REPORT ON INDIAN

FINANCIAL SYSTEM
(EQUITY MARKETS)

BY
SEMESTER III, SECTION- “G”
20FMUCHH010074- KAARTHIKEYA
20FMUCHH010093- NITHIN
20FMUCHH010094- SHASHANK
Indian financial system

A Report on

Equity Markets

By

Shashank Bodige , Karthikeya Badri, Boda Nithin Goud

ICFAI BUSINESS SCHOOL

A report submitted in partial fulfilment of the requirements

of

BBA Program of IBS Hyderabad

Distribution List:

Faculty Guide: Mr. Satish Tiwari

Date of Submission

16th December, 2021

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AUTHORIZATION
This report is submitted as partial fulfilment of the requirement of the

BBA Program of ICFAI Business School, Hyderabad.

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ACKNOWLEDGEMENT
It is not possible to prepare a project report without the assistance
& Encouragement of other people. This one is certainly no
exception. “On the very outset of this report, I would like to extend
my sincere & heartfelt obligation towards my teammates who have helped
me in this endeavour. Without their active guidance, help,
cooperation & encouragement, I would not have made headway in
the project. I am ineffably indebted to my faculty guide Mr.
Satish Tiwari for conscientious encouragement to accomplish this
assignment and extremely thankful, also I pay my gratitude for
his valuable guidance and support on completion of this project in
its presently. At last, but not least gratitude
goes to all of my friends and lecturers who has always been helping
and encouraging me throughout the semester. Any omission in this brief
acknowledgement does not mean lack of gratitude.

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TABLE OF CONTENTS
Title page………………………………………………………………….………………...I
Authorization…………………………………………………………...…………………. II
Acknowledgment…………………………………………………………………………. III
Tables of content……………………………….……………….………………………….IV
Introduction to Equity Markets………………………….…………………….….………..1
Recent trends and growth in equity markets…………………….….….………..………2-3
Recent trends and growth in equity markets……………………..….…………..………4-5
Recent trends and growth in equity markets…………………….….…………..…………6
Impact of COVID-19 on Equity Markets………………………………….….……….7-8-9
Conclusion…………………………………………………………………………………..10
References …….………………………………….…...….………………………...………11

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EQUITY MARKETS

The equity market is a place where companies' stocks and shares are traded. Either over the
counter or on stock exchanges, equities are traded in an equity market. An equity market, also
known as a stock market or a share market, allows sellers and buyers to trade equity or shares
on the same platform. First and foremost, it is critical to have a thorough understanding of
what an equity market is in the Indian context. The equity market, often known as the stock
market or the share market, is a place where corporations or entities' shares are traded. On the
same platform, sellers and buyers can trade equity or shares.

INTRODUCTION
The equity market is a group of buyers and sellers of stocks (also recognised as shares), which
represent ownership claims on businesses. Stocks can be traded public or private, such as shares
of private companies sold to investors through equity crowdfunding platforms. Brokerage firms
and electronic trading platforms are the most common ways to invest in the stock market. The
majority of investments are made with a specific investment strategy in mind. In India, stocks are
largely traded on stock exchanges. The National Stock Exchange (NSE), the Bombay Stock
Exchange (BSE), and the newest entry, the Metropolitan Stock Exchange of India, all offer stock
trading in India (MSE). Shares of publicly traded firms are bought and sold. Spot/cash market
and futures market are indeed the two types of equity share trading. The various types of equities
markets in India are as follows. A public financial market where stocks are traded for immediate
delivery is known as the spot market or cash market. The futures market is a place where shares
are traded with the expectation of delivery at a later date. Investors can use the Indian equity
market with the use of an equity trading account, a reputable broker like Nirmal Bang, and online
equity trading platforms. The equity market trades shares/stocks from companies that are
expanding. 'Growth' stocks, which belong to small companies with high growth potential, are
often considered an investment. Growth stocks are those where investors are willing to make
large bids in the live equities market, whether in India or worldwide. Investors use online
equities trading to accumulate growth stocks now in order to sell them at a later date for a profit.

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Recent Growth and Trends of Equity Markets

In the previous few years, we have seen the listing of numerous established businesses in India,
with significant listing gains. The stock markets had an extremely turbulent year in 2020.
COVID-19 and the accompanying lockdowns caused a significant drop in March-April 2021.
The markets, on the other hand, bounced back similarly rapidly in the second half of the year.

SEBI approval IPO’s:

The strong trend in India's IPO market is predicted to continue, with the market regulator
accepting preliminary papers for ten additional companies. These companies are Data Patterns
India Ltd, Electronics Mart India Ltd, Gemini Edibles & Fats India Ltd, India1 Payments Ltd,
Healthium Medtech Ltd, CE Info Systems Ltd, VLCC Health Care Ltd, AGS Transact
Technologies Ltd, Metro Brands Ltd, and Godavari Biorefineries Ltd.

The Securities and Exchange Board of India (Sebi) has approved Defence and aerospace industry
supplier Data Patterns' initial public offering (IPO), which would include a fresh issue of 300
crore and an offer for sale (OFS) of up to 6.07 million shares by promoters and shareholders.
Former Blackstone CEO Matthew Cyriac is a shareholder in Data Patterns through Florintree
Capital Partners LLP, which owns 12.8 percent of the company.

MapmyIndia, also known as CE Info Systems, would offer 7.55 million shares in a pure OFS to
existing shareholders and promoters. MapmyIndia is a leading provider of innovative digital
maps, geo-spatial software, and location-based IoT technologies in India, with data that powers
Apple Inc.'s maps and Amazon.com Inc.'s Alexa.

Healthium Medtech Ltd, India's second largest medical consumables and surgical sutures maker,
is planning an IPO that will include a fresh issue of 390 crore and an OFS of up to 39.10 million
shares by existing shareholders and promoters.

The IPO of Metro Brands, which is funded by Rakesh Jhunjhunwala, consists of a fresh issue of
250 crore and an OFS of 21.90 million shares by selling shareholders. The revenues from the
stock sale will be used to open new outlets for the footwear company.

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The IPO of Gemini Edibles and Fats India is a pure OFS worth 2,500 crore. In the sector of
sunflower oil, the company is the market leader. Electronics Mart, situated in Hyderabad, is
planning an initial public offering (IPO) to generate Rs 500 crore.

VLCC Health Care, a beauty and wellness company, would seek an IPO for the second time,
with a fresh offering of 300 crore and an OFS of up to 8.92 million shares by its current
promoters and shareholders. VLCC, which was founded by Vandana Luthra, cancelled its initial
public offering in 2016.

The IPO of AGS Transact Technologies, a supplier of omni-channel payment solutions, is a pure
OFS worth up to Rs 800 crore for its shareholders and promoters. Godavari Biorefineries' IPO
consists of a 370-crore fresh offering and a 6.56-million-share OFS by promoters and investors.
The company is one of India's largest ethanol producers and a pioneer in the production of
ethanol-based compounds. The IPO of India1 Payments consists of a fresh offering of 150 crore
and an OFS by existing shareholders and promoters of up to 10.31 million shares.

Stock Indices

Thousands of companies are listed on stock exchanges, making it nearly hard to keep track of
them all. Stock market indices were designed for this reason. Market indices are a collection of
firm stocks that are measured on a regular basis to represent the performance of the overall
market or a specific part of the market. In a nutshell, an index aids investors in determining the
health of the stock market, allowing them to analyse market sentiment and comparing the
performance of particular stocks. The Sensex and the Nifty-50 are two renowned benchmark
indices that measure the performance of the Bombay Stock Exchange (BSE) and the National
Stock Exchange (NSE), respectively (NSE). Sectoral indexes such as Nifty Bank help investors
understand how each sector of the stock market is performing.

Some related equities are chosen and clubbed together to construct an index from among the
stocks listed on the exchange. This classification may be based on the industry in which the
companies operate, their size, market capitalization, or some other factor. The BSE Sensex, for
example, is a stock market index made up of 30 stocks. Similarly, the BSE 500 is a stock market
index that includes 500 companies.

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The value of the index is calculated using the values of the grouped stocks. Any change in the
stock market's price affects the index's value. As a result, an index is a good indicator of market
fluctuations.

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

Dividends

A dividend is a payment made to shareholders by publicly traded firms, and it is derived from the
company's net profit. Such awards might be in the form of cash, currency equivalents, stock, or
other assets, and are often distributed from the remaining profit after all necessary expenses have
been fulfilled. The board of directors of a corporation determines the dividend rate, which is
subject to majority shareholder approval. Companies, on the other hand, may choose to keep
their profits and reinvest them in the business or set them aside for future use. Furthermore,
dividend income declaration announcements are usually made in conjunction with a large gain or
reduction in the company's stock value.

Opening of new Demat account

The number of new demat accounts opened between April 2020 and January 2021 shattered all
records, according to data from the Securities and Exchange Board of India (SEBI). According to
the data, about 10.7 million new demat accounts were opened over this time period.Despite the
fact that this statistics only covered the first ten months of the financial year 2020-2021, the
overall number of new accounts opened in this year exceeded the total number of new accounts
opened in FY20 and FY19 combined. Indeed, the overall number of new demat accounts
registered in FY20 was little over 4.7 million. This demonstrates a significant shift in the degree
of retail participation in the Indian stock market.

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In the month of January 2021 alone, about 1.7 million new demat accounts were created. India's
total demat account tally has risen to 51.5 million as a result of this rapid expansion.

Reasons:

• The abrupt and large spike in new account openings can be attributed to a number of
factors. One of these can be ascribed to the increase in free time that many people
experienced during the first half of FY21 as a result of a series of nationwide lockdowns.
This extra time proved to be the catalyst that people required to learn about and
participate in stock trading.
• Another key factor appears to be a lack of employment and revenue sources, which arose
from the lockdowns once again. As a result, people began to look for alternate sources of
income, which brought them to the stock market.
• Finally, the use of paperless online processes for opening demat and trading accounts by
an increasing number of broking firms has made entry to the stock market far easier and
smoother.

Impact of technology on equity markets

Today's high-tech trading eliminates the need for hollering and provides investors with more
efficient ways to analyse and buy stocks.

Research:

Investors now have unprecedented access to company and stock information. Current stock
prices, business earnings reports, and breaking news about stocks and the corporations that
issue them are all available on the Internet. Financial advisors can keep their clients up to
date on current events, and businesses can track the performance of their stock in real time.
Better-informed investors, traders, and counsellors are the result of this near-instantaneous
knowledge.

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Execution of trades:

Investors can find out their price and other facts about their buy and sell orders in seconds
because to computer systems that record them so swiftly. Furthermore, because computerised
trading eliminates the need for people to handle transactions, errors have become rare.
Though the three-day criterion for verifying that money has changed hands and the shares
have been entered in the buyer's account remains in effect, electronic trades can accomplish
all of this in seconds.

High frequency trading:

The rise of high-frequency trading has been aided by electronic trading. This trading method
involves buying and selling stocks on the same day, and in some cases, completing a full
buy-and-sell cycle in minutes. Though this gave rise to what is popularly referred to as "day
trading" for individuals, institutional investors who make deals in millions of shares in a
couple of seconds have had the greatest impact. This might cause a purchasing or selling
frenzy among other investors who want to get in on what they believe is a developing trend
in a specific stock. When trading was substantially slower, this form of trade was not
possible.

Program trading and glitches:

Programs are used by many institutional investors, including mutual funds, hedge funds, and
pension funds, to purchase and sell securities. Because the programme has a set day and time
to conduct the trade, this can result in a quick sell-off or purchase of stocks. The sudden
volume can deceive investors. Furthermore, certain institutional investors are affected by
technology problems, which might result in erratic purchasing and selling. These events
might send traders into a panic since they can't find any news to substantiate their
transactions, so they feel they should buy or sell the stock to get in on the activity.

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Impact of COVID-19 on Equity Markets

The unprecedented COVID19 epidemic has put the world in peril and shifted the global
landscape in unanticipated ways. The SARSCoV2 virus, which caused the COVID19 outbreak,
first appeared in Wuhan, Hubei Province, China, in December 2019, and quickly spread around
the world. This pandemic is not only a global health crisis, but it is also a major global economic
depression. Many countries' economic operations are suddenly halted as tight quarantine rules
are implemented to combat an unknown disease. Transportation between countries is limited, if
not prohibited, which has hampered global economic activity. Most crucially, terror among
consumers and businesses has stopped them from engaging in their customary purchase habits,
resulting in market abnormality. Uncertainty and risk have been created as a result of the
epidemic, resulting in enormous economic losses.

The United States, Spain, Italy, Brazil, and India are among the advanced and emerging
economies that have been affected. The financial market has reacted with spectacular movement
and has been badly affected as a result of this. The financial system, which includes both stock
and bond markets, has been significantly impacted by the economic instability related with
COVID19. The price of oil has dropped dramatically, but the price of gold has risen dramatically
as a result of the epidemic. This epidemic is referred to by Firzli (2020) as "the larger financial
catastrophe." Businesses are heavily leveraged in many nations, weak corporations are further
destabilised, and corporate debt is at an all-time high.

As a result of the pandemic, the global financial market risk has increased significantly. Fear and
uncertainty have caused enough losses for investors. For example, the global stock market lost
nearly US$6 trillion in one week from February 24 to February 28 as a result of the pandemic's
impact. Since the COVID19 outbreak, the market value of standard & poor (S&P) 500 indices
has dropped by 30%. Increased uncertainty, according to Azimili (2020), impacts the needed rate
of return and consequently the present market value of stocks.

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(Time plot of NSE Stock Price)

(Time plot of BSE Stock Price)

The lockdown in India began on March 25, 2020 - May 31, 2020. Which caused a Fear for
investors and traders. The first coronavirus case was reported on January 30, 2020, however the
nifty index was unaffected. The slide in the Indian stock market began at the end of February
2020 and lasted until the end of April, resulting in a 33 percent value loss.

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Larsen & Toubro, Bharat Forge, UltraTech Cement, Grasim Industries, Aditya Birla Group,
BHEL, and Tata Motors are among the major Indian corporations that have temporarily halted or
restricted operations. As funding has dried up, young start-ups have been harmed. Fast-moving
consumer products firms in the country have drastically curtailed their operations and are
concentrating on the necessities. On March 23, 2020, India's stock markets suffered their worst
losses in history.] The SENSEX and NIFTY, on the other hand, posted their largest gains in 11
years on March 25, one day after the Prime Minister announced a complete 21-day lockdown.
The panic was spared too quickly when the lockout was announced, and there was a day when
the Nifty closed at 7,000 levels, and many equities are closing in lower circuits, and even large
size stocks are accessible at deep discounts, as is the case with IT stocks. To be honest, these are
the happiest times for novice investors who are bullish on the stock market. In contrast to the first
wave, the stock market had little effect in the second. Wipro stock fell from 470 to 400 levels on
the day the 2nd wave began, then returned to 450 levels the next day, indicating that the 2nd
wave was ineffective. Following the second wave of covid, the Nifty index has experienced a
significant increase, and several IPOs, such as ZOMATO, which was a loss-making company
until recently, have had 70 percent listing gains.

This is the chart of NSE 50 during the pandemic.

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Conclusion

In a market-based economy, equity markets are critical. They can help with capital raising,
liquidity, and investment. These vital functions are the hallmarks of capitalism, as they enable
our economy to grow at a constant rate. The stock exchange is seen as a leading indicator of
economic activity. The stock exchange is in charge of regulating and monitoring trade activity.
The functions of stock exchanges are regulated by SEBI. The secondary market is a marketplace
for the sale of securities that have previously been issued and are publicly traded.

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References

https://www.google.com/search?
q=growth+and+recent+trend+of+the+indian+capital+markets&client=safari&rls=en&
sxsrf=AOaemvJz7HCOaIgT4lgOl1-nne04kNY-
rw:1638641185499&source=lnms&tbm=isch&sa=X&ved=2ahUKEwjcnZqO3sr0AhUd
TGwGHTtaA5sQ_AUoAnoECAEQBA&biw=1024&bih=476&dpr=2#imgrc=hKO8kNSqF
O75dM
https://www.worldwidejournals.com/paripex/recent_issues_pdf/2016/December/
emerging-trends-in-indian-capital-
market_December_2016_1191700605_7314051.pdf
https://www.citeman.com/3730-history-of-the-indian-capital-market.html

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THANKYOU