PROJECT REPORTON

“CHANGING TRENDS IN SHARE MARKET”

Submitted to

In the partial fulfillmentOf the award of the degree of

MBA (Master of Business Administration)

Project guide: - Submitted by:- Ms. Srishti Sharma MANISH KHARE

MBA (II SEM)

RAI BUSINESS SCHOOL, BHOPAL

1

PREFACE

In this study behaviour of the share market has been

analysed, and changing trends which comes in last ten

years. For which I surveyed the market and interviewed

registered brokers, sub- brokers and investors through

which I analyze the customer behaviour, how the share

market affect. The study is all about capital market .The

capital market is the market for securities, where

companies and governments can raise long term funds. It

is a market in which money is lent for periods longer than

a year. The capital market includes the stock market and

the bond market. Financial regulators, such as the U.S.

Securities and Exchange Commission (SEC), oversee the

capital markets in their designated countries to ensure

that investors are protected against fraud.

The capital markets consist of the primary market and the

secondary market. The primary markets are where new

stock and bonds issues are sold (underwriting) to

investors. The secondary markets are where existing

securities are sold and bought from one investor or

speculator to another, usually on an exchange (e.g. the

New York Stock Exchange).

Share market is the part of secondary market. Here are

a lot of changes in today’s share market in comparison

to last ten years. With the perception in mind that

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initially, before ten years back investors were only from

big cities but now the scenario has been changed with

the retailing in this industry. Today small investors

concept is in trend that show now cities like, Bhopal,

where financial market is not enough smart but a good

number of customer’s and investors have started

investing this study is all about this changing scenario.

CONTENTS

Certificate____________________________________6

3

Declaration___________________________________7

Acknowledgement______________________________8

The Indian Capital Market_______________________9-31

An Overview

Other leading cities in stock market operation

Growth of Indian Stock Exchanges

Sensex and Nifty

History

Key Milestones

Myths of Stock Market

How Stock Market Works

Initial Public Offering__________________________32-35

Introduction

How to apply Public issue

How to make Payment for IPOs

Role of SEBI in process of IPO

DEMAT account______________________________36-38

Introduction

How to open Demat account

Document required

SEBI (Securities and Exchange Board of India)_____39-45

Introduction

The Board Comprises

Functions and Responsibilities

BSE (Bombay Stock Exchange) Introduction_______46-49

NSE (National Stock Exchange)_________________50-52

Introduction

NSE group

SENSEX____________________________________53-58

Introduction

SENSEX calculation Methodology

Concept of Free Float

4

Definition of Free Float

Function and Purpose of Stock Market

Depository__________________________________59-64

CDSL

NSDL

CSD

FII(Foreign Institutional Investor)________________65-72

Introduction

FII mean

Regulations

Participatory Notes___________________________73-77

Scams of Share Market________________________78-94

Harshad Mehta Scam

Ketan Parekhs Scam

Satyam Scam

Karvy IPO scam

List of registered Share Brokers and Sub- Brokers__95-109

Research Methodology_______________________110-118

Result analysis &Interpretation________________119-126

Suggestions_______________________________127-128

Conclusion_________________________________129-132

Questions for interview_______________________133-134

Biblography________________________________135-136

CERTIFICATE

This is to certify that the project report at

RELIANCE MONEY , BHOPAL

5

on

“CHANGING TRENDS IN SHARE MARKET

Submitted in partial fulfillment of the requirement for the award of the

degree of

MADURAI KAMARAJ UNIVERSITY,MADURAI

Is a record of bonafide training carried out by

MANISH KHARE

Under my supervision and guidance and that no part of this report has been submitted for the award of any one

degree/diploma/fellowship or similar titles or prizes.

PROJECT GUIDE

Signature:

Name : Mrs. SRISHTI SHARMA Signature & seal of the

Learning centerSTUDENT DECLARATION

I hereby declare that the project report conducted at

RELIANCE MONEY , BHOPAL

6

Under the guidance of

Mrs. Srishti sharma

Submitted in partial fulfillment of the requirement for the award of the

degree of

MASTER OF BUSINESS ADMINISTRATION(Industry integrated)

TO

MADURAI KAMARAJ UNIVERSITY, MADURAI

Is my original work and same has not been submitted for the award of any other degree /diploma/fellowship of other

similar titles or prizes.

Place : Bhopal Name: Manish khare

Date: Reg. No. A8750139

ACKNOWLEDGEMENT

I would like to thank my project guide Mrs. Srishti

Sharma for guiding me through my summer internship

and research project. His encouragement, time and

effort are greatly appreciated.

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I would like to thank Ms. Niti Jain Centre Manager, for

supporting me during this project and providing me an

opportunity to learn outside the class room. It was a

truly wonderful learning experience.

I would like to dedicate this project to my parents.

Without their help and constant support this project

would not have been possible.

Lastly I would like to thank all the respondents who

offered their opinions and suggestions through the

survey that was conducted by me in Bhopal.

Once again my gratitude to the Brokers, Sub-Brokers

and Investors of share market. For their kind co-

operation.

THE INDIAN CAPITAL MARKET

AN OVERVIEW

The Indian capital market is more than a century old. Its

history goes back to 1875, when 22 brokers formed the

Bombay Stock Exchange (BSE). Over the period, the Indian

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securities market has evolved continuously to become one

of the most dynamic, modern, and efficient securities

markets in Asia. Today,

Indian market confirms to best international practices and

standards both in terms of structure and in terms of

operating efficiency .Indian securities markets are mainly

governed by a) The Company’s Act1956, b) the Securities

Contracts (Regulation) Act 1956 (SCRA Act), and c) the

Securities and Exchange Board of India (SEBI) Act, 1992. A

brief background of these above regulations are given

below

a) The Companies Act 1956 deals with issue, allotment

and transfer of securities and various aspects relating to

company management. It provides norms for disclosures

in the public issues, regulations for underwriting, and the

issues pertaining to use of premium and discount on

various issues.

b) SCRA provides regulations for direct and indirect control

of stock exchanges with an aim to prevent undesirable

transactions in securities. It provides regulatory

jurisdiction to Central Government over stock exchanges,

contracts in securities and listing of securities on stock

exchanges.

c) The SEBI Act empowers SEBI to protect the interest of

investors in the securities market, to promote the

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development of securities market and to regulate the

security market.

The Indian securities market consists of primary (new

issues) as well as secondary (stock) market in both equity

and debt. The primary market provides the channel for

sale of new securities, while the secondary market deals in

trading of securities previously issued. The issuers of

securities issue (create and sell) new securities in the

primary market to raise funds for investment. They do so

either through public issues or private placement. There

are two major types of issuers who issue securities. The

corporate entities issue mainly debt and equity

instruments (shares, debentures, etc.), while the

governments (central and state governments) issue debt

securities (dated securities, treasury bills). The secondary

market enables participants who hold securities to adjust

their holdings in response to changes in their assessment

of risk and return. A variant of secondary market is the

forward market, where securities are traded for future

delivery and payment in the form of futures and options.

The futures and options can be on individual stocks or

basket of stocks like index. Two exchanges, namely

National Stock Exchange (NSE) and the Stock Exchange,

Mumbai (BSE) provide trading of derivatives in single

stock futures, index futures, single stock options and index

options. Derivatives trading commenced in India in June

2000

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Other leading cities in stock market operations

Ahmedabad gained importance next to Bombay with

respect to cotton textile industry. After 1880, many mills

originated from Ahmedabad and rapidly forged ahead. As

new mills were floated, the need for a Stock Exchange at

Ahmedabad was realized and in 1894 the brokers formed

"The Ahmedabad Share and Stock Brokers' Association".

What the cotton textile industry was to Bombay and

Ahmedabad, the jute industry was to Calcutta. Also tea

and coal industries were the other major industrial groups

in Calcutta. After the Share Mania in 1861-65, in the

1870's there was a sharp boom in jute shares, which was

followed by a boom in tea shares in the 1880's and

1890's; and a coal boom between 1904 and 1908. On June

1908, some leading brokers formed "The Calcutta Stock

Exchange Association".

In the beginning of the twentieth century, the industrial

revolution was on the way in India with the Swadeshi

Movement; and with the inauguration of the Tata Iron and

Steel Company Limited in 1907, an important stage in

industrial advancement under Indian enterprise was

reached.

Indian cotton and jute textiles, steel, sugar, paper and

flour mills and all companies generally enjoyed

phenomenal prosperity, due to the First World War.

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In 1920, the then demure city of Madras had the maiden

thrill of a stock exchange functioning in its midst, under

the name and style of "The Madras Stock Exchange" with

100 members. However, when boom faded, the number of

members stood reduced from 100 to 3, by 1923, and so it

went out of existence.

In 1935, the stock market activity improved, especially in

South India where there was a rapid increase in the

number of textile mills and many plantation companies

were floated. In 1937, a stock exchange was once again

organized in Madras - Madras Stock Exchange Association

(Pvt) Limited. (In 1957 the name was changed to Madras

Stock Exchange Limited).

Lahore Stock Exchange was formed in 1934 and it had a

brief life. It was merged with the Punjab Stock Exchange

Limited, which was incorporated in 1936.

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp

boom which was followed by a slump. But, in 1943, the

situation changed radically, when India was fully mobilized

as a supply base.

On account of the restrictive controls on cotton, bullion,

seeds and other commodities, those dealing in them found

in the stock market as the only outlet for their activities.

They were anxious to join the trade and their number was

swelled by numerous others. Many new associations were

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constituted for the purpose and Stock Exchanges in all

parts of the country were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur

Stock Exchange Limited (1940) and Hyderabad Stock

Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share

Brokers' Association Limited and the Delhi Stocks and

Shares Exchange Limited - were floated and later in June

1947, amalgamated into the Delhi Stock Exchange

Association Limited.

There are two major indicators of Indian capital market-

SENSEX & NIFTY:

What are the Sensex & the Nifty?

The Sensex is an "index". What is an index? An index is

basically an indicator. It gives you a general idea about

whether most of the stocks have gone up or most of the

stocks have gone down. The Sensex is an indicator of all

the major companies of the BSE. The Nifty is an indicator

of all the major companies of the NSE. 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

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the major stocks on the BSE have gone down. Just like the

Sensex represents the top stocks of the BSE, the Nifty

represents the top stocks of the NSE. Just in case you are

confused, the BSE, is the Bombay Stock Exchange and the

NSE is the National Stock Exchange. The BSE is situated at

Bombay and the NSE is situated at Delhi. These are the

major stock exchanges in the country. There are other

stock exchanges like the Calcutta Stock Exchange etc. but

they are not as popular as the BSE and the NSE. Most of

the stock trading in the country is done though the BSE &

the NSE . Besides Sensex and the Nifty there are many

other indexes. There is an index that gives you an idea

about whether the mid-cap stocks go up and down. This is

called the “BSE Mid-cap Index”. There are many other

types of index. Unless stock markets provide

professionalized service, small investors and foreign

investors will not be interested in capital market

operations. And capital market being one of the major

source of long-term finance for industrial projects, India

cannot afford to damage the capital market path. In this

regard NSE gains vital importance in the Indian capital

market but if we see the sensex & nifty graph there is a

great variation.

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HISTORICAL PERSPECTIVE

The history of Indian stock market is about 200 years old.

Prior to this the hundis and bills of exchange were in use,

specially in the medieval period, which can be considered

as a form of virtual stock trading but it was certainly not

an organized stock trading. The recorded stock trading

can be traced only after the arrival of East India Company.

The first organized stock market that was governed by the

rules and regulations came into the existence in the form

of ‘The Native Share and Stock Brokers' Association in

1875. After gone through numerous changes this

association is today better as Bombay Stock Exchange,

which remains the premier stock exchange since its

inception. During this period several other exchanges

were launched and some of which were closed also.

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Presently, there are 19 recognized stock exchanges out of

which four are national level exchanges and the remaining

are regional exchanges. National Stock Exchange,

established in 1992, was the last exchange. Although the

regional level exchanges are in existence the volume of

trading in these exchanges is negligible. National Stock

Exchange and Bombay Stock Exchange are the leaders of

Indian Securities Market in terms of listing, trading and

volumes. The last 15 years of the Indian securities market

can be considered as the most important part of the

history where the market gone through the post

liberalization era of Indian economy and witnessed the

formation of Securities and Exchange Board of India (SEBI)

which brought substantial transparency in share market

practices and thus managed to bring in trust of not only

domestic investors but also the international ones.

The Big Picture of share market

As investors, most of us tend to forget about all of the

good years and only focus on the bad. The broad markets

have been heading up for about four years, so the

thoughts of what happened in 1999-2002 are well behind

us. But now that the markets are volatile, there is a lot of

talk about the subprime mortgage industry, a weak dollar,

and everyone begins to completely forget about how well

the past four years have been and only focus on the last

few months or weeks complaining how bad it is. Things

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can certainly continue to get worse, but you have to look

at things in context.

Remember, what goes up, must come down. Not only

does the stock market cycle, but there is a business cycle

as well. We will always have various times that are great,

and those that aren’t as great, but you can’t lose sight of

the big picture.

Take a look at the following 12 years in a colorized format.

Green identifies periods of strong growth. Yellow indicates

a period of volatility or no real direction, and red shows a

period of a downward trend. Based on this, is it any

surprise that markets are becoming volatile and possibly

trending downward?

For even more similarities, scroll back up and look at the

first chart from 1996-1999. Now, scroll down and look at

the 2005-Present image. Notice how similar they are? The

markets went up for completely different reasons, yet are

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behaving almost the same. All you have to do is look at

the following few years to see what might be in store for

us over the coming year or two. Will history repeat itself?

There is no way to tell, and anything could happen to

make all of this information worthless, but you do have to

at least consider the past trends and understand that

there is a chance the market will behave similarly and

we’ll enter a period of significant decline.

Keep Doing What You’re Doing

Sure, the market may be a bit unstable right now, and we

may certainly be headed for a time where the market falls

further, but that shouldn’t be of much concern to you if

you’re investing for the next 10, 20, 30 or more years. If

you want to try and time the market or predict what the

next hot sector is, that’s fine, but the best thing most

people can do is to just continuously invest in

a diversified portfolio. If you keep buying even as the

market falls, you’re just adding more shares at a lower

price.

Could you make more money if you only invested at the

low points and sold at the high points compared to dollar

cost averaging? Sure, but the likelihood of succeeding on

a regular basis is low. For most people, the best thing to

do is to just continue investing bi-weekly, monthly, or

quarterly into the same diversified portfolio regardless of

market conditions. When markets are choppy or headed

down, you’re just buying stocks or funds on sale. All you

have to do is look back a few years to see that even

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though the market might go down, it will eventually come

back up again.

KEY MILESTONES

Following is the timeline on the rise and rise of the Sensex

through Indian stock market history.

1830's Business on corporate stocks and shares in Bank

and Cotton presses started in Bombay.

1860-1865 Cotton price bubble as a result of the

American Civil War

1870 - 90's Sharp increase in share prices of jute

industries followed by a boom in tea stocks and coal

1900s

1978-79 Base year of Sensex, defined to be 100.

1986 Sensex first compiled. Using a market Capitalization

Weighted methodology for 30 component stocks

representing well-established companies across key

sectors.

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Since 1990

1000, July 25, 1990 On July 25, 1990, the Sensex

touched the magical four-digit figure for the first time and

closed at 1,001 in the wake of a good monsoon season

and excellent corporate results.

July 1991 Rupee devalued by 18-19 %

2000, January 15, 1992 On January 15, 1992, the

Sensex crossed the 2,000-mark and closed at 2,020

followed by the liberal economic policy initiatives

undertaken by the then prime minister P.V.Narasimha rao.

3000, February 29, 1992 On February 29, 1992, the

Sensex surged past the 3000 mark in the wake of the

market-friendly Budget announced by the then Finance

Minister, Dr Manmohan Singh.

4000, March 30, 1992 On March 30, 1992, the Sensex

crossed the 4,000-mark and closed at 4,091 on the

expectations of a liberal export-import policy. It was then

that the Harshad Mehta scam hit the markets and Sensex

witnessed unabated selling.

5000, October 8, 1999 On October 8, 1999, the Sensex

crossed the 5,000-mark as the BJP-led coalition won the

majority in the 13th Lok Sabha election.

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6000, February 11, 2000 On February 11, 2000, the

infotech boom helped the Sensex to cross the 6,000-mark

and hit and all time high of 6,006.

6151, Feb 14, 2000 Tops. Index declines until Sept 2001

and loses half the value. Coincides with dot-com bubble

burst.

2595, Sept 21, 2001 Bottoms.

7000, June 20, 2005 On June 20, 2005, the news of the

settlement between the Ambani brothers boosted investor

sentiments and the scrips of RIL, Reliance Energy,

Reliance Capital, and IPCL made huge gains. This helped

the Sensex crossed 7,000 points for the first time.

8000, September 8, 2005 On September 8, 2005, the

Bombay Stock Exchange's benchmark 30-share index --

the Sensex -- crossed the 8000 level following brisk buying

by foreign and domestic funds in early trading.

9000, November 28, 2005 The Sensex on November 28,

2005 crossed the magical figure of 9000 to touch 9000.32

points during mid-session at the Bombay Stock Exchange

on the back of frantic buying spree by foreign institutional

investors and well supported by local operators as well as

retail investors.

10,000, February 6, 2006 The Sensex on February 6,

2006 touched 10,003 points during mid-session. The

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Sensex finally closed above the 10K-mark on February 7,

2006.

11,000, March 21, 2006 The Sensex on March 21, 2006

crossed the magical figure of 11,000 and touched a life-

time peak of 11,001 points during mid-session at the

Bombay Stock Exchange for the first time. However, it was

on March 27, 2006 that the Sensex first closed at over

11,000 points.

12,000, April 20, 2006 The Sensex on April 20, 2006

crossed the 12,000-mark and closed at a peak of 12,040

points for the first time.

13,000, October 30, 2006 The Sensex on October 30,

2006 crossed the magical figure of 13,000 and closed at

13,024.26 points, up 117.45 points or 0.9%. It took 135

days for the Sensex to move from 12,000 to 13,000 and

123 days to move from 12,500 to 13,000.

14,000, December 5, 2006 The Sensex on December 5,

2006 crossed the 14,000-mark to touch 14,028 points. It

took 36 days for the Sensex to move from 13,000 to the

14,000 mark.

15,000, July 6, 2007 The Sensex on July 6, 2007 crossed

the magical figure of 15,000 to touch 15,005 points in

afternoon trade. It took seven months for the Sensex to

move from 14,000 to 15,000 points.

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16,000, September 19, 2007 The Sensex scaled yet

another milestone during early morning trade on

September 19, 2007. Within minutes after trading began,

the Sensex crossed 16,000, rising by 450 points from the

previous close. The 30-share Bombay Stock Exchange's

sensitive index took 53 days to reach 16,000 from 15,000.

Nifty also touched a new high at 4659, up 113 points.

The Sensex finally ended with a gain of 654 points at

16,323. The NSE Nifty gained 186 points to close at 4,732.

17,000, September 26, 2007 The Sensex scaled yet

another height during early morning trade on September

26, 2007. Within minutes after trading began, the Sensex

crossed the 17,000-mark. Some profit taking towards the

end, saw the index slip into red to 16,887 - down 187

points from the day's high. The Sensex ended with a gain

of 22 points at 16,921.

18,000, October 09, 2007 The BSE Sensex crossed the

18,000-mark on October 09, 2007. It took just 8 days to

cross 18,000 points from the 17,000 mark. The index

zoomed to a new all-time intra-day high of 18,327. It

finally gained 789 points to close at an all-time high of

18,280. The market set several new records including the

biggest single day gain of 789 points at close, as well as

the largest intra-day gains of 993 points in absolute term

backed by frenzied buying after the news of the UPA and

Left meeting on October 22 put an end to the worries of

an impending election.

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19,000, October 15, 2007 The Sensex crossed the

19,000-mark backed by revival of funds-based buying in

blue chip stocks in metal, capital goods and refinery

sectors. The index gained the last 1,000 points in just four

trading days. The index touched a fresh all-time intra-day

high of 19,096, and finally ended with a smart gain of 640

points at 19,059.The Nifty gained 242 points to close at

5,670.

20,000, October 29, 2007 The Sensex crossed the

20,000 mark on the back of aggressive buying by funds

ahead of the US Federal Reserve meeting. The index took

only 10 trading days to gain 1,000 points after the index

crossed the 19,000-mark on October 15. The major drivers

of today's rally were index heavyweights Larsen and

Toubro, Reliance Industries, ICICI Bank, HDFC Bank and

SBI among others. The 30-share index spurted in the last

five minutes of trade to fly-past the crucial level and

scaled a new intra-day peak at 20,024.87 points before

ending at its fresh closing high of 19,977.67, a gain of

734.50 points. The NSE Nifty rose to a record high

5,922.50 points before ending at 5,905.90, showing a

hefty gain of 203.60 points.

21,000, January 8, 2008 The sensex peaks. It crossed

the 21,000 mark in intra-day trading after 49 trading

sessions. This was backed by high market confidence of

increased FII investment and strong corporate results for

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the third quarter. However, it later fell back due to profit

booking.

15,200, June 13, 2008 The sensex closed below 15,200

mark, Indian market suffer with major downfall from

January 21,2008

14,220, June 25, 2008 The sensex touched an intra day

low of 13,731 during the early trades, then pulled back

and ended up at 14,220 amidst a negative sentiment

generated on the Reserve Bank of India hiking CRR by 50

bps. FII outflow continued in this week.

12,822, July 2, 2008 The sensex hit an intra day low of

12,822.70 on July 2nd, 2008. This is the lowest that it has

ever been in the past year. Six months ago, on January

10th, 2008, the market had hit an all time high of

21206.70. This is a bad time for the Indian markets,

although Reliance and Infosys continue to lead the way

with mostly positive results. Bloomberg lists them as the

top two gainers for the Sensex, closely followed by ICICI

Bank and ITC Ltd.

11801.70, Oct 6, 2008 The sensex closed at 11801.70

hitting the lowest in the past 2 years.

10527, Oct 10, 2008 The Sensex today closed at

10527,800.51 points down from the previous day having

seen an intraday fall of as large as 1063 points. Thus,this

week turned out to be the week with largest percentage

fall in the Sensex.

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14284.21, May 18, 2009 After the result of 15th indian

general election Sensex gained 2110.79 points form the

previous close of 12173.42 these creates a new histroy in

Indian Market. In the Opening Trade itself sensex gain

15% from the previous day close this leads to the

suspension of 2 hours trade. After 2 hours sensex again

surged this leads to the suspension of full day trading.

14200

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Myths of stock market

1. You can tell if a Stock is cheap or expensive by the

Price to Earnings Ratio.

False: PE ratios are easy to calculate, that is why they

are listed in newspapers etc. But you cannot compare PE’s

on companies from different industries, as the variables

those companies and industries have are different. Even

comparing within an industry, PE’s don’t tell you about

many financial fundamentals and nothing about a stock’s

value.

2. To make Money in the Stock Market, you must

assume High Risks.

False: Tips to Lower your Risk:

Do not put more than 10% of your money into any

one stock

Do not own more than 2-3 stocks in any industry

Buy your stocks over time, not all at once

Buy stocks with consistent and predictable

earnings growth

Buy stocks with growth rates greater than the total

of inflation and interest rates

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Use stop-loss orders to limit your risk

3. Buy Stocks on the Way Down and Sell on the Way

Up.

False: People believe that a falling stock is cheap and a

rising stock is too expensive. But on the way down, you

have no idea how much further it may fall. If a stock is

rising, especially if it has broken previous highs, there are

no unhappy owners who want to dump it. If the stock is

fairly valued, it should continue to rise.

4. You can Hedge Inflation with Stocks.

False: When interest rates rise, people start to pull money

out of the market and into bonds, so that pushes prices

down. Plus the cost of business goes up, so corporate

earnings go down, along with the stock prices.

5. Young People can afford to take High Risk.

False: The only thing true about this is that young people

have time on their side if they lose all their money. But

young people have little disposable income to risk losing.

If they follow the tips above, they can make money over

many years. Young people have the time to be patient.

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How stock market works

In order to understand what stocks are and how stock

markets work, we need to dive into history--specifically,

the history of what has come to be known as the

corporation, or sometimes the limited liability company

(LLC). Corporations in one form or another have been

around ever since one guy convinced a few others to pool

their resources for mutual benefit.

The first corporate charters were created in Britain as

early as the sixteenth century, but these were generally

what we might think of today as a public corporation

owned by the government, like the postal service.

Privately owned corporations came into being

gradually during the early 19th century in the United

States , United Kingdom and western Europe as the

governments of those countries started allowing anyone

to create corporations.

In order for a corporation to do business, it needs to get

money from somewhere. Typically, one or more people

contribute an initial investment to get the company off the

ground. These entrepreneurs may commit some of their

own money, but if they don't have enough, they will need

to persuade other people, such as venture capital

investors or banks, to invest in their business.

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They can do this in two ways: by issuing bonds, which are

basically a way of selling debt (or taking out a loan,

depending on your perspective), or by issuing stock, that

is, shares in the ownership of the company.

Long ago stock owners realized that it would be

convenient if there were a central place they could go to

trade stock with one another, and the public stock

exchange was born. Eventually, today's stock markets

grew out of these public places.

30

IPO – Initial Public Offering

Public issues can be classified into Initial Public offerings

and further public offerings. In a public offering, the issuer

makes an offer for new investors to enter its shareholding

family. The issuer company makes detailed disclosures as

per the DIP guidelines in its offer document and offers it

for subscription. Initial Public Offering (IPO ) is when an

unlisted company makes either a fresh issue of securities

or an offer for sale of its existing securities or both for the

first time to the public. This paves way for listing and

trading of the issuer’s securities.

IPO is New shares Offered to the public in the Primary

Market .The first time the company is traded on the stock

exchange. A prospectus is issued to read about its risk

before investing. IPO is a company's first sale of stock to

the public. Securities offered in an IPO are often, but not

always, those of young, small companies seeking outside

equity capital and a public market for their stock.

Investors purchasing stock in IPOs generally must be

prepared to accept very large risks for the possibility of

large gains. Sometimes, Just before the IPO is launched,

Existing share Holders get a very liberal bonus issues as a

reward for their faith in risking money when the project

was new

31

How to apply to a public issue ?

When a company floats a public issue or IPO, it prints

forms for application to be filled by the investors. Public

issues are open for a few days only. As per law, any public

issue should be kept open for a minimum of 3days and a

maximum of 21 days. For issues, which are underwritten

by financial institutions, the offer should be kept open for

a minimum of 3 days and a maximum of 21 days. For

issues, which are underwritten by all India financial

institutions, the offer should be kept open for a maximum

of 10 days. Generally, issues are kept open for only 3 to 4

days. The duly complete application from, accompanied

by cash, cheque, DD or stock invest should be deposited

before the closing date as per the instruction on the from.

IPO's by investment companies (closed end funds)

usually contain underwriting fees which represent a load

to buyers.

  Before applying for any IPO , analyse the following

factors:

1. Who are the Promoters ? What is their credibility and

track record ?

2. What is the company manufacturing or providing

services - Product, its potential

3. Does the Company have any Technology tie-up ? if yes ,

What is the reputation of the collaborators

32

4. What has been the past performance of the Company

offering the IPO?

5. What is the Project cost, What are the means of

financing and profitability projections?

6. What are the Risk factors involved ?

7. Who has appraised the Project ? In India Projects

apprised by IDBI and ICICI have more credibility than small

Merchant Bankers

 

How to make payments for IPOs:

The payment terms of any IPO or Public issue is fixed by

the company keeping in view its fund requirements and

the statutory regulations. In general, companies stipulate

that either the entire money should be paid along with the

application or 50 percent of the entire amount be paid

along with the application and rest on allotment. However,

if the funds requirements is staggered, the company may

ask for the money in calls, that is, the company demands

for the money after allotment as and when the cash flow

demands. As per the statutory requirements, for public

issue large than Rs. 250 crore, the money is to be

collected as under:

25 per cent on application

25 per cent on allotment

33

50 per cent in two or more calls

The role of SEBI in the process of IPO

SEBI regulates the IPO process and issued detailed

Guidelines under section 11 of the SEBI Act, 1992 in the

name of SEBI (Disclosure and Investors Protection)

Guidelines, 2002 generally known as DIP Guidelines. It is

also noted that under the provisions sections 55 of the

Companies Act, 1956. the matters pertaining to issue and

transfer of securities and non payment of dividend in case

of listed companies, the companies intend to get listed are

being administered by SEBI.

DEMAT ACCOUNT

Demat refers to a dematerialised account.

34

Though the company is under obligation to offer the

securities in both physical and demat mode, you have

the choice to receive the securities in either mode.

If you wish to have securities in demat mode, you need

to indicate the depository and also of the depository

participant with whom you have depository account in

your application.

It is, however desirable that you hold securities in demat

form as physical securities carry the risk of being fake,

forged or stolen.

Just as you have to open an account with a bank if you

want to save your money, make cheque payments etc,

Nowadays, you need to open a demat account if you

want to buy or sell stocks.

So it is just like a bank account where actual money is

replaced by shares. You have to approach the DPs

(remember, they are like bank branches), to open your

demat account. Let's say your portfolio of shares looks

like this: 150 of Infosys, 50 of Wipro, 200 of HLL and 100

of ACC. All these will show in your demat account. So

you don't have to possess any physical certificates

showing that you own these shares. They are all held

electronically in your account. As you buy and sell

the shares, they are adjusted in your account. Just like a

bank passbook or statement, the DP will provide you

with periodic statements of holdings and transactions.

35

The most important thing required to trade in share

market is Demat account. Demat or Dematerialized

account is to store stocks in electronics form. It is just like

opening a bank account to store your money. Now nobody

is interested to keep shares in physical forms and going

for electronic based filing of shares. This has changed the

style of operation in main Indian stock markets like BSE

Sensex ( Bombay Stock Exchange Sensitive Index) and

Nifty (National Stock Exchange of India) and its brokers.

How to Open a Demat Account

It is like opening a bank account. You have to approach a

depository participants to open an online trading or demat

account. Most of the banks are DPs too.

Documents Required

You will have to submit few documents with the

application form to open a demat account. As per latest

Govt of India rule PAN (Personal Account Number) card is

must for opening a demat account. These are the

documents required to open a demat account

1. Photo Copy of PAN Card (Mandatory)

2. Two Passport size photos

3. Address Proof – Ration Card/Passport/Driving

License/Voter’s ID Card/BSNL Telephone/LIC Policy

36

4. Latest Bank Statement and photocopy of Bank

Passbook.

SEBI – Introduction

In 1988 the Securities and Exchange Board of India (SEBI)

was established by the Government of India through an

executive resolution, and was subsequently upgraded as a

fully autonomous body (a statutory Board) in the year

1992 with the passing of the Securities and Exchange

Board of India Act (SEBI Act) on 30th January 1992. In

37

place of Government Control, a statutory and autonomous

regulatory board with defined responsibilities, to cover

both development & regulation of the market, and

independent powers have been set up. Paradoxically this

is a positive outcome of the Securities Scam of 1990-91. 

The basic objectives of the Board were identified

as:

to protect the interests of investors in securities;

to promote the development of Securities Market;

to regulate the securities market and

for matters connected therewith or incidental

thereto.

Since its inception SEBI has been working targetting the

securities and is attending to the fulfillment of its

objectives with commendable zeal and dexterity. The

improvements in the securities markets like capitalization

requirements, margining, establishment of clearing

corporations etc. reduced the risk of credit and also

reduced the market.

SEBI has introduced the comprehensive regulatory

measures, prescribed registration norms, the eligibility

criteria, the code of obligations and the code of conduct

for different intermediaries like, bankers to issue,

merchant bankers, brokers and sub-brokers, registrars,

portfolio managers, credit rating agencies, underwriters

and others. It has framed bye-laws, risk identification and

38

risk management systems for Clearing houses of stock

exchanges, surveillance system etc. which has made

dealing in securities both safe and transparent to the end

investor.

Another significant event is the approval of trading

in stock indices (like S&P CNX Nifty & Sensex) in 2000. A

market Index is a convenient and effective product

because of the following reasons:

It acts as a barometer for market behavior;

It is used to benchmark portfolio performance;

It is used in derivative instruments like index futures

and index options;

It can be used for passive fund management as in case

of Index Funds.

Two broad approaches of SEBI is to integrate the

securities market at the national level, and also to

diversify the trading products, so that there is an increase

in number of traders including banks, financial

institutions,insurance companies, mutual funds, primary

dealers etc. to transact through the Exchanges. In this

context the introduction of derivatives trading through

Indian Stock Exchanges permitted by SEBI in 2000 AD is a

real landmark.

SEBI appointed the L. C. Gupta Committee in 1998 to

recommend the regulatory framework for derivatives

trading and suggest bye-laws for Regulation and Control of

39

Trading and Settlement of Derivatives Contracts. The

Board of SEBI in its meeting held on May 11, 1998

accepted the recommendations of the committee and

approved the phased introduction of derivatives trading in

India beginning with Stock Index Futures. The Board also

approved the "Suggestive Bye-laws" as recommended by

the Dr LC Gupta Committee for Regulation and Control of

Trading and Settlement of Derivatives Contracts.

SEBI then appointed the J. R. Verma Committee to

recommend Risk Containment Measures (RCM) in the

Indian Stock Index Futures Market. The report was

submitted in November 1998.

However the Securities Contracts (Regulation) Act, 1956

(SCRA) required amendment to include "derivatives" in

the definition of securities to enable SEBI to introduce

trading in derivatives. The necessary amendment was

then carried out by the Government in 1999. The

Securities Laws (Amendment) Bill, 1999 was introduced. In

December 1999 the new framework was approved.

Derivatives have been accorded the status of `Securities'.

The ban imposed on trading in derivatives in 1969 under a

notification issued by the Central Government was

revoked. Thereafter SEBI formulated the necessary

regulations/bye-laws and intimated the Stock Exchanges

in the year 2000. The derivative trading started in India at

NSE in 2000 and BSE started trading in the year 2001. 

40

SEBI is the Regulator for the Securities Market in India.

Originally set up by the Government of India in 1988, it

acquired statutory form in 1992 with SEBI Act 1992 being

passed by the Indian Parliament.Chaired by C B Bhave,

SEBI is headquartered in the popular business district

of Bandra-Kurla complex in Mumbai, and has Northern,

Eastern, Southern and Western regional offices in New

Delhi, Kolkata, Chennai and Ahmedabad.

Organisation Structure

Chandrasekhar Bhaskar Bhave is the sixth chairman of the

Securities Market Regulator. Prior to taking charge as

Chairman SEBI, he had been the chairman of NSDL

(National Securities Depository Limited) ushering in

paperless securities. Prior to his stint at NSDL, he had

served SEBI as a Senior Executive Director. He is a

former Indian Administrative Service officer of the 1975

batch.

The Board comprises

Name Designation As per

Mr CB Bhave Chairman SEBICHAIRMAN (S.4(1)(a) of the SEBI Act, 1992)

Mr KP Krishnan Joint Secretary, Ministry of

Member (S.4(1)(b) of the SEBI Act,

41

Finance 1992)

Mr Anurag GoelSecretary, Ministry of Corporate Affairs

Member (S.4(1)(b) of the SEBI Act, 1992)

Dr G Mohan GopalDirector, National Judicial Academy, Bhopal

Member (S.4(1)(d) of the SEBI Act, 1992)

Mr MS SahooWhole Time Member, SEBI

Member (S.4(1)(d) of the SEBI Act, 1992)

Dr KM AbrahamWhole Time Member, SEBI

Member (S.4(1)(d) of the SEBI Act, 1992)

Mr Mohandas Pai Director, InfosysMember (S.4(1)(d) of the SEBI Act, 1992)

Functions and Responsibilities

SEBI has to be responsive to the needs of three groups,

which constitute the market:

the issuers of securities

the investors

the market intermediaries.

SEBI has three functions rolled into one body quasi-

legislative, quasi-judicial and quasi-executive. It drafts

42

regulations in its legislative capacity, it conducts

investigation and enforcement action in its executive

function and it passes rulings and orders in its judicial

capacity. Though this makes it very powerful, there is an

appeals process to create accountability. There is a

Securities Appellate Tribunal which is a three member

tribunal and is presently headed by a former Chief Justice

of a High court - Mr. Justice NK Sodhi. A second appeal lies

directly to the Supreme Court.

SEBI has enjoyed success as a regulator by pushing

systemic reforms aggressively and successively (e.g. the

quick movement towards making the markets electronic

and paperless rolling settlement on T+2 basis). SEBI has

been active in setting up the regulations as required under

law. It is regulating body.

43

INTRODUCTION –BSE

Bombay Stock Exchange is the oldest stock exchange in

Asia with a rich heritage, now spanning three centuries in

its 133 years of existence. What is now popularly known

as BSE was established as "The Native Share & Stock

Brokers' Association" in 1875.

BSE is the first stock exchange in the country which

obtained permanent recognition (in 1956) from the

Government of India under the Securities Contracts

(Regulation) Act 1956. BSE's pivotal and pre-eminent role

in the development of the Indian capital market is widely

recognized. It migrated from the open outcry system to an

online screen-based order driven trading system in 1995.

Earlier an Association Of Persons (AOP), BSE is now a

corporatised and demutualised entity incorporated under

the provisions of the Companies Act, 1956, pursuant to

the BSE (Corporatisation and Demutualisation) Scheme,

2005 notified by the Securities and Exchange Board of

India (SEBI). With demutualisation, BSE has two of world's

best exchanges, Deutsche Börse and Singapore Exchange,

as its strategic partners.

44

Over the past 133 years, BSE has facilitated the growth of

the Indian corporate sector by providing it with an efficient

access to resources. There is perhaps no major corporate

in India which has not sourced BSE's services in raising

resources from the capital market.

Today, BSE is the world's number 1 exchange in terms of

the number of listed companies and the world's 5th in

transaction numbers. The market capitalization as on

December 31, 2007 stood at USD 1.79 trillion . An investor

can choose from more than 4,700 listed companies, which

for easy reference, are classified into A, B, S, T and Z

groups.

The BSE Index, SENSEX, is India's first stock market index

that enjoys an iconic stature , and is tracked worldwide. It

is an index of 30 stocks representing 12 major sectors.

The SENSEX is constructed on a 'free-float' methodology,

and is sensitive to market sentiments and market realities.

Apart from the SENSEX, BSE offers 21 indices, including 12

sectoral indices. BSE has entered into an index

cooperation agreement with Deutsche Börse. This

agreement has made SENSEX and other BSE indices

available to investors in Europe and America. Moreover,

Barclays Global Investors (BGI), the global leader in ETFs

through its iShares® brand, has created the 'iShares®

BSE SENSEX India Tracker' which tracks the SENSEX. The

ETF enables investors in Hong Kong to take an exposure to

the Indian equity market.

45

The first Exchange Traded Fund (ETF) on SENSEX, called

"SPIcE" is listed on BSE. It brings to the investors a trading

tool that can be easily used for the purposes of

investment, trading, hedging and arbitrage. SPIcE allows

small investors to take a long-term view of the market.

BSE provides an efficient and transparent market for

trading in equity, debt instruments and derivatives. It has

a nation-wide reach with a presence in more than 359

cities and towns of India. BSE has always been at par with

the international standards. The systems and processes

are designed to safeguard market integrity and enhance

transparency in operations. BSE is the first exchange in

India and the second in the world to obtain an ISO

9001:2000 certification. It is also the first exchange in the

country and second in the world to receive Information

Security Management System Standard BS 7799-2-2002

certification for its BSE On-line Trading System (BOLT).

BSE continues to innovate. In recent times, it has become

the first national level stock exchange to launch its

website in Gujarati and Hindi to reach out to a larger

number of investors. It has successfully launched a

reporting platform for corporate bonds in India christened

the ICDM or Indian Corporate Debt Market and a unique

ticker-cum-screen aptly named 'BSE Broadcast' which

enables information dissemination to the common man on

the street.

46

In 2006, BSE launched the Directors Database and ICERS

(Indian Corporate Electronic Reporting System) to

facilitate information flow and increase transparency in

the Indian capital market. While the Directors Database

provides a single-point access to information on the

boards of directors of listed companies, the ICERS

facilitates the corporate in sharing with BSE their

corporate announcements.

47

INTRODUCTION – NATIONAL STOCK EXCHANGE

The National Stock Exchange (NSE), located in Bombay,

is India's first debt market. It was set up in 1993 to

encouragestock exchange reform through system

modernization and competition. It opened for trading in

mid-1994. It was recently accorded recognition as a stock

exchange by the Department of Company Affairs. The

instruments traded are, treasury bills, government

security and bonds issued by public sector companies. 

The Organisation

The National Stock Exchange of India Limited has genesis

in the report of the High Powered Study Group on

Establishment of New Stock Exchanges, which

recommended promotion of a National Stock Exchange by

financial institutions (FIs) to provide access to investors

from all across the country on an equal footing. Based on

the recommendations, NSE was promoted by leading

Financial Institutions at the behest of the Government of

India and was incorporated in November 1992 as a tax-

paying company unlike other stock exchanges in the

country. 

On its recognition as a stock exchange under the

Securities Contracts (Regulation) Act, 1956 in April 1993,

NSE commenced operations in the Wholesale Debt Market

48

(WDM) segment in June 1994. The Capital Market

(Equities) segment commenced operations in November

1994 and operations in Derivatives segment commenced

in June 2000.

Our Group

NSCCL

      

        NCCL NSETECH

IISL

      

 

       NSE NSE.IT

   

DotExIntl. Ltd.

 

NSDL

Listing

49

NSE plays an important role in helping an Indian

companies access equity capital, by providing a liquid and

well-regulated market. NSE has about 1319 companies

listed representing the length, breadth and diversity of the

Indian economy which includes from hi-tech to heavy

industry, software, refinery, public sector units,

infrastructure, and financial services. Listing on NSE raises

a company’s profile among investors in India and abroad.

Trade data is distributed worldwide through various news-

vending agencies. More importantly, each and every NSE

listed company is required to satisfy stringent financial,

public distribution and management requirements. High

listing standards foster investor confidence and also bring

credibility into the markets.

NSE lists securities in its Capital Market (Equities) segment

and its Wholesale Debt Market segment

Introduction of SENSEX

SENSEX, first compiled in 1986, was calculated on a

"Market Capitalization-Weighted" methodology of 30

50

component stocks representing large, well-established and

financially sound companies across key sectors. The base

year of SENSEX was taken as 1978-79. SENSEX today is

widely reported in both domestic and international

markets through print as well as electronic media. It is

scientifically designed and is based on globally accepted

construction and review methodology. Since September 1,

2003, SENSEX is being calculated on a free-float market

capitalization methodology. The "free-float market

capitalization-weighted" methodology is a widely followed

index construction methodology on which majority of

global equity indices are based; all major index providers

like MSCI, FTSE, STOXX, S&P and Dow Jones use the free-

float methodology.

The growth of the equity market in India has been

phenomenal in the present decade. Right from early

nineties, the stock market witnessed heightened activity

in terms of various bull and bear runs. In the late nineties,

the Indian market witnessed a huge frenzy in the 'TMT'

sectors. More recently, real estate caught the fancy of the

investors. SENSEX has captured all these happenings in

the most judicious manner. One can identify the booms

and busts of the Indian equity market through SENSEX. As

the oldest index in the country, it provides the time series

data over a fairly long period of time (from 1979 onwards).

Small wonder, the SENSEX has become one of the most

prominent brands in the country.

51

SENSEX Calculation Methodology

SENSEX is calculated using the "Free-float Market

Capitalization" methodology, wherein, the level of index at

any point of time reflects the free-float market value of 30

component stocks relative to a base period. The market

capitalization of a company is determined by multiplying

the price of its stock by the number of shares issued by

the company. This market capitalization is further

multiplied by the free-float factor to determine the free-

float market capitalization.

The base period of SENSEX is 1978-79 and the base value

is 100 index points. This is often indicated by the notation

1978-79=100. The calculation of SENSEX involves dividing

the free-float market capitalization of 30 companies in the

Index by a number called the Index Divisor. The Divisor is

the only link to the original base period value of the

SENSEX. It keeps the Index comparable over time and is

the adjustment point for all Index adjustments arising out

of corporate actions, replacement of scrips etc. During

market hours, prices of the index scrips, at which latest

trades are executed, are used by the trading system to

calculate SENSEX every 15 seconds. The value of SENSEX

is disseminated in real time.

Concept of FREE FLOAT

52

Free-float methodology refers to an index construction

methodology that takes into consideration only the free-

float market capitalization of a company for the purpose of

index calculation and assigning weight to stocks in the

index. Free-float market capitalization takes into

consideration only those shares issued by the company

that are readily available for trading in the market. It

generally excludes promoters' holding, government

holding, strategic holding and other locked-in shares that

will not come to the market for trading in the normal

course. In other words, the market capitalization of each

company in a free-float index is reduced to the extent of

its readily available shares in the market.

Definition of Free-float

Shareholding of investors that would not, in the normal

course come into the open market for trading are treated

as 'Controlling/ Strategic Holdings' and hence not included

in free-float. Specifically, the following categories of

holding are generally excluded from the definition of Free-

float:

Shares held by founders/directors/ acquirers which

has control element

Shares held by persons/ bodies with "Controlling

Interest"

Shares held by Government as promoter/acquirer

Holdings through the FDI Route

53

Strategic stakes by private corporate bodies/

individuals

Equity held by associate/group companies (cross-

holdings)

Equity held by Employee Welfare Trusts

Locked-in shares and shares which would not be sold

in the open market in normal course.

Maintenance of SENSEX

One of the important aspects of maintaining continuity

with the past is to update the base year average. The base

year value adjustment ensures that replacement of stocks

in Index, additional issue of capital and other corporate

announcements like 'rights issue' etc. do not destroy the

historical value of the index. The beauty of maintenance

lies in the fact that adjustments for corporate actions in

the Index should not per se affect the index values.

The BSE Index Cell does the day-to-day maintenance of

the index within the broad index policy framework set by

the BSE Index Committee. The BSE Index Cell ensures that

SENSEX and all the other BSE indices maintain their

benchmark properties by striking a delicate balance

between frequent replacements in index and maintaining

its historical continuity. The BSE Index Committee

comprises of capital market expert, fund managers,

54

market participants and members of the BSE Governing

Board.

Function and purpose of stock market

The stock market is one of the most important sources

for companies to raise money. This allows businesses to

be publicly traded, or raise additional capital for expansion

by selling shares of ownership of the company in a public

market. The liquidity that an exchange provides affords

investors the ability to quickly and easily sell securities.

This is an attractive feature of investing in stocks,

compared to other less liquid investments such as real

estate.

History has shown that the price of shares and other

assets is an important part of the dynamics of economic

activity, and can influence or be an indicator of social

mood. An economy where the stock market is on the rise

is considered to be an up and coming economy. In fact,

the stock market is often considered the primary indicator

of a country's economic strength and development. Rising

share prices, for instance, tend to be associated with

increased business investment and vice versa. Share

prices also affect the wealth of households and their

consumption. Therefore, central banks tend to keep an

eye on the control and behavior of the stock market and,

in general, on the smooth operation of financial system

55

functions. Financial stability is the raison d'être of central

banks.

Exchanges also act as the clearinghouse for each

transaction, meaning that they collect and deliver the

shares, and guarantee payment to the seller of a security.

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. In this way the financial system contributes

to increased prosperity.

Depository

What is a Depository?

A depository holds shares and other securities of investors

in electronic form. Through Depository Participants (DPs),

it also provides services related to transactions in

securities. Its structure and functioning are similar to the

Bank. Presently in India, there are two depository viz.

National Securities Depository Limited (NSDL) and Central

56

Depository Services (I) Limited (CDSL). Both of them are

registered with SEBI.

What is a DP?

DP is a member of a Depository who offers its services to

hold securities of Investors (Beneficial Owners) in

dematerialized form. DP is like a Bank branch. It is an

agent of the depository. DP works as an interface between

Depository and Investors. DPs are required to be

registered with SEBI. If an investor wants to avail the

services offered by Depository, he has to open a Demat

account with DP similar to opening of a bank account with

a branch of the bank.

Depository is responsible for keeping stocks of investors in

electronics form. There are two depositories in India, NSDL

(National Securities Depository Ltd) and CDSL (Central

Depository Services Ltd).

CDSL (Central Depository Services Ltd.)

CDSL was promoted by Bombay Stock Exchange Limited

(BSE) jointly with leading banks such as State Bank of

India, Bank of India, Bank of Baroda, HDFC Bank, Standard

Chartered Bank, Union Bank of India and Centurion Bank.

CDSL was set up with the objective of providing

convenient, dependable and secure depository services at

affordable cost to all market participants. Some of the

important milestones of CDSL system are:

57

CDSL received the certificate of commencement of

business from SEBI in February, 1999.

Honourable Union Finance Minister, Shri Yashwant Sinha

flagged off the operations of CDSL on July 15, 1999.

Settlement of trades in the demat mode through BOI

Shareholding Limited, the clearing house of BSE, started in

July 1999.

All leading stock exchanges like the National Stock

Exchange, Calcutta Stock Exchange, Delhi Stock

Exchange, The Stock Exchange, Ahmedabad, etc have

established connectivity with CDSL.

As at the end of Dec 2007, over 5000 issuers have

admitted their securities (equities, bonds, debentures,

commercial papers), units of mutual funds, certificate of

deposits etc. into the CDSL system.

About NSDL

Although India had a vibrant capital market which is more

than a century old, the paper-based settlement of trades

caused substantial problems like bad delivery and delayed

transfer of title till recently. The enactment of Depositories

Act in August 1996 paved the way for establishment of

National Securities Depository Limited (NSDL), the

first depository in India. This depository promoted by

58

institutions of national stature responsible for economic

development of the country has since established a

national infrastructure of international standards that

handles most of the securities held and settled in

dematerialised form in the Indian capital market.

Using innovative and flexible technology systems, NSDL

works to support the investors and brokers in the capital

market of the country. NSDL aims at ensuring the safety

and soundness of Indian marketplaces by developing

settlement solutions that increase efficiency, minimise risk

and reduce costs. At NSDL, we play a quiet but central role

in developing products and services that will continue to

nurture the growing needs of the financial services

industry.

In the depository system, securities are held in depository

accounts, which is more or less similar to holding funds in

bank accounts. Transfer of ownership of securities is done

through simple account transfers. This method does away

with all the risks and hassles normally associated with

paperwork. Consequently, the cost of transacting in a

depository environment is considerably lower as

compared to transacting in certificates Promoters /

Shareholders

NSDL is promoted by Industrial Development Bank of India

Limited (IDBI) - the largest development bank of India,

Unit Trust of India (UTI) - the largest mutual fund in India

and National Stock Exchange of India Limited (NSE) - the

59

largest stock exchange in India. Some of the prominent

banks in the country have taken a stake in NSDL.

NSDL Facts & Figures

As on December 31, 2008

Number of certificates eliminated (Approx.) : 550

Crore

Number of companies in which more than 75%

shares are dematted : 2282

Average number of accounts opened per day since

November 1996 : 3636

Presence of demat account holders in the country :

78% of all pincodes in the country.

Central Securities Depository (CSD)

A Central Securities Depository (CSD) is an

organization holding securities either in certificated or

uncertificated (dematerialized) form, to enable book entry

transfer of securities. In some cases these organizations

also carry out centralized comparison, and transaction

processing such as clearing and settlement of securities.

The physical securities may be immobilised by the

depository, or securities may be dematerialised (so that

they exist only as electronic records).

International Central Securities Depository (ICSD) is

a central securities depository that settles trades in

international securities and in various domestic securities,

60

usually through direct or indirect (through local agents)

links to local CSDs. ClearStream International (earlier

Cedel), Euro clear and SIX SIS are considered ICSDs. While

some view The Depository Trust Company (DTC) as a

national CSD rather than an ICSD, in fact DTC -- the

largest depository in the world -- holds over $2 trillion in

non-US securities and in American Depository Receipts

from over 100 nations.

Functions

Safekeeping Securities may be in dematerialized

form, book-entry only form (with one or more

"global" certificates), or in physical form immobilized

within the CSD.

Deposit and Withdrawal Supporting deposits and

withdrawals involves the relationship between the

transfer agent and/or issuers and the CSD. It also

covers the CSD's role within the underwriting process

or listing of new issues in a market.

Dividend, interest, and principal processing, as

well as corporate actions including proxy

voting Paying and transfer agents, as well as issuers

are involved in these processes, depending on the

level of services provided by the CSD and its

relationship with these entities.

Other services CSDs offer additional services aside

from those considered core services. These services

include Securities Lending and Borrowing, Matching,

and Repo Settlement

61

Pledge - Central depositories provide pledging of

share and securities. Every country require to provide

legal framework to protect the interest of the pledgor

and pledgee.

However, there are risks and responsibilities regarding

these services that must be taken into consideration in

analyzing and evaluating each market on a case-by-case

basis.

FII (Foreign Institutional Investors) in Indian

Stock Market

Foreign Institutional Investor (FII) is used to denote

an investor - mostly of the form of an institution or entity,

which invests money in the financial markets of a country

different from the one where in the institution or entity

was originally incorporated.

FII investment is frequently referred to as hot money for

the reason that it can leave the country at the same speed

at which it comes in.

In countries like India, statutory agencies like SEBI have

prescribed norms to register FIIs and also to regulate such

investments flowing in through FIIs. In 2008, FIIs

62

represented the largest institution investment category,

with an estimated US$ 751.14 billion.

Since 1990-91, the Government of India embarked on

liberalisation and economic reforms with a view of

bringing about rapid and substantial economic growth and

move towards globalisation of the economy. As a part of

the reforms process, the Government under its New

Industrial Policy, revamped its foreign investment policy

recognising the growing importance of foreign direct

investment as an instrument of technology transfer,

augmentation of foreign exchange reserves and

globalisation of the Indian economy. Simultaneously, the

Government, for the first time, permitted portfolio

investments from abroad by foreign institutional investors

in the Indian capital market. The entry of FIIs seems to be

a follow up of the recommendation of the Narsimhan

Committee Report on Financial System. While

recommending their entry, the Committee, however did

not elaborate on the objectives of the suggested policy.

The committee only suggested that the capital market

should be gradually opened up to foreign portfolio

investments.

From September 14, 1992 with suitable restrictions, FIIs

were permitted to invest in all the securities traded on the

primary and secondary markets, including shares,

debentures and warrants issued by companies which were

listed or were to be listed on the Stock Exchanges in India.

63

While presenting the Budget for 1992-93, the then

Finance Minister Dr. Manmohan Singh had announced a

proposal to allow reputed foreign investors, such as

Pension Funds etc., to invest in Indian capital market. To

operationalise this policy announcement, it had become

necessary to evolve guidelines for such investments by

Foreign Institutional Investors (FIIs). The policy framework

for permitting FII investment was provided under the

Government of India guidelines vide Press Note date

September 14, 1992. The guidelines formulated in this

regard were as follows:

1. Foreign Institutional Investors (FIIs) including

institutions such as Pension Funds, Mutual Funds,

Investment Trusts, Asset Management Companies,

Nominee Companies and Incorporated/Institutional

Portfolio Managers or their power of attorney holders

(providing discretionary and non-discretionary

portfolio management services) would be welcome

to make investments under these guidelines.

2. FIIs would be welcome to invest in all the securities

traded on the Primary and Secondary markets,

including the equity and other securities/instruments

of companies which are listed/to be listed on the

Stock Exchanges in India including the OTC

Exchange of India. These would include shares,

debentures, warrants, and the schemes floated by

domestic Mutual Funds. Government would even like

64

to add further categories of securities later from

time to time.

3. FIIs would be required to obtain an initial registration

with Securities and Exchange Board of India (SEBI),

the nodal regulatory agency for securities markets,

before any investment is made by them in the

Securities of companies listed on the Stock

Exchanges in India, in accordance with these

guidelines. Nominee companies, affiliates and

subsidiary companies of a FII would be treated as

separate FIIs for registration, and may seek separate

registration with SEBI.

4. Since there were foreign exchange controls in force,

for various permissions under exchange control,

along with their application for initial registration,

FIIs were also supposed to file with SEBI another

application addressed to RBI for seeking various

permissions under FERA, in a format that would be

specified by RBI for the purpose. RBI's general

permission would be obtained by SEBI before

granting initial registration and RBI's FERA

permission together by SEBI, under a single window

approach.

5. For granting registration to the FII, SEBI should take

into account the track record of the FII, its

65

professional competence, financial soundness,

experience and such other criteria that may be

considered by SEBI to be relevant. Besides, FII

seeking initial registration with SEBI were be

required to hold a registration from the Securities

Commission, or the regulatory organisation for the

stock market in the country of domicile/incorporation

of the FII.

6. SEBI's initial registration would be valid for five

years. RBI's general permission under FERA to the FII

would also hold good for five years. Both would be

renewable for similar five year periods later on.

7. RBI's general permission under FERA would enable

the registered FII to buy, sell and realize capital

gains on investments made through initial corpus

remitted to India, subscribe/renounce rights

offerings of shares, invest on all recognized stock

exchanges through a designated bank branch, and

to appoint a domestic Custodian for custody of

investments held.

8. This General Permission from RBI would also enable

the FII to:

Open foreign currency denominated accounts in

a designated bank. (There could even be more

66

than one account in the same bank branch each

designated in different foreign currencies, if it is

so required by FII for its operational purposes);

Open a special non-resident rupee account to

which could be credited all receipts from the

capital inflows, sale proceeds of shares,

dividends and interests;

Transfer sums from the foreign currency

accounts to the rupee account and vice versa, at

the market rate of exchange;

Make investments in the securities in India out of

the balances in the rupee account;

Transfer repatriable (after tax) proceeds from

the rupee account to the foreign currency

account(s);

f. Repatriate the capital, capital gains, dividends,

incomes received by way of interest, etc. and

any compensation received towards

sale/renouncement of rights offerings of shares

subject to the designated branch of a bank/the

custodian being authorized to deduct with

holding tax on capital gains and arranging to pay

such tax and remitting the net proceeds at

market rates of exchange;

Register FII's holdings without any further

clearance under FERA.

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What Does Foreign Institutional Investor - FII Mean?

An investor or investment fund that is from or registered

in a country outside of the one in which it is

currently investing. Institutional investors include hedge

funds, insurance companies, pension funds and mutual

funds.

Regulation imposed by SEBI on FII

(a) "Act" means the Securities and Exchange Board of

India Act, 1992 (15 of 1992);

(b) "certificate" means a certificate of registration

granted by the Board under these regulations;

(c) "designated bank" means any bank in India, which

has been authorised by the Reserve Bank of India to act

as a banker to Foreign Institutional Investors;

(d) "domestic custodian" includes any person carrying

on the activity of providing custodial services in respect

of securities;

(e) "Enquiry officer" means any officer of the Board, or

any other person appointed by the Board under Chapter

V of these regulations;

68

(f) "Foreign Institutional Investor" means an institution

established or incorporated outside India which

proposes to make investment in India in securities;

(g) "Form" means a form specified in the First Schedule

to these regulations;

(h) "Government of India Guidelines" means the

guidelines dated September 14, 1992 issued by the

Government of India for Foreign Institutional Investors,

as amended from time to time;

(i) "institution" includes every artificial juridical person;

(j) "schedule" means a schedule to these regulations;

(k) "sub-account" includes those institutions,

established or incorporated outside India and those

funds, or portfolios, established outside India, whether

incorporated or not, on whose behalf investments are

proposed to be made in India by a Foreign Institutional

Investor.

Participatory notes   (P- Notes)

69

Participatory notes (PNs / P-Notes) are instruments

used by investors or hedge funds that are not registered

with the SEBI (Securities & Exchange Board of India) to

invest in Indian securities. Participatory notes are

instruments that derive their value from an underlying

financial instrument such as an equity share and, hence,

the word, 'derivative instruments'. SEBI permitted FIIs to

register and participate in the indian stock market in

1992.

Indian based brokerages buy Indian-based securities and

then issue PNs to foreign investors.

Any dividends or capital gains collected from the

underlying securities go back to the investors.

Participatory notes are instruments used for making

investments in the stock markets. However, they are not

used within the country. They are used outside India for

making investments in shares listed in that country. That

is why they are also called offshore derivative

instruments.

In the Indian context, foreign institutional investors (FIIs)

and their sub-accounts mostly use these instruments for

facilitating the participation of their overseas clients, who

are not interested in participating directly in the Indian

stock market. For example, Indian-based brokerages buy

India-based securities and then issue participatory notes

to foreign investors. Any dividends or capital gains

70

collected from the underlying securities go back to the

investors. According to an expert group constituted by the

finance ministry in India, in August 2004, participatory

notes constituted about 46 per cent of the cumulative net

investments in equities by FIIs.

Any entity investing in participatory notes is not required

to register with SEBI (Securities and Exchange Board of

India), whereas all FIIs have to compulsorily get

registered. Trading through participatory notes is easy

because participatory notes are like contract notes

transferable by endorsement and delivery. Secondly,

some of the entities route their investment through

participatory notes to take advantage of the tax laws of

certain preferred countries. Thirdly, participatory notes are

popular because they provide a high degree of anonymity,

which enables large hedge funds to carry out their

operations without disclosing their identity.

Participatory notes in brief is as follows :

What are participatory notes or PNs? Participatory notes

are instruments used by foreign funds which are not

registered to trade in domestic Indian Capital Markets. PNs

are derivative instruments issued against an underlying

security permitting holders to get a share in the income

from the security.

How does it work? Investors who buy PNs deposit their

funds in US or European operations of Foreign Institutional

71

Investors (FII) operating in India . The FII uses its

proprietary account to buy stocks.

Why do investors use PNs? Reason for using PNs is to keep

investor name anonymous, some investors have used

them to save transaction and overhead costs.

Tax officials fear that PNs are becoming a favourite with a

host of Indian money launderers who use them to first

take funds out of country through hawala and then get it

back using PNs.

Participatory Notes Crisis of 2007

On the 16th of October, 2007, SEBI (Securities & Exchange

Board of India) proposed curbs on participatory notes

which accounted for roughly 50% of FII investment in

2007. SEBI was not happy with P-Notes because it is not

possible to know who owns the underlying securities and

hedge funds acting through PNs might therefore cause

volatility in the Indian markets.

However the proposals of SEBI were not clear and this led

to a knee-jerk crash when the markets opened on the

following day (October 17, 2007). Within a minute of

opening trade, the Sensex crashed by 1744 points or

about 9% of its value - the biggest intra-day fall in Indian

stock-markets in absolute terms. This led to automatic

suspension of trade for 1 hour. Finance Minister

P.Chidambaram issued clarifications, in the meantime,

that the government was not against FIIs and was not

72

immediately banning PNs. After the markets opened at

10:55 am, they staged a remarkable comeback and ended

the day at 18715.82, down just 336.04 from Tuesday’s

close after tumbling to a day’s low of 17307.90.

This was, however not the end of the volatility. The next

day (October 18, 2007), the Sensex tumbled by 717.43

points — 3.83 per cent — to 17998.39, its second biggest

fall. The slide continued the next day when the Sensex fell

438.41 points to settle at 17559.98 at the end of the

week, after touching the lowest level of that week at

17226.18 during the day.

The SEBI chief, M.Damodaran held an hour long

conference on the 22nd of October to clear the air on the

proposals to curb PNs where he announced that funds

investing through PNs were most welcome to register as

FIIs, whose registration process would be made faster and

more steamlined. The markets welcomed the clarifications

with an 879-point gain — its biggest single-day surge — on

October23, thus signalling the end of the PN crisis. SEBI

issued the fresh rules regarding PNs on the 25th of

October, 2007 which said that FIIs cannot issue fresh P-

Notes and existing exposures were to be wound up within

18 months. The Sensex gave a thumbs up the next day -

Friday, 26 October by re-crossing the 19,000 barrier with a

428 point surge. The coming Monday (October 29, 2007)

history was created when the Sensex leaped 734.5 points

to cross the hallowed 20,000 mark.

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SCAMS OF SHARE MARKET

HARSHAD MEHTA SCAM

74

Harshad Mehta was an Indian stockbroker and is alleged

to have engineered the rise in the BSE stock exchange in

the year 1992. Exploiting several loopholes in the banking

system, Mehta and his associates siphoned off funds from

inter-bank transactions and bought shares heavily at a

premium across many segments, triggering a rise in the

Sensex. When the scheme was exposed, the banks started

demanding the money back, causing the collapse. He was

later charged with 72 criminal offenses and more than 600

civil action suits were filed against him. He died in 2002

with many litigations still pending against him.

Early Life

Harshad Shantilal Mehta was born in a Gujarati Jain family

of modest means. His early childhood was spent in

Mumbai where his father was a small-time businessman.

Later, the family moved to Raipur in Madhya Pradesh after

doctors advised his father to move to a drier place on

account of his indifferent health. But Raipur could not hold

back Mehta for long and he was back in the city after

completing his schooling,

Mehta gradually rose to become a stock broker on the

Bombay Stock Exchange and lived almost like a movie

star in a 15,000 square feet apartment, which had a

swimming pool as well as a golf patch. He also had a taste

for flashy cars, which ultimately led to his downfall. “The

year was 1990. Years had gone by and the driving

75

ambitions of a young man in the faceless crowd had been

realised. Harshad Mehta was making waves in the stock

market. He had been buying shares heavily since the

beginning of 1990. The shares which attracted attention

were those of Associated Cement Company (ACC),”. The

price of ACC was bid up to Rs 10,000. For those who

asked, Mehta had the replacement cost theory as an

explanation. The theory basically argues that old

companies should be valued on the basis of the amount of

money which would be required to create another such

company.

Through the second half of 1991, Mehta was the darling of

the business media and earned the sobriquet of the ‘Big

Bull’, who was said to have started the bull run. But,

where was Mehta getting his endless supply of money

from? Nobody had a clue.

On April 23, 1992, journalist Sucheta Dalal in a column in

The Times of India, exposed the dubious ways of Harshad

Metha. The broker was dipping illegally into the banking

system to finance his buying.

“In 1992, when I broke the story about the Rs 600 crore

that he had swiped from the State Bank of India, it was his

visits to the bank’s headquarters in a flashy Toyota Lexus

that was the tip-off. Those days, the Lexus had just been

launched in the international market and importing it cost

a neat package,” Dalal wrote in one of her columns later.

76

The authors explain: “The crucial mechanism through

which the scam was effected was the ready forward (RF)

deal. The RF is in essence a secured short-term (typically

15-day) loan from one bank to another. Crudely put, the

bank lends against government securities just as a

pawnbroker lends against jewellery. The borrowing bank

actually sells the securities to the lending bank and buys

them back at the end of the period of the loan, typically at

a slightly higher price.”

It was this ready forward deal that Harshad Mehta and his

cronies used with great success to channel money from

the banking system.

A typical ready forward deal involved two banks brought

together by a broker in lieu of a commission. The broker

handles neither the cash nor the securities, though that

wasn’t the case in the lead-up to the scam.

“In this settlement process, deliveries of securities and

payments were made through the broker. That is, the

seller handed over the securities to the broker, who

passed them to the buyer, while the buyer gave the

cheque to the broker, who then made the payment to the

seller.

In this settlement process, the buyer and the seller might

not even know whom they had traded with, either being

know only to the broker.”

77

This the brokers could manage primarily because by now

they had become market makers and had started trading

on their account. To keep up a semblance of legality, they

pretended to be undertaking the transactions on behalf of

a bank.

Another instrument used in a big way was the bank

receipt (BR). In a ready forward deal, securities were not

moved back and forth in actuality. Instead, the borrower,

i.e. the seller of securities, gave the buyer of the securities

a BR.

As the authors write, a BR “confirms the sale of securities.

It acts as a receipt for the money received by the selling

bank. Hence the name - bank receipt. It promises to

deliver the securities to the buyer. It also states that in the

mean time, the seller holds the securities in trust of the

buyer.”

Having figured this out, Mehta needed banks, which could

issue fake BRs, or BRs not backed by any government

securities. “Two small and little known banks - the Bank of

Karad (BOK) and the Metorpolitan Co-operative Bank

(MCB) - came in handy for this purpose. These banks were

willing to issue BRs as and when required, for a fee,” the

authors point out.

Once these fake BRs were issued, they were passed on to

other banks and the banks in turn gave money to Mehta,

obviously assuming that they were lending against

78

government securities when this was not really the case.

This money was used to drive up the prices of stocks in

the stock market. When time came to return the money,

the shares were sold for a profit and the BR was retired.

The money due to the bank was returned.

The game went on as long as the stock prices kept going

up, and no one had a clue about Mehta’s modus operandi.

Once the scam was exposed, though, a lot of banks were

left holding BRs which did not have any value - the

banking system had been swindled of a whopping Rs

4,000 crore.

Mehta made a brief comeback as a stock market guru,

giving tips on his own website as well as a weekly

newspaper column. This time around, he was in cahoots

with owners of a few companies and recommended only

those shares. This game, too, did not last long.

Interestingly, by the time he died, Mehta had been

convicted in only one of the many cases filed against him.

Till now, it is still unknown what was the real story behind

the entire scam. The recent Hindi movie 'Gafla' showed

this scam in a different perspective. and is 45 years old.

KETAN PAREKH SCAM

79

Ketan Parekh was a Mumbai-based stock broker. He

hails from a well-to-do Gujarati family involved in share

trading, and Ketan was involved in the shares scam of

2000-2001 on the Indian Stock Market.

Shares scam

Companies, when raising money from the stock market,

rope in brokers to back them in raising the share price.

Ketan formed a network of brokers from smaller

exchanges like the Allahabad Stock Exchange and the

Calcutta Stock Exchange, and used benami, or share

purchases, in the name of poor people living in the shanty

towns of Mumbai. Ketan rose to fame at the same time as

the worldwide dot-com boom (1999-2000) and he relied

primarily on the shares of ten companies for his dealings

(now known infamously as the K-10 scrips).

Ketan had large borrowings from Global Trust Bank, whose

shares he was ramping up so that he could get a good

deal at the time of its merger with UTI Bank. He got a Rs

250 crore loan from Global Trust Bank, although Global

Trust’s chairman Ramesh Gelli, who was later asked to

resign, repeatedly asserted that the amount was less than

Rs 100 crore, which was in keeping with the Reserve Bank

of India's normal amount. Ketan and his associates

obtained another Rs 1,000 crore from the Madhavpura

Mercantile Co-operative Bank despite the fact that RBI

regulations ruled that the maximum loan a broker could

80

obtain was Rs 15 crore. In addition, Mr Mehta's was

involved with Ketan's Business in 1996.

Ketan's modus operandi was to ramp up the shares of

select firms in collusion with promoters. Interestingly,

around the time when Ketan started taking long positions

in his favorite K-10 scrips, the Securities and Exchange

Board of India (SEBI) concluded a 3-year old case against

Harshad Mehta, who had colluded with the managements

of BPL, Sterlite and Videocon to ramp up their shares.

In Ketan's case, SEBI found prima facie evidence of price

rigging in the scrips of Global Trust Bank, Zee Telefilms,

HFCL, Lupin Laboratories, Aftek Infosys and Padmini

Polymer.

Discovery and arrest

With the prices of selective shares constantly going up

due to his rigging, innocent investors who had bought the

shares at high prices, thinking the market as genuine, lost

heavily. Soon after the discovery of the scam, the prices of

these stocks came down to a fraction of the values at

which they were bought, causing even banks to lose large

sums of money.

At the time, a group of traders known as the "Bear Cartel"

(Shankar Sharma, Anand Rathi, Nirmal Bang) were making

money from falling stock prices. Bears sell stocks at high

prices and buy back at low prices. Around February end in

2000, this cartel placed sell orders on the K-10 stocks and

81

crushed their inflated prices. All of Ketan's borrowings

could not rescue his scrips. The Global Trust Bank and the

Madhavpura Cooperative went bust when the money they

had lent to Ketan sunk with his K-10 stocks.

The information furnished by the Reserve Bank of India to

the Joint Parliamentary Committee (JPC) during the

investigation of the scam revealed that financial

institutions like Industrial Development Bank of India (IDBI

Bank) and Industrial Finance Corporation of India (IFCI)

had extended loans of Rs 1,400-odd crore to companies

known to be close to Ketan Parekh.

Ketan Parekh was arrested on December 2, 2002 in

Kolkata.

SATYAM SCAMS

Byrraju Ramalinga Raju (born September 16, 1954) is

the founder of Satyam Computers and was its Chairman

until January 7, 2009 when he resigned from the Satyam

board after admitting to corporate fraud. Satyam was

created by Ramalinga Raju and others and was until

recently perceived to be amongst the top Indian IT

vendors. Raju has allegedly admitted overstating its cash

reserves by USD$ 1.5 billion. Later, allegations have been

made that the company's assets were not inflated, but

instead siphoned off by Ramalinga Raju. Raju is currently

82

held in Hyderabad's Chanchalguda jail on criminal charges

including fraud, forgery, cheating, embezzlement and

insider trading.

A botched acquisition attempt involving Maytas (a

company owned by his own family) in December 2008 led

to a plunge in the share price of Satyam. In January 2009,

Raju indicated that Satyam's accounts had been falsified

over a number of years. He admitted to an accounting

fraud to the tune of 7000 crore rupees or 1.5 Billion US

Dollars and resigned from the Satyam board on January 7,

2009. In his letter of resignation, Raju described how an

initial cover-up for a poor quarterly performance

escalated: "It was like riding a tiger, not knowing how to

get off without being eaten." Raju and his brother, B Rama

Raju, were then arrested by Andhra Pradesh police on

charges of criminal breach of trust, criminal conspiracy,

cheating, falsification of records and forgery. Raju may

face lifetime imprisonment if convicted of misleading

investors. Raju had also opened multiple benami (dummy)

accounts through relatives and friends and used them to

trade in Satyam's shares, violating the insider trading

norm. It has now been alleged that these accounts may

have been the means of siphoning off the missing funds.

KARVY IPO SCAMS

83

The Karvy Group, one of the top brokerages banned by

Sebi from operating in the market for handling almost 95

per cent of the fake accounts used to engineer the demat

scam, in a statement on Friday claimed: "We were victims

of a fraud purported by individuals who projected

themselves as sub brokers in the primary market with a

large customer base."

J Ramaswamy, vice president, corporate affairs, Karvy

Group, commenting on the Sebi ban order stated, "The

Sebi order issued on the 27th of April is very harsh. We

wish to take this opportunity to state the following:

"Karvy Stock Broking Ltd has been named as one of the 85

entities, which has acted as a financer of the master

accountholders, who appear to be the ultimate

beneficiaries. Karvy Stock Broking Ltd has never financed

any IPO customer till date.

"The Sebi order refers to KSBL as financer to one Shri D B

Mehta in the NTPC issue. Neither Karvy Stock Broking nor

any of its associate companies financed the said investor

for the said issue. This investor has a secondary market

trading account with Karvy Stock Broking Ltd, Mumbai

branch and he had transferred shares into our pool

account on the day the securities were listed and sold the

shares in the market.

"Sebi appears to have mistaken the transfer of securities

in, to our pool account by a customer, who was

84

subsequently paid the proceeds, as a wrongful act of

Karvy.

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Bull Run? Beware of being scammed

"Sebi order has once again come down heavily on Karvy-

DP on account of a few of its sub-brokers having been

involved in opening fictitious/benami accounts. In this

connection we wish to state as under:

"Sebi has alluded in the report that the certificates of

introduction issued by the bankers are forged and that

they have been issued with the connivance of Karvy. This

is baseless and simply based on the concerned bank along

with the said individuals, who seemed to have acted in

collusion and now shifting the blame.

"The fact that the collusion of the banks with these

individuals can be borne out of the fact that all these

fictitious individuals were given loans and the refunds

credited to the said accounts. If these bank certificates

were issued without the knowledge of the concerned

bank, then how did these banks issue loans to such

applicants without a bank account and how did they credit

the refunds, either given piecemeal or in a consolidated

form to the respective loan accounts.

85

"Sebi has not provided an opportunity to Karvy to clarify

its role vis-à-vis the allegations made by the perpetrators

and the bankers.

"Should Karvy have acted with a malafide intent or they

have been benefited unduly, then they should have

received the benefit either by way of shares or funds by

way of profit realised on these shares.

"Sebi has all means to verify whether such benefits have

been received and had not identified even a single case of

such benefits being accrued. Karvy has not received any

undue benefits whatsoever.

"There are certain portions of Sebi order, which have been

highlighted, which seem to suggest that Karvy has

orchestrated the entire scheme of defrauding investors.

This is untrue and Karvy-DP has been misused by some of

these individuals.

"We maintain that we have collected all the relevant

documents, established proof of identity and address. The

KYC (know your customer) norms, prima-facie, were

fulfilled.

"We were victims of a fraud purported by these

individuals, who projected themselves as sub brokers in

the primary market with a large customer base.

"Out of a total of approximately 800,000 accounts,

approximately 65,000 accounts aggregating to 8% of the

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total accounts opened by these sub-brokers were of

suspicious nature and these have since been closed. Karvy

still has over 7,00,000 DP accounts and is amongst the

largest DP in terms of number of accounts.

"Karvy has over 500 branches and over 15,000 primary

market sub brokers. These accounts were opened by a

handful of sub-brokers in two branches at Ahmedabad and

Mumbai.

"There is a reference in this order with respect to Karvy

RTI. The main allegation in this order is that single refund

orders were issued by Karvy to various institutions that

have financed the IPOs. This is a process that has been

adopted based on the requests received from various

banks/finance companies purely for the sake of

administrative convenience.

"In all such cases, we believe that the methodology

adopted is akin to the ECS/direct credit system proposed

to be encouraged by RBI and SEBI. It is incorrect to allege

that Karvy RTI had any malafide intents because most of

the refunds so issued do not pertain to their associate

companies DP clients or broking clients.

"It is also submitted that the process of issuing a single

cheque upon a request received from the financer, had

also been adopted, till recently by other registrars."

The statement further adds:

87

"We also wish to state that with over 7,00,000 DP

accounts, Karvy is the largest DP in the country. Our

customers are all retail and on a daily basis we process

over 25,000 delivery instruction slips received from all

parts of the country.

"Karvy Computershare Pvt Ltd is India's largest registrar

and transfer agent servicing over 22 million investors for

the best of the corporates in the country and mutual

funds. We have had an unblemished record so far and

have taken up special assignments at the behest of the

regulator in the past. Our JV partner Computershare is

considered to be the largest registrar in the world with

operations in about 15 countries.

"Karvy is also one of India's largest stock brokers with

approximately 290,000 customers. Over 35,000 individual

customers trade with Karvy on a daily basis. Karvy Stock

Broking Ltd is also among the leading distributors for IPOs

and mutual funds.

"The Karvy group employs over 7,000 people and has over

500 branches spread across the country. This is a retail

company with focus on servicing individual investors.

There will be approximately about 50,000 to 60,000

investors, who get in touch with Karvy on a daily basis for

servicing their needs.

"Karvy has always believed in the highest standards of

compliance and integrity. This is the hallmark of the

88

management. The entire incident took place in two

branches of Karvy and with a handful sub-brokers as

against 15,000 primary market sub-brokers, who work

under the Karvy banner.

"We only wish that Sebi had given us an opportunity of

being heard before passing such a harsh order. Our

commitment to the Indian capital market is total and we

will continue to strive to service retail investors to the best

of our abilities. We will appeal to Sebi to consider our

representation favourably.

"We respect the Sebi order and we will certify the position

by filing our objections within the time stipulated from the

date of this order. We believe that the inspection of our

operations undertaken by the depositories or SEBI did not

reveal any serious violation, especially those with a

malafide intent.

"As responsible intermediaries, we have, however,

strengthened our process and systems in the DP area. We

are also thankful to Sebi for allowing us to continue

service to our customers in the secondary market.

"Karvy Group's robust practices protect and service over

10 lakh investors. Its level of automation and transparency

is unparalleled resulting in the Group enjoying a

leadership position in several categories of the business.

89

"Karvy's management of the rectification of the

ONGC  Issue allotment process in 2004 was appreciated

by the Government of India.

"Subsequent to this Karvy handled the NTPC order which

received over 15 lakh (1.5 million) applications and had

received accolades from various quarters of the capital

market including a few officials of the regulator.

"Karvy Computershare Private Ltd is currently processing

the recent public offer of Reliance Petroleum Ltd  which

has received 21 lakh (2.1 million) application forms,

thereby creating a record in the Indian capital markets."

90

REGISTERED BROKERS AND SUB-BROKERS IN BHOPAL

ANAGRAM STOCK BROKING LTD.

BRANCH OFFICE

ADDRESS 22,MARWADI ROAD  NEAR CBI  BHOPAL – 462001PHONES 0755-2733429  CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

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ADDRESS C-25,INDRAPURI  BHOPAL – 462024

91

PHONES 0755-5261413, 0755-3880018 CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

DYNAMIC EQUITIES PVT.LTD.

BRANCH OFFICE

ADDRESS G.M.TOWER,E-A/29  NEAR 10 NO.SHOP  ARERA COLONY  BHOPAL - 462016PHONES    CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

EXCLUSIVE BROKING HOUSE LTD.

BRANCH OFFICE

ADDRESS FF-7A,MANSAROVAR COMPLEX,1ST FLOOR

  NEAR HABIB GANJ STATION  BHOPAL - 462016PHONES 0755-5233211  CORPORATE EMAIL bhagwan@sancharnet.inCONTACT PERSON MR.SANJAY SHRIVASTAV  BRANCH MANAGER  bhagwan@sancharnet.inDIRECT PHONE 0755-5233211

92

GEOJIT FINANCIAL SERVICES LTD.

BRANCH OFFICE

ADDRESS GF-35,MANSAROVAR COMPLEX  NEAR HABIBGANJ RAILWAY STATION  BHOPAL - 462011PHONES    CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

IDFC-SSKI SECURITIES LTD.

BRANCH OFFICE

ADDRESS HOUSE NO.15-B,1ST FLOOR  PLOT NO.9B,OPP.RAJBHAWAN  MALVIYA NAGAR  BHOPAL – 462003PHONES 9893043421  CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

93

INDIRA SHARE & STOCK BROKERS PVT.LTD.

BRANCH OFFICE

ADDRESS RAMAVAT HOSUE  E-15,SAKET NAGAR  BHOPAL – 452001PHONES 0731-2566361, 0731-2567111 FAX 0731-2562117CORPORATE EMAIL iss_indore@yahoo.co.inCONTACT PERSON MR.VIJAYKUMAR BASANTILAL

RAMAVAT  DIRECTOR  vramavat@indiratrade.comDIRECT PHONE 0731-2566361

JM FINANCIAL SERVICES PVT.LTD.

BRANCH OFFICE

ADDRESS 98,MARWADI ROAD  CHOWK  BHOPAL – 462001PHONES    CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

ADDRESS E-56,BDA  KOH-E-FIZA  BHOPAL – 462001PHONES    

94

CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

ADDRESS 166,STAR ARCADE ZONE-I  MAHARANA PRATAP NAGAR  BHOPAL – 462011PHONES    CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

KALPATARU MULTIPLIER LTD.

REGISTERED OFFICE

ADDRESS KALPATARU HOUSE  18,ITWARA  BHOPAL – 462001PHONES 0755-2530536, 0755-2545934, 075

5-2739822FAX 0755-4276727

CORRESPONDENCE OFFICE

ADDRESS KALPATARU HOUSE  18,ITWARA  BHOPAL – 462001PHONES 0755-2530536, 0755-2545934, 075

5-2739822FAX 0755-4276727CORPORATE EMAIL kmlbhopal@eth.netWEBSITE www.kalpatarumulti.com

95

BRANCH OFFICE

ADDRESS HALL NO.2,1ST FLOOR  WESTERN BLOCK,ABOVE CENTRAL

BANK  T.T.NAGAR  BHOPAL - 462003PHONES 0755-4235726  CORPORATE EMAIL kmlbhopal@eth.netCONTACT PERSON MS.AMITABH MANYA JAIN  MANAGING DIRECTOR  kmlbhopal@eth.netDIRECT PHONE 0755-2538895

ADDRESS E-3/235,ARERA COLONY  BHOPAL - 462016PHONES 0755-2467499, 0755-4276725, 075

5-4276728FAX 0755-2463957CORPORATE EMAIL kmlbhopal@eth.netCONTACT PERSON MR.ADITYA MANYA JAIN  VICE CHAIRMAN  kmlbhopal@eth.netDIRECT PHONE 0755-5276724

ADDRESS NEMA COMPLEX,GROUND FLOOR  OPP.JUBILEE GATE BHEL  20-B,INDRAPURI

  BHOPAL - 462020PHONES  CORPORATE EMAIL d240072@iseindia.com

96

CONTACT PERSON   DIRECT PHONE  

ADDRESS 13-B,INDRAPURI  NEAR SBI PLANT AREA BRANCH  BHEL  BHOPAL – 462021PHONES 0755-4260437  CORPORATE EMAIL kmlbhopal@eth.netCONTACT PERSON MRS.ABHA JAIN  BRANCH HEAD  kmlbhopal@eth.netDIRECT PHONE 0755-4223552

KARVY STOCK BROKING LTD.

BRANCH OFFICE

ADDRESS KAYKAY BUSINESS CENTRE  133,ZONE 1  MAHARANA PRATAP NAGAR  BHOPAL – 462011PHONES 0755-3010721, 0755-3010722 FAX 0755-3010732CORPORATE EMAIL ksblbhopal@karvy.comCONTACT PERSON MR.VAMSEE KUMAR NS

  REGIONAL HEAD  vamseedsnr@karvy.comDIRECT PHONE 0755-3010729

97

LKP SECURITIES LTD.

BRANCH OFFICE

ADDRESS FLAT NO.M4,PLOT NO.138  HARI KRISHNA ARCADE,ZONE II  MAHARANA PRATAP NAGAR  BHOPAL - 426011PHONES 9302321000  CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

NETWORTH STOCK BROKING LTD.

BRANCH OFFICE

ADDRESS GANGA JAMUNA COMPLEX,2ND FLOOR

  PLOT NO.202,ZONE-I  MAHARANA PRATAP NAGAR  BHOPAL - 462011PHONES 0755-3010916, 0755-3010920 CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

NIRMAL BANG SECURITIES PVT.LTD.

98

BRANCH OFFICE

ADDRESS PLOT NO.244,KING SHOPPING COMPLEX

  ZONE-1  MAHARANA PRATAP NAGAR  BHOPAL – 462011PHONES 9425303673  CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

ADDRESS SM-12A,MANSAROVAR COMPLEX,2ND FLOOR

  NEAR 7 NO.BUS STOP  BHOPAL – 462016PHONES 0755-3299739  CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

NIRMAN SHARE BROKERS PVT.LTD.

REGISTERED OFFICE

ADDRESS 235,ZONE-I,M.P.NAGAR  BHOPAL – 462011PHONES 0755-4260000, 0755-4077777, 075

5-4233666FAX 0755-4288800

CORRESPONDENCE OFFICE

99

ADDRESS 235,ZONE-I,M.P.NAGAR  BHOPAL – 462011PHONES 0755-4260000, 0755-4077777, 075

5-4233666FAX 0755-4288800CORPORATE EMAIL nsbl@sify.comWEBSITE www.nirmanbroking.com

BRANCH OFFICE

ADDRESS 97,MARWARI ROAD  OPP.CENTRAL DAIRY,CHINTAMAN

CHAURAHA  CHOWK  BHOPAL – 462001PHONES 0755-4034400  CORPORATE EMAIL nsbl@sify.comCONTACT PERSON MR.AMIT UPADHYAYA  BRANCH MANAGER  nsbl@sify.comDIRECT PHONE 0755-4034400

ADDRESS 42,OLD MPMLA QUARTERS  NEAR NATKHAT HOSPITAL,JAWAHAR

CHOWK  NEW MARKET  BHOPAL – 462003PHONES 0755-4222300, 0755-4222400 CORPORATE EMAIL nsbl@sify.comCONTACT PERSON MR.RAJENDRA SHARMA

  BRANCH MANAGER  nsbl@sify.comDIRECT PHONE 0755-4222400

100

ADDRESS 232,ZONE-1  MAHARANA PRATAP NAGAR  BHOPAL – 462011PHONES 0755-4233666, 0755-4233777 FAX 0755-4288800CORPORATE EMAIL nsbl@sify.comCONTACT PERSON MR.ABHISHEK JAIN

DIRECTORnsbl@sify.com

DIRECT PHONE 0755-4233666

ADDRESS LB-16,B-BLOCK  MANSAROVAR COMPLEX  HOSHANGABAD ROAD  BHOPAL – 462011PHONES 0755-2551872  CORPORATE EMAIL nsbl@sify.comCONTACT PERSON MR.VIPIN JAIN  BRANCH MANAGER  nsbl@sify.comDIRECT PHONE 0755-2551872

ADDRESS SHOP NO.4 & 5,STERLING ENCLAVE  TRILANGA ROAD  SHAHPURA  BHOPAL – 462016PHONES 0755-4284444, 0755-4282244, 075

5-4284422CORPORATE EMAIL nirman02@airtelmail.inCONTACT PERSON MR.ABHAS JAIN  DIRECTOR  abhas1972@yahoo.co.in

101

DIRECT PHONE 0755-4284444

ADDRESS U/G-131,MINAL SHOPPING MALL  J.K.ROAD  BHOPAL - 462021PHONES 0755-4287200  CORPORATE EMAIL nsbl@sify.comCONTACT PERSON MR.SANJEEV KOLANGDE  SUB-BROKER  nsbl@sify.comDIRECT PHONE 0755-4287200

ADDRESS 9,SECTOR III  INDRAPURI  BHOPAL - 462021PHONES 0755-4273322, 0755-4253322 CORPORATE EMAIL nsbl@sify.comCONTACT PERSON MR.SULABH JAIN  BRANCH HEAD  nsbl@sify.comDIRECT PHONE 0755-4273322

ADDRESS UG-32,KARTAR ARCADE  NEAR CAPITAL PETROL PUMP  RAISEN ROAD  BHOPAL - 462021PHONES 0755-4034088  CORPORATE EMAIL nsbl@sify.comCONTACT PERSON MR.YOGESH SAHU  BRANCH MANAGER  nsbl@sify.comDIRECT PHONE 0755-4034088

102

ADDRESS 110-A,SARVADHARAM COLONY  KOLAR ROAD  BHOPAL – 462042PHONES 0755-4236322, 0755-4236422 CORPORATE EMAIL nsbl@sify.comCONTACT PERSON MR.AMIT JAIN  SUB-BROKER  nsbl@sify.comDIRECT PHONE 0755-4236322

SBICAP SECURITIES LTD.

BRANCH OFFICE

ADDRESS C/O STATE BANK OF INDORE  PANCHANAN BHAVAN  T.T.NAGAR  BHOPAL – 462003PHONES 0755-5549108  CORPORATE EMAIL sslcare@sbicaps.comCONTACT PERSON MR.ASIS GUPTA  DEALER  asis.gupta@sbicaps.comDIRECT PHONE 0755-5549108

SHAREKHAN LTD.

BRANCH OFFICES

ADDRESS HOUSE NO.15-B,1ST FLOOR  OPP.RAJBHAWAN,PLOT NO.9 B

103

  MALVIYA NAGAR  BHOPAL - 462003PHONES 9893043421  CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

ADDRESS HOUSE NO.15B,SEWANI PLAZA,1ST FLOOR

  PLOT NO.9B,OPP.RAJ BHAWAN  MALVIYA NAGAR  BHOPAL – 462003PHONES    CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

STANDARD CHARTERED STCI CAPITAL MARKETS LTD.

BRANCH OFFICE

ADDRESS K.K.PLAZA,PLOT NO.1,ZONE-2  MAHARANA PRATAP NAGAR  BHOPAL – 462011PHONES 0755-4056521  FAX 0755-4056525CORPORATE EMAIL  CONTACT PERSON   DIRECT PHONE  

SWASTIKA INVESTMART LTD.

BRANCH OFFICE

104

ADDRESS 22-ZONE-II  MAHARANA PRATAP NAGAR  BHOPAL – 462011PHONES 0755-4299111  CORPORATE EMAIL swastikafin@hotmail.comCONTACT PERSON MR.SAURABH NUWAL  BRANCH HEAD  sfl_saurabh@yahoo.co.inDIRECT PHONE 0755-4299222

SYSTEMATIX SHARES & STOCKS INDIA LTD.

BRANCH OFFICE

ADDRESS MEZZANINE FLOOR,FRONT SIDE NO.M1

  PLOT NO.43,ZONE-II  M.P.NAGAR  BHOPAL – 462011PHONES 0755-3209111  CORPORATE EMAIL manojgupta@systematixshares.co

mCONTACT PERSON MR.MANOJ GUPTA  EMPLOYEE  manojgupta@systematixshares.co

mDIRECT PHONE 0755-3209111

105

RESEARCH

METHODOLOGY

RESEARCH METHODOLOGY

TITLE:

To analyse the changing trends of the share market, in

last ten years share market faces so many ups and down.

106

And also anlayse that how the investor invest their money

with what perception.

TITLE JUSTIFICATION :

The above title is self explanatory. In this study it is tried

to find out that why share market faces so many

changes in last ten years what are the things which

affect the market most. And how the investor decide

their shares to buy or sell.

OBJECTIVE

Objective One

Analysis of changing trends in Indian stock market

in last ten years.

To determine reasons for so many ups and down.

To determine the procedures of investors to

opting companies for share.

To determine the reasons of increasing the

number of investors.

To determine the effect of all scams in the share

market.

To determine the use of Internet for valuable

information and decision-making process.

Objective Two

107

To determine that how the Indian economy

affected through the changing trends in share

market.

To determine that how the changing trends affect

investor’s behaviour.

Objective Three

To study of milestones came across the journey.

To determine the reasons for affect Sensex

SIGNIFICANCE OF THE STUDY

SIGNIFICANCE TO THE INDUSTRY:

This is a limited study which takes into consideration the

responses of 30-40 people. This data can be explored to

take in the trends across the industry. The significance for

the industry lies in studying these trends that emerge

from the study. It is a rapidly changing and evolving

sector. People are only beginning to wake up to it’s vast

possibilities. A study like this can attempt to guide the

future of the industry based on current trends.

SIGNIFICANE FOR THE RESEARCHER :

To facilitate and provide all the useful information of the

study, which can be helpful to make decision for investing

108

money in right shares which is profitable to investors as

well as brokers.

RESEARCH DESIGN :

Source of Data.

Method of Data collection.

Types of research.

Sampling

Tools of analysis

Source of Data:

There are many sources which provide information

regarding the research. The data may be of two types

1) Primary Data.

2) Secondary Data

1) Primary Data :

Primary data is data which is not already available.

Primary data is found in its original form. Primary data are

those which are collected afresh and for the first time, and

thus happen to be original in character.

109

Methods for collecting primary data are:

Questionnaires

Interviews

Schedules etc.

In this study the interview method have been used

2) Secondary Data :

Secondary data means data that are already available

i.e. they refer to the data which have already been

collected and analyzed by others. Secondary data may

be published or unpublished.

The sources of secondary data are:

Bulletin, books and magazines organized by

organizations.

Web Sites, Official records.

Case studies.

DISCRIPTIVE AS WELL AS ANALYTICAL

RESEARCH

The research is primarily descriptive as well as analytical

in nature. The sources of information are both primary &

secondary.

Well-structured interviews were conducted to collect the

customer’s perception and buying behavior, through this

interview.

110

SAMPLING METHODOLOGY

Sampling Technique:

Initially, a rough draft was prepared keeping in mind the

objective of the research. A pilot study was done in order

to know the accuracy of the interview. The final interview

was arrived only after certain important changes were

done. Thus my sampling came out to be judemental and

convinent.

Random Sampling:-

It is also known as random sampling or chance sampling.

Under this every item of the universe has an equal chance

of inclusion in the sample.

In brief, the implications of random sampling are:

It gives each element in the population an equal

probability of getting into the sample and all choice is

independent of one another number.

It gives each possible sample combination an equal

probability of being chosen.

111

Why random sampling has been chosen:-

Sampling can save time and money: - Sample

study is usually less expensive than a census

study and produces results faster.

Sampling may enable more accurate

measurements foe a sample study.

Sampling usually enables to estimate the sampling

errors and thus assists in obtaining information

concerning some characteristics of the population.

Sampling Unit:

The respondents who were interviewed to analyse the

subject are the sampling units. These comprise of

registered brokers and sub-brokers and the regular

investors.

Sample size:

The sample size was restricted to only 30-40, which

comprised of mainly peoples from different regions of

Bhopal due to time constraints.

Sampling Universe:

112

The area of the research is Bhopal, India.

Tool of Analysis:

Qualitative.

i. Observation

ii. Case Study

Qualitative:

It is concerned with the qualitative phenomenon i.e.

phenomenon related to or involves quality. For instance,

when we are interested in investigating the reason for

human behavior i.e. why people think or do certain thing.

We quite often talk of “Motivation Research” an important

type of qualitative research. This type of research aims at

discovering the underlying motives and desires, using the

depth interview for the purpose.

Observation:-

Observation includes minute observation of activities take

place in the field of research. For observation in this study

secondary data has been used.

Case Study:

It includes the systematic study of cases related to

research as well as it includes the in-depth study of the

literature which is already available.

113

In this study qualitative technique of analysis has

been chosen.

LIMITATIONS OF THE RESEARCH

1. The research is confined to a certain parts of Bhopal

and does not necessarily shows a pattern applicable to

all of Country.

2. Some respondents were reluctant to divulge personal

information which can affect the validity of all

responses.

3. In a rapidly changing industry, analysis on one day or

in one segment can change very quickly. The

environmental changes are vital to be considered in

order to assimilate the findings.

114

RESULT ANALYSIS &

INTERPRETATION

Analysis of changing trends in Indian stock market

in last ten years.

The trend in last ten years in share market has been

changed like the way selling and buying initially, bidding

form was there to sell or buy. Share price in that time

could change suddenly according to bidding. Investors had

more risk in investing because everything was hidden

even share price also was hidden. So that investors have

to do believe on brokers. The availability of brokers was

also less. Today everything we can watch on screen

investors can know their share price anytime and

investors can buy easily share online through internet by

which investors belief have been increased. SEBI playing

115

an important role in motivating the investors to invest in

share market. SEBI makes a regulation to protect the

interests of investors in securities, to promote the

development of Securities Market, to regulate the

securities market through which interest of investors is

increased .

To determine reasons for so many ups and down

There are so many reason which affect the share market

for example elections, FII’s sale and purchase, the world

economy, future projects of different companies, scams

are also affect the share market for e.g. the Harshad

Mehta scam affect so much on the market as well as

investors behaviour. And the last downfall’s reason was

recession and FII that downfall broke the belief of

investors because the investors bear huge losses in a that

single day. The day was black Monday.

Black Monday saw bloodbath on Dalal Street as the Indian

stock markets crashed by over 1430 points in afternoon

trade (the market has since then recovered somewhat),

reminding investors.

Why Did the Markets Crash?? I am listing below some of

the reason that I understand

1. Relent less selling by the FII's.

2. Lot of Investors turning into traders and taking long

positions in the futures Market.

116

3. Overall Change in the Global Investment Climate

4. Fear of the US Economy headed towards a recession.

5. Commodities Market Being Very Volatile.

6. Increasing Presence of Hedge funds across all asset

classes increases chances of volatility.

To determine the procedures of investors to opting

Companies for share.

It is very difficult to determine the good share for

investment but investors can use some ways to play a

safe game. Share market is like speculation but It is most

important thing to analyse the market before investing in

it. It is generally very difficult for new investors because

they are unable to decide or select a good share which will

profitable for them Many investor new to share trading

overcomplicate the whole process. Investors load their

charts with lots of fancy technical indicators and are

constantly testing out new systems in order to try and find

that holy grail trading system that’s going to make them

rich. However it should be pointed out that the most basic

systems are often the most profitable.

If you look at the price patterns of various different

companies you will generally see that when a stock is

trending upwards it will never go up in a straight line.

Even when there is a very long-term upwards trend there

will always be pull-backs along the way.

117

So therefore if you are looking to trade these long-term

trends then a very simple but effective trading strategy

would be to wait for one of these pull-backs and then

enter a long position as soon as the price moves back up

again.

So you can see that this very simple trading strategy can

produce some excellent results and it’s a lot more

effective than most of the overcomplicated systems that a

lot of traders use. Successful share trading isn’t really that

difficult. You simply need to look for shares that are

trending either upwards or downwards and then find a

way of profiting from this trend.

To determine the reasons of increasing the number

of investors

The lowering of interest rates on all major saving schemes

is forcing small investors to look at the stock markets. This

has resulted in a sharp jump in liquidity in the market.

Investors are growing more enthusiastic about shares

every day highlighted by sharply higher fund inflows in the

market that propelled the benchmark market index.

There are many factors that have boosted the sentiment

of not only domestic investors but also foreign institutional

investors who had lately adopted an indifferent approach

towards Indian market.

118

According to analysts, include sharp increase in foreign

fund inflows in the market, a smart pick up in industrial

growth, and a downward trend in the overall interest rate

regime.

To determine the effect of all scams in the share

market.

All the scams affect the share market every scams make

the drastic change in share market. In Harshad Mehta

scams share market raise 1000 points in just 16 days

When his scam was opened share market falls down

suddenly through which investor belief was broken. And

they were avoiding the investment in share market. When

the investors are interested to invest the next scam was

held Ketan Parekh scam. In this the share prices of Zee

telefilm raised from Rs.476 to Rs.1555 and it falls down to

Rs.121 in a year. And Satyam scam plays a major role in

the downfall of Indian market. It is because of only one

member our market has decreased a lot. Lot of

shareholders suffers because of him as the share price

comes down like a rocket. Will the market come up and

when it would happen will be a big question.

119

To determine that how the Indian economy affected

through the changing trends in share market.

Indian market is presently down due to various reasons.

The effect of recession has just now crossed Indian banks.

The main thing for recession is bank rupturing and it

should be stopped and it should not happen hereafter. But

the effect is increasing day by day and this results in

unemployment. Before Recession the unemployment is

some what controlled but after recession it is a growing

concern. The recession affect most in the Indian Economy.

The sensex climbed at a rapid rate, touching record

heights in 2007 -2008. The average Indian investor who

traditionally has been a very conservative investor

became more confident and started investing heavily in

the stock market. The stock market grew in leaps and

bounds and its growth in the last five years itself has been

a phenomenal twenty five per cent. All the economists and

statisticians of the world started making predictions about

India becoming the next economic superpower of Asia or

perhaps the world. All this sounded very good to be true

and the whole country’s attitude seemed to be a vibrant

one. Against this backdrop the unthinkable happened, the

stock market Of the United states of America or Wall

street stock exchange crashed due to a crisis in the

housing finance sector of its leading banks, caused due to

delinquency and non-repayment of housing loans. This

resulted in a panic in the world market including India. The

sensex dropped more than nine thousand points in the

120

Bombay Stock Exchange. The Foreign Investment also

came down heavily due to a liquidity crunch in the major

companies. The banks stopped lending to the bankers and

in effect the market came to a sudden stop. The Indian

investor panicked again and started selling like crazy.

Major companies started making announcements like job

layoffs to minimize their losses.

Large domestic market will keep fuelling growth of the

Indian economy, though at a lower pace, despite financial

crisis leaving the US and Europe reeling under recession,

experts have said.

While the Reserve Bank and stock regulator SEBI have

announced measures to improve liquidity in the system,

the equity market has suffered painful bruises in India in

sync with the global bourses.

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SUGGESTIONS

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1. Brokers should improve their services.

2. SEBI should imply some mere regulations. So that

investors can feel more secure

3. Small investors cannot afford daily trading so script

call updating facilities should be improved.

4. Brokerage slabs should be flexible.

5. Compliance department should be more active in

companies.

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CONCLUSION

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CONCLUSION

After going through all the analysis regarding the stock

market in last ten years, we can say that stock market

faces so many ups and down during this time it comes

from its lowest point to its peak at 21000 but then crashed

badly. During its skimming point some scams were held by

which it forms its new peak falls down suddenly and so

badly by which investors are afraid to invest in this

market. Now it is revolving around a 14000-15500 figure.

Though the sensex is a barometer and after seeing such

fluctuations one could be afraid of investing. Still we can

say that people can play safe by investing the blue-chips

and undervalued shares.

During year 2006, if we keep aside that brief period of loss

that the market witnessed from may 10 2006 to June 14

2006, investors’ wealth seem to have grown double fold

with the Sensex touching the 10000, 11000, 12000, 13000

and 14000 levels in the same calendar year. Investor

wealth in terms of market capitalization has been growing

in the range of 6.84-12.41%

And talking about year 2007, we can summarize the

happenings of year 2007 as a year which redefined the

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resistance levels at sensex. Strong economic data, heavy

inflow of funds from FIIs towards the close of previous

calendar year and decent to highly encouraging surge in

earnings of top notch companies all pointed to a rosy

2007. The rupee's rise against the US dollar the

regulator's decision to restrict investments made through

participatory notes, rising crude oil prices, the sub-prime

mortgage woes in US, concerns over a slowing down US

economy and The Left parties' opposition to the Indo-US

nuclear pact, did halt the market's progress at times. But

the inherent strength of the Indian economy, fairly

buoyant results quarter after quarter, the various chops

and subsidies announced by the government and

sustained efforts made by the market regulator to keep

investor confidence in the system alive kept the

momentum going.

Presently the hike and seek being played by crude prices,

inflation and RBI is affecting our market to a great extent.

And adding to the worries are global slowdown, political

instability, serial bomb blasts, negative public sentiments

etc. It is indeed surprising that though the epicenter of the

sub-prime crisis is the US, the tremors are being felt in

India. The loss of market cap in the US is only 14 per cent

vis-À-vis 38 per cent in India.

But even after analyzing the causes for downturn, we can

say that India story has not ended; else $200 billion with

institutional investors would have fled for safer waters.

Exports being 14 per cent of GDP, India is less vulnerable

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to external shocks than many other Asian nations. Political

uncertainties too have narrowed down. Savings in India

have risen at a historic rate of 35 per cent on the growing

GDP base; 17 per cent of this is in gold, commodities and

real-estate while financial savings represent 18 per cent of

GDP. Even this is skewed towards deposits both banking

and non-banking, while the percentage of savings in

shares and debentures is a mere 6.3 per cent. If this

percentage goes to 25 per cent, it would amount to $40

billion of incremental money being diverted to capital

markets. So even after such downturns, we can be hopeful

for a positive market.

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QUESTIONS FOR INTERVIEW

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For Investors:-

1. How do you select the share to invest?

2. How do you perceive that share trading is a good

mode of investment?

3. Which kind of brokers do you prefer?

For Brokers & sub brokers.:-

1. How the trends affect your business?

2. What are the reasons for increment of

investors?

3. How much the scams effect investor’s

behaviour?

4. What is the main reason which provoked

investors form small cities?

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BIBLIOGRAPHY

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BIBLIOGRAPHY

1. BOOKS/MAGAZINES REFFERED:

DALAAL STREET

INDIA TODAY

BUSINESS TIMES

2. WEBSITES REFFERED:

www.bseindia.com

www.nseindia.com

www.sebi.gov.in

www.moneycontrol.com

3. SEARCH ENGINES:

www.google.co.in

www.wikipedia.org.in

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THANK YOU

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