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Recent Developments and Business Opportunities in Indian Financial Markets The Indian financial markets are undergoing major

transformation since the last 2 years. We are witnessing lot of new developments in Indian financial markets. This article attempts to cover some of the recent developments in Indian financial markets and the possible business opportunities that one can avail. To begin with, recently [Apr 2011], NSE, National Stock Exchange of India introduced the Smart order routing [SOR] which would allow the orders to pass from NSE to various other stock exchanges. What SOR does is that it looks for the best possible price across various exchanges. So if Reliance is trading at 995 in NSE and at 1000 in BSE, this SOR system would execute your order on NSE and thus save you Rs 5 per share Smart order routing is a new phenomenon in our markets, though this concept is already in existence in US, UK and Saudi markets. The SOR would further do is that it will bring in more algorithmic trading. Algorithmic or Program trading is again a new concept in Indian financial markets. NSE bought it in early 2009 and BSE too started algorithmic trading in early 2010. What Algorithmic trading means is that instead of manual orders, the control would be given to the algorithms which will decide when to take position in the market and when to square off the positions. So with these algorithms various strategies can be developed, and without manual intervention, these algorithms can generate huge profits for the traders. In India, some algorithms which became very popular were arbitrage algorithms. Arbitrage refers to taking advantage of price differential between 2 exchanges or between 2 calendar months on same exchange. These algorithms would bring in more liquidity and thus more efficiency in our markets.

In mid-2008, SEBI [Securities and Exchange board of India] gave approval for DMA [Direct market access]. The DMA means is that it allows the broker to give direct access to its clients. So a client can use the infrastructure of the broker and place orders directly in the stock market, instead of calling up the broker on phone and asking him to place an order. DMA has potential advantages - in that it would speed up execution of orders and would give more control to clients. Also DMA will help reduce errors because now the clients would place orders themselves and so the chances of manual errors are less compared to the previous scenario when clients had to call up broker on phone and the broker used to place orders for them.

Also, the coming up of financial instruments like currency futures and currency options is pretty new in our markets. Currency trading started in mid- 2008 and has witnessed huge volumes. In fact, recently the volumes in currency options have broken all records. There is huge business opportunity in this segment too as the currency markets are worth more than 2 trillion dollars! So currency trading offers a huge business opportunity.

Business opportunities to enter financial markets There are innumerable business opportunities in financial markets for budding entrepreneurs. If you feel confident to learn the depth about . professionals. CFA. As of now. FRM and other educational courses are getting popular and so there is also a demand for faculty. buy side and sell side firms. For example. Education in financial services: Well. To build your knowledge in this area. you need to do your homework and build knowledge. institutes that can help the students clear these international can take a franchise of a brokerage house and become a sub broker yourself. These events provide tremendous opportunity for interaction of various stakeholders in financial markets. right? In that can start your own IT company and get in touch with various brokerage houses and work with them in developing IT solutions catering to financial markets 2. you are well acquainted with financial services industry. each worth a million dollar.the FixGlobal event in Mumbai saw participation by stock exchanges.Another recent development in Indian financial markets is the coming up of various electronic trading conferences. etc. financial markets news agencies. In India. BSE [Bombay Stock Exchange] or NISM [National Institute of Securities Management. So if you feel that you need to learn about financial markets. As an IT company developing financial products . you can pursue various certifications which will help you get an overview of various stakeholders involved in this industry. investment banks. I have 2 tips for you. There are various ways one can enter the financial markets in India: 1. retail investor participation. Here is the first one. the Indian financial markets are evolving and there are opportunities in various sectors viz. you can begin by taking certifications from NSE [National Stock Exchange]. In the end. Such events have started in Indian markets since last 3 years and provide a great networking as well as learning opportunity for everyone. This way you can bring more clients for the brokerage house and you can earn money 3. financial market education. Technology companies providing financial markets solutions.For getting into any business. why not explore the opportunity to create a capital markets school? Education is a huge industry in India and you can get a pie of it by creating courses that offer learning opportunity to students.namely FixGlobal Face2Face and TradeTech events. it is essential that you know the theoretical part before getting practical. exploring opportunities in stock broking etc. Franchise route . promoted by SEBI]. but wealth management is not your cup of tea. So this gives us tremendous scope of innovation and growth potential. To build the theory. traders. etc.

read newspapers regularly and publications that interest you. So. First. carry your business cards with you and always exchange with the people you meet in any events. First. Also. ask the person if they are on various social/ professional networking sites like LinkedIn and you can request them for connecting with your network. you may also go for an MBA in finance and get holistic learning not only in finance related subjects.while getting introduced to a new person. Also. I want to know its recent developments and its effect on our economy. The most important tip for networking is. and who you know is the remaining 50%! To network. Ask lot of questions. and do not try to directly talk about the purpose. This way you can access your contacts whenever necessary. So. When you are networked well. Alternatively. In business. New Measures of Risk Management System in Indian Capital Market Every shareholder or investor wants to protect his investment and promote it as his source of earning. SEBI did several steps in this regards. This way you can come up as an individual who is open to new ideas and at the same time. My advice to entrepreneurs is. Even. what you know is just 50%. And here's the 2nd million dollar tip .financial markets. never hesitate to meet a new person. Once you meet someone. I would share the techniques that I use and how they have helped me. seek their advice and knowledge and keep the meeting informational. you can also increase your knowledge about the subject.both offline and online. I will cover new things which shows the latest development of Indian capital market. you know whom to seek advice from. my always concentration is on new measures the Risk management system of SEBI which is the controller of Indian Capital Market. 1. "What are recent developments in the Indian Capital Market?" is not only important question for finance students but there are large number of investors. I strongly advocate networking.which will help you learn about various kinds of risks].'Networking'. maintain a dairy or notes and keep track of your contacts. I am not personally interested in this market but as a teacher and being an Indian. { A } Measures for Reducing Price Volatility . Also. I never hesitate to ask questions and also appreciate questions from other party. 'Put consistent effort in networking'. but also in various other subjects and how they relate to each other. researchers and companies may also be interested in this topic. remember their name and use it often during the conversation. you can talk about business. To learn where such events are happening. understand and learn the needs of that person and later on. you may go for CFA [Certified Financial Analyst] or for FRM [Financial Risk Management .

But this technique of profit maximization which is used by bad guys for wrong purposes.Price volatility is the relative rate at which the price of a security moves up and down. All in one day. For example. for many days. in case the transaction is closed out at a closing price different from a price at which the transaction has been entered. Because. on average. also known as Day Trading. To reduce price volatility and stability in the prices of stock market. We all know an excessive speculation is always risky for every investor. stock options and stock futures. then stock trading will stop if it hit of Rs. For reducing it. is the system where you take a position on a stock and release that position before the end of that day's trading session. This would constitute a 1% daily movement. SEBI has introduced place circuit breakers. {D} Mark to Market Margin MTM margin is imposed to cover loss that a member may incur. {C} Intraday Trading Limit Intraday Trading. Higher volatility brings worry to the investors as they watch the value of their portfolios move wildly and decrease in value. if a stock is at Rs. Suppose you notice that a market price index. 95 or Rs. In the case of futures Contracts MTM may be considered as Mark to Market Settlement. 105. up or down. . 100 and circuit breaker is fixed at 5%.000. Index options. Volatility is often viewed as a negative term in the market that represents uncertainty and risk. One is index wise circuit breakers and other is stock wise circuit breakers. There are mainly two types of circuit breakers. A major reform undertaken by SEBI was the introduction of derivatives products: Index futures. {B} Place Circuit Breakers This is another recent development in Indian Capital Market. they get idea of trend of next price of shares with invalid source instead of using mathematical formula which is given below Using a simplification of the formulas above it is possible to estimate annualized volatility based solely on approximate observations. It is just collection in cash for all futures contracts and adjusted against the available Liquid Networth for option positions. They buys shares at very cheap rates and sell when overpriced. which has a current value near 10. Thereby making a profit for yourself in that buy-sell or sell-buy exercise. has moved about 100 points a day. A circuit breaker is the system which stops to trade in stock market when prices move after a specific level.

Investor Awareness Campaign For making Indian capital market more secure for indian and foreign investors. SEBI has started investors awareness campaign. Investigations If any company law or SEBI Act's rules regarding indian capital market are voilated. . SEBI has made ( Prohibition of Insider Trading) Regulations. Workshops/ Seminars Conducted by Investor Associations recognised by SEBI. In most countries. key employees. 4. This is the list of cases resulted in compounding in the prosecution filed by SEBI (As on 30th June 2010).in/ Under this But SEBI accepted shorter settlement cycles will mean more pressure on trade processing systems so that funds/securities are ready for payin/pay-out on the next day. trading by corporate insiders such as officers. Trading Cycle Under T + 2 T' represents the trade day. 1992. There are following things are included : Caution to Investors • • • Do not enter into securities transactions with unregistered intermediaries. Do not get carried away by advertisements promising unrealistic gains and windfall profits. To ban on inside trading. Do not invest based on market rumours or unconfirmed or unauthentic news. For this. Be aware that advice through television or print media does not mean that it is the opinion of the channel or publisher. See PDF 3. 'T + 2' implies the settlement on the 2th trading day. it may be T + 1 settlement cycle.2. Ban on Inside Trading Insider trading is the trading of a corporation's stock or other securities (e. SEBI has made his official site's sub domain at http://investor. directors. 4.sebi. bonds or stock options) by individuals with potential access to non-public information about the company. SEBI has reduced the settlement cycle upto T +2 and in future. its investigation is done by SEBI.

Growth stocks are excellent investment if as an investor you want to see your investment rise at a faster rate than the market average. growth stocks are really a viable investment opportunity for you. It is calculated by dividing the net income of the company with the number of equity it has. Technically speaking. . In reality the stocks of the growth companies are in most cases overvalued in the market rather than being growth stocks.A stock is said to be growth stock when it appreciates more than the market average. while investing in the growth stock you must always remember that the basic for gaining form stock market investment remains the same for the growth stocks as well. the growth stocks hardly pay any dividends to the investors but bring high returns for them. Growth stocks have high ROE and give high returns to its investors compared to the other stocks in that particular sector and in comparison to the overall average in which the stock market appreciates at that particular time. ROE is a measurement that is used by the experts to determine the growth stocks. So. While buying the growth stocks and holding the stocks for significant period of time you must always remember that growth stocks will not pay you dividends even if the companies post a good profit at the end of the year. That is. Therefore. you have to pick the right stocks for gaining from your investment. But as with any other stock market investment. In most cases companies that reinvest major share of its earnings have stocks that rise above the overall industry trend of appreciation in the market. a stock can be termed as growth stock when it has the return on equity or ROE of 15% or above. Remember that not all the growth companies’ stocks are not growth stocks. if you are looking forward to have a good profit from the stock market investment. But while investing in growth stocks you must be prepared for a long term investment to get the maximum benefit of the investment.