“A STUDY OF AN OVERVIEW ON INDIAN STOCK MARKET”

A Project Report Submitted to

University of Mumbai for partial completion of the Degree of

BACHELOR OF MANAGEMENT STUDIES

By

Mr. ADITYA LALBAHADUR SHAHI

Seat number: -31

Under the esteemed guidance of

Mr. Punam Singh

DEPARTMENT OF BACHELOR OF MANAGEMENT STUDIES

MAHATMA PHULE COLLEGE OF ARTS, SCIENCE, COMMERCE AND

MANAGEMENT (BMS)

(Affiliated to University of Mumbai)

MUMBAI-400012

MAHARASHTRA

2018-2019

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 CERTIFICATE

This is to certify that Mr. ADITYA LALBAHADUR SHAHI has worked and
daily completed his project work for the degree of Bachelor Management of

Studies under the faculty of commerce in the subject

“WEALTH MANAGEMENT” and his project entitled ,

“A STUDY OF AN OVERVIEW ON INDIAN STOCK MARKET” under my

supervision.I further certify that the entire work has been done by the learner under
my guidance and that no part of it has been submitted previously for any Degree of
any University.

It is his own work and facts reported by his personal finding and investigations

_____________________ __________________

Name and Signature Head of Institute

Guidance Teacher

Date of Submission: -

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 DECLARATION

I the undersigned Mr. ADITYA LALBAHDUR SHAHI here by, declare that the
work embodied in this project work titled “WEALTH MANAGEMENT ” forms my
own contribution to the research work carried out under the guidance of

MS. PUNAM SINGHis a result of my own research work and has not been
previously submitted to any other University for any other Degree to this or any
other University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

______________________________

ADITYA LALBAHADUR SHAHI

Certified by:-

__________________________________

Name and Signature of the Guiding teacher

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 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbaifor giving me chance to

do this project.

I would like to thank Head of my InstituteDr. Satish Kelshikar” for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our TEACHERS” ” for their moral support and
guidance.

I would also like to express my sincere gratitude towards my project guide “Ms.
Punam Singh” whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference
books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped
me in the completion of the project especially my Parents and Peers who
supported me throughout my project.

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 EXECUTIVE SUMMARY

Indian securities markets have undergone many changes during the last decade. Exponential
growth in trading volumes is pushing existing trading systems and processes to capacity and
increasing settlement risk. With Indian market moving to a T+3 rolling settlement cycles in line
with global markets, SEBI is continuing its efforts to increase the efficiency and transparency in
Indian markets. This would result in lowering of trade costs and make Indian markets a more
attractive destination for global investors. Indeed it has been SEBI endeavor to make the Indian
markets, one of the most competitive and efficient markets of the world.

The move from a 5 day settlement period to a three day period requires firms to streamline
trading processes by way of a foolproof, faster, cost effective and universally acceptable mode of
communication among market participants. With changes happening in rapid succession,
derivatives markets looking to expand, the settlement risk are increasing and this is pushing the
need for Straight Through Processing (STP) and making it a pre-requisite for success of smooth
functioning of securities market with a settlement period of T + 3 or less.

Straight-through Processing (“STP”) involves electronically capturing and processing transactions

in one pass, from the point of first “deal” to final settlement. Current practices involve costly
multiple data re-entry from paper documents and other sources that are susceptible to errors,
discrepancies, delays and possible fraud. STP enables orders to be processed, confirmed cleared
and settled in a shorter time period, more cost effectively and with fewer errors than under
traditional methods such as phone, fax, email etc. that require human intervention. It is the
human element that slows the trade processes, introduces errors and delays settlement.

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 TABLE OF CONTENT
Sr.no. Topic Page
no.
1. Research methodology 7-9
2. Introduction 9-10
3. What is stock market 11-17
4. How does stock market works 18-19
5. How to invest in stock market 20-21
6. Why there is buying and selling of stocks 22-23

7. BSE & NSE 23-25

8. What is Sensex and what is Nifty 26-27
9. What are stock indices 28-28
10. Why do we need indices 29-30
11. Regulatory authority in Indian stock market 31-32
12. Primary and Secondary market 33-35
13. Trading Mechanism 36-38
14. Settlement cycle & Trading hours 39-40
15. What is Bull market & Bear market 41-42
16. Role of stock market in India 43-44
17. Types of risk involved in stock market 45-46
18. Different Investment tools in stock market 46-48
19. What is Dematerlization 48-50
20. Understanding how the demat account works 50-51
21. Findings 52-56
22. Recommendation & Suggestion 57-57

23. Conclusion 58-58

24. Bibliography 59-60

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 1.RESEARCH METHODOLOGY

The Securities and Exchange Board of India (SEBI) which was set up in early 1988 was given
statutory recognition in January 1992 to frame rules and guidelines for various operations of the
Stock Exchanges in India. The Over the Counter Exchange of India (OTCEI) established earlier
for serving the smaller companies became operational in September1992 and the National Stock
Exchange was set up in Mumbai in 1994.India's official

Economic Survey 1992-93, observed that the process of reforms in the capital market... needs to
be deepened to bring about speedier conclusion of transactions, greater transparency in operations,
and improved services to investors, and greater investor protection while at the same time
encouraging corporate sector to raise resources directly from the market on an increasing scale.
Major modernization of the stock exchanges to bring them in line with world standards in terms of
transparency and reliability is also necessary if foreign capital is to be attracted on any significant
scale.

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 I. Title of Study:-

“An On Indian Stock Market with special reference of share, securities fund debenture and
commodity market, Commercial Bills, and T-Bonds. The study is emphasized on the current
Capital market and its services and also about the investment in the Capital market.
Study focuses to the interest of investors towards the Investment in Stock market.

II. Research:-

Research can be defined as scientific and systematic search for pertinent information on a specific
topic. It is careful investigation or inquiry through search for new facts of any branch of
knowledge. Research plays an important role in the project work. The results of theproject are
completely based upon the research of the facts and figurescollected through the different ways of
research.

III. Research Design: -

A research design is a framework or blueprint for conducting themarketing research project. It

details the procedures necessary for obtaining the required information, and its purpose is to
design a study that will test the hypotheses of interest, determine possible answers to the research
questions, and provide the information needed for decision making. Conducting exploratory
research, precisely defining the variables, and designing appropriate scales to measure them are
also a part of the research design. The issue of how the data should be obtained from the
respondents (for example, by conducting a survey or an experiment) must be addressed. It is also
necessary to design a questionnaire and a sampling plan to select respondents for the study.

Research can classify in two categories:

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 1. Exploratory Research

It has the goal of formulating problems more precisely, clarifyingconcepts, gathering explanatio
ns, gaining insight, eliminating impractical ideas, and forming hypotheses. Exploratory research
can be performed using a literature search, surveying certain people about their experiences, focus
groups, and case studies. When surveying people, exploratory research studies would nottry to
acquire a representative sample, but rather, seek to interview those who are knowledgeable and
who might be able to provide insight concerning the relationship among variables.

2. Descriptive Research

It is more rigid than exploratory research and seeks to describe users of a product, determine the

Proportion of the population that uses a product or predict future demand for a product. As
opposed to exploratory research, descriptive research should define questions, people surveyed,
and the method of analysis prior to beginning data collection. These classifications are made
according to the objective of the research. In some cases the research will fall into one of these
categories, but in other cases different phases of the same research project will fall into different
categories.

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 2.INTRODUCTION

There was a time when India was discussed as the land of snake charmers, black magic and
epidemics but the revolutionary Indian growth story changed everything. Indian economy at its
height compelled the world to change its viewpoint towards India. Out of the several factors which
changed the face of modern India, we are going to discuss the most roaring of them i.e. our share
market. The earlier reform procedures adopted by India gave India the two most sought after
world-class brands i.e. SENSEX and NIFTY. The magical figures displayed by our market turned
all the heads on India. And India became one of the most favorite places for investment.

There are about 22 stock exchanges in India which regulates the market trends of different stocks.
Generally the bigger companies are listed with the NSE and the BSE, but there is the OTCEI or
the Over the Counter Exchange of India, which lists the medium and small sized companies. There
is the SEBI or the Securities and Exchange Board of India which supervises the functioning of the
stock markets in India.

Other than some restricted industries, foreign investment in general enjoys a majority share in
SEBI and the RBI for operating in Indian stock exchanges. In the Asset Management Companies
the Indian stock market. Foreign Institutional Investors (FII) need to register themselves with the
and Merchant Banking Companies also foreign.

So to analyze the saga of Indian share market, we had two indices to follow: BSE sensex and NSE
nifty. Though NSE nifty is a more advanced option and has left BSE sensex far behind, still we
call BSE sensex as the barometer of our economy.

Indian Stock Market Analysis is about the correct measurement of the trends of various stocks of
the leading companies topping the BSE and NSE stock charts. Indian stock market is a volatile
market where the shares of the companies are subjected to changes at any point of time. The major
stock indices used in the Indian Stock Market Analysis are NSE S&P CNX Nifty 50 index BSE
SENSEX, and others. From an analysis of the share market of India, investors and traders can
decide whether the market is a Bull Market or a Bear Market before investing on the shares of
their desired companies.

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The BSE is the oldest exchange in India(started in 1875).NSE started operation on 1994.Before
2000 shares was held in Physical form But the main difficulty with Physical shares is method of
transaction which is open outcry system and process is not transparent to investor also Physical
shares were prone to duplication and fraud. So in 2000 NSE introduced the electronic screen based
trading system further the introduction of Dematerilization (Conversion of physical share in to
electronic form) and depository (where the electronic form of share is kept) revolutionized the
Indian Stock market. Currently there are mainly two Depository (DP) -NSDL and CDSL and these
DP are like bank of share. Individual/Firm can deal through Broker (who is registered and having
membership in Exchanges and Depository) for buying and selling securities.

Today NSE outpaced BSE in volume of trade. Then what is the purpose of stock market? Stock
market serves the company by providing company the finance for long term needs and for investor
an opportunity to park their savings in corporate world and in turn give their hand in Nation's
development so stock exchange have a very vital role in country's economic development.

Mark Twain once divided the world into two kinds of people: those who have seen the famous
Indian monument, the Taj Mahal, and those who haven't. The same could be said about investors.
There are two kinds of investors: those who know about the investment opportunities in India and
those who don't. India may look like a small dot to someone in the U.S., but upon closer
inspection, you will find the same things you would expect from any promising market. Here we'll
provide an overview of the Indian stock market and how interested investors can gain exposure.

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 3.WHAT IS STOCK MARKET?

A share market is where shares are either issued or traded in.

A stock market is similar to a share market. The key difference is that a stock market helps you
trade financial instruments like bonds, mutual funds, derivatives as well as shares of companies. A
share market only allows trading of shares.

The key factor is the stock exchange – the basic platform that provides the facilities used to trade
company stocks and other securities. A stock may be bought or sold only if it is listed on an
exchange. Thus, it is the meeting place of the stock buyers and sellers. India's premier stock
exchanges are the Bombay Stock Exchange and the National Stock Exchange.

WHY DO WE INVEST?

Simple saving money and keeping it aside does not help too.

Here’s why you should invest in the stock market:

• Beat inflation: People invest to beat inflation – the increase in prices of everyday goods and
services. Because of inflation, you have to keep paying extra amounts of money to purchase
the same quantity of goods. As a result, you feel the need to save more to meet future
expenses. Hence, you invest. This increases the value of your money through timely returns.
Equity trading is one of the best ways to beat inflation.
• Better than cash: Equity trading is one of the riskiest investments. As a result, many people
are afraid ofstock market investments. They fear that a fall in stock market might jeopardize
their financial security. However, there is an element of risk in all investments. Simply holding
cash in bank accounts or keeping money aside in lockers may be considered very safe, but its
low returns do not help beat inflation. Equity scores over cash as an effective long-term
investment.

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• Best long-term returns: Equity investments can provide excellent long-term returns,
illustrated by the chart below

To make sure we have enough funds to be prepared for the future. Simply earning and saving is
not enough. Inflation – the price-rise beast – eats into the value of your money. To make up for the
loss through inflation, we invest and earn extra. This is the investment fundament. The stock
market is one such investment avenue. It has a history that goes way back to the 1800s.

Earlier, stockbrokers would converge around Banyan trees to conduct trades of stocks. As the
number of brokers increased and the streets overflowed, they simply had no choice but to relocate
from one place to another. Finally in 1854, they relocated to Dalal Street, the place where the
oldest stock exchange in Asia – the Bombay Stock Exchange (BSE) – is now located.
It is also India’s first stock exchange and has since then played an important role in the Indian
stock markets. Even today, the BSE Sensex remains one of the parameters against which the
robustness of the Indian economy and finance is measured.

In 1993, the National Stock Exchange or NSE was formed. Within a few years, trading on both
the exchanges shifted from an open outcry system to an automated trading environment.

This shows that stock markets in India have a strong history. Yet, at the face of it, especially
when you consider investing in the stock market, it often seems like a maze. But once you start,
you will realize that the investment fundamentals are not too complicated.

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HOW TO BUY SHARES?

First, you need to open atrading accountand a demat account. This trading and demat account will
be linked to your savings account to facilitate smooth transfer of money and shares.
In order to buystocks, you need the assistance of astockbrokerwho is licensed to
purchasesecuritieson your behalf. However, before you go looking in telephone or online
directories for your nearestbroker-dealer, you need to figure out what type of stockbroker is right
for you.

There are four basic categories of stockbrokers available today, ranging from cheap and
simpleorder-takers to the more expensive brokers who provide full-service, in-depth financial
analysis, advice and recommendations:online/discount brokers, discount brokers with
assistance,full-service brokersormoney managers.

DIFFERENT TYPES OF STOCK

When share prices rise, everyone wants to know what share to buy. Investors are keen to be a part
of the wealth creation process. Stock markets are engines of economic growth for a country. A
vibrant stock market is essential for a country like India. There are multiple ways an investor
could participate Stocks can be classified into multiple categories on various parameters – size of
the company, dividend payment, industry, risk, volatility, as well as fundamentals.

• Preferred & common stocks:

• Definition: Common stocks are one form of a piece of ownership of a corporation. They
are the type of stock that most people are thinking of when they use the term "stock."
Since stocks are partial ownership of a corporation, they are also known as "shares."
Common stocks allow stockholders to vote on corporate issues, such as the board of
directors and accepting takeover bids. Most of the time, stockholders receive one vote per
share.
The key difference between common and preferred stocks is in the promised dividend
payments. Preferred stocks promise investors that a fixed amount will be paid as

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dividends every year. A common stock does not come with this promise. For this reason,
the price of a preferred stock is not as volatile as that of a common stock. Another key
difference between a common stock and a preferred stock is that the latter enjoy greater
priority when the company is distributing surplus money.

However, if the company is getting liquidated – its assets are being sold off to pay off
investors, then the claims of preferred shareholders rank below that of the company’s
creditors, and bond- or debenture-holders. Another distinction is that preferred
shareholders may not have voting rights unlike holders of common stocks Preferred
stock vs. common stocks:

The other type of stock ispreferred stock. The main difference is that preferred stock does
not allow voting rights. It also pays a set dividend that does not change. Furthermore,
preferred stockholders will receive their set dividends before the company decides how
much they will spend on dividends for common stock. If the company goes out of
business or is restructured in a bankruptcy, the assets are distributed to bondholders first.
Preferred stockholders are next and common stockholders are last. In most cases, the
common stockholder will receive nothing.

Hybrid stocks: Some companies also issue hybrid stocks. These are often preferred
shares that come with an option to be converted into a fixed number of common stocks at
a specified time.

These kinds of stocks are called ‘convertible preferred shares’. Since these are hybrid
stocks, they may or may not have voting rights like common stocks.
Stocks with embedded-derivative options: Some stocks come with an embedded

derivative option. This means it could be ‘callable’ or ‘putable’. A ‘callable’ stock is one
which has the option to be bought back by the company at a certain price or time.
FINANCIAL INSTRUMENT IN STOCK MARKET

let us understand the four key financial instruments that are traded:

Bonds:

Companies need money to undertake projects. They then pay back using the money earned
through the project. One way of raising funds is through bonds. When a company borrows from
the bank in exchange for regular interest payments, it is called a loan. Similarly, when a company
borrows from multiple investors in exchange for timely payments of interest, it is called a bond.

For example, imagine you want to start a project that will start earning money in two years. To
undertake the project, you will need an initial amount to get started. So, you acquire the requisite
funds from a friend and write down a receipt of this loan saying 'I owe you Rs 1 lakh and will
repay you the principal loan amount by five years, and will pay a 5% interest every year until
then'. When your friend holds this receipt, it means he has just bought a bond by lending money
to your company. You promise to make the 5% interest payment at the end of every year, and
pay the principal amount of Rs 1 lakh at the end of the fifth year.

Thus, a bond is a means of investing money by lending to others. This is why it is called a debt
instrument. When you invest in bonds, it will show the face value – the amount of money being
borrowed, the coupon rate or yield – the interest rate that the borrower has to pay, the coupon or
interest payments, and the deadline for paying the money back called as the maturity date.

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Mutual Funds:

These are investment vehicles that allow you to indirectly invest in stocks or bonds. It pools
money from a collection of investors, and then invests that sum in financial instruments. This is
handled by a professional fund manager.

Every mutual fund scheme issues units, which have a certain value just like a share. When you
invest, you thus become a unit-holder. When the instruments that the MF scheme invests in make
money, as a unit-holder, you get money.

This is either through a rise in the value of the units or through the distribution of dividends
money to all unit-holders.

DERIVATIVE:

A derivative is an instrument whose value is derived from the value of one or more underlying,
which can be commodities, precious metals, currency, bonds, stocks, stocks indices, etc. Four
most common examples of derivative instruments are Forwards, Futures, Options and Swaps.
The financial instruments we've considered so far - stocks, bonds, commodities and currencies -
are generally referred to as cash instruments (or sometimes, primary instruments). The value of
cash instruments is determined directly by markets. By contrast, aderivativederives its value
from the value of some other financial asset or variable. For example, a stockoptionis a
derivative that derives its value from the value of a stock. An interest rateswapis a derivative
because it derives its value from an interest rate index. The asset from which a derivative derives
its value is referred to as the underlying asset. The price of a derivative rises and falls in
accordance with the value of the underlying asset. Derivatives are designed to offer a return that
mirrors the payoff offered by the instruments on which they are based.

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STOCK/SHARES:

A share of stock is the smallest unit of ownership in a company. If you own a share of a

company’s stock, you are a part owner of the company.

You have the right to vote on members of the board of directors and other important matters
before the company. If the company distributes profits to shareholders, you will likely receive a
proportionate share.

One of the unique features of stock ownership is the notion of limited liability. If the company
loses a lawsuit and must pay a huge judgment, the worse that can happen is your stock becomes
worthless. The creditors can’t come after your personal assets. That’s not necessarily true in
private-held companies.

There are two types of stock:

• Common stock

• Preferred stock

Most of the stock held by individuals is common stock.

Common Stock

Common stock represents the majority of stock held by the public. It has voting rights, along
with the right to share in dividends. When you hear or read about “stocks” being up or down, it
always refers to common stock.

Liquidity is another benefit of common stocks is that they are highly liquid for the most part.
Small and/or obscure companies may not trade frequently, but most of the larger companies’
trade daily creating an opportunity to buy or sell shares.

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Preferred Stock

Despite its name, preferred stock has fewer rights than common stock, except in one important
area – dividends. Companies that issue preferred stocks usually pay consistent dividends and
preferred stock has first call on dividends over common stock.

Investors buy preferred stock for its current income from dividends, so look for companies that
make big profits to use preferred stock to return some of those profits via dividends.

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 4.HOW DOES STOCK MARKET WORKS

A stock exchange is the platform

where financial instruments like stocks
and derivatives are traded. Market
participants have to be registered with
the stock exchange and SEBI to
conduct trades. This includes
companies issuing shares, brokers
conducting the trades, as well as
traders and investors. All of this is
regulated by the Securities and
Exchange Board of India (SEBI),
which makes the rules of conduct.

First, a company gets listed in the primary market through an Initial Public Offering (IPO). In its
offer document, it lists details about the company, the stocks being issued, and so on. During the
listing, the stocks issued in the primary market are allotted to investors who have bid for the
same.

Once listed, the stocks issued can be traded by the investors in the secondary market. This is
where most of the trading happens. In this market, buyers and sellers gather to conduct
transactions to make profits or cut losses. However, there are tens and thousands of investors. It

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is impossible for all to converge in one location and conduct their trades. This is where stock
brokers and brokerage firms play role.

Stock brokers and brokerage firms are entities registered with the stock exchange. They act as an
intermediary between you, as an investor, and the stock exchange. Once you place an order to
buy a particular share at a said price, it is processed through your broker at the exchange. There
are multiple parties involved in the process behind the scenes. Your broker passes on your buy
order to the exchange, which searches for a sell order for the same share. Once a seller and a
buyer are fixed, a price is agreed finalized, upon which the exchange communicates to your
broker that your order has been confirmed. Meanwhile, the exchange also confirms the details of
the buyers and the sellers to ensure the parties don’t default. It then facilitates the actual transfer
of ownership of shares. This process is called settlement. Earlier, it used to take weeks to settle
trades.

This message is then passed on to you. Even at the broker and exchange levels, there are multiple
parties involved in the communication chain like brokerage order department, exchange floor
traders, and so on. However, the trading process has become electronic today. This process of
matching buyers and sellers is done through computers. Now, this has been brought down to T+2
days. For example, if you conducted a trade today, you will get your shares deposited in your
demat account by the day after tomorrow (i.e. two working day).

HOW YOUR ORDER IS PROCESSED

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 5.HOW TO INVEST IN STOCK MARKET

Step 1

First, understand your investment requirements and limitations. Your requirements should take
into account the present as well as the future.

The same applies to your limitations. For example, you just got a job and earn Rs. 20,000 a
month. Your limitation could be that you need to set aside at least Rs.10, 000 for installment
payments for your car, and another Rs. 5,000 for your monthly expenses.

This leaves aside only Rs.5, 000 for investment purposes. Now, if you are a risk-averse investor,
you may prefer to invest a larger portion of this amount in low-risk options like bonds and fixed
deposits. This means, you have only a small portion left for stock market investing – Rs.1, 000.
Further, take into consideration your tax liabilities.

Remember, making profits on short-term buying and selling of shares incurs capital gains tax.

This is not applicable if you sell your shares after a year.

So, ensure that your cash needs don’t force you to sell your shares on short-term unnecessarily.

Better to take a wise well-thought decision, than attract unnecessary costs in the future.

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Step 2

Once you understand your investment profile, analyze the stock market and decide your
investment strategy. Find out which stocks suit your profile. If we continue the above example,
with a budget of Rs 1,000, you can either choose to buy one large-cap stock or multiple smallcap
stocks. If you need an additional source of income, opt for high-dividend stocks.

If not, opt for growth stocks which are likely to appreciate the most in the future. Deciding the
kind of stocks you wish to collect is part of your investment strategy

Step 3

Wait for the right time. Have you ever seen a cheetah or tiger hunt? They lie low for a while
waiting for their prey, and then they pounce. Exactly the same way, time is of utmost importance
in the stock market. Merely getting the stock right is not enough. Your profits will be maximized
only if you buy at the lowest level possible. The same applies if you are selling your shares. This
needs time. Do not be impulsive.

Step 4

Conduct your trade either online or on the phone through your broker. Ensure that your broker
confirms the trade and gets all the details right. Recheck the trade confirmation to avoid errors.

Step 5

Monitor your portfolio regularly. The stock market is dynamic. Companies may seem profitable
one moment, and not-so profitable the next due to some unforeseen factor. Ensure you regularly
read about the companies you have invested in. In the case of some unfortunate situation, this
will help you minimize your losses before it is too late.

However, this does not mean you panic every time the stock falls. A stock’s price will fall at
some point in time, because there will be some investor in the market with a shorter investment
horizon than you. So, he will sell his stock and pocket whatever profits possible in that shorter
time. Patience is a key virtue in the markets.

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 6.WHY THERE IS BUYING AND SELLING OF STOCKS

When you buy a stock you're buying a piece of the company. When a company needs to raise
money, it issues shares. This is done through an initial public offering (IPO), in which the price
of shares is set based how much the company is estimated to be worth, and how many shares are
being issued. The company gets to keep the money raised to grow its business, while the shares
(also called stocks) continue to trade on an exchange.

WHY BUY?

Traders and investors continue totrade a company's stockafter the IPO because
theperceivedvalueof company changes over time.Investors can make or lose money depending
on whether their perceptions are in agreement with "the market." The market is the vast array of
investors and traders who buy and sell the stock, pushing the price up or down.

Trying to predict which stock will rise or fall, and when, is very difficult. Over timestocks as a
whole tend to rise, which is why many investors choose to buy abasketof stocks in various
sectors (this is called diversification) and hold them for the long-term. Investors who use this
approach do not concern themselves with moment-to-moment fluctuations in stock prices. The
ultimate goal of buying shares is to make money by buying stocks in companies you expect to do
well, those whose perceived value (in the form of the share price) will rise.

Mature and established companies may also pay a dividend to shareholders. A dividend is a cut
of the company's profit, which the company sends to shareholders as long as the company
continues to pay the dividend. Aside from the dividend, the share price will continue to fluctuate.
The losses and gains associated with the share price are independent of the dividend. Dividends
can be large or small – or nonexistent (many stocks don't pay them). Investors seeking regular
income from their stock market investments tend to favoring buying stocks that pay high
dividends.

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When you buy shares of a company, you own a piece of that company and therefore have a vote
in how it is run. While there are different classes of shares (a company can issue shares more
than once), typically owning shares gives youvoting rightsequal to the number of shares you
own. Shareholders as a whole, based on their individual votes, select aboard ofdirectorsand can
vote on major decisions the company is making.

Why Sell Shares?

For everystock transaction, there must be a buyer and aseller. When you buy 100 shares of stock
(called a "lot") someone else must sell it to you. Either buyers or sellers can be more aggressive
than the other, pushing the price up or down.

When the price of a stock goes down, sellers are more aggressive because they are willing to sell
at a lower and lower price. The buyers are also timid and only willing to buy at lower at lower
prices. The price will continue to fall until the price reaches a point where buyers step in and
become more aggressive and willing to buy at higher prices, pushing the price back up.

Investors don't all have the same agenda, which leads traders to sell stocks at different times.
One investor may hold stock that has grown significantly in price and sells to lock in that profit
and extract the cash. Another trader may have bought at a higher price than the stock now sells
for, putting the trader in a losing position. That trader may sell to keep the loss from getting
bigger. Investors and traders may also sell because they believe a stock is going to go down,
based on their research, and want to take their money out before it does.

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 7.BSE & NSE

The Bombay Stock Exchange (BSE) is an India stock

exchange located at Dalal Street Kala Ghoda Mumbai
Maharashtra Established in 1875, the BSE is Asia’s first
stock exchange. It claims to be the world's fastest stock
exchange, with a median trade speed of 6 microseconds. The BSE is the world's 11th largest
stock exchange with an overall market capitalization of $1.7 trillion as of January 23, 2015.
More than 5500 companies are publicly listed on the BSE. The Bombay is the oldest exchange in
Asia. Its history dates back to 1855, when five stockbrokers would gather under banyan trees in
front of Mumbai's Town Hall. The location of these meetings changed many times to
accommodate an increasing number of brokers. The group eventually moved to Dalal Street in
1874 and in became an official organization known as "The Native Share & Stock Brokers
Association" in 1875.

On August 31, 1957, the BSE became the first stock exchange to be recognized by the Indian
Government under the Securities Contracts Regulation Act. In 1980, the exchange moved to the
PhirozeJeejeebhoy Towers at Dalal Street, Fort area. In 1986, it developed the BSE SENSEX
index, giving the BSE a means to measure the overall performance of the exchange. In 2000, the
BSE used this index to open its derivatives market, trading SENSEX futures contracts. The
development of SENSEX options along with equity derivatives followed in 2001 and 2002,
expanding the BSE's trading platform.

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Historically an open outcry floor trading exchange, the Bombay Stock Exchange switched to an
electronic trading system developed by CMC Ltd. in 1995. It took the exchange only 50 days to
make this transition. This automated screen-based trading platform called BSE On-Line Trading
(BOLT) had a capacity of 8 million orders per day. The BSE has also introduced a centralized
exchange-based internet trading system, BSEWEBx.co.in to enable investors anywhere in the
world to trade on the BSE platform

The National Stock Exchange of India Limited (NSE) is

the leading stock exchange of India, located in Mumbai.
NSE was established in 1992 as the first demutualized

electronic exchange in the country. NSE was the first exchange in the country to provide a
modern, fully automated screen-based electronic trading system which offered easy trading
facility to the investors spread across the length and breadth of the country.

National Stock Exchange has a total market capitalization of more than US$1.65 trillion, making
it the world’s 12th largest stock exchange as of 23 January 2015.NSE’s flagship index, the CNX
NIFTY, the 51 stock index, is used extensively by investors in India and around the world as a
barometer of the Indian capital markets. In 1994, the National Stock Exchange of India (NSE)
functioned as a platform for securities exchange. The NSE India exchanges many different
securities, such as equity, corporate debt, central and state government securities, commercial
paper, and certificates of deposit. At present, 1000 members are enrolled on the NSE, and it is
the owner of different financial and insurance institutions.

NSE offers trading, clearing and settlement services in equity, equity derivatives, debt and
currency derivatives segments. It is the first exchange in India to introduce electronic trading
facility thus connecting together the investor base of the entire country. NSE has 2500 VSATs
and 3000 leased lines spread over more than 2000 cities across India.

27
NSE was mainly set up to bring in transparency in the markets. Instead of trading membership
being confined to a group of brokers, NSE ensured that anyone who was qualified, experienced
and met minimum financial requirements was allowed totrade. In this context, NSE was ahead of
its times when it separated ownership and management in the exchange underSEBI's supervision

NSE was also instrumental in creating theNational Securities Depository Limited(NSDL) which
allows investors to securely hold and transfer their shares and bonds electronically. This not only
made holding financial instruments convenient but more importantly, eliminated the need for
paper certificates and greatly reduced the incidents of forged or fake certificates and fraudulent
transactions that had plagued the Indian stock market.

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 8.WHAT IS SENSEX AND WHAT IS NIFTY?

Sensex refers to "Sensitivity Index" and is generally associated with the stock market indices.
What is an index? An index is basically an indicator. It gives us a general idea about whether
most of the stocks have gone up or most of the stocks have gone down. There are currently two
major stock exchanges in India, The Bombay Stock exchange (BSE) and The National Stock
Exchange (NSE).

The BSE Sensex is an indicator of all the major companies listed on Bombay Stock Exchange
(BSE). If the Sensex goes up, it means that the prices of the stocks of most of the major
companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price
of most of the major stocks on the BSE have gone down The major stock exchanges of India are
Bombay Stock Exchange and National Stock exchange. In SEBI Website we have 5 permanent
stock exchanges; Sensex & Nifty are one of the permanent and biggest stock exchanges. BSE
Sensex is an index comprised of 30 well established and financially sound companies which are
listed on Bombay Stock Exchange. The base value of the S&P BSE SENSEX is taken as 100 on
1 April 1979, and its base year as 1978–79.

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 On the following dates, the SENSEX index suffered major single-day falls:

NO. YEARS POINTS.

1. 24th August 2015 1,624.51
2. 21st January 2008 1,408.35
3. 24th October 2008 1070.63
4. 17th March 2008 951.03
5. 3rd March 2008 900.84

The Nifty is an indicator of all the major companies listed on National Stock Exchange
(NSE).Just like the Sensex which was introduced by the Bombay stock exchange, Nifty is a
major stock index in India introduced by the National stock exchange.

NIFTY was coined for the two words ‘National’ and ‘FIFTY’. The word fifty is used because;
the index consists of 50 actively traded stocks from various sectors.
So the nifty index is a bit broader than the Sensex which is constructed using 30 actively traded
stocks in the BSE.
ThemethodologyforcalculatingtheSensexwas given in our earlier post. Nifty is calculated using
the same methodology adopted by the BSE in calculating the Sensex – but with three differences.
They are:

• The base year is taken as 1995

• The base value is set to 1000

• Nifty is calculated on 50 stocks actively traded in the NSE

• 50 top stocks are selected from 24 sectors. The selection criteria for the 50 stocks are also similar
to the methodology adopted by the Bombay stock exchange.

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 9.WHAT ARE STOCK INDICES?

A stock index or stock market index is a measurement of the value of a section of thestock
market. It is computed from the prices of selectedstocks(typically aweighted average). It is a tool
used by investorsand financial managers to describe the market, and to compare the return on
specificinvestments.

An index is a mathematical construct, so it may not be invested in directly. But manymutual

fundsandexchange-traded fundsattempt to "track" an index (seeindex fund), and those funds that
do not may be judged against those that do.

From among the stocks listed on the exchange, some similar stocks are selected and grouped
together to form an index. This classification may be on the basis of the industry the companies
belong to, the size of the company, market capitalization or some other basis. For example, the
BSE Sensex is an index consisting of 30 stocks. Similarly, the BSE 500 is an index consisting of
500 stocks.

The values of the grouped stocks are used to calculate the value of the index. Any change in the
price of the stocks leads to a change in the index value. An index is thus indicative of the
changes in the market.

Some of the important indices in India are:

• Benchmark indices – BSE Sensex and NSE Nifty

• Sectoral indices like BSE Bankex and CNX IT

• Market capitalization-based indices like the BSE Smallcap and BSE Midcap Broad-
market indices like BSE 100 and BSE 500

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 10.WHY DO WE NEED INDICES?

Indices are an important part of the stock market. Here’s why we need stock indices:

Sorting:

In a share market, there are thousands of companies listed. How do you differentiate between all
of those and pick one or two to buy? How do you sort them out? It is a classic case of a pin in a
stack of hay. This is where indices come into the picture. Companies and their shares are
classified into indices based on key characteristics like size of company, sector or industry they
belong to, and so on.

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Representation:

Indices act as a representative of the entire market or a certain segment of the market. In India,
the BSE Sensex and the NSE Nifty are considered the benchmark indices. They are considered
to represent the overall market performance. Similarly, an index formed of IT stocks is supposed
to represent all stocks of companies from the industry.

Comparison:

An index makes it easy for an investor to compare performance. An index can be used as a
benchmark to compare against. For example, in India the Sensex is often used as a benchmark.
So, to find if a stock has outperformed the market, you simply compare the price trends of the
index and the stock. On the other hand, an index can also be used to compare a set of stocks
against a benchmark or another index. For example, on a given day, the benchmark index like
Sensex may jump 200 points, but this rally may not extend to a certain segment of stocks like IT.
Then, the fall in the value of index representing IT stocks could be used for comparison rather
than each individual stocks. This also helps investors identify market trends easily.

Reflection:

Investor sentiment is a very important aspect of stock market movements. This is because, if
sentiment is positive, there will be demand for a stock. This will subsequently lead to a rise in
prices. It is very difficult to gauge investor sentiment correctly. Indices help reflect investor’s
mood – not just for the overall market, but even sector-wise and across company sizes. You can
simply compare an index with a benchmark to see if has underperformed or outperformed. This
will, in turn, reflect investor sentiment.

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Passive investment:

Many investors prefer to invest in a portfolio of securities that closely resembles an index. This
is called passive investment. An index portfolio helps investors cut down cost of research and
stock selection. They rely on the index for stock selection. As a result, portfolio returns will
match that of the index. For example, if Sensex gave 8% returns in one month, an investor’s
portfolio that resembles the Sensex is also likely to give the same amount of returns. Indices are
also used to construct mutual funds and exchange-traded funds (ETFs).

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 11. REGULATORY AUTHORITY IN INDIAN STOCKMARKET

Indian Capital Markets are regulated and monitored by the Ministry of Finance, The Securities
and Exchange Board of India and The Reserve Bank of India.
The Ministry of Finance regulates through the Department of Economic Affairs - Capital
Markets Division. The division is responsible for formulating the policies related to the orderly
growth and development of the securities markets (i.e. share, debt and derivatives) as well as
protecting the interest of the investors.

In particular, it is responsible for

• institutional reforms in the securities markets,

• building regulatory and market institutions,

• strengthening investor protection mechanism, and

• providing efficient legislative framework for securities markets.

The Division administers legislations and rules made under the

• Depositories Act, 1996,

• Securities Contracts (Regulation) Act, 1956 and

• Securities and Exchange Board of India Act, 1992.

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The Regulators Securities & Exchange Board of India (SEBI)

Stock markets are risky. Hence, they need to be regulated to protect investors. The Security and
Exchange Board of India (SEBI) is mandated to oversee the secondary and primary markets in
India since 1988 when the Government of India established it as the regulatory body of stock
markets. Within a short period of time, SEBI became an autonomous body through the SEBI Act
of 1992.

SEBI has the responsibility of both development and regulation of the market. It regularly comes
out with comprehensive regulatory measures aimed at ensuring that end investors benefit from
safe and transparent dealings in securities.

Its basic objectives are:

• Protecting the interests of investors in stocks

• Promoting the development of the stock market

• Regulating the stock market

The Securities and Exchange Board of India (SEBI) is the regulatory authority established under
the SEBI Act 1992 and is the principal regulator for Stock Exchanges in India. SEBI’s primary
functions include protecting investor interests, promoting and regulating the Indian securities
markets. All financial intermediaries permitted by their respective regulators to participate in the
Indian securities markets are governed by SEBI regulations, whether domestic or foreign.
Foreign Portfolio Investors are required to register with DDPs in order to participate in the
Indian securities markets.

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Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) is governed by the Reserve Bank of India Act, 1934. The RBI
is responsible for implementing monetary and credit policies, issuing currency notes, being
banker to the government, regulator of the banking system, manager of foreign exchange, and
regulator of payment & settlement systems while continuously working towards the
development of Indian financial markets. The RBI regulates financial markets and systems
through different legislations. It regulates the foreign exchange markets through the Foreign
Exchange Management Act, 1999.

National Stock Exchange (NSE) – Rules and Regulations

In the role of a securities market participant, NSE is required to set out and implement rules and
regulations to govern the securities market. These rules and regulations extend to member
registration, securities listing, transaction monitoring, compliance by members to SEBI / RBI
regulations, investor protection etc. NSE has a set of Rules and Regulations specifically
applicable to each of its trading segments. NSE as an entity regulated by SEBI undergoes regular
inspections by them to ensure compliance.

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 12. PRIMARY AND SECONDARY MARKET

The word "market" can have many different meanings, but it is used most often as a catch-all
term to denote both theprimary marketand thesecondary market. In fact, "primary market" and
"secondary market" are both distinct terms; the primary market refers to the market where
securities are created, while the secondary market is one in which they are traded among
investors. Knowing how the primary and secondary markets work is key to understanding how
stocks trade. Without them, thestock marketwould be much harder to navigate and much less
profitable. We'll help you understand how these markets work and how they relate to individual
investors.

PRIMARY MARKET

The primary market is the part of thecapital marketthat deals with issuing of new securities.
Primary markets create long term instruments through which corporate entities borrow from
capital market.

In a primary market, companies, governments or public sector institutions can obtain funds
through the sale of a newstockorbond issues. This is typically done through aninvestment
bankorfinance syndicateof securities dealers. The process of selling new issues to investors is

38
called underwriting. In the case of a new stock issue, this sale is an initial public offering(IPO).
Dealers earn a commission that is built into the price of the security offering, though it can be
found in the prospectus.

Once issued the securities typically trade on a secondary market such as a stock exchange, bond
market or derivatives exchange.

The main features of primary markets are:

• This is the market for new long term equity capital. The primary market is the market where
the securities are sold for the first time. Therefore, it is also called the new issue market
(NIM).
• In a primary issue, the securities are issued by the company directly to investors.

• The company receives the money and issues new security certificates to the investors.

• Primary issues are used by companies for the purpose of setting up new business or for
expanding or modernizing the existing business.
• The new issue market does not include certain other sources of new long term external
finance, such as loans from financial institutions. Borrowers in the new issue market may be
raising capital for converting private capital into public capital; this is known as "going
public."

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SEONDARY MARKET

The secondary market, also called the aftermarket, is the financial market in which previously
issued financial instruments

such as stock, bonds, options, and futures are bought and sold. Another frequent usage of
"secondary market" is to refer to loans which are sold by a mortgage bank.

The term "secondary market" is also used to refer to the market for an yused goodsor assets, or an
alternative use for an existing product or asset where the customer base is the second market
(for example, corn has been traditionally used primarily for food production and feedstock, but a
"second" or "third" market has developed for use in ethanol production).

With primary issuances of securities or financial instruments, or the primary market, investors
purchase these securities directly from issuers such as corporations issuingsharesin
anIPOorprivate placement, or directly from the government in the case of treasuries. After the
initial issuance, investors can purchase from other investors in the secondary market.

The securities are firstly offered in the primary market to the general public for a subscription
where the company receives the money from the investors and the investors get the securities;
thereafter they are listed on the stock exchange for the purpose of trading. These stock
exchanges are the secondary market where maximum trading of the company is done. The top
two stock exchanges of India areBombay Stock Exchange and National Stock Exchange.

An investor can trade in securities through the stock exchange with the help of brokers who
provide assistance to their client for purchasing and selling. The brokers are the registered
members of the recognized stock exchange in which the investor is trading his / her securities.
The brokers are allowed to trade on the advanced trading system. The SEBI issues a certificate
of registration to the member brokers through which an investor can identify.

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 13.TRADING MECHANISM

• FLOOR TRADING

• E-TRADING (Online Trading)

Floor trading

The floor where trading activities are conducted Trading floors are found in the buildings of
various exchanges, such as the Bombay Stock Exchange and the National Stock Exchange.
These floors represent the area where traders complete the buying or selling of an asset.

The trading floor is also referred to as "the pit" of an exchange, due to the hectic nature of the
area. However, with the advent of electronictrading platforms, many of the trading floors that
once dominated market exchanges have started to disappear as trading has become more
electronically based.

Trading floors can also be found in brokerages,investment banksand other companies involved
in trading activities. In this case, it refers to the physical office location that houses the trading
division, which can complete transactions over the internet or telephone.

An exchange member who executes transactions from the floor of the exchange exclusively for
his or her own account. Floor traders used to use the "open outcry" method in the pit of a
commodity exchange, but now most of them use electronic trading systems. They fulfill an
important role in commodity and stock market by risking their own capital to trade futures,
options or stocks, thereby providing liquidity and narrowing bid-ask spreads.

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Online trading

Online trading, also known as electronic trading (or sometimes e-trading), is a method of trading
securities (such as stocks and bonds), foreign exchange or financial derivatives electronically.
Information technology is used to bring together buyers and sellers through an electronic trading
platform and network to create virtual market places such as BSE and NSE, which are also
known as electronic communication networks (ECNs).

Online stock traders place buy/sell orders for financial securities and/or currencies with the use
of a brokerage's Internet-based proprietary trading platforms. The use of online trading increased
dramatically in the mid to late 1990s with the introduction of affordable high-speed computers
and Internet connections. Stocks, bonds, options, futures and currencies can all be traded online.
Another benefit to online traders is the improvement in the speed of which transactions can be
executed and settled, because there is no need for paper-based documents to be copied, they are
filed and entered into an electronic format.

Online trading has given anyone who has a computer, enough money to open an account and a
reasonably good financial history the ability to invest in the market. They don't have to have a
personal broker or a disposable fortune to do it, and most analysts agree that average people
trading stock is no longer a sign of impending doom.

The market has become more accessible, but that doesn't mean that an online trader should take
online trading lightly.

After choosing a stock broker, and before beginning to buy investments such as stocks, bonds,
mutual funds, or exchange traded funds there are twelve main types of trades that can be placed,
that need to be understood so that big (and potentially expensive) mistakes are not made.

42
These are:-

• Market Orders - A market order is the simplest type of stock trade you can place. It
means that if a trader wants to buy or sell 100 shares of a stock, for instance, it will get
transmitted to the exchange and the order will be filled at the current price.
• Limit Orders-A limit order lets a trader set a minimum or maximum price before their
stock trade gets converted to a market order and sent to the stock exchange. Until a trader
becomes very experienced, almost all orders should be limit orders to protect themselves.
• All-or-None Orders - An all-or-none stock trade allows the trader to tell their broker that
they only want an order filled if they can buy, or sell, all of the shares they instructed them
to trade. This is important for strategies such as selling covered calls.

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Stop OrderandStop Limit Orders - A sell stop order would allow an investor to avoid
further losses or protect a profit if a stock drops below a certain level. The order then gets
sent to the exchange and becomes a market order when triggered.
Selling ShortandBuy to Cover Orders- A short sell order means a trader tells their broker
to sell shares of stock that they don't own. If the stock falls, they can close the transaction
with a buy-to-close order, replacing the borrowed stock and pocketing the difference.
DayandGTC Orders - When a trader is ready to trade stock, they can place either a day
order, which will expire at the end of the trading day if it isn't filled, or a good-tillcanceled
order, which won't expire for up to sixty days, depending upon the broker. Extended
hours trading- The extended hour’s market allows a trader to place trades between 8 pm
and 8 am; times when the market is traditionally closed. This system permits investors to
react to corporate announcements and news prior to the next session. There are a number
of risks associated with extended hours orders; primarily an increase in volatility as a
result of decreased liquidity.

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 14.SETTLEMENT CYCLE AND TRADING HOURS

After you have bought or sold shares through your broker, the trade has to be settled. Meaning,
the buyer has to receive his shares and the seller has to receive his money. Settlement is just the
process whereby payment is made by all those who have made purchases and shares are
delivered by all those who have made sales.

The stock exchange ensures that buyers who have paid for the shares purchased receive the
shares. Similarly, sellers who have delivered the shares receive payment for the same. The entire
process of settlement of shares and money is managed by stock exchanges through the clearing
house. The clearing house has been formed specifically to facilitate the transfer and ownership of
shares and ensure the process of settlement takes place smoothly.

In a rolling settlement, each trading day is considered as a trading period and trades executed
during the day are settled based on the net outstanding for the day. At present, trades in rolling
settlement are settled on a T+2 basis, i.e. on the second working day. T+2 means that trades are
settled two working days after the day the trade takes place. For instance, trades taking place on
Monday are settled on Wednesday, Tuesday's trades settled on Thursday and so on. It's possible
to buy and sell within a settlement cycle many times, which is what traders do. They settle only
their net outstanding positions at the end of the cycle.

Eg. Bought 100 HLL, Sold 50 HLL

Bought 100 Infosys

Bought 50 Gujarat Ambuja, Sold 150 Gujarat Ambuja

Then at the end of the settlement cycle, you will receive 50 shares of HLL and 100 of Infosys
and receive money for selling a net 100 shares of Gujarat Ambuja. In other words, the settlement
is made for the net outstanding positions at the end of the settlement cycle.

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Trading session

The pre-open session shall be for duration of 15 minutes i.e. from 9:00 am to 9:15 am.

The pre-open session is comprised of Order Entry period and Order Matching period.

Pre-open session shall comprise of two sessions viz.

• Order Entry period.

• Order matching period

After order matching period there are buffer period to facilitate transition between preopen
and continuous session.
Order Entry Period

• The order entry period shall be for duration of 8* minutes, during which order entry,
modification and cancellation shall be allowed. (* - System driven random stoppage between
7th and 8th minute)
• Both Limit and market order will be allowed.

Dissemination of indicative equilibrium price, indicative match-able quantity & indicative index
value
Order matching period

Order matching period will start immediately after completion of order entry period.

• No Order Addition/Modification/Cancellation shall be allowed

Opening price determination, and trade confirmation.
Continuous Trading Session

9:15am – 3:30pm Trades occur continuously as orders match at time/price priority

• With the introduction of the Call Auction session the trading day will look like

46
• The continuous trading session will commence only after the pre open session ends. The two
trading sessions, continuous and call auction (pre-open) sessions will not run concurrently.
• The block deal trading session (35 minutes) will start with the commencement of the
continuous session

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 15.WHAT ARE BULL MARKET AND BEAR MARKET

Markets are often described as ‘bull’ or ‘bear’ markets. These names have been derived from
the manner in which the animals attack their opponents. A bull thrusts its horns up into the air,
and a bear swipes its paws down. These actions are metaphors for the movement of a market: if
stock prices trend upwards, it is considered a bull market; if the trend is downwards, it is
considered a bear market.

The supply and demand for securities largely determine whether the market is in the bull or bear
phase. Forces like investor psychology, government involvement in the economy and changes in
economic activity also drive the market up or down. These combine to make investors bid higher
or lower prices for stocks.

The use of "bull" and "bear" to describe markets comes from the way the animals attack their
opponents. A bull thrusts its horns up into the air, while a bear swipes its paws downward.

These actions are metaphors for the movement of a market. If the trend is up, it's a bull market.

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BULL MARKET

A bull market is afinancial marketof a group of securities in which prices are rising or are
expected to rise. The term "bull market" is most often used to refer to thestock marketbut can be
applied to anything that is traded, such as bonds,currenciesand commodities.

Bull markets are characterized by optimism, investor confidence and expectations that strong
results should continue. It is difficult to predict consistently when the trends in the market might
change. Part of the difficulty is that psychological effects and speculation may sometimes play a
large role in the markets.

BEAR MARKET

The bear market definition is exactly the opposite of a bull market. A bear market is when the
price of an asset class declines pretty substantially over time. Most analysts announce a bear
market when prices have fallen 20% or more from their 52-week high. The term is widely used
when talking about the stock market, especially the major indices: BSE AND NSE

Investing is about taking advantage of fear and greed. We like to buy when there’s fear. In other
words, when the market is going down, we love to be a buyer. When the market is going up, we
love to be a seller.

A bear market should not be confused with a correction, which is a short-term trend that has a
duration of fewer than two months. Whilecorrectionsoffer a good time for value investors to find
anentry pointinto stock markets, bear markets rarely provide suitable points of entry. This is
because it is almost impossible to determine a bear market's bottom.

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SHORT SELLING ON BEAR MARKET

Investors can make gains in a bear market by short selling. This technique involves selling
borrowed shares and buying them back at lower prices. A short seller must borrow the shares
from a broker before a short-sell order is placed. The short seller’s profit and loss amount is the
difference between the price at which the shares were sold and the price at which they were
bought back, referred to as "covered." For example, an investor shorts 100 shares of a stock at
94.00. The price falls and the shares are covered at 84.00. The investor pockets a profit of 10 x
100 = 1,000.

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 16.ROLE OF STOCK EXCHANGE IN INDIA

Stock exchange plays a crucial role in consolidation of national economy in general and in the
development of industrial sector in particular. It is the most dynamic and organized component
of capital market. Especially in developing country like India, the stock exchange play a cardinal
role in promoting the level of capital formation through effective mobilization of saving and
ensuring investment safety.

they have very important role to play in the economy of the country. Some of them are listed
below.

1. Providing a ready market.

The organization of stock exchange provides a ready market to speculators and investors in
industrial enterprises. It thus, enables the public to buy and sell securities already in issue.
2. Providing a quoting market prices.

It makes possible the determination of supply and demand on price. The very sensitive pricing
mechanism and the constant quoting of market price allows investors to always be aware of
values. This enables the production of various indexes which indicate trends etc.
3. Providing facilities for working.

It provides opportunities to Jobbers and other members to perform their activities with all
their resources in the stock exchange. 4. Safeguarding activities for investors.
The stock exchange renders safeguarding activities for investors which enables them to make
a fair judgment of a securities. Therefore directors have to disclose all material facts to their
respective shareholders. Thus innocent investors may be safeguard from the clever brokers.
5. Operating a compensation fund

It also operate a compensation fund which is always available to investors suffering loss due due
the speculating dealings in the stock exchange.

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6. Creating the discipline.

Its members controlled under rigid set of rules designed to protect the general public and its
members. Thus this tendency creates the discipline among its members in social life also.

7. Checking functions.

New securities checked before being approved and admitted to listing. Thus stock exchange
exercises rigid control over the activities of its members.

8. Adjustment of equilibrium.

The investors in the stock exchange promote the adjustment of equilibrium of demand and
supply of a particular stock and thus prevent the tendency of fluctuation in the prices of shares.
9. Maintenance of liquidity.

The bank and insurance companies purchase large number of securities from the stock exchange.
These securities are marketable and can be turned into cash at any time. Therefore banks prefer
to keep securities instead of cash in their reserve. This facilities the banking system to maintain
liquidity by procuring the marketablesecurities.
10. Promotion of the habit of saving.

Stock exchange provide a place for saving to general public. Thus it creates the habit of thrift and
investment among the public. This habit leads to investment of funds incorporate or government
securities. The funds placed at the disposal of companies are used by them for productive
purposes.

11. Refining and advancing the industry

Stock exchange advances the trade , commerce and industry in the country. it provides
opportunity to capital to flow into the most productive channels. Thus the flow of capital
from unproductive field to productive field helps to refine the large scale enterprises.

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12. Promotion of capital formation

It plays an important part in capital formation in the country. its publicity regarding various
industrial securities makes even disinterested people feel interested in investment.
13. Increasing Govt. Funds

The govt. can undertake projects of national importance and social value by raising funds
through sale of its securities on stock exchange.
According to MARSHAL "Stock exchange are not merely the chief theaters of business
transaction, they are also barometers which indicate the general conditions of the atmosphere of
business.

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 17. TYPES OF RISK INVOLVED IN STOCK MARKET

This is the risk of investing in the stock market in general. It refers to a chance that a security’s
value might decline. Although a particular company may be doing poorly, the value of its stock
can go up because the stock market value is collectively going up. Conversely, your company
may be doing very well, but the value of the stock might drop because of negative factors like
inflation, rising interest rates, political instability etc that are effecting the whole market. All
stocks are affected by market risk.

INDUSTRY RISK

This is a risk that affects all companies in a particular industry. This is because the companies in
an industry may work in a similar fashion. This exposes them to certain kinds of risk unique to
the industry.

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REGULATORY RISK

Virtually every company is subject to some sort of regulation. It refers to the risk that the
government will pass new laws or implement new regulations that will dramatically affect a
business.

BUSINESS RISK

These are the risks unique to an individual company. It refers to the uncertainty regarding the
organization’s ability to conduct its business. Products, strategies, management, labor force,
market share, etc. are among the key factors investors consider in evaluating the value of a
specific company.

MARKET RISK

Market risk is the possibility for an investor to experience losses due to factors that affect the
overall performance of thefinancial marketsin which he is involved. Market risk, also called
"systematic risk," cannot be eliminated through diversification, though it can be hedged against.
Sources of market risk includerecessions, political turmoil, changes in interest rates, natural
disasters and terrorist attacks

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 18.DIFFERENT INVESTMENT TOOLS IN STOCKMARKET

Bonds

Grouped under the general category calledfixed-incomesecurities, the termbondis commonly

used to refer to any securities that are founded on debt. When you purchase a bond, you are
lending out your money to a company or government. In return, they agree to give you interest
on your money and eventually pay you back the amount you lent out.

The main attraction of bonds is their relative safety. If you are buying bonds from a stable
government, your investment is virtually guaranteed, orrisk-free. The safety and stability,
however, come at a cost. Because there is littlerisk, there is little potential return. As a result, the
rate of return on bonds is generally lower than other securities.

Stocks

When you purchasestocks, or equities, as your advisor might put it, you become a part owner of
the business. This entitles you to vote at the shareholders' meeting and allows you to receive any
profits that the company allocates to its owners. These profits are referred to asdividends.

While bonds provide a steady stream of income, stocks arevolatile. That is, they fluctuate in
value on a daily basis. When you buy a stock, you aren't guaranteed anything. Many stocks don't
even pay dividends, in which case, the only way that you can make money is if the stock
increases in value - which might not happen.

Compared to bonds, stocks provide relatively high potential returns. Of course, there is a price
for this potential: you must assume the risk of losing some or all of your investment.
Amutual fundis a collection of stocks and bonds. When you buy a mutual fund, you are pooling
your money with a number of other investors, which enables you (as part of a group) to pay a
professional manager to select specific securities for you. Mutual funds are all set up with a
specific strategy in mind, and their distinct focus can be nearly anything:large

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stocks,smallstocks, bonds from governments, bonds from companies, stocks and bonds, stocks in
certain industries countries, etc.
The primary advantage of a mutual fund is that you can invest your money without the time or
the experience that are often needed to choose a sound investment. Theoretically, you should get
a better return by giving your money to a professional than you would if you were to choose
investments yourself. In reality, there are some aspects about mutual funds that you should be
aware of before choosing them, but we won't discuss them here.

Alternative Investments: Option, Futures, FOREX, Gold, Real Estate, Etc.

So, you now know about the two basic securities: equity and debt, better known as stocks and
bonds. While many (if not most) investments fall into one of these two categories, there are
numerous alternative vehicles, which represent the most complicated types of securities and
investing strategies.

The good news is that you probably don't need to worry about alternative investments at the start
of your investing career. They are generally high-risk/high-reward securities that are much more
speculative than plain old stocks and bonds. Yes, there is the opportunity for big profits, but they
require some specialized knowledge. So if you don't know what you are doing, you could get
yourself into a lot of trouble. Experts and professionals generally agree that new investors should
focus on building a financial foundation before speculating.

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 19.WHAT IS DEMATERIALIZATION?

Technology has brought about a drastic change in our everyday lives. The stock markets too
have not been left untouched by the change. In 1875, the Bombay Stock Exchange was founded
with an open outcry floor trading exchange. Traders would stand on the floor and shout prices of
stocks for buying or selling. Then, money would be exchanged for physical receipts of the shares
called the certificate. This led to a great amount of paperwork. Even the settlements of trade
agreements took time because of the need to deliver the share certificates.

Much has changed since

In 1996,dematerialization was embraced. Dematerialization is the process by which physical

share certificates held by an investor are converted into an equivalent number of securities in
electronic form and credited into the investor’s demat account.

BENEFITS OF DEMATERIALIZATION

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COMMON BANK:

Dematerialization is not just for shares, but also for debt instruments like bonds. Now, you can
hold all your investments in a single account.

AUTOMATIC UPDATE:

Since this is a common account, you don’t have to keep giving all your details like addresses
every time you transact or every time you change the details. These details are automatically
made available to companies you transact with.

ODD-LOT PROBLEM:

Earlier, shares were transacted in lots. A single or odd number of securities could not be
transacted. This problem is now eliminated.

DELIVERY RISKS:

Dematerialization has also eliminated the risks of fake shares, thefts, deliveries gone wrong, and
so on, and reduced the paperwork involved. Time of delivery has also reduced drastically. Once
your trade is approved, the securities are automatically credited to your account. This applies to
other company-related activities like stock splits, stock bonuses, and so on.

COST REDUCTION:

Earlier, when you transferred the securities, you incurred extra costs due to the stamp duty. This
is not a problem with the demat form.

EASY TO HOLD:

Paper certificates are vulnerable to tears and damage. In contrast, the dematerialized or demat
format is a safe and convenient way to hold securities. You also have a nomination facility,
whereby you can facilitate a transfer of shares in the event of your demise.

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WHAT IS DEMAT ACCOUNT?

A demat is to your shares what a bank account is to your money. Simply put, it is the account
that holds all your shares in electronic or dematerialized form. Like the bank account, a demat
account holds the certificates of your financial instruments like shares, bonds, government
securities, mutual funds and exchange traded funds (ETFs). You cannot trade in the stock market
without a demat account

20.UNDERSTAND HOW THE DEMAT ACCOUNT WORKS:

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CENTRAL DEPOSITORY:

There are two depositories in India – the CDSL and NSDL. They hold all the demat accounts.

The central depository holds details of your shareholding on your behalf like banks.

UNIQUE ID: Each demat account has a unique number for identification purposes. This is the
number you need to provide for transactions. The number will help the exchange and companies
identify you and credit the shares in your account.

DEPOSITORY PARTICIPANTS:

Access to the central depository is provided by the Depository Participants or DPs. They act as
the intermediary between the central depository and the investor. DPs could be banks, brokers or
financial institutions that are empowered to offer demat services. Youopen a demat accountor a
Beneficial Owner (BO) accounts with a DP, who will provide you a unique access to the central
depository.

PORTFOLIO HOLDING: The demat account holds all your securities. So, whenever you
check your account, you can see your portfolio holding and its details. These are updated
automatically every time you conduct a transaction – be is buying or selling a security.

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 21.FINDINGS

INTRODUCTION

When you are making an equity investment decision, the first place you often turn to is the
numbers: how successful has this company been financially? How many shares ofstockdoes it
have outstanding? What is the company spending its money on and how much cash does it have
on hand?

Sometimes that data doesn’t exist, especially if you want to invest in a private company or In
those cases, you can complete a SWOT analysis to examine the opportunities and challenges that
a company faces. A SWOT analysis can also supplement what you learn from the numbers.

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WEAKNESS

•The weak point of Indian stock market is its volatility i.e. High risk.

• It is a kind of gambling where no guarantee of return and some time it depends on luck also.

• Less awareness among general masses about the different servicesprovided by agencies.

• Inflation and Deflation rate is high.

• Lot of black money deposit in foreign banks.

• India too much depend on foreign direct investment (FDI).

• India is facing financial pain despite healthy banks.

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OPPORTUNITY

• Stock market provides an opportunity to money lender and money seeker to Invest and use
money for their plan.

• It provides an opportunity to the investor to be the owner of the company and contribute in the
business decision of the company.

• Stock market is a kind of indicator of the economic growth of the country where it provides an
opportunity to gain according to the inflation of the country or more than that

• Opportunity to remind funds that purchases of illiquid securities.

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THREATS

• There are many competitors of stock market such as post office savings, public provident
fund, company fixed deposits, fixed deposits with bank etc. which provides fixed and assured
returns.

• Reorganization of agencies of stock market structure. The all agency have started to
redefine their objective to attract customer’s attention.

• A few stock markets have been permitted to increase their number of branches and its
entry has taken directly solve out the problems of investors.

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 22. RECOMMENDATION AND SUGGESTION

1. Market misconducts and other fraudulent activities should be tackled and

initiatives should be taken to prevent the recurrence of such events in the future in order to
uphold investors confidence in the Indian Stock Exchanges.

2. Involvement of illegal activities such as terrorist financing, money laundering etc that
hopes the free interplay of market forces of demand and supply should be monitored.

3. The Indian capital market should move to the era of T+0 settlement mechanism in order
to face the emerging global competition.

4. Further simplification of IPO process will attract new investors and fresh money into the
stock markets.

5. In order to further promote small investors, DPs should reduce demat charges and
account maintenance charges from them.

6. More robust software that would bring in more integration between trading end and back
end should be developed and implemented in order to enhance real time updating of investor
position in the market.

7. Bank automation that facilitates real time clearing system should be developed to bring in
real time settlements in stock market operations.

8. Indian universities and leading management schools should promote and provide
specializations in capital market in order to infuse more professionalism and corporate
governance.

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 23.CONCLUSION

Let's recap what we've learned :

• Stock means ownership. As an owner, you have a claim on the assets and earnings of a
company as well as voting rights with your shares.

• Stock is equity, bonds are debt. Bondholders are guaranteed a return on their investment
and have a higher claim than shareholders. This is generally why stocks are considered
riskier investments and require a higher rate of return.

• You can lose all of your investment with stocks. The flip-side of this is you can make a
lot of money if you invest in the right company.

• The two main types of stock are common and preferred. It is also possible for a company
to create different classes of stock.

• Stock markets are places where buyers and sellers of stock meet to trade. The BSE and
the NSE are the most important exchanges in the India.

• Stock prices change according to supply and demand. There are many factors influencing
prices, the most important of which is earnings.

• There is no consensus as to why stock prices move the way they do.

• To buy stocks you can either use a brokerage or a dividend reinvestment plan(DRIP).

• Stock tables/quotes actually aren't that hard to read once you know what everything
stands for.

• Bulls make money, bears make money, but pigs get slaughtered!

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 24.BIBILOGRAPHY

A. INTERNET

Website

Links:

http://www.en.wikipedia.org

http://www.yahoo.com

http://www.rediff.com

http://www.google.co m

B.BOOKS

Investment analysis and portfolio management

The intelligent Investor

Security analysis

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C. PROFESSIONAL WEBPAGES

Links:

http://www.bseindia.com

http://www.nseindia.com

http://www.stockinfo.com

http://www.cnbc.com

D. MAGIZINE ARTICLE

Traders resources

Technical analysis of stock

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E.NEWSPAPER

The Economic Times

The Times of India

Business Standard

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