INDIAN STOCK MARKET - THE PRESENT SCENARIO

Capital market is the centre or arrangement that provides facilities for buying and selling of longterm financial claims. It is the market where transactions are made in long term securities such as
stocks and bonds. Capital market is not a compact unit but consists of two major parts:
Primary Market
Secondary market.
The primary market or otherwise called as new issue market is one in which long term capital is
raised by corporate directly from the public. The secondary market or popularly called as the
stock market refers to the market where these long-term financial instruments which are already
issued in the primary market are traded.
The emergence of the stock exchanges in India can be traced back to the later half of 19th century.
RECENT DEVELOPMENTS IN THE CAPITAL MARKETS
SECURITIES MARKETS
PAN as the sole identification number
PAN has been made the sole identification number for all transactions in securities market. This
is an investor friendly measure as he does not have to maintain different identification numbers
for different kinds of transactions/different segments in financial markets.
Equity Finance for the Small and Medium Enterprises (SMEs)
The finance minister on 18-9-12 launched EMERGE, a dedicated NSE platform for emerging
corporate. EMERGE is expected to help thousands of small and medium enterprises (SMEs) to
raise capital from institutional investors and high networth individuals.
IPO grading
SEBI has made it compulsory for companies coming out with IPOs of equity shares to get their
IPOs graded by at least one credit rating agency registered with SEBI. This measure is intended
to provide the investor with an informed and objective opinion expressed by a professional rating
agency after analyzing factors like business and financial prospects, management quality and
corporate governance practices etc.
Permitting Indian mutual funds to invest in overseas securities
SEBI has fixed the aggregate ceiling for overseas investments at US $ 5 billion. Within the
overall limit of US $ 5 billion, mutual funds can make overseas investments subject to a
maximum of US $300 million per mutual fund.
New derivative products
Mini derivative contract on Index (Sensex and Nifty) having a minimum contract size of Rs. 1
lakh have been introduced. It has been found that globally overall market liquidity and
participation generally increases with introduction of mini contracts.

Investment options for Navaratna and Miniratna Public Sector Enterprises

The Navaratna and Miniratna Public Sector Enterprises have been allowed to invest in
public sector mutual funds subject to the condition that they would not invest more than 30% of
the available surplus funds in equity mutual funds and the Boards of PSEs would decide the
guidelines, procedures and management control systems for such investment in consultation with
their administrative Ministries.
Short selling
SEBI has issued a circular to permit short selling by institutional investors and securities lending
and borrowing to support settlement of short sales. The scheme is likely to be operationalised
shortly.
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. So, my always concentration is on new measures the Risk management system of SEBI
which is the controller of Indian Capital Market. SEBI did several steps in this regards.
{B} Place Circuit Breakers
This is another recent development in Indian Capital Market. We all know an excessive
speculation is always risky for every investor. For reducing it, SEBI has introduced place circuit
breakers.
A circuit breaker is the system which stops to trade in stock market when prices move after a
specific level. For example, if a stock is at Rs. 100 and circuit breaker is fixed at 5%, then
stock trading will stop if it hit of Rs. 95 or Rs. 105. There are mainly two types of circuit
breakers. One is index wise circuit breakers and other is stock wise circuit breakers.
{D} Mark to Market Margin
MTM margin is imposed to cover loss that a member may incur, in case the transaction is closed
out at a closing price different from a price at which the transaction has been entered.
It is just collection in cash for all futures contracts and adjusted against the available Liquid
Networth for option positions. In the case of futures Contracts MTM may be considered as Mark
to Market Settlement.
Investor Awareness Campaign
For making Indian capital market more secure for indian and foreign investors, SEBI has started
investors awareness campaign. Under this campaign, Workshops/ Seminars are conducted by
Investor Associations recognised by SEBI.
Recent developments and business opportunities in indian financial markets
Smart order routing :NSE, National Stock Exchange of India introduced the [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.
algorithmic trading. 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.
DMA [Direct market access]. What 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. 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.
currency futures and currency options. 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.
Another recent development in Indian financial markets is the coming up of various electronic
trading conferences- namely FixGlobal Face2Face and TradeTech events. These events provide
tremendous opportunity for interaction of various stakeholders in financial markets. For
example- the FixGlobal event in Mumbai saw participation by stock exchanges, buy side and sell
side firms, Technology companies providing financial markets solutions, investment banks,
financial markets news agencies, etc. Such events have started in Indian markets since last 3
years and provide a great networking as well as learning opportunity for everyone.
Review of Recent Policy developments and Programmes
a) Shareholding in stock exchanges: To encourage competition in the stock exchange space,
SEBI board decided to enhance the shareholding in the stock exchanges from 5 percent to 15
percent in respect of six categories of shareholders namely, public financial institutions, stock
exchanges, depositories, clearing corporations, banks and insurance companies.
b) Guidelines in respect of exit option to Regional Stock Exchanges: Broad guidelines were
issued by SEBI with the objective of providing an exit option to Regional stock exchanges
(RSEs) whose recognition was withdrawn or if renewal of recognition was refused by SEBI or
for RSEs who would like to surrender their recognition. As per the SEBI guidelines such RSEs
may be permitted to retain movable and immovable assets and to deal with such assets as they
deem fit, subject to the compliance with SEBI norms in this regard.
c) Margining of Institutional Trades in the Cash Market: This initiative by SEBI was to
strengthen the risk management frame work in capital market operations. Margins have to be
collected from institutional investors on a T + 1 basis and the institutional investors can maintain
the entire margin in the form of approved securities.
e) Advertisement by Mutual Funds: Investments in mutual funds are subject to market risk and
an investor has to read the entire offer document before going for such investments. Hence it was
made mandatory by SEBI that such statement, on advertisement code should appear in all
advertisements printed in bold.
FINANCIAL ACTION TASK FORCE (FATF)
India became the 34th country to join the Financial Action Task Force (FATF) as its full fledged
member. Action Task Force (FATF) is an inter-governmental body, responsible for setting global
standards on anti-money laundering (AML) and combating the financing of terrorism (CFT).
FATF membership is very important for India in its quest to become a major player in the
International finance. It will help India to build the capacity to fight terrorism and trace terrorist

money and to successfully investigate and prosecute money laundering and terrorist financing
offences. India will benefit in securing a more transparent and stable financial system by
ensuring that financial institutions are not vulnerable to infiltration or abuse by organized crime
groups. The FATF process will also help us in co-ordination of AML/CFT efforts at the
international level.
WORKING GROUP ON FOREIGN INVESTMENT IN INDIA
With a view to rationalising the present arrangements relating to foreign portfolio investments by
Foreign Institutional Investors (FIIs)/ Non Resident Indians (NRIs) and other foreign
investments like Foreign Venture Capital Investor (FVCI) and Private Equity entities etc., the
Government set up a working group to look at various types of foreign flows, which are taking
advantage of arbitrage across the respective stand-alone regulations and generate
recommendations to Government.
MUTUAL FUNDS MIGRATE FROM COMMISSION BASED SYSTEM OF
REMUNERATION TO FEE BASED SYSTEM
SEBI has stipulated that no entry load shall be there for any mutual fund scheme and the upfront
commission to distributors will be paid by the investor directly based on his assessment of
various factors including the service rendered by the distributor. In order to have parity among all
classes of unit holders, SEBI has mandated that no distinction among unit holders should be
made based on the amount of subscription while charging exit loads.
INCREASE IN PUBLIC SHAREHOLDING NORMS
The Securities Contracts (Regulation) (Amendment) Rules, 2010 provided for all listed
companies to raise a minimum of 25% public shareholding. Subsequently on reconsideration it
was decided to allow for a lower public shareholding (10%) for public sector enterprises (PSEs)
and provide flexibility to all companies in attaining 25% (or 10% for PSEs ) public shareholding
level within three years without any annual floor.
APPLICATIONS SUPPORTED BY BLOCKED AMOUNT (ASBA)
In its endeavor to make the existing public issue facility more efficient SEBI has introduced the
ASBA facility ASBA is an application containing an authorization to block the application
money in the bank account, for subscribing to an issue. If an investor is applying through ASBA,
his application money shall be debited from the bank account only, if his/her application is
selected for allotment.
INTRODUCTION OF UNIFORM MARGIN PAYMENT FOR ALL CATEGORIES OF
INVESTORS IN PUBLIC ISSUES
Retail individual investors and non institutional investors were required to pay entire application
money upfront while applying in public issues whereas Qualified Institutional Buyers (QIBs)

could apply by paying only 10% of the application money as margin on their application. In
order to provide a level playing field for retail individual investors and non institutional investors
vis-a-vis the QIBs, SEBI has mandated that the margin collected shall be uniform across all
categories of investors.
Development of Securities Market The Indian Experience
Well-developed securities markets are the backbone of any financial system.
Apart from providing the medium for channelizing funds for investment purposes, they aid in
pricing of assets and serve as a barometer of the financial health of the economy. The Indian
securities markets have witnessed far-reaching reforms in the post-liberalization era in terms of
market design, technological developments, settlement practices and introduction of new
instruments. The markets have achieved tremendous stability and as a result, have attracted huge
investments by foreign investors. There still is tremendous scope for improvement in both the
equity market and the government securities market. Change is a constant and therefore the
Indian capital markets also need to continue to evolve to ensure that it meets the challenges of
the current day