Securities Market Basics

Presented by:
KARISHMA VELAGALETI
KOMAL GUPTA
IMBA (IB), SEMESTER 8
 Organization structure
Securities
market

Derivatives
Equity market Debt market
market

Govt. securities Corporate debt

Options market Futures market
market market

Money market
 Participants in the securities market
1. Regulators • Primary dealers
2. Stock exchanges • Mutual funds
3. Listed securities • Custodians
4. Depositors • Registrars
5. Brokers • Underwriters
6. Foreign Instititutional • Bankers to an issue
Investors • Debenture trustees
7. Merchant bankers • Venture capital funds
• Credit rating agencies
 Primary equity market

Public issue Rights issue

Private Preferential
placement allotment
 What is Trading?

• Buying and selling of securities

• Traders are also called Brokers

Screen
Based
Open Outcry Trading
system/
Floor Based
Trading
 Who is a broker?

• A stockbroker is person who is licensed

to trade in shares. Brokers also have
direct access to the share market and
can act as your agent in share
transactions. For this service they
charge a fee.

They can also offer additional services like advice on shares, debentures,
government bonds and listed property trusts and non-listed investment options
(cash management trusts, property and equity trusts.
 Types of Order
Limit Order

Market Order

Stop Order

Day Order

Week Order

Month Order

Open Order

Fill or kill Order

 Settlement
DEPOSITORY

Clearing
CASH House Agent CASH

SECURITY
SECURITY
BUYER SELLER
 Evolution of Settlement System

T+2
T+3
T+5

Rolling Settlement

Account Period Settlement system

 Speculation
• Speculators are people who invest in
securities for a short term with the intention
to make quicker profits

Positions
•Long: BUY
•Short: SALE
Types of Speculator

Bull

Bear

Lame Duck

Stag
 Margin Trading
• Borrowing money from bank or broker for
investing/purchasing securities is known as
margin trading
• Investor
provides
interest to the
broker on the
sum borrowed
 What is a Depository?
• Depository is like a bank. Depository holds securities for
investors in electronic form and provides services related to
transaction of securities.

Depository (NSDL)

Depository
Participants
(DP)
 What is a Depository?
Depository is like a bank wherein the deposits are
securities in electronic form

There are two depositories in India – National Securities

Depository Limited (NSDL) (1996) and
Central Depository Services Limited (CDSL) (1999)
Transaction Costs
• Brokerage cost
Trading costs • Market impact cost
• Securities Transaction cost

Clearing
costs
Settlement
cost
 What is an Index?
• Index shows how a specified portfolio of share
prices are moving in order to give an
indication of market trend.
• An index represents a basket of securities
 Stock market Indices
• Price Weighted Index
– Sum of prices of sample shares in a certain year
with reference to the base year. Eg: Dow Jones
Industrial Average

• Value Weighted Index

– It reflects aggregate market cap of the sample of
shares in a certain year in relation to the base yr.
Eg: Sensex, S&P CNX Nifty
Price weighted Index: (314/225) X 100 = 140

Value Weighted Index: (4550/2850) X 100 = 160

Share Price in Price in Price No. of Market Market

Base Year year ‘t’ relative outstandi cap in cap in t
ng shares base year year
A 50 70 140 10 500 700
B 40 50 125 20 800 1000
C 100 90 90 5 500 450
D 20 80 400 15 300 1200
E 15 24 160 50 750 1200
Sum 225 314 915 2850 4550
 Stock Markets in India
Name of the Stock Exchange Location
OTC Exchange of India Mumbai
The Uttar Pradesh Stock Exchange Kanpur
Association Ltd.
Jaipur Stock Exchange Jaipur
Madras Stock Exchange Madras
Cochin Stock Exchange Cochin
Bangalore Stock Exchange Bangalore
National Stock Exchange Exchange Plaza, Bandra-Kurla Complex,
Bandra(E), Mumbai - 400051
Guwahati Stock Exchange Guwahati
Ludhiana Stock Exchange Ludhiana
Calcutta Stock Exchange Kolkata
Bhubaneshwar Stock Exchange Orissa
 Contd..
Name of the Stock Exchange Location
Delhi Stock Exchange DSE House, 3/1, Asaf Ali Road, New Delhi
- 110002
Vadodara Stock Exchange Ltd. Vadodara
Ahmedabad Stock Exchange Ltd. Ahmedabad
Madhya Pradesh Stock Exchange Ltd. Madhya Pradesh
Pune Stock Exchange Ltd. Pune
Bombay Stock Exchange Ltd. Phiroze Jeejeebhoy Towers , Dalal Street,
Mumbai – 400023
Inter connected Stock Exchange of India Mumbai
Ltd.
MCX Stock Exchange Ltd Mumbai
 Bombay Stock Exchange
• The Bombay Stock Exchange is the oldest exchange in Asia. It
traces its history to the 1850s, when four Gujarati and one Parsi
stockbroker would gather under banyan trees in front of
Mumbai's Town Hall.

• The group eventually moved to Dalal Street in 1874 and in 1875

became an official organization known as 'The Native Share &
Stock Brokers Association'.

• In 1956, the BSE became the first stock exchange to be

recognized by the Indian Government under the Securities
Contracts Regulation Act.
 Bombay Stock Exchange
• The Bombay Stock Exchange developed the BSE SENSEX in
1986, giving the BSE a means to measure overall performance
of the exchange

• Historically an open outcry floor trading exchange, the

Bombay Stock Exchange switched to an electronic trading
system in 1995.

• This automated, screen-based trading platform called BSE On-

line trading (BOLT) currently has a capacity of 8 million orders
per day.
 Indices of BSE
• SENSEX • DOLLEX-200
• MIDCAP
• SMLCAP
• BSE-100
• BSE-200
• BSE-500
• DOLLEX-30
• DOLLEX-100
 SENSEX

• Also known as BSE 30 is a free-float market

capitalization-weighted stock market index of 30
well-established and financially sound companies
listed on Bombay Stock Exchange

• Established in 1986

• Base value of the SENSEX is taken as 100 on April 1,

1979, and its base year as 1978-79.
 Indices of NSE
• S&P CNX Nifty • CNX INFRA
• CNX Nifty Junior • CNX PHARMA
• S&P CNX 500 • CNX FMCG
• CNX IT • CNX MNC
• BANK NIFTY • CNX PSE
• INDIA VIX • CNX PSU BANK
• CNX 100 • CNX ENERGY
• S&P CNX DEFTY
• CNX MIDCAP
 S&P CNX Nifty
• Standard & Poor CRISIL NSE IndeX 50 = S&P CNX Nifty

• Nifty is owned and managed by India Index Services and

Products Ltd. (IISL), which is a joint venture between NSE and
CRISIL. IISL has a marketing and licensing agreement with
Standard & Poor's.

• The base period for the S&P CNX Nifty index is November 3, 1995

• The Nifty is a well diversified 50 stock index accounting for 23

sectors of the economy.