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H I G H L I G H T S O F N S E 1

August 2009


Do unexpected events cause significant market volatility? – An Indian Perspective—By Debashis Kundu

The paper studies volatility of returns in NSE Nifty over a 14-year period caused by major domestic and international events. Statistical tests
measure step-by-step changes in volatility before and after all the 126 events that have been segregated into six types. The results show very
few cases of statistically significant volatility caused by the events. Among the six types, only budgets and macro-economic announcements do
cause some volatility soon after the event day.

Direct Market Access: New Kid on the block - By Anuradha Guru and Rasmeet Kohli

Automated trading through Direct Market Access (DMA) and Algorithmic Trading (AT) are set to become the dominant execution process in the
near future. DMA has been permitted for institutional clients in India in April, 2008. This article talks about the advantages DMA has to offer
and explores its potential in the Indian markets.

RBI’s First Quarter Review of Monetary Policy 2009-10 released on 28th July, 2009

⇒ Consistent with its current assessment of macroeconomic and monetary conditions, RBI decided to keep all these rates unchanged.

⇒ RBI placed the growth projection for GDP for 2009-10 at 6.0 per cent .

⇒ The Bank projects the WPI inflation for end-March 2010 at around 5.0 per cent.

⇒ Firm commitment from investors for schemes/funds of Foreign Venture Capital Investors

⇒ Amendments to SEBI (Disclosure and Investor Protection) Guidelines, 2000

⇒ Abolition of no-delivery period for all types of corporate actions

⇒ Amendments to the Equity Listing Agreement

⇒ Comprehensive Risk Management Framework for the cash market


⇒ Change in Index

⇒ Index based market wide circuit breaker for the quarter July 01, 2009 to September 30, 2009

⇒ Neonet provides NASDAQ OMX with European consolidated market data

⇒ London Stock Exchange introduces new order book pricing

⇒ IOSCO’s consultation paper on Principles for Periodic Disclosure by Listed Entities

⇒ Federation of European Securities Exchanges (FESE) introduces harmonised tick size regimes in Europe

⇒ Eurex and Wiener Börse to cooperate in derivatives market

⇒ CME Group announces the launch of clearing services for OTC London gold forwards

⇒ Launch of new Eurex agricultural derivatives

⇒ Johannesburg Stock Exchange launches options for the retail investor
H I G H L I G H T S O F N S E N E W S L E T T E R A u g u s t 2 0 02 9


Performanc e of Nifty vis-a-vis other International Performanc e of selec t sec tors vis-a-vis Nifty
Indic es (Rebased to 100 for 31 Marc h 09) (Rebased to 100 for Marc h 31, 2009)
150 200

130 150
110 50
90 0

31-Mar-09 30-Apr-09 30-May-09 29-Jun-09 29-Jul-09 31-Mar-09 30-Apr-09 30-May-09 29-Jun-09 29-Jul-09
Nifty Dow Jones NIKKIE Hang seng Nasdaq
S&P CNX P etro hemicals S&P CNX P harmaceuticals CNX B ank Nifty
CNX Infrastructure S&P CNX Nifty

Turnover in Past 12 Months
Parameters Rank
Capital Market Segment F&O Segment
Single stock futures 3rd 18000 1000

Avg. Daily Trading Value
5000 300
Trading Value

Avg. Daily Trading
250 15000

Trading Value
Stock index options 3rd 4000 800
200 12000

Stock index futures 3rd 3000 600
150 9000
2000 100
No. of trades 4th 6000 400
1000 50
No. of companies listed 10th 3000 200















Market capitalization 12th

Currency Derivatives Segment WDM Segment
1000 50
600 30

Avg. Daily Trading
Avg. Daily Trading

The average daily volatility 800 40 500 25
Trading Value
Trading Value

of the Nifty for the month 400 20
600 30


was 2.22 % with returns of 300 15
8.05 %. 400 20 200 10
200 10 100 5
The market capitalization 0 0
of companies listed on the 0 0








NSE stood at Rs. 48,16,459







cr on 31st July ‘09.

There was a 12% fall in
turnover in the CM seg- Trading value ( Rs hundred crore) Average Daily Trading value ( Rs hundred crore)
ment of the exchange in
the month of July’09, as
compared to June’09.
The average daily turn- Turnover in the
in June’09. The
derivatives segment was up 3% in July’09, at Rs 15,735,00 cr, compared to the levels
average daily turnover in the segment was Rs 68,400 cr.
over in the segment was
Rs 18,500 cr. The turnover in the currency derivatives segment touched a new high of Rs 96,523 cr during July’09,
28% higher than the June turnover. The average daily turnover was Rs 4,197 cr.
The turnover in WDM segment during July’09 was Rs 51,200 cr, with an average daily turnover of Rs
2,200 cr.
*Source is WFE.
Ranking for single stock futures, stock index options and stock index futures is based on number of contracts traded over Jan'09 to June'09.

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N S E N E W S L E T T E R August 2009 1


Do unexpected events cause significant market volatility? – An Indian Perspective—By Debashis Kundu 1

Volatility is the child of uncertainty. Rational human beings favour either zero volatility or a quick return to certainty both in their
life and in their market investments. Unfortunately, volatility in stock prices is the norm rather than the exception. So investors
have learnt to live with it and also make occasional profit through speculation. But when volatility becomes extreme and persistent
over a period of time even seasoned investors prefer to move to the sidelines.
Extreme volatility is premised to be caused by news of unexpected events, among other things. But neither all events cause the
same level of volatility nor are they as persistent as others. The search for the type of events causing volatility and their statistical
measurement form the basis of this paper.
The paper starts with a brief introduction on volatility. The next section takes a look at the findings of other research papers on
volatility followed by the significance, objectives and sources of data for the present study. The methodology is outlined next fol-
lowed by the findings. The last section concludes the article.
This paper current paper is both an event study as well as a study of volatility in the Indian context. The past studies thus perused
comprise of both event-based as well as volatility tests conducted in and outside India. In the international context, Geske and Roll
(1983) conclude that stock returns forecast real activity (industry performance) and anticipated macroeconomic changes, causing
interest rates to rise. French and Roll (1986) report that private information and ‘mispricing’ were significant factors causing daily
volatility. Fama (1990) gives evidence of a positive relation between stock prices and announcements of real activities. Binder and
Merges (2001) identify four key determinants of market volatility that help to examine the past behaviour of stock market volatility
and in forecasting future volatility. Dolde, Saad, and Tirtiroglu (2002) reported that 63.5% of extreme volatility increases and
53.4% of decreases are associated with extraordinary reported news items. Brooks, Patel and Su (2003) found out that the response
time of stock prices to unanticipated news lasted about two hours after which they tended to reverse. Al-Khazali (2003) found out
that in the long term, there is a positive relationship among stock returns, consumer price index and industrial production. In the
Indian context, Kaur (2004) found that 1992 was the most volatile year and April was usually the most volatile month in the Indian
stock market. Sabnavis (2005) reports that economic events and natural disasters do not have much impact on Sensex movement
unlike political events and terrorist attacks. Padhi (2005) reports the same trend of volatility in the case of aggregate indices and
five selected sectors such as electrical, machinery, mining, non-metallic and power plant sector. Sarkar, Chakrabarti, and Sen
(2008) reports that shocks in Dow Jones, Jakarta stock index and BVSP has profound effect on the BSE Sensex. Capital goods and
consumer durables sectors were the most prominent contributors to the volatility of the Sensex.

The paper looks at the effect of six major types of events on variance of returns of the proxy market portfolio, i.e., the NSE Nifty,
over a fourteen-year period from 1995 to 2009. The study is significant in the way it tries to statistically measure actual volatility
caused by six major types of events in the Indian market. The step-by-step analysis of volatility in Nifty using simple F-tests before
and after the events provides a clear picture to investors, speculators, researchers and the regulator alike about the possible ex-
tent of volatility from similar events in the future.

The triple objectives are thus –

⇒ To empirically study the occurrence of statistically significant volatility from major events

⇒ To study the presence of statistically significant volatility up to nine trading days after the event day, if any

⇒ To segregate events according to their volatility-causing capacity.
The fourteen year period covers a crucial period of the transformation of the Indian landscape both economically and otherwise.
The period has witnessed very high GDP growth rates, substantial growth in international trade, rise of regional parties in politics,
high incidence of terrorist attacks, and a steady movement towards a globalised economic system.

The chosen index Nifty comprises of fifty stocks that adequately represent the broad spectrum of the Indian industry. Nifty belongs
of National Stock Exchange (NSE), the largest Indian exchange in terms of turnover.

The events (126 of them) have been chosen on the basis of their effect on the market as a whole and not on any particular industry
1 The author is with Department of Commerce, Sivanath Sastri College, Kolkata
N S E N E W S L E T T E R 2
August 2009

or company. The events (Tables 6 to 12) have been regrouped into six broad types – budgets, macro-economic policy events, securi-
ties market matters, non-economic events, international matters (both economic and otherwise), and major disasters (man-made
and natural). In case of some events the market got the news after the event day. Hence calculation was performed on the closing
figure of the next trading day. They have been mostly sourced from Manorama, Penguin and Statesman’s yearbooks. The Nifty values
come from the official website of NSE.


Volatility in returns has been measured through variance of returns over blocks of three (3) trading days. Six such blocks have been
considered, three before the event (X1, X2, X3) and three after (Y1, Y2, Y3), for each event. The blocks have been used to under-
stand changes in volatility as one move towards the event day, and later away from it. Only three such blocks were considered on
either side because consecutive events happening in quick succession tend to affect one another.

This comparison of variances through F-tests can be pictorially viewed as under:

X1 X2 X3 Y1 Y2 Y3

Event day

The study has used the statistical technique of hypothesis testing with the help of F-test. The test statistic F is calculated as follows:

F = s(Xi)2 / s(Yi)2

[where s(Xi)2 = å(RXi – RXi)2 / (n1-1) and s(Yi)2 = å( RYi – RYi)2 / (n2-1)]

Here, Xi and Yi are the two sample time periods, s(Xi)2 and s(Yi)2 being the sample return variances, and n1 and n2 being their respec-
tive numbers of observations.

In all the cases, variance of return of the succeeding period (say, X3) has been compared with the preceding period (say, X2). The
null hypotheses in all the tests assume no change in variance, i.e., the variances are equal. The alternative hypotheses H1 want to
prove that variance during the succeeding period is more than the preceding period. Hence the comparisons are: s2X1 < s2X2, s2X2 < s2X3,
s2X3 < s2Y1, s2Y1 < s2Y2 and s2Y2 < s2Y3.

All-in-all the steps of investigation can be outlined as follows:

⇒ Calculation of daily logarithmic change in returns over the fourteen-year period
⇒ Segregation of selected events into six major types
⇒ Identification of the event days
⇒ Calculation of variances in six blocks of three trading days before and after the event
⇒ Five F-tests at 95% level of confidence for each type of event
⇒ Interpretation of the outcome.

The next few paragraphs analyse the F-test results based on variances of returns at the standard 5% level of significance. As already
mentioned, five F-tests have been conducted for each event. Some of the events have occurred previous to the day when the market
got the news. This happens if the event occurred in the after-market hours or on a trading holiday.
Table 1 shows the F-test values comparing the variances of returns around sixteen budgets. The results clearly show that in only five
out of sixteen instances, the budgets were found to cause statistically significant volatility. In fact, two significant instances oc-
curred even before the budget day. This may be due to the pre-budget press leaks and expectations that are already built into the
stocks. Instant volatility (statistically significant volatility caused immediately after the event; Y1 on X3) is present only in two cases

N S E N E W S L E T T E R 3
August 2009

Table 2 shows the F-test values that compare the variances of return around thirty-six macro-economic events. The results show
a curious pattern of the maximum number of statistically significant cases occurring before the actual announcement day. A
closer look reveals that most of these events were the announcement of rate changes by RBI. This indicates that the market was
expecting such an announcement despite RBI's attempt to keep these secret. Most other major policy decisions seem to be al-
ready either discounted or deemed to be not so significant by the market. Instant volatility is present only in three cases.

Table 3 exhibits the results from F-tests comparing the variances of returns around seventeen stock market-related events. The
events that are supposed to directly affect the stock market cause hardly any statistically significant volatility. Only the matters
affecting foreign investment cause some volatility and that too well after the event day. Instant volatility is present only in one

Table 4 shows the F-test values of twenty-four non-economic events. These are events (mostly political ones) that are widely
speculated upon by the public. Hence these events hardly cause any significant volatility. Instant volatility is present only in two

Table 5 shows the F-test values comparing the variances of returns around twenty-one international (both economic and non-
economic) events. International events are said to influence Indian markets much more than ever. However, the results depict a
completely different picture. They hardly cause any volatility in Indian markets. Instant volatility is present only in one case.

Table 6 shows the F-test values comparing the variances of returns around twelve man-made and natural disasters. Terrorist at-
tacks and natural disasters also hardly cause any statistically significant volatility. Instant volatility is present only in one case.


The paper helps to empirically verify the widely held notion that major events (economic and non-economic) cause substantially
changes in returns. A total of 126 events, grouped into six types, have been studied over a fourteen-year period.

The 630 (126 x 5) F-tests report only thirty-eight (38) statistically significant cases of volatility. In fact, these cases are evenly
distributed both before and after the events, indicating that the selected events cannot be held responsible for causing such vola-

In the light of the triple objectives outlined at the outset, the study conclusively proves the absence of significant volatility
caused by major events. Even in instances where such volatility occurs, they do not linger beyond the third trading day post
event. Out of the six major types of events, only budgets and macro-economic announcements cause a few cases of volatility
more than others.

All-in-all, the investors and the Regulator can rest assured that major domestic and international events do not cause too much
uncertainty in stock prices, at least in the Indian context.


Al-Khazali, Osamah M. (2003): “Stock prices, Inflation and Output: Evidence from the Emerging Markets”, Journal of Emerging
Finance, pp. 287-314.

Binder, John J. and Merges, Matthias J. (2001): “Stock Market Volatility and Economic Factors”, Review of Quantitative Finance
and Accounting, Volume 17(1).

Brooks, R. M., and Patel, Ajay and Su, Tie (2003): “How the Equity Market Responds to Unanticipated Events”, Journal of Busi-
ness, pp. 109-133.

Dolde, W., Saad, R. and Tirtiroglu, Dogan (2002); “Evidence that Extreme Volatility in Stock Prices is Associated with Extraordi-
nary Reported News Items”,

Fama, Eugene F. (1990): “Stock returns, expected returns and real activity”, Journal of Finance, pp. 1089-1108.

French, Kenneth R. and Roll, Richard (1986): “Stock Return Variances: The Arrival of Information and the Reaction of Traders”,
Journal of Financial Economics, pp. 5-26.

Geske, Robert and Roll, Richard (1983): “The fiscal and monetary linkage between stock returns and inflation”, Journal of Fi-
nance, pp. 1-33.
N S E N E W S L E T T E R 4
August 2009

Gujarati, Damodar (1999): "Essentials of Econometrics", Irwin Mcgraw Hill, p. 274, 281.

Kaur, Harvinder (2004): “Stock Market Volatility in India”, The Indian Journal of Commerce, Vol. 57(4), pp. 55-70.

Kothari, C. R. (2004): "Research Methodology: Methods and Techniques", New Age International (P) Ltd., New Delhi, p. 95.

Manorama Yearbook (various issues), Malayala Manorama Press, Kottayam, Kerala.

Padhi, Puja (2005): “Stock Market Volatility in India: A Case of Select Scripts”, Indian Institute of Capital Markets 9th Capital
Markets Conference Paper.

Sabnavis, Madan (2005): “Irrational, and remarkably resilient”, Business Standard, Kolkata, p. 8.

Sarkar, A., Chakrabarti, G. and Sen, C. (2008): “Indian Stock Market Volatility in Recent Years: Transmission from Global and
Regional Contagion and Traditional Domestic Sectors”,

Statesman’s Yearbook (various issues), The Macmillan Press Ltd., London and Basingstoke.

Table 1: F– test values from budgets

Dates X2 on X1 X3 on X2 Y1 on X3 Y2 on Y1 Y3 on Y2 T.V. (5%),

d.f. = 2 and 2

15-Mar-95 0.16 38.11* 0.70 0.02 0.53 19.00

28-Feb-96 0.96 0.09 10.40 0.04 3.16 19.00
22-Jul-96 0.58 6.00 0.75 0.08 21.19* 19.00
28-Feb-97 0.34 1.63 17.89 0.03 11.75 19.00

1-Jun-98 0.34 0.02 305.22* 0.34 4.83 19.00
27-Feb-99 15.21 0.68 0.13 12.74 0.75 19.00

29-Feb-00 2.04 0.53 5.01 0.37 0.11 19.00

28-Feb-01 0.07 3.13 16.27 0.28 0.60 19.00

28-Feb-02 0.85 0.95 9.95 0.10 0.33 19.00

28-Feb-03 0.03 24.55* 1.68 0.14 7.46 19.00
08-Jul-04 4.10 0.83 4.04 0.21 0.43 19.00
28-Feb-05 3.49 0.08 53.98* 0.16 0.54 19.00
28-Feb-06 0.09 4.39 1.70 1.79 4.82 19.00
28-Feb-07 0.26 4.04 4.93 1.18 0.60 19.00

29-Feb-08 1.69 0.17 10.05 1.07 2.29 19.00

16-Feb-09 1.81 1.84 1.55 0.41 0.65 19.00

T.V. (5%) = Table value at 5% level of significance, d.f. = degrees of freedom, figures with * = statistically significant results]

N S E N E W S L E T T E R 5
August 2009

Table 2: F-test values from Macro-economic Policy events

Dates X2 on X1 X3 on X2 Y1 on X3 Y2 on Y1 Y3 on Y2 T.V. (5%),

d.f. = 2 and 2

24-Jul-00 0.48 1.06 42.96* 0.06 0.38 19.00
21-May-01 0.39 8.45 0.34 2.64 1.05 19.00
22-Oct-01 0.07 36.87* 0.49 0.19 4.36 19.00
28-Jan-02 0.28 0.01 25.29* 2.32 11.68 19.00
1-Apr-02 0.30 2.30 1.04 1.96 0.42 19.00
1-Jul-02 0.10 8.75 0.34 0.36 3.09 19.00
29-Oct-02 0.10 43.00* 7.57 0.62 0.03 19.00
29-Apr-03 0.37 0.55 0.04 14.94 0.50 19.00
15-Jun-04 0.09 2.06 0.74 0.26 16.69 19.00
13-Sep-04 0.22 25.54* 0.23 7.01 1.95 19.00
6-Sep-05 1.78 0.08 3.06 1.94 0.23 19.00
25-Oct-05 0.48 2.99 0.66 1.40 0.02 19.00
20-Jan-06 0.16 16.13 0.34 1.05 1.08 19.00
24-Jan-06 0.20 20.85* 0.05 9.79 2.55 19.00
31-Mar-06 0.42 2.76 2.05 1.09 3.81 19.00
7-Apr-06 3.85 0.58 3.89 1.30 0.07 19.00
5-Jun-06 0.08 22.32* 0.00 1889.40* 0.99 19.00
25-Jul-06 0.60 3.07 0.02 2.51 1.41 19.00
22-Aug-06 0.27 0.14 31.03* 0.03 12.88 19.00
13-Feb-07 0.28 5.58 0.86 0.39 2.00 19.00
19-Feb-07 5.58 0.86 0.39 2.00 4.64 19.00
30-Mar-07 1.34 0.64 7.05 0.07 0.45 19.00
31-Aug-07 0.36 0.04 2.13 1.19 0.04 19.00
30-Oct-07 11.41 0.11 0.37 4.32 0.26 19.00
8-Nov-07 0.16 0.67 0.38 28.46* 0.28 19.00
14-Feb-08 1.25 4.17 0.65 0.32 1.18 19.00
29-Apr-08 1.14 2.09 0.76 0.08 11.71 19.00
24-Jun-08 2.67 0.33 3.47 0.26 23.60* 19.00
7-Jul-08 0.26 23.60* 0.33 0.34 6.34 19.00
29-Jul-08 0.62 0.59 3.73 0.23 0.01 19.00
14-Aug-08 0.01 246.85* 0.24 7.34 0.08 19.00
28-Aug-08 7.34 0.08 15.76 1.29 0.58 19.00
10-Oct-08 5.36 1.15 4.91 0.10 4.83 19.00
15-Oct-08 1.15 4.91 0.10 4.83 1.50 19.00
5-Dec-08 0.71 0.97 1.61 0.10 7.29 19.00
28-Jan-09 0.25 1.48 0.63 1.85 0.54 19.00

N S E N E W S L E T T E R 6
August 2009
Table 3: F-test values from Securities market events

Dates X2 on X1 X3 on X2 Y1 on X3 Y2 on Y1 Y3 on Y2 T.V. (5%),
d.f. = 2
and 2
15-Oct-98 0.54 0.89 0.07 5.36 1.52 19.00
4-Apr-00 0.05 2.78 27.51* 0.44 0.30 19.00
1-Feb-01 0.17 103.97* 0.23 1.58 0.27 19.00
23-Mar-01 0.09 1.79 0.49 3.05 0.13 19.00
11-Apr-01 0.13 1.22 6.57 0.06 0.25 19.00
11-Sep-01 0.51 2.27 17.94 7.68 0.42 19.00
15-Jan-04 1.08 0.61 2.97 0.11 21.14* 19.00
12-Dec-05 0.22 0.65 1.46 2.27 0.18 19.00
15-Dec-05 0.65 1.46 2.27 0.18 17.19 19.00
29-Dec-05 0.60 6.98 0.06 3.19 1.07 19.00
13-Apr-06 0.58 3.89 1.30 0.07 23.47* 19.00
25-Apr-06 0.44 0.56 9.42 0.09 0.08 19.00
8-May-06 0.09 0.08 0.14 348.71* 11.39 19.00
24-Jul-07 0.07 6.56 0.98 18.54 0.88 19.00
26-Sep-07 9.04 0.28 0.34 5.62 5.94 19.00
15-Sep-08 1.06 0.05 10.11 2.32 0.30 19.00
7-Jan-09 0.50 0.68 2.91 2.06 0.55 19.00

Table 4: F-test values from Non-economic events

Dates X2 on X1 X3 on X2 Y1 on X3 Y2 on Y1 Y3 on Y2 T.V. (5%),
d.f. = 2
and 2

27-May-96 11.53 0.32 15.65 0.37 0.34 19.00
3-Jun-96 3.36 2.76 0.21 0.35 2.25 19.00
21-Apr-97 8.27 0.26 0.66 0.07 26.98* 19.00
28-Nov-97 2.40 0.47 1.32 0.41 1.90 19.00
19-Mar-98 0.15 6.81 0.21 11.00 0.37 19.00
5-Apr-99 0.23 43.27* 3.51 0.21 11.42 19.00
17-Apr-99 0.21 11.42 1.04 0.03 20.39* 19.00
26-Apr-99 1.04 0.03 20.39* 0.30 0.12 19.00
26-May-99 0.42 0.96 1.17 3.51 0.07 19.00
7-Oct-99 1.72 0.97 2.66 0.02 43.14* 19.00
12-Mar-01 0.57 1.04 8.39 0.09 1.79 19.00
4-Dec-01 1.11 0.01 37.31* 0.16 1.05 19.00
28-Mar-02 3.70 0.58 0.55 9.98 0.37 19.00
22-May-02 0.26 4.86 7.19 0.22 0.54 19.00
27-Apr-04 0.23 0.91 9.85 0.53 0.92 19.00
18-May-04 2.34 8.32 0.50 0.11 2.45 19.00
27-May-04 0.07 0.47 1.30 1.27 0.06 19.00
7-Mar-05 9.83 0.19 0.62 0.90 1.40 19.00
23-May-05 7.50 0.12 0.23 21.66* 1.03 19.00
16-Nov-05 1.34 0.75 0.04 69.31* 0.02 19.00
2-Mar-06 0.14 2.03 1.17 3.01 0.58 19.00
24-Dec-07 3.23 0.04 14.50 0.09 2.10 19.00
18-Jun-08 0.34 0.70 0.90 2.93 2.35 19.00
22-Jul-08 0.43 0.23 8.84 0.41 0.36 19.00 6
N S E N E W S L E T T E R 7
August 2009

Table 5: F-test values from International matters

Dates X2 on X1 X3 on X2 Y1 on X3 Y2 on Y1 Y3 on Y2 T.V. (5%),
d.f. = 2 and

28-Oct-97 7.49 0.02 3413.47* 0.00 0.19 19.00
12-May-98 1.14 0.37 23.52* 0.07 3.49 19.00
19-Jun-98 1.23 1.86 0.19 1.22 0.57 19.00
11-Jun-99 0.07 4.93 0.14 5.59 1.99 19.00
17-Apr-00 0.42 0.93 0.67 0.51 5.52 19.00
7-Aug-01 6.19 0.12 0.80 8.05 0.42 19.00
11-Sep-01 0.51 2.27 17.94 7.68 0.42 19.00
14-Sep-01 2.27 17.94 7.68 0.42 0.20 19.00
23-Oct-01 0.26 2.64 1.73 0.85 1.49 19.00
29-Nov-01 0.04 7.48 0.32 2.29 0.09 19.00
22-Jul-02 1.28 1.08 5.73 0.73 0.14 19.00
19-Mar-03 14.89 0.21 2.25 3.42 0.22 19.00
7-Jul-05 0.81 1.19 3.32 0.08 1.20 19.00
21-Jul-05 6.03 0.15 5.77 0.23 2.17 19.00
1-Feb-06 0.39 0.93 0.29 6.48 0.41 19.00
17-Apr-06 0.79 1.97 0.44 0.56 9.42 19.00
3-Jul-06 37.67* 0.82 0.23 4.74 0.63 19.00
3-Aug-06 0.43 0.09 1.21 2.78 0.27 19.00
27-Feb-07 0.39 2.00 4.64 1.32 0.68 19.00
29-Jan-09 0.27 2.04 1.21 0.09 1.81 19.00
25-Feb-09 1.55 0.41 0.65 4.44 1.16 19.00

Table 6: F-test values from Disasters (Natural and man-made)

Dates X2 on X1 X3 on X2 Y1 on X3 Y2 on Y1 Y3 on Y2 T.V. (5%),
d.f. = 2 and

22-Dec-00 4.16 0.07 27.16* 0.30 0.01 19.00
29-Jan-01 5.25 0.17 103.97* 0.23 1.58 19.00
1-Oct-01 2.17 0.03 4.19 1.06 0.85 19.00
13-Dec-01 2.29 0.09 0.44 18.95 0.39 19.00
22-Jan-02 54.35* 0.87 0.03 2.28 2.09 19.00
27-Feb-02 15.33 1.16 14.70 0.01 30.75* 19.00
24-Sep-02 2.66 0.18 0.80 6.64 0.45 19.00
27-Dec-04 4.64 0.40 0.16 15.73 1.84 19.00
31-Oct-05 5.17 0.22 0.75 1.34 0.75 19.00
11-Jul-06 0.23 4.74 0.63 0.77 3.35 19.00
25-Jul-06 0.60 3.07 0.02 2.51 1.41 19.00
26-Jul-06 2.82 0.88 0.43 0.09 1.21 19.00

N S E N E W S L E T T E R 8
August 2009

Table 7: Budgets
Sl. Date Event

1. 15/03/95 Manmohan Singh’s fifth Budget
2. 28/02/96 Manmohan Singh’s sixth Budget (Interim)
3. 22/07/96 P. Chidambaram’s first budget
4. 28/02/97 P. Chidambaram’s second ‘dream’ budget
5.. 01/06/98 Yashwant Sinha’s first budget

6. 27/02/99 Yashwant Sinha’s second budget
7. 29/02/00 Yashwant Sinha’s third budget
8. 28/02/01 Yashwant Sinha’s fourth budget
9. 28/02/02 Yashwant Sinha’s fifth budget
10. 28/02/03 Jaswant Singh’s first budget for 2003-2004

11. 08/07/04 UPA government’s first budget presented by P. Chidambaram. Securities Transaction Tax
12. 28/02/05 Second budget presented by P. Chidambaram.
13. 28/02/06 Chidambaram presents the budget for 2006-07.
14. 28/02/07 Chidambaram presents the budget for 2007-08.

15. 29/02/08 Budget for 2008-09 tabled in Parliament.

16. 16/02/09 Budget (Interim) for 2009-10 tabled by Pranab Mukherjee.

Table 8: Securities Market matters
Sl. No. Date Event
1. 05/10/98 UTI’s Unit Scheme 64 collapses
2. 04/04/00 Income Tax department issues notice to FIIs investing through Mauritius.
3. 01/02/01 Government decides to privatize VSNL and CMC Ltd.
4. 23/03/01 Income Tax authorities raid 6 big city brokers including former BSE president Anand Rathi and
Ketan Parekh.
5. 11/04/01 Infosys gives bleak guidance for 2001-02.
6. 11/09/01 US 64, badla banned and rolling settlement introduced.
7. 15/01/04 SEBI clarifies its position on Participatory Notes.
8. 12/12/05 MFs and FIIs allowed to participate in gold, silver and crude futures.
9. 15/12/05 SEBI unearth large-scale multiple application scam in Yes Bank IPO.
10. 29/12/05 SEBI to allow short selling by institutional investors.
11. 13/04/06 Deptt. of Post to invest Rs. 10,000 crore in stock market.
12. 25/04/06 Margin fees of traders are hiked.
13. 08/05/06 SEBI allows companies to privately place shares to QIBs.
14. 24/07/07 FII inflows cross $10 billion.
15. 26/09/07 SEBI raises investment limits of MFs.
16. 15/09/08 Stocks crash due to crisis in Lehman Bros and Merill Lynch.
17. 07/01/09 Massive fraud at Satyam Computers stuns the industry.

N S E N E W S L E T T E R 9
August 2009

Table 9: Macro-economic matters
Sl. Date Event
1. 24/07/00 RBI hikes Bank Rate by 1%.

2. 20/05/01 Government opens up the defence sector for private investments.

3. 22/10/01 RBI cuts bank rate to 6.5%, lowest since May 1973.

4. 27/01/02 Inflation touches a 2-decade low of 1.57%.

5.. 30/03/02 Small savings rate cut to 9% p.a.

6. 30/06/02 India’s first current account surplus after 23 years announced.

7. 29/10/02 RBI cuts Bank rate from 6.5 to 6.25 and CRR from 5 to 4.75.

8. 29/04/03 RBI cuts Bank rate from 6.25 to 6%.

9. 15/06/04 Petrol and diesel prices hiked; kerosene price left untouched.

10. 13/09/04 CRR cut by 0.5% to 5.0%.

11. 06/09/05 Petrol and diesel prices hiked.

12. 25/10/05 RBI raises reverse repo rate by 25 bps.

13. 20/01/06 Inflation rate falls to 4.24%.

14. 24/01/06 Govt opens up the retail sector to FDI.

15. 31/03/06 Foreign exchange reserves touch new high. Current account deficit narrows.

16. 07/04/06 Foreign Trade policy outlines $120 billion target.

17. 05/06/06 Petrol and diesel prices are hiked.

18. 25/07/06 RBI hikes repo and reverse repo rates.

19. 22/08/06 Govt clears 46 new SEZ proposals.

20. 13/02/07 RBI raises CRR to 6% in 2 phases.

21. 17/02/07 RBI directs banks to tighten procedures on loans for properties.

22. 30/03/07 RBI hikes repo rate to 7.75% and CRR by 50 bps.

23. 31/08/07 Govt declares 9.3% first quarter GDP growth.

24. 30/10/07 RBI hikes CRR by 50 bps.

25. 08/11/07 Inflation at 2.97%, the lowest in 5 years.

26. 14/02/08 Petrol and diesel prices hiked.

27. 29/04/08 RBI raises CRR o 8.25%.

28. 24/06/08 RBI hikes Repo and CRR by 50 bps each.

29. 06/07/08 Inflation rises to 11.63%.

30 29/07/08 RBI raises Repo and CRR both to 9%.

31. 14/08/08 Govt accepts 6th Pay Commission Report.

32. 28/08/08 Inflation shoots up to 12.40%.
33. 10/10/08 Industrial growth slumps to 1.3% in August.

34. 15/10/08 RBI cuts CRR by 100 bps.

35. 05/12/08 Petrol and diesel prices reduced.
36. 28/01/09 Petrol, diesel and LPG prices reduced.

N S E N E W S L E T T E R 10
August 2009

Table 10: Non-economic events

Sl. Date Event
1. 27/05/96 BJP loses confidence vote in Parliament. A.B. Vajpayee’s 13-day government comes to an end.

2. 01/06/96 H. D. Deve Gowda’s 21-member cabinet sworn in.

3. 31/03/97 Fall of Deve Gowda Government.

4. 21/04/97 I. K. Gujral sworn in as Prime Minister.

5.. 28/11/97 I. K. Gujral resigns as Prime Minister.

6. 19/03/98 A. B. Vajpayee sworn in as Prime Minister.

7. 04/04/99 AIADMK threatens to withdraw support.

8. 17/04/99 Fall of A. B. Vajpayee Government.

9. 26/04/99 President dissolves Lok Sabha.

10. 26/05/99 Air attacks on Kargil begins.

11. 07/10/99 BJP-led NDA Govt. leads towards absolute majority in elections.

12. 11/03/01 BJP President Bangaru Laxman caught on the camera of taking bribes.

13. 04/12/01 Madras H.C. acquits Jayalalitha, a key supporter of the NDA Government, in TANSI land deal case.

14. 28/03/02 Congress wins crucial Delhi municipal elections.

15. 22/05/02 Vajpayee asks troops to prepare for decisive battle against Pakistan.

16. 27/04/04 Prediction of hung Parliament affects market.

17. 18/05/04 Manmohan Singh, former Finance Minister, tipped to become next Prime Minister.

18. 27/05/04 UPA government releases its Common Minimum Programme (CMP).

19. 07/03/05 President’s Rule imposed in Bihar ending 15-year RJD rule. RJD is an important ally of the Central
20. 23/05/05 CP(I)M assures UPA govt of continuing support.

21. 15/11/05 Left warns Govt of serious consequence if India votes against Iran in UNSC.

22. 02/03/06 Indo-US nuclear deal signed.

23. 23/12/07 BJP wins in Gujarat. Modi becomes CM for 3rd time.

24. 18/06/08 UPA and Left seem to be parting ways on Indo-US nuclear deal.

25. 22/07/08 UPA Govt wins trust vote in Lok Sabha by 19 votes.

N S E N E W S L E T T E R 11
August 2009

Table 11: International matters

Sl. Date Event
1. 28/10/97 Asian currency Crisis erupts.

2. 12/05/98 US impose economic sanctions after Pokhran nuclear blasts takes place.

3. 19/06/98 Moody’s 2 notch sovereign ratings downgrade for India.

4. 11/06/99 US lifts economic sanctions.

5. 14/04/00 Crash in the NASDAQ composite index. Beginning of the dotcom bust.

6. 07/08/01 S&P downgrades India’s sovereign credit rating again.

7. 11/09/01 On Sept. 11 terrorists attack WTC, New York. Stock markets crash worldwide.

8. 14/09/01 Shares fall in panic of an immediate US attack on Afghanistan.

9. 23/10/01 Japan lifts economic sanctions on India.

10. 29/11/01 Enron, the US energy company, declares bankruptcy.

11. 22/07/02 Worldwide markets crash after series of accounting scandals.

12. 18/03/03 Bush gives ultimatum to Iraq.

13. 07/07/05 Terrorist explosion in London subway.

14. 21/07/05 China appreciates yuan by 2% and removes its dollar peg.

15. 01/02/06 Federal Reserve raises US interest rates.

16. 17/04/06 Oil rises fearing US action against Iran.

17. 03/07/06 WTO talks fail.

18. 03/08/06 Iranian President calls for elimination for Israel.

19. 27/02/07 US and Chinese markets crash suddenly and swiftly.

20. 29/01/09 $825billion stimulus plan cleared by the US Senate.

21. 25/02/09 Mutiny by Bangladesh BDR. Many officers killed.

Table 12: Major Disasters (Man-made and Natural)

Sl. Date Event
1. 22/12/00 Suicide squad of Lashkar-e-Toiba strikes at Red Fort. 3 soldiers killed and 2 injured.
2. 26/01/01 Gujarat Earthquake. More than 30,000 people are dead.
3. 01/10/01 Terrorists attack Jammu & Kashmir Assembly. 22 killed.
4. 13/12/01 5 Terrorists attack Parliament. 7 killed.
5.. 22/01/02 American Centre in Kolkata attacked. 4 policemen killed.
6. 27/02/02 Train carrying ‘kar sevaks’ burnt in Godhra. 57 killed.
7. 24/09/02 Two terrorists attack Akshardham temple in Gujarat.
8. 26/12/04 Tsunami hits South and South-East Asia. Massive loss of life and property.
9. 29/10/05 Serial bomb blasts in Delhi. 59 killed.
10 11/07/06 170 killed in serial train blasts in Mumbai.
11 25/07/08 Bangalore hit by serial bomb blasts.
12 26/07/08 Ahmedabad hit by serial bomb blasts.
N S E N E W S L E T T E R 12
August 2009

Direct Market Access: New Kid on the block - By Anuradha Guru and Rasmeet Kohli1
Innovation is critical for survival in the financial markets these days. Automated trading through Direct Market Access
(DMA) and Algorithmic Trading (AT) are notable examples of such innovation in the securities markets. Before explaining
what these processes entail, it may be useful to understand the practice of ‘front running’. Technically, front-running is
a practice where a broker or a dealer ‘buys’ or ‘sells’ a particular stock for himself first before executing a large order in
the same stock for his clients or passing on confidential information about its client orders to traders outside the firm.
This is often done when there are large institutional orders and as a result of this practice, brokers/dealers profit from
the price spurt or fall that takes place due to an institution buying or selling a stock. Not surprisingly, the practice of
‘front running’ by brokers is a cause of concern for regulators. To check this practice and to offer institutions better con-
trol over their own orders, DMA and algorithmic trading are popularly used in the advanced markets of the US, UK and
Europe. This channel has provided the buy side with greater control over trades, faster and better quality of execution,
facilitation of complex trading strategies, market and liquidity aggregation, increased compliance with regulations, and
lowered brokerage fees. It is not surprising, then, that transaction flows through DMA in these markets have shown re-
markable increase.

Boston-based research and analysis firm Celent estimates that the DMA in the US accounts for about 15–18% of equities
share volume. It predicts that the DMA flows would increase to 20% of equities share volume by 2010 and would gradually
replace manual executions. In Europe, DMA flow for equities is expected to grow from 8% of traded value to 15% in 2011,
according to the firm. The demand for greater venue aggregation to cope with the proliferation of alternative trading
systems 2 (ATSs) 2 and multilateral trading facilities (MTFs) 3 are expected to contribute to DMA growth in Europe. Among
the emerging markets that allow DMA are Taiwan, Korea, Singapore, Vietnam, Malaysia and Brazil. It is also currently
being introduced in Brazil, Chile, Mexico and Columbia.

What is DMA and what are its benefits?
In different markets, different terminologies are used for DMA. These include ‘direct access’, ‘direct market access’,
‘pure direct market access’, ‘intermediated access’, and ‘sponsored access’. The International Organization for Securi-
ties Commission (IOSCO) calls the DMA arrangement as ‘Direct Electronic Access’, which it defines as the process by
which people transmit orders on their own (i.e. without any handling or re-entry by another person) directly into the
market’s trade matching system for execution.

The key benefits DMA are:

i. Direct control of clients over orders & maintaining secrecy of orders: Through the facility of DMA, clients can place orders through
the computer system directly rather than routing them through the broker. This ensures that the secrecy of orders is maintained i.e. the
brokers would not be privy to the trades before execution.

ii. Speed of order execution: DMA results in faster order placement and execution. Under the non-DMA framework the institutions have
to convey their orders to a broker, and the broker then places the orders in the trading system of the stock exchanges. This means that
the same information has to be conveyed twice, which results in delays, and at times, errors. In market parlance, this is known as “high
latency” problem which also reduces the profit making potential of the market participants. With DMA, the institutions are able to place
the orders directly in the market, implying faster execution of orders and reduced risk of errors associated with manual order entry.

iii. Greater transparency and increased liquidity: Orders through DMA are visible to the entire market allowing all market participants
full contribution to central market liquidity, and reduces price manipulation. DMA also provides an audit trail which helps the stock
exchanges to easily trace any malpractice and helps in regulation.

iv. Tighter spreads and lower impact cost: Through DMA, institutional clients can act as market makers whereby they can place a limit
order 4 and benefit from the bid ask spread. As limit orders are displayed publicly rather than held privately, market spreads become
tighter, benefiting the order placer, who has a higher chance of getting the trade executed at a desirable price. Further, DMA helps an
institutional investor to break a large trade into several small ones which imply lower impact cost for large orders.

v. Cost Saving: With no intermediary involved in the transactions, there are significant cost savings for the institutions by way of bro-
kerage charges.

vi. Enable Algorithmic Trading (AT): Traders can develop and deploy computers running complex mathematical algorithms and place
buy and sell orders automatically in the trading system through DMA. This is called Algorithmic trading (AT) and is facilitated by DMA. A
detailed discussion on AT is given below.

1 The authors are with the NSE. Views are personal.

2 These are trading systems that are not regulated as an exchange, but are a venue for matching the buy and sell orders of its subscribers. They are gaining popularity around the world and account for
much of the liquidity found in publicly traded issues.

3. This is a trading system that facilitates the exchange of financial instruments between multiple parties. It allows eligible contract participants to gather and transfer a variety of securities, especially
instruments that may not have an official market. These facilities are often electronic systems controlled by approved market operators or larger investment banks.

4 Limit orders are orders to buy or sell shares at a stated quantity and stated price. If the price quantity conditions do not match, the limit order will not be executed

N S E N E W S L E T T E R 13
August 2009

Algorithmic trading

AT (also commonly known as program trading or black box trading or dark pool etc) refers to orders that are automatically placed in
the market by software programs built on certain mathematical models. In its simplest form, AT could be based on a program de-
signed to detect an arbitrage opportunity between the cash and the futures market and place orders on exchanges in real time.

Such a trading methodology has advantages such as control over the trading process, the ability to focus on the most difficult trades
and cost control. Further, AT is also seen to drive down trading costs. AT has been accepted internationally due to: reduced market
impact; increased trading efficiency; better alignment between strategy and execution and lower cost. It is estimated that the use of
AT reduces transaction costs by almost 75%.

Another significant advantage is the anonymity of algorithms which helps prevent information leakage. Further, algorithmic strate-
gies satisfy regulatory compliance. Due to the methodological documentation that occurs during the AT process, this mechanism of-
fers a regulatory solution through the trail of information that results from transactions unlike the manual trades. It also enhances
the efficiency of the financial market for arbitrageurs and eliminates front running.

Indian Markets and DMA/AT

The facility of DMA was not available in the Indian markets till recently, although it was recognized that the Indian markets have a
huge potential for increasing trading volumes through DMA/AT. The High Powered Expert Committee on Making Mumbai an Interna-
tional Finance Centre (HPEC on MIFC) in its report in 2007 had referred to the significance of DMA in Indian markets. Recognizing
that DMA and AT are both necessary and inevitable, if India were to become a serious global player. the Securities and Exchange
Board of India (SEBI) permitted stock exchanges to facilitate its trading members to offer DMA to institutional clients in April, 2008.
Foreign institutional investors (FIIs) and domestic institutions such as mutual funds and insurance firms can now directly execute
their buy and sell orders without any manual intervention by their brokers. With this, our capital market has moved a step further
towards having a sophisticated and efficient trading infrastructure that compares with global standards.

Subsequent to the permission of DMA by SEBI, the requirement of decision making tools such as automated trading or algorithmic
trading gathered momentum. To facilitate algorithmic trading, in June 2008 National Stock Exchange of India (NSE) permitted its
members to offer such decision support tools. Under the system, the orders can be placed for execution in the Capital Market seg-
ment as well as the Futures & Options segment. Members can use their own software running on any suitable hardware/software
platform of their choice and hence customize the software to meet their specialised needs such as provision of on-line trade analy-
sis, risk management tools, integration of back-office operations etc. NSE members have been permitted to offer the facility only
after prior approval of the Exchange. Following these initiatives, algorithmic trading together with DMA is expected to gather mo-
mentum in the country. MF Global became the first broker to offer DMA services to its clients in India in June, 2008. In July 2008,
BNP Paribas and Morgan Stanley started offering the service. They were joined by UBS and Credit Suisse in September, 2008. As re-
gards AT services, the brokers offering the same include Merrill Lynch, Goldman Sachs, JPMorgan, Citigroup and Credit Suisse.

Potential for Indian Markets

The decision of SEBI to give institutions direct market access complemented with AT, has brought in a lot of sophistication in Indian
markets. Low transaction time and speedy trade execution that result from DMA and AT have made trading in Indian markets attrac-
tive to institutions, especially foreign institutions. The institutional investors, which currently account for 22-25 % of the total turn-
over in the Indian stock markets, are expected to increase their market share of the turnover with the advent of DMA. Global institu-
tions have placed a large amount of funds in markets using algorithmic models, some part of which are expected to flow into the
Indian markets. Celent has estimated that by 2010, around 11% of trading volume in India will be facilitated through direct market

The basic brokerage fees for institutional trades in India range from 10 to 40 basis points, depending on the size of trade and range of
execution services offered. Market analysts expect this fee to drop to 10 to 20 basis points following the adoption of DMA facility.

Some analysts hold the view that while FII clients are likely to start using DMA facilities instantly as they have already have the ex-
perience of using AT models across the developed markets, domestic Indian institutional clients and mutual funds may take some
time to start using DMA through AT. Further once AT becomes popular, India will become a more attractive destination for listing by
overseas firms.


1. A buy-side handbook on Algorithmic Trading, published by The Trade, UK, 2005
2. DMA-ushering in a New Era, Charter Financial Analyst, June 2008
3. DMA a Priority in Emerging Markets Amid Sagging Results, Securities Industry News, January 2009
4. Impact of Direct Market Access in India, Celent, July 2008
5. Policies on Direct Electronic Access, Consultation Report, IOSCO, February, 2009
6. The evolution of DMA Trading Services in the US and Europe, Celent, March, 2008

N S E N E W S L E T T E R 14
August 2009


RBI’s First Quarter Review of Monetary Policy 2009-10 released on 28th July, 2009

The Highlights of the Review were:

1. Monetary Policy Action: RBI stated that it has adjusted the policy rates several times in the last ten months.
Currently, the repo rate is at 4.75%, the reverse repo at 3.25%, and the CRR at 5%. Consistent with its current
assessment of macroeconomic and monetary conditions, it has decided to keep all these rates unchanged.

2. Growth Outlook: On current assessment, the RBI placed the growth projection for GDP for 2009-10 at 6.0 per
cent with an upward bias. This updated growth projection thus marks a slight improvement over the growth
expectation of around 6.0 per cent indicated in the Annual Policy Statement. The overall macroeconomic sce-
nario continues to be uncertain, although it is expected that the fiscal and monetary stimulus measures will
supplement domestic demand in 2009-10. On balance, an uptrend in the growth momentum is unlikely before
the middle of 2009-10, the Bank said.

3. Inflation Outlook: The Bank projects the WPI inflation for end-March 2010 at around 5.0 per cent ─ higher
than the projection of 4.0 per cent made in the Annual Policy Statement of April 2009. As anticipated, the WPI
inflation turned negative in June 2009 due to the statistical base effect and not because of any contraction in
demand. However, the sharp decline in WPI inflation has not been commensurately matched by a similar de-
cline in inflation expectations.

4. Monetary Policy Stance: On the basis of the above overall assessment, the stance of monetary policy of the
RBI for the remaining period of 2009-10 will be as follows:

⇒ Manage liquidity actively so that the credit demand of the Government is met while ensuring the flow of credit
to the private sector at viable rates.

⇒ Keep a vigil on the trends and signals of inflation, and be prepared to respond quickly and effectively through
policy adjustments.

⇒ Maintain a monetary and interest rate regime consistent with price stability and financial stability supportive
of returning the economy to the high growth path.

N S E N E W S L E T T E R 15


1. Firm commitment from investors for schemes/funds of Foreign Venture Capital Investors

As per Regulation 11(3) of the SEBI Venture Capital Regulations each scheme launched or fund set up by a venture capital fund
should have firm commitment from the investors for contribution of an amount of at least Rs. 5 crores before the start of op-
erations by the venture capital fund. However, the SEBI (Foreign Venture Capital Investors) Regulations, 2000, do not stipulate
a similar requirement for Foreign Venture Capital Investors (FVCIs).

It has been decided to bring in parity between domestic Venture Capital Funds and Foreign Venture Capital Investors by requir-
ing the applicants desirous of registering with SEBI as FVCIs to obtain firm commitment from their investors for contribution of
an amount before the start of operations. The applicants desirous of registering with SEBI as the Foreign Venture Capital Inves-
tors, henceforth, would obtain firm commitment from their investors for contribution of an amount of at least USD 1 million at
the time of submission of applications seeking registration as FVCIs. A circular to this effect was issued by SEBI on 3rd July,

2. Amendments to SEBI (Disclosure and Investor Protection) Guidelines, 2000

SEBI has amended the SEBI (Disclosure and Investor Protection) Guidelines, 2000 on 9th July, 2009 providing, inter-alia, for the

a. Clause 2.1.4 of the SEBI (DIP) Guidelines have been amended to provide that an unlisted company making an IPO shall
list the securities being issued through the IPO on at least one stock exchange having nationwide trading terminals.

b. A concept of Anchor Investor in public issues through book building has been introduced. The amended guidelines pro-
vide that out of the portion available for allocation to Qualified Institutional Buyers (QIBs) upto 30% may be allocated to Anchor
Investors subject to, inter-alia, the following:

⇒ Anchor Investors shall necessarily be Qualified Institutional Buyers as defined in these guidelines.

⇒ The minimum application size by an Anchor Investor shall be Rs.10 crores.

⇒ One-third of the Anchor Investor portion shall be reserved for domestic mutual funds.

⇒ Allocation to Anchor Investors shall be on a discretionary basis subject to minimum number of 2 investors for allocation of
upto Rs.250 crores and 5 investors for allocation of more than Rs.250 crores.

⇒ Anchor Investors shall pay a margin of at least 25% on application with the balance to be paid within two days of the date
of closure of the issue.

⇒ The parameters for selection of Anchor Investors shall be clearly identified by the merchant banker and shall be available
as part of records of the merchant banker for inspection by SEBI.

3. Abolition of no-delivery period for all types of corporate actions

SEBI had reduced the notice period from companies to stock exchanges to atleast 7 working days for all types of corporate ac-
tions vide their circular dated April 24, 2009. Pursuant to the recommendations made by the Secondary Market Advisory Com-
mittee of SEBI at its meeting held on June 30, 2009, it has been decided to do away with ‘no-delivery period’ for all types of
corporate actions in respect of the scrips which are traded in the compulsory dematerialised mode and accordingly, short deliv-
eries, if any, of the shares traded on cum-basis could be directly closed out. Circular to this effect was issued on 21st July,
2009. In case of such direct close-out, the mark-up price would be as stated in SEBI circular no. dated April 16, 2002.

4. Amendments to the Equity Listing Agreement

In accordance with decision taken at the SEBI Board meeting of 18th June, 2009, SEBI amended the Equity Listing Agreement to
prohibit listed companies from issuing shares with superior rights as to voting or dividend vis-à-vis the rights on equity shares
that are already listed. A circular to this effect was issued on 21st July, 2009.

N S E N E W S L E T T E R 16
August 2009

R E G U L A T O R Y C H A N G E S ( c o n t d . . )

5. Comprehensive Risk Management Framework for the cash market

As per the recommendations of the Secondary Market Advisory Committee of SEBI, few changes regarding the Comprehensive
Risk Management Framework for the cash market have been made on 27th July, 2009. The SEBI circular provides that in case of
a buy transaction in cash market, VaR margins, Extreme loss margins and mark to market losses together should not exceed the
purchase value of the transaction. Further, in case of a sale transaction in cash market, the existing practice should continue
viz., VaR margins and Extreme loss margins together should not exceed the sale value of the transaction and mark to market
losses should also be levied.


1. Change in Index

The Index Maintenance Sub-Committee carried out a change in the S&P CNX 500 Index with effect from July 31, 2009 on account
of the Scheme of arrangement between Adlabs Films Limited, Reliance Media World Limited (formerly Reliance Unicom Lim-

S&P CNX 500
Sr. Company Name

1 Adlabs Films Ltd. Excluded
2 Torrent Power Ltd. Included

2. Index based market wide circuit breaker for the quarter July 01, 2009 to September 30, 2009

As per SEBI directive, the Exchange has been implementing the index based market wide circuit breaker in compulsory rolling
settlement with effect from July 02, 2001.

The index based market wide circuit breaker system is applicable at three stages of the index movement either way at 10%, 15%
and 20%. Accordingly the percentages are calculated on the closing index value of the quarter. These percentages are translated
into absolute points of index variations (rounded off to the nearest 10 points in case of NIFTY). At the end of each quarter, these
absolute points of index variations are revised and made applicable for the next quarter.

On June 30, 2009, the last trading day of the quarter, NIFTY closed at 4291.10 points. The absolute points of NIFTY variation
(over the previous day’s closing NIFTY) which would trigger market wide circuit breaker for any day in the quarter between July
01, 2009 to September 30, 2009 would be as under:-

Percentage Equivalent Point (+/-)
10% 430.00
15% 640.00
20% 860.00

N S E N E W S L E T T E R 17
August 2009


1. Neonet provides NASDAQ OMX with European consolidated market data

Neonet, the global provider of agency brokerage services and trading technology, announced on 1st July, 2009 that its Euro-
pean Consolidated Market Data shall power NASDAQ OMX's analysis tool Market Replay Europe.

Market Replay Europe allows users to view data from major European execution venues at any point in time. The tool is pow-
ered by market data collected and presented in Neonet's Consolidated European Order Book. Neonet delivers high quality
market data, tapped directly from connected exchanges' and execution venues' order books and fed through high-speed cir-
cuits to deliver a low-latency feed to clients.

Market Replay Europe can be used by all market participants including institutional and retail investors, professional and non-
professional traders, and compliance officers. It enables users to:

⇒ Review a situation for analysis or training
⇒ Analyze whether a trade complied with best-execution requirements
⇒ Review interesting situations and missed opportunities
⇒ Share a replay with clients to confirm best trades
⇒ Send a screen shot to help Trade Support
⇒ Filter by exchange to remove those exchanges not included within the users MiFID execution policy.
In addition to the NASDAQ OMX Group, Neonet provides market data to the multi-lateral trading facility Turquoise, as well as
to banks and brokerage firms throughout Europe.

By bringing relevant high speed market data into one consolidated order book, Neonet eliminates the challenges related to
market fragmentation and improves the market transparency. The agreement with NASDAQ OMX shows that it is important for
leading exchanges, MTFs and other market participants to have high-quality, high-speed market data.

2. London Stock Exchange introduces new order book pricing

London Stock Exchange Group, on 1st July, 2009, announced a new, simplified fee structure for trading on its UK order
books. The new structure, to be introduced from 1 September, will deliver benefits to a broad cross section of the Ex-
change’s diverse customer base.

In particular, the new price list will:

⇒ Balance charges applicable to each side of a transaction
⇒ Substantially lower the threshold for volume discounts
⇒ Increase the number of firms benefiting from incentives
⇒ Reduce the minimum charge per execution
⇒ Introduce new incentives for trading in Small Cap securities
The Group expects the new tariff to drive growth in trading. For instance, applying the new tariff to the trading activity be-
tween January and March 2009, an additional £3 million in aggregate trading fee benefits would have accrued to member

N S E N E W S L E T T E R 18
August 2009

I N T E R N A T I O N A L N E W S ( c o n t d . . )

3. IOSCO’s consultation paper on Principles for Periodic Disclosure by Listed Entities

The Technical Committee of the International Organization of Securities Commission (IOSCO) has, on 2nd July, 2009, published a
consultation paper – Principles for Periodic Disclosure by Listed Entities (Periodic Disclosure Principles) – that makes preliminary
recommendations for disclosures that could be provided by issuers in periodic reports, particularly annual reports, of listed enti-
ties. The Periodic Disclosure Principles also cover other issues related to periodic disclosure, such as the timeliness of disclo-
sures, disclosure criteria and storage of information.

The Periodic Disclosure Principles are aimed at setting out what issues should be considered by securities regulators in develop-
ing or reviewing their disclosure regimes for the periodic reports of listed entities with securities listed or admitted to trading on
a regulated market in which retail investors participate. These periodic reports enhance investor protection by providing rele-
vant information which facilitates investor decision-making, by allowing investors to compare the performance of the same com-
pany over regular intervals and by enabling investors to make comparisons between different companies.

This consultation forms part of IOSCO’s ongoing work to develop principles for disclosure by issuers of listed securities to inves-
tors in the public capital markets. These proposed principles would complement IOSCO’s existing disclosure principles which pro-
vide guidance for cross-border offerings of equity securities (1998); ongoing disclosure and material development reporting
(2002); management’s discussion and analysis (2003); cross-border offerings of debt securities (2007); and offerings of asset-
backed securities (2009).

The following principles have been identified as essential for any periodic disclosure regime:

⇒ Periodic reports should contain relevant information;
⇒ For those periodic reports in which financial statements are included, the persons responsible for the financial statements
provided should be clearly identified, and should state that the financial information provided in the report is fairly pre-
⇒ The issuer’s internal control over financial reporting should be assessed or reviewed;
⇒ Information should be available to the public on a timely basis;
⇒ Periodic reports should be filed with the relevant regulator;
⇒ The information should be stored to facilitate public access to the information;
⇒ Disclosure criteria;
⇒ Equal access to disclosure; and
⇒ Equivalence of disclosure.

4. Federation of European Securities Exchanges (FESE) introduces harmonised tick size regimes in Europe

Since March 2009, FESE has been in negotiations with LIBA and some MTFs to harmonise the tick size regimes in Europe (which
currently stand at approximately 25 across the EU) in the interest of achieving benefits to the markets, users and investors by
simplifying the complexity and number of regimes in place.

From the perspective of each trading venue, strong incentives exist to undercut others in terms of tick sizes, which is not in the
interest of market efficiency or the users and end investors. This might, in turn, lead to excessively reduced tick sizes in the
market. Excessively granular tick sizes in securities can have a detrimental effect to market depth (i.e. to liquidity). An exces-
sive granularity of tick sizes could lead to significantly increased costs for the many users of each exchange throughout the value
chain; and have spillover costs for the derivatives exchanges’ clients.

N S E N E W S L E T T E R 19
August 2009

I N T E R N A T I O N A L N E W S ( c o n t d . . )
Based on the results of this consultation, FESE has met with LIBA and the MTFs on 30 June to present the results and agree on an
implementation timeline. FESE committed to:

⇒ Harmonising the tick size regimes for the most liquid stocks;
⇒ Reducing the number of regimes in place to the maximum extent possible ;
⇒ Simplifying the bands; and
⇒ Implementing the changes, together with the users within a range of 2

5. Eurex and Wiener Börse to cooperate in derivatives market
The international derivatives exchange Eurex and Wiener Börse AG announced on 7th July, 2009 that they plan to enter into a
technical cooperation which entails Wiener Börse operating its derivatives market on the Eurex system with effect from March
2010, thereby replacing the current OMex® system. The Austrian market will remain autonomous with its own market surveillance
and supervision.

Wiener Börse has been cooperating with Deutsche Börse on the cash market since 1999, when it began to use the Xetra electronic
trading system for its equities market. In June 2007, the two parties extended their cooperation by another five years, taking it to
2012. The shift to Eurex in the derivatives market and the associated expansion of the partnership serve to underscore the suc-
cess of the cooperation.

6. CME Group announces the launch of clearing services for OTC London gold forwards

CME Group Inc. on 14th July, 2009 announced the launch of clearing services for over the counter (OTC) London gold forwards.
Clearing services will be available through CME ClearPort((R)), a set of flexible clearing services open to OTC market participants
to substantially mitigate counterparty risk and provide capital efficiencies across asset classes. Clearing services for house busi-
ness will commence on August 23 for trade date August 24, with customer segregated activity following within 90 days of com-
mencement. These contracts are made available for clearing on COMEX through CME ClearPort, and are subject to COMEX and
CME rules and regulations.

CME Clearing will provide post-trade clearing services for physically delivered OTC London gold forwards. The positions will re-
main as forwards to the date in clearing and settle with 'London Good Delivery' gold via the market standard book-entry transfer
system. Positions will be marked-to-market daily with margins applied to open positions. CME Clearing will remain in the delivery
process throughout settlement and ensure transfer of gold and dollars between counterparties.

7. Launch of new Eurex agricultural derivatives

The international derivatives exchange Eurex expanded its product range to include the agricultural derivatives asset class. Since
trading commenced on 20th July, 2009, Eurex clients have been able to trade four new agricultural contracts: futures on European
processing potatoes and potatoes for the British market (London Potatoes), and piglet and hog futures.

All four futures are settled in cash, with the market price indices based on recognized price determination as underlyings. Partici-
pants will be able to trade all four agricultural contracts free of charge for the rest of July 2009, and from August to October 2009
for only 50 percent of the transaction fee.

8. Johannesburg Stock Exchange launches options for the retail investor

The JSE launched equity options for retail investors on 27th July, 2009. Retail Equity options include Single Stock Options on the
top twenty companies in the FTSE/JSE Top 40 Index and Index Options on the Top 40 Index itself. Smaller contract sizes bring new
affordability to the options market in South Africa and open it up to the man in the street.

The JSE has a well-established wholesale options market catering for institutional investors, but they have not focused on the
retail investor before. This new investment avenue complements the existing equity futures market and will increase both trading
volumes and liquidity in market. Like equity futures, options allows investors and speculators to benefit from the movement of
the share price, but differ in that they come with a ‘built-in insurance policy’ where the investor is able to resign a contract at
any point in the contract term.

N S E N E W S L E T T E R August 2009 20

Mr Ravi Narain Managing Director and CEO 26598122 7050
Ms Chitra Ramkrishna Dy. Managing Director 26598123 7051
Mr J Ravichandran Director Finance & Accounts, Legal & Secre- 26598203 5005
Mr. Ravi Apte Chief Technology Offi- 26598316 5004
Mr R Sundararaman Sr. Vice President NSCCL 26598212 4006
Mr Yatrik R Vin Sr. Vice President Finance & Accounts 26598213 3008
Ms. Kamala Vice President Compliance, Inspection, Member- 26598220 3006
ship, Arbitration, Defaulters Section
& Investor Service Cell
Mr. Nirmal Mohanty Head - SBU EDU SBU - EDUCATION 26598372 3007
Mr R Nanda Kumar Vice President NSCCL - Development & NCCL, 26598223 3000
NOW, Web Team
Mr Ravi Varanasi Vice President Investigation, Surveillance & In- 26598225 5003
Ms T. S. Jagadharini Vice President Trade (Capital Market, Currency 26598435 4002
Derivatives, F&O & WDM), Devel-
opment, IPO, CRM, Marketing &
International Business
Mr. Vidhu Shekhar Vice President New Products & Six Sigma Inititia- 26598209 4007
Mr Arup Mukherjee Asst. Vice President SBU - EDUCATION 26598217 3002
Mr C. N. Upadhyay Asst. Vice President Inspection 26598210 5002
Mr Dhruvkumar Patil Asst. Vice President Arbitration, Defaulters Section & 26598190 5006
Investor Service Cell
Mr Hari K Asst. Vice President Listing & Corporate Communica- 26598452 5058
Mr Mahesh Haldipur Asst. Vice President Premises 26598211 4003
Mr Mayur Sindhwad Asst. Vice President NOW, Dotex International Ltd. 26598312 3102
Mr. Nilesh Tinaikar Asst. Vice President Development 26598445 5090
Ms Nisha Subhash Asst. Vice President Investigation 26598162 5088
Mr R Jayakumar Asst. Vice President Secretarial 26598222 5023
Ms. Rana Usman Asst. Vice President NSCCL - Securities & Data Supply 26598267 4048
Mr Ravindra Mohan Bathula Asst. Vice President Legal 26598197 5047

Mr Suprabhat Lala Asst. Vice President Trade - Capital Market, F&O, Cur- 26598154 6026
rency Derivatives & WDM
Mr Suresh Narayan Asst. Vice President India Index Services & Products Ltd. 26598221 2004
& Dotex Int'l
Mr T Venkat Rao Branch In-charge Regional Office - New Delhi , Jaipur (011) 23344335 127
Mr Ajith Kumar V Manager Administration & Development 26598146 4094
Ms. Aparna Bhat Manager NSCCL -Risk Management 26598168 4036
Mr. Amit Bhobe Manager NCCL 26592312 3103
Mr Amol Mahajan Manager Finance & Accounts 26598139/40 3081
Ms. Anuradha Guru Officer on Special SBU - EDUCATION (011) 23344507 180
Mr. Arvind Goyal Manager F&O - Trade 26598152 6028
Mr. Avinash Kharkar Manager Listing 26598452 5057

N S E N E W S L E T T E R 21

Mr. Bireshwar Chatterjee Manager Investigation 26598366 5146

Ms Himabindu Vakkalanka Manager Development 26598453 5155

Mr. Huzefa Mahuvawala Manager NSCCL -Risk Management 26598168 4040
Mr. Janardhan Gujaran Manager F&O Trade 26598152 6029
Ms Jayna Gandhi Manager Finance & Accounts 26598141 3066
Mr. Johnson Joseph Chiriyath Manager Arbitration & Investor Service 26598192 5078
Mr. Kiran Dusane Manager Premises 26598454 4112
Mr. Kiran Sawant Manager NSCCL - Collaterals 26598265 4088
Ms. Pareezad Deboo Manager NSCCL - Currency Derivatives 26598310 4130
Mr. Prashanto Banerjee Manager Marketing 26598350 1228
Mr. Ram Surve Manager Human Resources 26598224 3125
Ms. Rehana D'Souza Manager Membership 26598295 4116
Mr. Sandeep Dandapat Branch In-charge Regional Office - Kolkata (033) 2463 117
Mr. Sandeep Manoharan Manager NSCCL - Development 26598253 3089
Mr. Shekhar Rao Manager Finance & Accounts 26598143 3051
Ms. Sonali Karnik Manager Surveillance 26598166 6013
Mr. Sunil Gawde Manager Capital Market 26598448 6033
Ms. Sunitha Anand Branch In-charge Regional Office - Chennai & Hy- (044) 100
derabad 28332512
Ms. Sushama Bhagchandani Manager Finance & Accounts 26598144 3041

Mr. Vinayak Shenoy Manager Finance & Accounts 26598139 3076

NAME Designation Projects Tel. No. Ext
Mr. N Muralidaran CEO Projects 26598205 2001
Mr. G. M. Shenoy Senior Vice Presi-
dent Projects 26598207 2000
Mr. M. R. Krishnan Vice President Infrastructure 26598132 2003
Ms. Hema Iyer Vice President Risk Management 26598254 2002
Mr. Mahesh Soparkar Group Head Projects 26598100 2005
Mr. P. R. Visvas Assistant Vice Presi- Internal Systems - Listing, DBA/
dent SysAdmin, DWH 26598270 1189
Ms. Mamatha Rangaprasd Assistant Vice Presi-
dent Trade 26598100 1168
Mr. Mahesh Basrur Assistant Vice Presi-
dent FOCAS 26598100 2072

N S E N E W S L E T T E R 22

Designation Projects Tel. No. Ext
Mr. Hemant Patade
Assistant Vice President BCP 26598100 2067
Mr. Deviprasad Singh
Assistant Vice President Telecom 26598262 2122
Ms. Smrati Kaushik
Senior Manager Trade 26598271 6082
Mr. Viral Mody
Senior Manager Trade 26598100 2078
Mr. Hitesh Shah
Senior Manager DBA /Sys Admin 26598270 2102
Mr. Sujoy Das
Senior Manager PRISM / TAP 26598275 2032
Mr. Sudhir Sawant
Senior Manager Project Management Office 26598100 2112
Mr. Pranav Gupta
Senior Manager Risk Management 26598100 1165
Mr. Rajanish Nagwekar
Senior Manager Index / Neat Plus 26598100 2130
Mr. Nipun Dave
Senior Manager Architecture 26598100 2024
Mr. Bineet Jha
Senior Manager HWARE SUPPORT 26598396 1570
Ms. Geeta Mathew
Senior Manager ASG / Operations 26598100 2077
Mr. Mathew Joseph K
Senior Manager NCSS 26598100 2055
Mr. Benny Sebastian
Senior Manager Membership 26598100 1142
Mr. Manoj Joshi
Manager Projects 6598231 1190
Ms. Anuja Joshi
Manager BCP 26598100 1124
Mr. Suresh Chandani
Manager Trade 26598100 6083
Mr. Shibu Tomy
Manager NFA/FAMS 26598100 1154
Ms. Pranali Taskar
Manager Telecom 26598277 2096
Mr. Umesh Agroya
Manager Telecom 26598277 2105
Mr. Joy John
Manager BCP - Chennai 044-28473702 141
Mr. Narayan Neelakanthan
Manager Telecom 26598100 2113
Ms. Bernadine Swamy
Manager HRD 26598100 2135
Mr. Mahesh Dere
Manager Membership 26598100 1163
Mr. Anoop Kumar Rawat
Consultant DBA 26598100 2094
Mr. Nitin Gupte
Manager Telecom 26598100 2087
Mr. Sandeep Kumar Gupta
Manager ASG 26598100 2085
Mr. Tushar H. Kulkarni
Manager C2N 26598100 1171
Mr. Prasad Addagatla
Manager SysAdmin 26598100 6087
Mr. Suraj P Bangera
Manager Web 26598100 1110
Mr. Manoj Kumar Singh
Manager TECH - Delhi (011) 23346978 109
Mr. Sagar Joshi
Manager Project Management Office 26598100 2111
Mr. Shreekantha Velankar
Manager DWH 26598100 2119
Mr. Balakrishnan M
Manager FOCASS 26598100 2019
Mr. Aditya Agarwal
Manager Architecture 26598100 2141
Ms. Meena Hajare
Manager Listing 26598100 1123
Mr. Nishant Jha
Manager OPMS 26598100 1166
Ms. Veena Khilnani
Manager DBA 26598100 2104
Mr. Vinit Naik
Manager Survellience 26598100 1160
Ms. Vishakha Shenoy Manager PRISM 26598100 2042

N S E N E W S L E T T E R 23

NAME Designation Dept Tel No. Extn.
Mr Ramesh Padmanabhan CEO CEO's office 9820187572
Mr Vinay Patkar SVP New Initiatives 9821524635
Mr Manoj Uppal SVP Quality & Delivery 9322404060
Mr V Rajaraman VP EMS 9820444452 7727
Mr Anand Pachchhapur VP Customer Support 9820345089 7609
Mr Shailesh Chitre VP Marketing 9820058329 7605
Mr R V Krishnan AVP MKT 9322641956
Mr Aditya Garg AVP Quality 9930822377
Mr Deepak Salvi Head Turnkey Projects Projects 9892404250
Mr Kankesh Kamath Head - Fin & Accounts Accts 9820677419
Mr Ravindra Sant Sr.Manager MKT 9821735452
Mr. Mudit Sharma Sr.Manager BAT 9324178475
Mr. Pravin Pillai Delivery Manager Projects 9820211736
Mr. Surendra Saraf Delivery Manager Projects 9765409721
Mr. Satish Chincholi Head-Customer Support IMS 9322599995
Mr Sumeet Batra Manager TECH 011-23344512 100
Mr Ushanas Shastri Manager ProBos 9820225580
Mr Cletus Pais Manager HRD 9867622314
Mr Atul Shahapurkar Manager NCDEX 9821216692
Mr Tushar Kulkarni Manager Projects 9819413589
Mr Santosh Shet Manager Projects 9892555457
Mr Mangesh Sardesai Manager Ensettle 9821228281
Ms Yogita Dere Manager NCDEX 9820656418
Ms Swati Agarwal Manager Company Sec. 9819007581
Mr Abhijit Kshirsagar Manager Administration 9833087126
Mr Rahul Bajaj Manager Marketing 9811584877
Mr Sunil Desai Manager Marketing 9320297809
Mr. Nikhil Chande Manager NOW 9821840559
Mr. Raju Ghosh Manager Online exam 9836300612
Mr. Vishal Sawant Manager HRD 9892041854
Mr. Vishnu Dev Manager Online exam 9999822843
Mr. Prasad Jadhav Manager Administation 9930510006
Mr Vinod Alex Manager Online exam 9567763733
Mr Ravi Kiran M Manager Online exam 9030991055
Mr Rohit Rajani Manager Online exam 9920130300