for such large and apparently non-random price movements have been promulgated. just noise. a study of the fifty largest one-day share price movements in the United States in the post-war period seems to confirm this. theoretically could cause financial markets to overreact. to this day. non-trending).6 percent²the largest-ever one-day fall in the United States. would not be strictly applicable). profits or dividends.e. a 'soft' EMH has emerged which does not require that prices remain at or near equilibrium.) The 'hard' efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987. such as stop-loss limits and Value at Risk limits. some research has shown that changes in estimated risk. and often will perceive a pattern in what is.) In the present context this means that a succession of good news items about a company may lead investors to overreact positively (unjustifiably driving the price 11 .

and a counterreaction may occur if the news is better (or worse) than expected. euphoria and mass panic. less than 1 percent of the analyst's recommendations had been to sell (and even during the 2000 ± 2002 bear market. people generally prefer to have their opinion validated by those of others in the group. as more experienced investors (especially the hedge funds) quickly rally to take advantage of even the slightest. The stock market. so that by summer of 2002. the media amplified the general euphoria. rumors. In times of market stress. stocks and other securities can be battered or buoyed by any number of fast market-changing events. momentary hysteria. A period of good returns also boosts the investor's self-confidence. with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. but generally only briefly. the probabilities are known and largely independent of the investment decisions of the different players. predictions of a DOW average below 5000 were quite common. the average did not rise above 5 %%).) Irrational behavior Sometimes the market seems to react irrationally to economic or financial news. In normal times the market behaves like a game of roulette. But this may be more apparent than real. is quite unforgiving of amateurs. making the stock market behavior difficult 12 . An example with which one may be familiar is the reluctance to enter a restaurant that is empty. Inexperienced investors rarely get the assistance and support they need. it is not easy to stick to an opinion that differs markedly from that of a majority of the group. the stock market may be swayed in either direction by press releases. Therefore. (And later amplified the gloom which descended during the 2000 ± 2002 bear market. In the run up to 2000. reducing his (psychological) risk threshold. Over the short-term. the game becomes more like poker (herding behavior takes over).up). As social animals. even if that news is likely to have no real effect on the fundamental value of securities itself. however. as with any other business. Another phenomenon²also from psychology²that works against an objective assessment is group thinking. In the period running up to the 1987 crash. In one paper the authors draw an analogy with gambling. The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically. since often such news has been anticipated.

single-stock futures. rather than the (hypothetical) stock market. equity swaps. These last two may be traded on futures exchanges (which are distinct from stock exchanges²their history traces back to commodities futures exchanges). As all of these products are only derived from stocks. The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment. which causes market inefficiencies. of which there are many. are opportunities to make money. leaving the prices of stocks rationally determined. e. people are generally not as rational as they think. the FTSE and the Euronext indices. in turn. However. and stock index futures. Some examples are exchange-traded funds (ETFs). Stock market index The movements of the prices in a market or section of a market are captured in price indices called stock market indices. with the weights reflecting the contribution of the stock to the index. 13 . stock index and stock options.g. Emotions can drive prices up and down. Derivative instruments Financial innovation has brought many new financial instruments whose pay-offs or values depend on the prices of stocks.. they are sometimes considered to be traded in a (hypothetical) derivatives market. which.to predict. the S&P. or traded over-the-counter. and the reasons for buying and selling are generally obscure. Behaviorists argue that investors often behave 'irrationally' when making investment decisions thereby incorrectly pricing securities. Such indices are usually market capitalization weighted. the whole notion of EMH is that these non-rational reactions to information cancel out.

Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright. The investor is responsible for any shortfall following such forced sales. In the United States. speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks 14 . margin buying may be used to purchase stock with borrowed funds. the trader borrows money (at interest) to buy a stock and hopes for it to rise. if you want to make a $1000 investment. and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position. Before that." This strategy may also be used by unscrupulous traders in illiquid or thinly traded markets to artificially lower the price of a stock. A margin call is made if the total value of the investor's account cannot support the loss of the trade. derivatives may be used to control large blocks of stocks for a much smaller amount of money than would be required by outright purchase or sale.) Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929. or. The trader eventually buys back the stock. (Upon a decline in the value of the margined securities additional funds may be required to maintain the account's equity. Short selling In short selling. The practice of naked shorting is illegal in most (but not all) stock markets. and there is often a maintenance margin below the $500).Leveraged strategies Stock that a trader does not actually own may be traded using short selling. the trader borrows stock (usually from his brokerage which holds its clients' shares or its own shares on account to lend to short sellers) then sells it on the market. it can be a maximum of a certain percentage of those other stocks' value. making money if the price fell in the meantime and losing money if it rose. Hence most markets either prevent short selling or place restrictions on when and how a short sale can occur. Margin buying In margin buying. Exiting a short position by buying back the stock is called "covering a short position. you need to put up $500. the margin requirements have been 50 %% for many years (that is. hoping for the price to fall.

Additionally. many choose to invest via the index method. used by John W. Middle East and Africa (EMEA) increased by 333 %%. 15 . one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as the S&P 500 or Wilshire 5000). Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. two basic methods are classified as either fundamental analysis or technical analysis. New issuance Global issuance of equity and equity-related instruments totaled $505 billion in 2004. Other rules may include the prohibition of free-riding: putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock). since World War II). minimize taxes from too frequent trading. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings. Henry and Ed Seykota. and IPOs in Europe. a 29. general economic conditions. utilizes strict money management and is also rooted in risk control and diversification. in the U. but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in the interim).8 %% increase over the $389 billion raised in 2003. etc. from $ 9 billion to $39 billion. One example of a technical strategy is the Trend following method. and ride the general trend of the stock market (which. The principal aim of this strategy is to maximize diversification. has averaged nearly 10 %%/year. In this method. compounded annually. "How do I make money investing?" There are many different approaches.purchased.S. which uses price patterns.. Initial public offerings (IPOs) by US issuers increased 221 %% with 233 offerings that raised $45 billion. Investment strategies One of the many things people always want to know about the stock market is. business trends.

its price will fall down. and can trade freely from their home or office over the phone or through Internet. if there are more sellers than buyers (i. less supply). most of the operations are done electronically and the stock markets have become almost paperless. 18th Century 1830's East India Company was the dominant institution and by end of the century. The price at which each buying and selling transaction takes is determined by the market forces (i. the Indian Stock Markets have a 200 years old history. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price.e. More and more people would want to buy this stock (i. buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT. In earlier times.e.Ltd. Ltd. Let us take an example for a better understanding of how market forces determine stock prices. high supply and low demand) for the stock of ABC Co. History of the Indian Stock Market .e. Trading list by the end of 1839 got broader Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business 16 1840's 1850's . ABC Co. buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. On the contrary. Now investors dont have to gather at the Exchanges. Ltd. high demand) and very few people will want to sell this stock at current market price (i.The Origin One of the oldest stock markets in Asia. demand and supply for a particular stock). Therefore.Stock Markets in India Introduction Stock markets refer to a market place where investors can buy and sell stocks. in the market. busuness in its loan securities gained full momentum Business on corporate stocks and shares in Bank and Cotton presses started in Bombay.e.

attracting more people into the business 1860's 1860-61 The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America. Bank of Bombay Share which had touched Rs. "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" 1875 1880's 1894 1880 . brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. 87) 1862-63 1865 Pre-Independance Scenario . marking the beginning of the "Share Mania" in India The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example.90's Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal 1908 "The Calcutta Stock Exchange Association" was formed 17 .Establishment of Different Stock Exchanges 1874 With the rapidly developing share trading business. 2850 could only be sold at Rs.

1920 Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Lahore Estock Exchange was closed down after the partition of India.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited" 1923 1934 1936 1937 1940 1944 1947 Post Independance Scenario (Regulations) Act. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts were: 18 . 1956. The Exchanges that were recognized under the Act The depression witnessed after the Independance led to closure of a lot of exchanges in the country. number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange Re-organisation and set up of the Madras Stock Exchange Limited (Pvt. When recession followed. and later on merged with the Delhi Stock Exchange.

1982) 3. Magadh Stock Exchange Association (at Patna. Kanara Stock Exchange Limited (at Mangalore. Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. listed companies as well as their capital. 1989) 11. Pune Stock Exchange Limited (1982) 4. 1986) 8. 7. 2. Cochin Stock Exchange (1980) 2. Vadodara Stock Exchange Limited (at Baroda. Ludhiana Stock Exchange Association Limited (1983) 5.1. 1985) 7. Meerut Stock Exchange At present. 6. Gauhati Stock Exchange Limited (1984) 6. Bombay Calcutta Madras Ahmedabad Delhi Hyderabad Bangalore Indore Many more stock exchanges were established during 1980's. Uttar Pradesh Stock Exchange Association Limited (at Kanpur. There was a sharp increase in number of Exchanges. 4. there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). Bhubaneswar Stock Exchange Association Limited (1989) 10. 1990) 12. Saurashtra Kutch Stock Exchange Limited (at Rajkot. 3. Jaipur Stock Exchange Limited (1989) 9. 8. 19 . 5. Coimbatore Stock Exchange 13. namely: 1.

the brokers moved their venue to another set of foliage. and one that they could. At last. aptly. A decade later.. in 1874. 2005. It had also laid down best practices which were adopted 20 . the name "The Stock Exchange. While BSE is now synonymous with Dalal Street. the brokers found a permanent place. where Horniman Circle is now situated. 1956. The BOLT network was expanded nationwide in 1997. replaced its open outcry system of trading in 1995. Mumbai" was changed to Bombay Stock Exchange. it was not always so. The new place was. BSE.in front of the Town Hall. As the number of brokers increased. It is surely BSE's pride that almost every leading corporate in India has sourced BSE's services in capital raising and is listed with BSE. as India's biggest bourse. The first venues of the earliest stock broker meetings in the 1850s were in rather natural environs . In 2002. in terms of listed companies and market capitalisation. called Dalal Street ( Brokers' Street). they had to shift from place to place. quite literally. In fact. Even in terms of an orderly growth.BOMBAY STOCK EXCHANGE The oldest stock exchange in Asia (established in 1875) and the first in the country to be granted permanent recognition under the Securities Contract Regulation Act. with the totally automated trading through the BSE Online trading (BOLT) system. much before the actual legislations were enacted. call their own. but they always overflowed to the streets. BSE had formulated a comprehensive set of Rules and Regulations for the securities market.under banyan trees . Bombay Stock Exchange Limited (BSE) has had an interesting rise to prominence over the past 135 years. Prominent Position The journey of BSE is as eventful and interesting as the history of India's securities market. the exchange turned into a corporate entity from an Association of Persons (AoP) and renamed as Bombay Stock Exchange Limited. Subsequently on August 19. this time under banyan trees at the junction of Meadows Street and what is now called Mahatma Gandhi Road. which had introduced securities trading in India. BSE has played a pioneering role in the development of the Indian securities market.

subsequently by 23 stock exchanges which were set up after India gained its independence.under which awareness 21 .on February 18. BSE has in fact been a pioneer in several areas. First to have an exclusive facility for financial training First in India in the financial services sector to launch its website in Hindi and Gujarati Shifted from Open Outcry to Electronic Trading within just 50 days First bell-ringing ceremony in the history of the Indian capital markets (listing ceremony of Bharti Televentures Ltd. First in India to introduce Equity Derivatives First in India to launch a Free Float Index First in India to launch US$ version of BSE SENSEX First in India to launch Exchange Enabled Internet Trading Platform First in India to obtain ISO certification for a stock exchange 'BSE On-Line Trading System¶ (BOLT) has been awarded the globally recognised the Information Security Management System standard BS7799-2:2002. BSE. It has several firsts to its credit even in an intensely competitive environment.2002) Investor Education An equally important accomplishment of BSE is its nationwide investor awareness campaign . Several Firsts At par with the international standards."Safe Investing in the Stock Market" . has been and is synonymous with the capital market in India. Its SENSEX is the benchmark equity index that reflects the health of the Indian economy. as a brand.

campaigns and dissemination of information through print and electronic medium is undertaken across the country.(CDSL) set up with other 22 .. BSE also actively promotes the securities market awareness campaign of the Securities and Exchange Board of India. country's first equity index launched (Base Year:1978-79 =100) 10th Jul 1987 3rd Jan 1989 25th Jul 1990 1st May 1992 Investor's Protection Fund (IPF) introduced BSE Training Institute (BTI) inaugurated SENSEX closes above 1000 SEBI Act established ( An Act to protect. Milestones 9th Jul 1875 The Native Share & Stock Broker's Association formed 31st Aug 1957 BSE granted permanent recognition under Securities Contracts (Regulation) Act (SCRA) 2nd Jan 1986 SENSEX. develop and regulate the securities market) BSE On-Line Trading (BOLT) system introduced BSE On-Line Trading (BOLT) system expanded nation-wide 14th Mar 1995 1997 22nd Mar 1999 Central Depository Services Ltd.

financial institutions 11th Oct 1999 9th Jun 2000 1st Apr 2003 8th Aug 2005 7th Feb 2006 4th Jan 2010 SENSEX closed above 5000 Equity Derivatives introduced T+2 settlement Introduced Incorporation of Bombay Stock Exchange Limited SENSEX closed above 10000 Market time changed to 9.0 a. Sensex The BSE Sensex or Bombay Stock Exchange Sensitivity Index is a valueweighted index composed of 30 stocks that started January 1. or shares that are readily available for trading. 1979.3. It consists of the 30 largest and most actively traded stocks. These companies account for around fifty per cent of the market capitalisation of the BSE. does not include restricted stocks. The index is calculated based on a free-float capitalization method. government and strategic investors. Instead of using a company's outstanding shares it uses its float. and the base year of BSE-SENSEX is 1978-79. 23 . therefore.30 p. the Bombay Stock Exchange (BSE) authorities review and modify its composition to be sure it reflects current market conditions. 1986.m. The free-float method. . At a regular intervals. representative of various sectors. on the Bombay Stock Exchange. a variation of the market cap method. such as those held by promoters. The base value of the sensex is 100 on April 1. The Sensex is regarded as the pulse of the domestic stock markets in India.m.

However this was shifted to the free float method with effect from September 1. This Market capitalization is multiplied by a free float factor to determine the free float market capitalization.6% per annum. Globally. replacement of scrips.The Divisor is the only link to original base period value of the Sensex. Using information from April 1979 onwards. The Calculation of Sensex involves dividing the free float market capitalization of 30 companies in the index by a number called Index divisor. the long-run rate of return on the BSE Sensex works out to be 18. The index has increased by over ten times from June 1990 to the present. Free float factor represent the percentage of shares that are readily available for trading. the free float market capitalization is regarded as the industry best practice. It keeps the index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions. etc. the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period. which translates to roughly 9% per annum after compensating for inflation. 2003. As per free float capitalization methodology. 24 . Free float factor is also referred as adjustment factor. The Market Capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company.Initially. the index was calculated based on the µfull market capitalization¶ method.

46 trillion. It is the second fastest growing stock exchange in the world with a recorded growth of 16. Origins The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India. for both equities and derivative trading. known as the NSE NIFTY (National Stock Exchange Fifty). 2799 in total. NSE is mutually-owned by a set of leading financial institutions.262. In April 1993. although this has not yet occurred. 25 . insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities.6%. The NSE's key index is the S&P CNX Nifty. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE. 1956. making it the second largest stock exchange in South Asia. India. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. As of 2006. the NSE VSAT terminals. The Capital market (Equities) segment of the NSE commenced operations in November 1994. cover more than 1500 cities across India. In October 2007.NATIONAL STOCK EXCHANGE The National Stock Exchange (NSE) is a stock exchange located at Mumbai.507 crore (US$ 1. NSE has a market capitalization of around 7. and between them are responsible for the vast majority of share transactions. while operations in the Derivatives segment commenced in June 2000. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India. Though a number of other exchanges exist. the equity market capitalization of the companies listed on the NSE was US$ 1. an index of fifty major stocks weighted by market capitalisation.648. banks. and was incorporated in November 1992 as a tax-paying company. it was recognized as a stock exchange under the Securities Contracts (Regulation) Act.59 billion) (October 2010) and was expected to become the biggest stock exchange in India in terms of market capitalization by 2009 end. It is the largest stock exchange in India in terms of daily turnover and number of trades.

NSE. NSE pioneered commencement of Internet Trading in February 2000. derivatives market) trades in India. NSCCL was a landmark in providing innovation on all spot equity market (and later. Setting up the first clearing corporation "National Securities Clearing Corporation Ltd. Markets Currently. NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBC-TV18. A Vertical Specialist Enterprise. existent market and new market structures have followed the "NSE" model. NSE has the following major segments of the capital market: y y y y y y Equity Futures and Options Retail Debt Market Wholesale Debt Market Currency futures Mutual fund 26 . NSE. Since the success of the NSE. anonymous. in India. which led to the wide popularization of the NSE in the broker community." in India. first depository in India Setting up of S&P CNX Nifty. Co-promoting and setting up of National Securities Depository Limited. and its pioneering efforts include: y y y y y y y y y Being the first national. the NSE was permitted to start trading equity derivatives Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in India. setup in 1999 . is a 100% subsidiary of the National Stock Exchange of India.IT Limited. solutions and services. After four years of policy and regulatory debate and formulation. Being the first exchange that.Innovations NSE has remained in the forefront of modernization of India's capital and financial markets.IT offers end-toend Information Technology (IT) products. proposed exchange traded derivatives. in 1996. particularly on an equity index. electronic limit order book (LOB) exchange to trade securities in India.

Currently it has also launched currency futures in EURO. Interest Rate Futures was introduced for the first time in India by NSE on 31 August 2009. the first Clearing Corporation y October 1995 Became largest stock exchange in the country y April 1996 Commencement of clearing and settlement by NSCCL y April 1996 Launch of S&P CNX Nifty y November 1996 Setting up of National Securities Depository Limited. POUND & YEN. a futures contract based on 7% 10 Year GOI bond (NOTIONAL) was launched with quarterly maturities. Milestones y November 1992 Incorporation y April 1993 Recognition as a stock exchange y May 1993 Formulation of business plan y June 1994 Wholesale Debt Market segment goes live y November 1994 Capital Market (Equities) segment goes live y April 1995 Establishment of NSCCL. exactly after one year of the launch of Currency Futures. first depository in India. co-promoted by NSE y December 1996 Commencement of trading/settlement in dematerialised securities y July 1998 Launch of NSE's Certification Programme in Financial Market y August 1998 CYBER CORPORATE OF THE YEAR 1998 award y February 1999 Launch of Automated Lending and Borrowing Mechanism y January 2000 Launch of NSE Research Initiative y February 2000 Commencement of Internet Trading y June 2000 Commencement of Derivatives Trading (Index Futures) y December 2000 Commencement of WAP trading y June 2001 Commencement of trading in Index Options y July 2001 Commencement of trading in Options on Individual Securities 27 . on 31 August 2009.y Stocks lending & borrowing August 2008 Currency derivatives were introduced in India with the launch of Currency Futures in USD INR by NSE. NSE became the first stock exchange to get approval for Interest rate futures as recommended by SEBI-RBI committee.

a mechanism under which investors can bid for stocks before the market opens. 28 .y November 2001 Commencement of trading in Futures on Individual Securities y January 2002 Launch of Exchange Traded Funds (ETFs) y October 2002 Launch of NSE Government Securities Index y January 2003 Commencement of trading in Retail Debt Market y June 2003 Launch of Interest Rate Futures y August 2003 Launch of Futures & options in CNXIT Index y August 2008 Launch of Currency Derivatives y November 2009 Launch of Mutual Fund Service System y October 2010 Launch of 5-minute special pre-open trading session.

Comparison of Trade Value of NSE & BSE 264 809 BSE NSE 29 .

Comparison of Market Capitalisation at NSE & BSE 1588 1627 BSE NSE 30 .

Investers Stock Exchange Preference Others 5% BSE 36% NSE 59% NSE BSE Others 31 .

Reasons for Prefering NSE the most 50 45 40 35 30 25 20 15 10 5 0 Liquidity Brand Value Trust Divesified services 32 .

Growth of Sensex and Nifty last 15 years 25000 Sensex Nifty 20000 15000 10000 5000 0 33 .

Invester¶s preference for analyzing market 36% 44% 14% 6% Sensex Nifty Both of them Others also 34 .

Client Satisfaction 25 20 15 10 5 0 NSE BSE Equal in both 35 .

Invester¶s Selction for most secured investment 18% 38% 40% 4% Bank Stock Market Real Estate Others 36 .

37 . But there is a difference between NSE and BSE. it is always preferable to go for some professional help if you wish to invest in the Indian stock market. Investors put their money in the stock market in order to reap huge benefits from their investment. So. Also the growth of these two stock exchanges are decided by our country¶s growth. Bombay Stock Exchange and National Stock Exchange are both major stock exchange in India. You should also be acquainted with the concept of NSE and BSE.Conclusion Stock market is something which you cannot predict what is going to happen in the market tomorrow without proper analyzes of market. But you should be aware that it requires a lot of patience. But nobody can predict the market as we have already discussed.

Questionnaire Name: Place: 1. Are you an invester in any stock market? a) yes b) no 38 . Are you an invester in any kind of investment? a) yes b) no 5. Sex a) male b) female b)21-30 d) above 40 4. Your age group? a) below 20 c)30-40 3. What is your occupation a) student b) government servant c) private employee d) businessman 2.

6. What is the reason for that? a) liquidity c) trust in the exchange b) brand value of exchange d) more diversified services 8. Which stock exchange in India you prefer the most for investing? a) NSE b) BSE C)others 7. Wheather the Indian stock market is more profitable or not comparing to foreign exchanges? a) Yes b) no 9. Which of the following investment is more secure? a) stock market c) Real estate b) bank d) others 10. From which stock exchange you get better satisfaction? a) NSE b) BSE c) equal satisfaction 39 .

Which index You are using for analyzing the market trends? a) Sensex c) both of them 12.11. Any other suggestions? b) Nifty d) others also 40 .

com http://in.answers.yahoo.gov.References www.bseindia.org http://www.nseindia.sebi.answers.wikipedia.com www.com www.in 41 .com http://wiki.sharetipsinfo.com www.

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