Chapter 3 STOCK MARKET IN INDIA The Battlefield

“ Market is a place where buyers and sellers come into contact to exchange goods or services”

*The essential features * 1) Existence of buyers and sellers 2) Existence of price 3)Allocation of resources 4) Existence of regulatory mechanism.

STRUCTURE OF THE SECURITIES MARKET

Securities Market

Equity Market

Debt Market

Derivatives Market

Government Securities Market

Corporate Debt Market

Money Market

Options Market

Futures Market

SEBI and its Objectives 1. Tries to develop the securities market. 2. Promotes Investors’ Interest. 3. Makes rules and regulations for the securities market. Important Functions of SEBI 1) Regulating the business in stock exchanges and any other securities markets 2) Registering and regulating the working of the depositories [participants], custodians of securities, foreign institutional investors, credit rating agencies 3) Registering and regulating the working of venture capital funds and collective investment schemes, including mutual funds; 4) ) Prohibiting fraudulent and unfair trade practices relating to

Departments of SEBI 1)MARKET INTERMEDIARIES REGULATION AND SUPERVISION DEPARTMENT (MIRSD) 2) MARKET REGULATION DEPARTMENT (MRD) 3) DERIVATIVES AND NEW PRODUCTS DEPARTMENT (DNPD) 4) CORPORATION FINANCE DEPARTMENT (CFD) 5) INVESTMENT MANAGEMENT DEPARTMENT (IMD) 6) INTEGRATED SURVEILLANCE DEPARTMENT (ISD) 7) INVESTIGATIONS DEPARTMENT (IVD) 8) ENFORCEMENT DEPARTMENT (EFD) 9) LEGAL AFFAIRS DEPARTMENT (LAD) 10 ) ENQUIRIES AND ADJUDICATION DEPARTMENT (EAD) 11) OFFICE OF INVESTOR ASSISTANCE AND EDUCATION (OIAE). 12 ) GENERAL SERVICES DEPARTMENT (GSD) 13)RESEARCH AND TRAINING DEPARTMENT (RTD). 14) OFFICE OF THE CHAIRMAN (OCH) 15) THE REGIONAL OFFICES (RO’s)

PRIMARY EQUITY MARKET • PUBLIC ISSUE • RIGHTS ISSUE • PRIVATE PLACEMENT • PREFERENTIAL ALLOTMENT

ISSUE TYPE Fixed Price Issues

OFFER PRICE Price at which the securities are offered and would be allotted is made known in advance to the investors

DEMAND Demand for the securities offered is known only after the closure of the issue

PAYMENT 100 % advance payment is required to be made by the investors at the time of application.

Book Building A 20 % price band is Demand for Issues offered by the issuer the securities within which investors offered , and are allowed to bid and at various the final price is prices, is determined by the available on a issuer only after real time closure of the bidding. basis..

10 % advance payment is required to be made by the QIBs along with the application, while other categories of investors have to pay 100 % advance along with the application.

Reverse Book Building The reverse book building is an efficient price discovery mechanism of de-listing of securities, which is provided for capturing the sell orders on online basis from the shareholders through respective BRLM.

Secondary Market
Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Listing of Securities Listing means admission of securities of an issuer to trading privileges (dealings) on a stock exchange through a formal agreement. The prime objective of admission to dealings on the exchange is to provide liquidity and marketability to securities, as also to provide a mechanism for effective control and supervision of trading.

SCREEN BASED SYSTEM
The kind of screen based system adopted in India is referred to as the open electronic order (ELOB) market system. ELOB

• Buyers and sellers place their orders on the computer • Computer instantly tries to match mutually compatible orders on a price-time priority

BUYING AND SELLING OF SHARES • Locating a Broker • Placement of Order • Execution of Order • Internet Trading

SETTLEMENT • Security transactions are settled through electronic delivery facilitated by depositories • Presently, the settlement of all trades is a rolling settlement on a T+2 basis

What is a Depository? A depository is an organisation which holds securities (like shares, debentures, bonds, government securities, mutual fund units etc.) of investors in electronic form at the request of the investors through a registered Depository Participant

Circuit Breakers
In case of a 10% movement on either side of index, there would be a 1-hour market halt if the movement takes place before 1 p.m. In case the movement takes place at or after 1 p.m. but before 2.30 p.m. there will be a trading halt for ½ hour. In case the movement takes place at or after 2.30 p.m. there will be no trading halt at the 10% level and the market will continue trading. In case of a 15% movement of either side of index, there will be a 2-hour market halt if the movement takes place before 1 p.m. If the 15% trigger is reached on or after 1 p.m. but before 2 p.m., there will be a 1 hour halt. If the 15% trigger is reached on or after 2 p.m. the trading will halt for the remainder of the day. In case of a 20% movement of the index, the trading will be halted for the remainder of the day.

Circuit filters On individual stocks When applied to individual stocks, circuit filters are known as price bands or price filters. There are no circuits on the 30 stocks included in the Sensex or the 50 included in the Nifty. The filter bands are in the range of 2%, 5%, 10% and 20%.

Buy back of shares Buyback is the reverse of issue of shares by a company. In buy back, company offers to take back its shares owned by the investors at a specified price; this offer can be binding or optional to the investors.

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