Project Report on

COMPARATIVE STUDY OF NSE & BSE
MiniProject (2009-11) Bach

Submitted By Melbin Maria Noble

Under the guidance of Prof. Dr.K.Gopalakrishanan Nair

DEPARTMENT OF BUSINESS ADMINISTRATION COLLEGE OF ENGINEERING TRIVANDRUM
1

DEPARTMENT OF BUSINESS ADMINISTRATION COLLEGE OF ENGINEERING TRIVANDRUM

2010

Certificate s
Certified that this report of the Mini project titled ´ Comparative study of BSE & NSE µ is a bonafide record of the work done by Melbin Maria Noble in this department as part of the Mini Project work to be done in the third semester of MBA in Dept. of Business Administration, College of engineering, TVM.
Dr.K.Gopalakrishanan Nair,
Dept. of Business Administration, College of engineering, TVM.

Prof. S. Sivakumar
HOD, Dept. of Business Administration, College of Engineering, TVM

ACKNOWLEDGEMENT
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We would like to place on record our deep sense of gratitude to Prof. S. Sivakumar, HOD, Dept. of Business Administration, College of engineering, TVM for his invaluable help and guidance to shape this project in a symmetric way.

We also express our hearty gratitude to Dr.K.Gopalakrishanan Nair, for his opinion of intelligence, support and guidance which has resulted in the successful culmination of this project work.

We also express our sincere thanks to the 50 participants of market survey for providing us with adequate information for the completion of this project.

Trivandrum, December 6th, 2010.

Melbin Maria Noble.

Index
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y y y y

Introduction History of Stock Market Market participants Importance of stock market 
Function and purpose  Relation of the stock market to the modern financial system  The stock market, individual investors, and financial risk  The behavior of the stock market  Irrational behavior

6 7 8 8
8 9 9 10 10

y y y y y y

Stock market index Derivative instruments Leveraged strategies New issuance Investment strategies Stock Markets in India
Introduction History of the Indian Stock Market - The Origin

13 13 14 14 14 16
16 17

y Bombay stock exchange
o Prominent position o several firsts o investor education o milestones o sensex

20
20 21 21 22 23

y National stock exchange 
Origins  Innovations  Markets  Milestones
4

25
25 26 26 27

y y y y y y y y y y y Comparison of Trade Value of NSE & BSE Comparison of Market Capitalisation at NSE & BSE Investers stock exchange preference Reasons for prefering nse the most Growth of sensex and nifty last 15 years Invester¶s preference for analyzing market Client satisfaction Invester¶s selction for most secured investment Conclusion Questionnaire References 29 30 31 32 33 34 35 36 37 38 41 5 .

Asian examples include the Tokyo Stock Exchange. the largest stock market is the Toronto Stock Exchange.e. The size of the world stock market was estimated at about $36. 6 . In Canada. the vast majority of derivatives 'cancel' each other out (i. by market cap. which traditionally refers to an actual value. is the New York Stock Exchange. a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring). not a physical facility or discrete entity) for the trading of company stock (shares) and derivatives at an agreed price. cannot be directly compared to a stock or a fixed income security. Paris Bourse. and the Deutsche Börse. because it is stated in terms of notional values.6 trillion at the start of October 2008. these are securities listed on a stock exchange as well as those only traded privately. the Shanghai Stock Exchange. rather than an actual market price. The largest stock market in the United States. and the Bombay Stock Exchange. In Latin America. Moreover. 11 times the size of the entire world economy. there are such exchanges as the BM&F Bovespa and the BMV. the Hong Kong Stock Exchange. NYSE.Introduction A stock market or equity market is a public (a loose network of economic transactions. The total world derivatives market has been estimated at about $791 trillion face or nominal value. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The value of the derivatives market. Major European examples of stock exchanges include the London Stock Exchange.. Many such relatively illiquid securities are valued as marked to model.

but actually. and in 1309 they became the "Brugse Beurse". unit trusts and other speculative instruments. option trading. which let shareholders invest in business ventures and get a share of their profits ± or losses. until then. as their primary place for trading. Bankers in Pisa. Verona. an informal meeting. much as we know them". The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock exchange to introduce continuous trade in the early 17th century. Canada. This was only possible because these were independent city states not ruled by a duke but a council of influential citizens. 7 . China. the Van der Beurze had Antwerp.History of Stock Market In 12th century France the courratiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. they could be called the first brokers. Japan. In 1351 the Venetian government outlawed spreading rumors intended to lower the price of government funds. with the world's biggest market being in the United States. Genoa and Florence also began trading in government securities during the 14th century. India. The idea quickly spread around Flanders and neighboring counties and "Beurzen" soon opened in Ghent and Amsterdam. In 1602. The Dutch later started joint stock companies. South Korea and the Netherlands. The Dutch "pioneered short selling. In the middle of the 13th century. France. United Kingdom. Because these men also traded with debts. A common misbelief is that in late 13th century Bruges commodity traders gathered inside the house of a man called Van der Beurze. There are now stock markets in virtually every developed and most developing economies. Germany. as most of the merchants of that period. institutionalizing what had been. It was the first company to issue stocks and bonds. merchant banking. the family Van der Beurze had a building in Antwerp where those gatherings occurred. the Dutch East India Company issued the first share on the Amsterdam Stock Exchange. debt-equity swaps. Venetian bankers began to trade in government securities.

The rise of the institutional investor has brought with it some improvements in market operations. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. Importance of stock market Function and purpose The stock market is one of the most important sources for companies to raise money. An economy where the stock market is on the rise is considered to be an upand-coming economy. buyers and sellers are largely institutions. or raise additional capital for expansion by selling shares of ownership of the company in a public market. Therefore. such as wealthy businessmen. the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor. buyers and sellers were individual investors. (They then went to 'negotiated' fees. This is an attractive feature of investing in stocks. In fact. Thus.Market participants A few decades ago. and can influence or be an indicator of social mood. central banks tend to keep an eye on the control and 8 .) However. the stock market is often considered the primary indicator of a country's economic strength and development. Share prices also affect the wealth of households and their consumption. for instance. usually with long family histories to particular corporations. This allows businesses to be publicly traded. but only for large institution. markets have become more "institutionalized". but only after the large institutions had managed to break the brokers' solid front on fees. worldwide. tend to be associated with increased business investment and vice versa. Over time. compared to other less liquid investments such as real estate. corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'. Rising share prices.

mutual funds. insurance investment of premiums. on the smooth operation of financial system functions.behavior of the stock market and. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. Relation of the stock market to the modern financial system The financial system in most western countries has undergone a remarkable transformation. pension funds. Financial stability is the raison d'être of central banks. The major part of this adjustment in financial portfolios has gone directly to shares but a good deal now takes the form of various kinds of institutional investment for groups of individuals.. Exchanges also act as the clearinghouse for each transaction.g. The trend towards forms of saving with a higher risk has been accentuated by new rules for most funds and insurance. deposit accounts and other very liquid assets with little risk made up almost 60 percent of households' financial wealth. meaning that they collect and deliver the shares. etc. The general public's heightened interest in investing in the stock market. and guarantee payment to the seller of a security. compared to less than 20 percent in the 2000s. In all developed economic systems. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. the trend has been the same: saving has moved away from traditional (government insured) bank deposits to more risky securities of one sort or another. Similar tendencies are to be found in other industrialized countries. the United States. In this way the financial system contributes to increased prosperity. either directly or through mutual funds. such as the European Union. Japan and other developed nations. One feature of this development is disintermediation. hedge funds. in general. A portion of the funds involved in saving and financing. permitting a higher proportion of shares to bonds. 9 . e. in Sweden. In the 1970s. has been an important component of this process.

This is certainly more important now that so many newcomers have entered the stock market. The behavior of the stock market From experience we know that investors may 'temporarily' move financial prices away from their long term aggregate price 'trends'. Stock prices fluctuate widely. negative or down trends are referred to as bear markets. Over the years he has built himself a multi-billion-dollar fortune.000 from seven limited partners consisting of Buffett's family and friends. then plummet just as quickly. individual investors. At the same time. are exchanging questionable and often misleading tips. 10 . The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century. (Positive or up trends are referred to as bull markets.) Over-reactions may occur²so that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. the noise level in the stock market rises. or have acquired other 'risky' investments (such as 'investment' property. and people who have turned to investing for their children's education and their own retirement become frightened. Economists continue to debate whether financial markets are 'generally' efficient. With each passing year. Television commentators. only folly. despite all this available information. Yet. investors find it increasingly difficult to profit. but also the economy on a large scale.The stock market. Stock prices skyrocket with little reason. individual investors. and $100. This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. The following deals with some of the risks of the financial sector in general and the stock market in particular. i. in marked contrast to the stability of (government insured) bank deposits or bonds. Sometimes there appears to be no rhyme or reason to the market. and market strategists are all overtaking each other to get investors' attention. real estate and collectables).. analysts.e. immersed in chat rooms and message boards. This is something that could affect not only the individual investor or household. and financial risk Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. financial writers. Buffett began his career with $100.

) The 'hard' efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987. ought to affect share prices beyond the short term.. (Something like seeing familiar shapes in clouds or ink blots. profits or dividends. such as stop-loss limits and Value at Risk limits. This event demonstrated that share prices can fall dramatically even though. and the use of certain strategies. such as the outlook for margins.According to one interpretation of the efficient-market hypothesis (EMH). where random 'noise' in the system may prevail. it is impossible to fix a generally agreed upon definite cause: a thorough search failed to detect any 'reasonable' development that might have accounted for the crash.) It seems also to be the case more generally that many price movements (beyond that which are predicted to occur 'randomly') are not occasioned by new information. only changes in fundamental factors. many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer. although very rarely. when the Dow Jones index plummeted 22. Moreover. (But this largely theoretic academic viewpoint²known as 'hard' EMH²also predicts that little or no trading should take place. a 'soft' EMH has emerged which does not require that prices remain at or near equilibrium. having priced in all public knowledge. in any of its current forms.) In the present context this means that a succession of good news items about a company may lead investors to overreact positively (unjustifiably driving the price 11 . in fact. while EMH predicts that all price movement (in the absence of change in fundamental information) is random (i. just noise. However. since prices are already at or near equilibrium. some research has shown that changes in estimated risk. contrary to fact. and often will perceive a pattern in what is. a study of the fifty largest one-day share price movements in the United States in the post-war period seems to confirm this. would not be strictly applicable). theoretically could cause financial markets to overreact. But the best explanation seems to be that the distribution of stock market prices is nonGaussian (in which case EMH. (But note that such events are predicted to occur strictly by chance. Various explanations for such large and apparently non-random price movements have been promulgated. to this day. non-trending). but only that market participants not be able to systematically profit from any momentary market 'inefficiencies'. Other research has shown that psychological factors may result in exaggerated (statistically anomalous) stock price movements (contrary to EMH which assumes such behaviors 'cancel out'). Psychological research has demonstrated that people are predisposed to 'seeing' patterns.6 percent²the largest-ever one-day fall in the United States.e. For instance.

As social animals. but generally only briefly. Therefore. In the period running up to the 1987 crash. however. Inexperienced investors rarely get the assistance and support they need. The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically. An example with which one may be familiar is the reluctance to enter a restaurant that is empty. rumors. since often such news has been anticipated. the stock market may be swayed in either direction by press releases. and a counterreaction may occur if the news is better (or worse) than expected. the probabilities are known and largely independent of the investment decisions of the different players. even if that news is likely to have no real effect on the fundamental value of securities itself. In the run up to 2000. with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. predictions of a DOW average below 5000 were quite common. as more experienced investors (especially the hedge funds) quickly rally to take advantage of even the slightest. momentary hysteria. Over the short-term. A period of good returns also boosts the investor's self-confidence. stocks and other securities can be battered or buoyed by any number of fast market-changing events. But this may be more apparent than real. so that by summer of 2002. In one paper the authors draw an analogy with gambling. as with any other business. euphoria and mass panic.up). is quite unforgiving of amateurs. the average did not rise above 5 %%). In normal times the market behaves like a game of roulette. Another phenomenon²also from psychology²that works against an objective assessment is group thinking. The stock market. less than 1 percent of the analyst's recommendations had been to sell (and even during the 2000 ± 2002 bear market. the game becomes more like poker (herding behavior takes over). the media amplified the general euphoria. people generally prefer to have their opinion validated by those of others in the group. (And later amplified the gloom which descended during the 2000 ± 2002 bear market. In times of market stress. reducing his (psychological) risk threshold. making the stock market behavior difficult 12 . it is not easy to stick to an opinion that differs markedly from that of a majority of the group.) Irrational behavior Sometimes the market seems to react irrationally to economic or financial news.

Some examples are exchange-traded funds (ETFs). Derivative instruments Financial innovation has brought many new financial instruments whose pay-offs or values depend on the prices of stocks. and the reasons for buying and selling are generally obscure. These last two may be traded on futures exchanges (which are distinct from stock exchanges²their history traces back to commodities futures exchanges). in turn..g. with the weights reflecting the contribution of the stock to the index. of which there are many. the whole notion of EMH is that these non-rational reactions to information cancel out. However. they are sometimes considered to be traded in a (hypothetical) derivatives market. and stock index futures. the FTSE and the Euronext indices. Emotions can drive prices up and down. single-stock futures. are opportunities to make money. which. Stock market index The movements of the prices in a market or section of a market are captured in price indices called stock market indices. The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment. Behaviorists argue that investors often behave 'irrationally' when making investment decisions thereby incorrectly pricing securities. which causes market inefficiencies. people are generally not as rational as they think. As all of these products are only derived from stocks. 13 . stock index and stock options. e.to predict. the S&P. rather than the (hypothetical) stock market. equity swaps. or traded over-the-counter. Such indices are usually market capitalization weighted. leaving the prices of stocks rationally determined.

derivatives may be used to control large blocks of stocks for a much smaller amount of money than would be required by outright purchase or sale. the trader borrows money (at interest) to buy a stock and hopes for it to rise. and there is often a maintenance margin below the $500). The practice of naked shorting is illegal in most (but not all) stock markets. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright. Short selling In short selling. it can be a maximum of a certain percentage of those other stocks' value." This strategy may also be used by unscrupulous traders in illiquid or thinly traded markets to artificially lower the price of a stock. Hence most markets either prevent short selling or place restrictions on when and how a short sale can occur. you need to put up $500.) Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929. Exiting a short position by buying back the stock is called "covering a short position. (Upon a decline in the value of the margined securities additional funds may be required to maintain the account's equity. or. The investor is responsible for any shortfall following such forced sales. A margin call is made if the total value of the investor's account cannot support the loss of the trade. hoping for the price to fall. the trader borrows stock (usually from his brokerage which holds its clients' shares or its own shares on account to lend to short sellers) then sells it on the market. margin buying may be used to purchase stock with borrowed funds. Before that. the margin requirements have been 50 %% for many years (that is.Leveraged strategies Stock that a trader does not actually own may be traded using short selling. if you want to make a $1000 investment. speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks 14 . The trader eventually buys back the stock. Margin buying In margin buying. making money if the price fell in the meantime and losing money if it rose. In the United States. and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position.

15 . Investment strategies One of the many things people always want to know about the stock market is. which uses price patterns. Henry and Ed Seykota. One example of a technical strategy is the Trend following method. utilizes strict money management and is also rooted in risk control and diversification. and ride the general trend of the stock market (which. two basic methods are classified as either fundamental analysis or technical analysis. The principal aim of this strategy is to maximize diversification. from $ 9 billion to $39 billion. etc. minimize taxes from too frequent trading. Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. "How do I make money investing?" There are many different approaches. New issuance Global issuance of equity and equity-related instruments totaled $505 billion in 2004. has averaged nearly 10 %%/year.S. one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment of the stock market (such as the S&P 500 or Wilshire 5000). a 29. in the U. used by John W. Other rules may include the prohibition of free-riding: putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock). but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in the interim). since World War II).. business trends. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings.8 %% increase over the $389 billion raised in 2003. and IPOs in Europe. Initial public offerings (IPOs) by US issuers increased 221 %% with 233 offerings that raised $45 billion. compounded annually. many choose to invest via the index method. In this method.purchased. Additionally. Middle East and Africa (EMEA) increased by 333 %%. general economic conditions.

its price will fall down. demand and supply for a particular stock). enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i. less supply). The price at which each buying and selling transaction takes is determined by the market forces (i. high demand) and very few people will want to sell this stock at current market price (i. and can trade freely from their home or office over the phone or through Internet. if there are more sellers than buyers (i. buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT. Ltd. Trading list by the end of 1839 got broader Recognition from banks and merchants to about half a dozen brokers Rapid development of commercial enterprise saw brokerage business 16 1840's 1850's . most of the operations are done electronically and the stock markets have become almost paperless. busuness in its loan securities gained full momentum Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. In earlier times. the Indian Stock Markets have a 200 years old history.e. Now investors dont have to gather at the Exchanges. History of the Indian Stock Market . On the contrary.Stock Markets in India Introduction Stock markets refer to a market place where investors can buy and sell stocks.e. buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd.The Origin One of the oldest stock markets in Asia. 18th Century 1830's East India Company was the dominant institution and by end of the century. high supply and low demand) for the stock of ABC Co. Let us take an example for a better understanding of how market forces determine stock prices. in the market.e.Ltd. ABC Co.e. Therefore.

90's Sharp increase in share prices of jute industries in 1870's was followed by a boom in tea stocks and coal 1908 "The Calcutta Stock Exchange Association" was formed 17 . marking the beginning of the "Share Mania" in India The number of brokers increased to about 200 to 250 A disastrous slump began at the end of the American Civil War (as an example. 87) 1862-63 1865 Pre-Independance Scenario . Bank of Bombay Share which had touched Rs. "The Native Share and Stock Brokers' Association" (also known as "The Bombay Stock Exchange") was established in Bombay Development of cotton mills industry and set up of many others Establishment of "The Ahmedabad Share and Stock Brokers' Association" 1875 1880's 1894 1880 . brokers used to gather at a street (now well known as "Dalal Street") for the purpose of transacting business. 2850 could only be sold at Rs.Establishment of Different Stock Exchanges 1874 With the rapidly developing share trading business.attracting more people into the business 1860's 1860-61 The number of brokers increased to 60 The American Civil War broke out which caused a stoppage of cotton supply from United States of America.

and later on merged with the Delhi Stock Exchange. The Exchanges that were recognized under the Act The depression witnessed after the Independance led to closure of a lot of exchanges in the country. When recession followed.1920 Madras witnessed boom and business at "The Madras Stock Exchange" was transacted with 100 brokers. 1956. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts were: 18 . Lahore Estock Exchange was closed down after the partition of India. number of brokers came down to 3 and the Exchange was closed down Establishment of the Lahore Stock Exchange Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange Re-organisation and set up of the Madras Stock Exchange Limited (Pvt. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established Establishment of "The Hyderabad Stock Exchange Limited" "Delhi Stock and Share Brokers' Association Limited" and "The Delhi Stocks and Shares Exchange Limited" were established and later on merged into "The Delhi Stock Exchange Association Limited" 1923 1934 1936 1937 1940 1944 1947 Post Independance Scenario (Regulations) Act.

6. there are twenty one recognized stock exchanges in India which does not include the Over The Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL). Cochin Stock Exchange (1980) 2. 1986) 8. Gauhati Stock Exchange Limited (1984) 6. 19 . Meerut Stock Exchange At present. listed companies as well as their capital. 4. There was a sharp increase in number of Exchanges. Bombay Calcutta Madras Ahmedabad Delhi Hyderabad Bangalore Indore Many more stock exchanges were established during 1980's. 1982) 3. 5. 7. Vadodara Stock Exchange Limited (at Baroda. 8.1. Government policies during 1980's also played a vital role in the development of the Indian Stock Markets. Jaipur Stock Exchange Limited (1989) 9. Uttar Pradesh Stock Exchange Association Limited (at Kanpur. Kanara Stock Exchange Limited (at Mangalore. 1990) 12. Saurashtra Kutch Stock Exchange Limited (at Rajkot. 1985) 7. 1989) 11. Ludhiana Stock Exchange Association Limited (1983) 5. Bhubaneswar Stock Exchange Association Limited (1989) 10. Magadh Stock Exchange Association (at Patna. 3. Coimbatore Stock Exchange 13. namely: 1. 2. Pune Stock Exchange Limited (1982) 4.

which had introduced securities trading in India. BSE had formulated a comprehensive set of Rules and Regulations for the securities market. 2005. but they always overflowed to the streets. In fact. The first venues of the earliest stock broker meetings in the 1850s were in rather natural environs . The new place was. aptly. this time under banyan trees at the junction of Meadows Street and what is now called Mahatma Gandhi Road. It is surely BSE's pride that almost every leading corporate in India has sourced BSE's services in capital raising and is listed with BSE. A decade later. quite literally. BSE. in terms of listed companies and market capitalisation. the name "The Stock Exchange. the brokers moved their venue to another set of foliage. The BOLT network was expanded nationwide in 1997. Prominent Position The journey of BSE is as eventful and interesting as the history of India's securities market. Bombay Stock Exchange Limited (BSE) has had an interesting rise to prominence over the past 135 years. At last. While BSE is now synonymous with Dalal Street.BOMBAY STOCK EXCHANGE The oldest stock exchange in Asia (established in 1875) and the first in the country to be granted permanent recognition under the Securities Contract Regulation Act. In 2002. they had to shift from place to place.under banyan trees . with the totally automated trading through the BSE Online trading (BOLT) system. it was not always so.in front of the Town Hall. Even in terms of an orderly growth. Mumbai" was changed to Bombay Stock Exchange. 1956. It had also laid down best practices which were adopted 20 . As the number of brokers increased. the brokers found a permanent place. call their own. Subsequently on August 19. much before the actual legislations were enacted. and one that they could. as India's biggest bourse. the exchange turned into a corporate entity from an Association of Persons (AoP) and renamed as Bombay Stock Exchange Limited.. in 1874. BSE has played a pioneering role in the development of the Indian securities market. called Dalal Street ( Brokers' Street). where Horniman Circle is now situated. replaced its open outcry system of trading in 1995.

Its SENSEX is the benchmark equity index that reflects the health of the Indian economy.under which awareness 21 . has been and is synonymous with the capital market in India.2002) Investor Education An equally important accomplishment of BSE is its nationwide investor awareness campaign ."Safe Investing in the Stock Market" .subsequently by 23 stock exchanges which were set up after India gained its independence.on February 18. BSE. First to have an exclusive facility for financial training First in India in the financial services sector to launch its website in Hindi and Gujarati Shifted from Open Outcry to Electronic Trading within just 50 days First bell-ringing ceremony in the history of the Indian capital markets (listing ceremony of Bharti Televentures Ltd. Several Firsts At par with the international standards. BSE has in fact been a pioneer in several areas. It has several firsts to its credit even in an intensely competitive environment. as a brand. First in India to introduce Equity Derivatives First in India to launch a Free Float Index First in India to launch US$ version of BSE SENSEX First in India to launch Exchange Enabled Internet Trading Platform First in India to obtain ISO certification for a stock exchange 'BSE On-Line Trading System¶ (BOLT) has been awarded the globally recognised the Information Security Management System standard BS7799-2:2002.

develop and regulate the securities market) BSE On-Line Trading (BOLT) system introduced BSE On-Line Trading (BOLT) system expanded nation-wide 14th Mar 1995 1997 22nd Mar 1999 Central Depository Services Ltd. BSE also actively promotes the securities market awareness campaign of the Securities and Exchange Board of India.. Milestones 9th Jul 1875 The Native Share & Stock Broker's Association formed 31st Aug 1957 BSE granted permanent recognition under Securities Contracts (Regulation) Act (SCRA) 2nd Jan 1986 SENSEX.campaigns and dissemination of information through print and electronic medium is undertaken across the country. country's first equity index launched (Base Year:1978-79 =100) 10th Jul 1987 3rd Jan 1989 25th Jul 1990 1st May 1992 Investor's Protection Fund (IPF) introduced BSE Training Institute (BTI) inaugurated SENSEX closes above 1000 SEBI Act established ( An Act to protect.(CDSL) set up with other 22 .

government and strategic investors. a variation of the market cap method.0 a. representative of various sectors. Sensex The BSE Sensex or Bombay Stock Exchange Sensitivity Index is a valueweighted index composed of 30 stocks that started January 1. The free-float method.30 p. These companies account for around fifty per cent of the market capitalisation of the BSE. The index is calculated based on a free-float capitalization method. 23 . At a regular intervals. on the Bombay Stock Exchange. or shares that are readily available for trading. and the base year of BSE-SENSEX is 1978-79. It consists of the 30 largest and most actively traded stocks. such as those held by promoters. 1979. the Bombay Stock Exchange (BSE) authorities review and modify its composition to be sure it reflects current market conditions. The base value of the sensex is 100 on April 1.m. The Sensex is regarded as the pulse of the domestic stock markets in India. 1986. . Instead of using a company's outstanding shares it uses its float.3.financial institutions 11th Oct 1999 9th Jun 2000 1st Apr 2003 8th Aug 2005 7th Feb 2006 4th Jan 2010 SENSEX closed above 5000 Equity Derivatives introduced T+2 settlement Introduced Incorporation of Bombay Stock Exchange Limited SENSEX closed above 10000 Market time changed to 9. therefore.m. does not include restricted stocks.

replacement of scrips. The Market Capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company. 2003. Globally. 24 .The Divisor is the only link to original base period value of the Sensex.6% per annum. which translates to roughly 9% per annum after compensating for inflation. Using information from April 1979 onwards. Free float factor represent the percentage of shares that are readily available for trading. the long-run rate of return on the BSE Sensex works out to be 18. the index was calculated based on the µfull market capitalization¶ method. The Calculation of Sensex involves dividing the free float market capitalization of 30 companies in the index by a number called Index divisor. However this was shifted to the free float method with effect from September 1. As per free float capitalization methodology. etc. This Market capitalization is multiplied by a free float factor to determine the free float market capitalization. It keeps the index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions. the free float market capitalization is regarded as the industry best practice. the level of index at any point of time reflects the free float market value of 30 component stocks relative to a base period.Initially. The index has increased by over ten times from June 1990 to the present. Free float factor is also referred as adjustment factor.

It is the second fastest growing stock exchange in the world with a recorded growth of 16. 2799 in total. Though a number of other exchanges exist. and was incorporated in November 1992 as a tax-paying company. banks. making it the second largest stock exchange in South Asia. 1956. The Capital market (Equities) segment of the NSE commenced operations in November 1994.262. In April 1993. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. the NSE VSAT terminals. It is the largest stock exchange in India in terms of daily turnover and number of trades. it was recognized as a stock exchange under the Securities Contracts (Regulation) Act. The NSE's key index is the S&P CNX Nifty. for both equities and derivative trading. India. 25 . In October 2007. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. and between them are responsible for the vast majority of share transactions.46 trillion. an index of fifty major stocks weighted by market capitalisation. NSE is mutually-owned by a set of leading financial institutions. As of 2006. Origins The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India. although this has not yet occurred. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs who have taken a stake in the NSE. insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India. while operations in the Derivatives segment commenced in June 2000. known as the NSE NIFTY (National Stock Exchange Fifty).6%.59 billion) (October 2010) and was expected to become the biggest stock exchange in India in terms of market capitalization by 2009 end. NSE has a market capitalization of around 7.NATIONAL STOCK EXCHANGE The National Stock Exchange (NSE) is a stock exchange located at Mumbai.507 crore (US$ 1.648. cover more than 1500 cities across India. the equity market capitalization of the companies listed on the NSE was US$ 1.

Since the success of the NSE. NSE. is a 100% subsidiary of the National Stock Exchange of India. anonymous. derivatives market) trades in India. Markets Currently.IT Limited. proposed exchange traded derivatives.Innovations NSE has remained in the forefront of modernization of India's capital and financial markets. existent market and new market structures have followed the "NSE" model. the NSE was permitted to start trading equity derivatives Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in India. electronic limit order book (LOB) exchange to trade securities in India. and its pioneering efforts include: y y y y y y y y y Being the first national. After four years of policy and regulatory debate and formulation. first depository in India Setting up of S&P CNX Nifty. solutions and services. NSE. NSCCL was a landmark in providing innovation on all spot equity market (and later. Setting up the first clearing corporation "National Securities Clearing Corporation Ltd. in India. particularly on an equity index. Being the first exchange that." in India. which led to the wide popularization of the NSE in the broker community. NSE has the following major segments of the capital market: y y y y y y Equity Futures and Options Retail Debt Market Wholesale Debt Market Currency futures Mutual fund 26 . NSE pioneered commencement of Internet Trading in February 2000. setup in 1999 . A Vertical Specialist Enterprise. NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBC-TV18. in 1996.IT offers end-toend Information Technology (IT) products. Co-promoting and setting up of National Securities Depository Limited.

co-promoted by NSE y December 1996 Commencement of trading/settlement in dematerialised securities y July 1998 Launch of NSE's Certification Programme in Financial Market y August 1998 CYBER CORPORATE OF THE YEAR 1998 award y February 1999 Launch of Automated Lending and Borrowing Mechanism y January 2000 Launch of NSE Research Initiative y February 2000 Commencement of Internet Trading y June 2000 Commencement of Derivatives Trading (Index Futures) y December 2000 Commencement of WAP trading y June 2001 Commencement of trading in Index Options y July 2001 Commencement of trading in Options on Individual Securities 27 .y Stocks lending & borrowing August 2008 Currency derivatives were introduced in India with the launch of Currency Futures in USD INR by NSE. exactly after one year of the launch of Currency Futures. first depository in India. on 31 August 2009. POUND & YEN. Currently it has also launched currency futures in EURO. the first Clearing Corporation y October 1995 Became largest stock exchange in the country y April 1996 Commencement of clearing and settlement by NSCCL y April 1996 Launch of S&P CNX Nifty y November 1996 Setting up of National Securities Depository Limited. Interest Rate Futures was introduced for the first time in India by NSE on 31 August 2009. a futures contract based on 7% 10 Year GOI bond (NOTIONAL) was launched with quarterly maturities. Milestones y November 1992 Incorporation y April 1993 Recognition as a stock exchange y May 1993 Formulation of business plan y June 1994 Wholesale Debt Market segment goes live y November 1994 Capital Market (Equities) segment goes live y April 1995 Establishment of NSCCL. NSE became the first stock exchange to get approval for Interest rate futures as recommended by SEBI-RBI committee.

y November 2001 Commencement of trading in Futures on Individual Securities y January 2002 Launch of Exchange Traded Funds (ETFs) y October 2002 Launch of NSE Government Securities Index y January 2003 Commencement of trading in Retail Debt Market y June 2003 Launch of Interest Rate Futures y August 2003 Launch of Futures & options in CNXIT Index y August 2008 Launch of Currency Derivatives y November 2009 Launch of Mutual Fund Service System y October 2010 Launch of 5-minute special pre-open trading session. 28 . a mechanism under which investors can bid for stocks before the market opens.

Comparison of Trade Value of NSE & BSE 264 809 BSE NSE 29 .

Comparison of Market Capitalisation at NSE & BSE 1588 1627 BSE NSE 30 .

Investers Stock Exchange Preference Others 5% BSE 36% NSE 59% NSE BSE Others 31 .

Reasons for Prefering NSE the most 50 45 40 35 30 25 20 15 10 5 0 Liquidity Brand Value Trust Divesified services 32 .

Growth of Sensex and Nifty last 15 years 25000 Sensex Nifty 20000 15000 10000 5000 0 33 .

Invester¶s preference for analyzing market 36% 44% 14% 6% Sensex Nifty Both of them Others also 34 .

Client Satisfaction 25 20 15 10 5 0 NSE BSE Equal in both 35 .

Invester¶s Selction for most secured investment 18% 38% 40% 4% Bank Stock Market Real Estate Others 36 .

it is always preferable to go for some professional help if you wish to invest in the Indian stock market. You should also be acquainted with the concept of NSE and BSE. Bombay Stock Exchange and National Stock Exchange are both major stock exchange in India. Also the growth of these two stock exchanges are decided by our country¶s growth. So. 37 . But you should be aware that it requires a lot of patience.Conclusion Stock market is something which you cannot predict what is going to happen in the market tomorrow without proper analyzes of market. Investors put their money in the stock market in order to reap huge benefits from their investment. But there is a difference between NSE and BSE. But nobody can predict the market as we have already discussed.

Sex a) male b) female b)21-30 d) above 40 4. Are you an invester in any stock market? a) yes b) no 38 .Questionnaire Name: Place: 1. Your age group? a) below 20 c)30-40 3. What is your occupation a) student b) government servant c) private employee d) businessman 2. Are you an invester in any kind of investment? a) yes b) no 5.

From which stock exchange you get better satisfaction? a) NSE b) BSE c) equal satisfaction 39 .6. Which stock exchange in India you prefer the most for investing? a) NSE b) BSE C)others 7. What is the reason for that? a) liquidity c) trust in the exchange b) brand value of exchange d) more diversified services 8. Wheather the Indian stock market is more profitable or not comparing to foreign exchanges? a) Yes b) no 9. Which of the following investment is more secure? a) stock market c) Real estate b) bank d) others 10.

Which index You are using for analyzing the market trends? a) Sensex c) both of them 12. Any other suggestions? b) Nifty d) others also 40 .11.

yahoo.References www.sharetipsinfo.com www.wikipedia.gov.answers.in 41 .com www.com www.com http://wiki.org http://www.com http://in.bseindia.answers.nseindia.sebi.