depoaitary participants
TRANSCRIPT
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CHAPTER - 1
INTRODUCTION
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INTRODUCTION
A stock exchange is a nervous system of capital market. The changes in the capital market are
brought about by a complex set of factors, all operating on the market simultaneously.
A stock exchange is a key institution facilitating the issue and sale of various types of
securities.In the absence of stock exchange, the people with savings would hardly invest in
corporate securities for which there would be no liquidity (buying and selling facility).
Corporate investments from the general public would have been thus lower.
A stock exchange is a place or a market where securities, shares, debentures, bonds, mutual
funds of joint stock companies, central and state government organizations, local bodies and
foreign government are bought and sold. A stock exchange is a platform for the trade of already
issued securities through primary market. It is essential pillar of the private sector and corporate
economy. It is open auction market where buyer and seller met and involve a competitive price
for the securities. It reflects hope aspirations and fears of people regarding the performance of
the economy.
The stock exchange defined
The supreme court of India has enunciated the roll of stock exchange in these words:
A stock exchange fulfills a vital function in the economic development of a nation. Its main
function is to liquefy capital by enabling a person who has invested money in, say a factory
or railway to convert it into cash by disposing off his shares in the enterprises to someone
else.
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Top 5 Stock Exchanges
Rank Stock
exchange
Head
quarter
Market
capitalization(US$billion)
Trade value
(US$billion)
Logo
1 New york
stock
exchange
New
york city
14,242 20,161
2 NASDAQ
OMX
New
york city
4,687 13,552
3 Tokyo
stock
exchange
Tokyo 3,325 3,972
4 London
stock
exchange
London 3,266 2,871
5 Shanghai
stock
exchangge
Shanghai 2,357 3,658
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STOCK EXCHANGES IN INDIA
In India only registered stock exchange can operate the stock market activities and the recognition is
governed under the provision of securities and contract (Regulation) act, 1956.
There are 24 Regional stock exchanges in INDIA under Bombay stock exchange (BSE) and National
stock Exchange (NSE). Daily turnover of all the stock exchanges is about 30,000 crore daily. BSE is
131 years old, which was established in the year 1875 where NSE is just 13 year old and was
established in 1993. NSE has brought screen based Trading System in INDIA.
BOMBAY STOCK EXCHANGE
Bombay Stock Exchange, commonly referred to as the BSE, (Bombay Share Bazaar) is a stock
exchange located on Dalal Street Mumbai, Maharashtra, India. It is the 10th largest stockexchange in the world by market capitalization. Established in 1875, BSE Ltd. (formerly known as
Bombay Stock Exchange Ltd.), is Asias first Stock Exchange and one of Indias leading exchange
groups. Over the past 137 years, BSE has facilitated the growth of the Indian corporate sector by
providing it an efficient capital-raising platform. Popularly known as BSE, the bourse was established
as "The Native Share & Stock Brokers Association" in 1875.It operates one of the most respected
capital market educational institutes in the country (the BSE Institute Ltd.). BSE also provides
depository services through its Central Depository Services Ltd. (CDSL) .
NATIONAL STOCK EXCHANGE
The National Stock Exchange (NSE) is stock exchange located at Mumbai, India. It is the 11th
largest stock exchange in the world by market capitalization and largest in India by daily turnover and
number of trades, for both equities and derivative trading. NSE has a market capitalization of
around US$1 trillion and over 1,652 listings as of July 2012.Though a number of other exchanges
exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India
and between them are responsible for the vast majority of share transactions. The NSE's key index is
the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange fifty), an index of fifty
major stocks weighted by market capitalization.
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INTRODUCTION TO LUDHIANA STOCK EXCHANGE
The Ludhiana Stock Exchange Limited was established in 1981, by Sh. S.P. Oswal of Vardhman
Group and Sh. B.M. LalMunjal of Hero Group, leading industrial luminaries, to fulfill a vital
need of having a Stock Exchange in the region of Punjab, Himachal Pradesh, Jammu & Kashmir
and Union Territory of Chandigarh. Since its inception, the Stock Exchange has grown
phenomenally. The Stock Exchange has played an important role in channelizing savings into
capital for the various industrial and commercial units of the State of Punjab and other parts of
the country. The Exchange has facilitated the mobilization of funds by entrepreneurs from the
public and thereby contributed in the overall, economic, industrial and social development of the
States under its jurisdiction.
Ludhiana Stock Exchange is one of the leading Regional Stock Exchange and has been in the
forefront of other Stock Exchange in every spheres, whether it is formation of subsidiary for
providing the platform of trading to investors, for brokers etc. in the era of Screen based trading
introduced by National Stock Exchange and Bombay Stock Exchange, entering into the field of
Commodities trading or imparting education to the Public at large by way of starting
Certification Programmes in Capital Market.
It has around 325 listed companies.
Regional 212
Non-regional 113
Total 325
The vision and mission of Stock Exchange is:
"Reaching small investors by providing services relating to Capital Market including
Trading, Depository Operations etc and creating Mass Awareness by way of education and
training in the field of Capital Market.
To create educated investors and fulfilling the gap of skilled work force in the domain in
Capital Market."
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Further, the Exchange has 295 members out of which 162 are registered with National Stock
Exchange as Sub-brokers and 121 with Bombay Stock Exchange as sub-brokers through our
subsidiary.
LISTING OF SECURITIES OF COMPANIES AT LUDHIANA STOCK EXCHANGE
At present, Ludhiana Stock Exchange has 324 listed companies, out of which 211 are regional
and 113 are Non-regional. The total listed capital of aforesaid companies is Rs. 3063.56
Croresappx. The market capitalization of the said companies is more than Rs. 1890.53 crores.
The Stock Exchange is covering the vast investor base through the listing of above said
companies, which are situated in the region comprising of Punjab, Himachal Pradesh, Jammu &
Kashmir, and Chandigarh.
Ludhiana Stock Exchange has facilitated the capital generation for agro based industries as
Punjab is a agricultural led economy. It will continue to do so, once it gets approval for a tie up
with bigger Exchanges for commencing trading operations.
BOARD OF DIRECTORS
Sh. V.P. Gaur Chairman
Sh. Anup Kumar Jain Shareholder Director
Sh. Ashok Kumar Shareholder Director
Sh. Rajinder Mohan Singla Shareholder Director
ShPadamParkashKansal Shareholder Director
Sh. VikasBatraSh. VikasBatra Shareholder Director
Dr. R.L. Behl Public Representative
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STRENGTH OF LSE
1. LSE brand is popular among masses. The brand image of LSE can be capitalized.
2. We have requisite infrastructure for the Capital Market activities which includes a multi-
storeyed, centrally air conditioned building situated in the financial hub of the city i.e. Feroze
Gandhi Market.
3. We have well experienced staff handling operations of Stock Exchange.
4. We have competent Board and professional management.
5. We have much needed networking of sub brokers in the entire region, who are having rich
experience in Stock Market operations for the last 31 years.
6. We have more than 46,000 clients spread across Punjab, Himachal Pardesh, Jammu &
Kashmir and adjoining areas of Haryana and Rajasthan.
7. The turnover of our subsidiary is the highest amongst all subsidiaries of Regional Stock
Exchanges in India.
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INTRODUCTION TO DEPOSITORY PARTICIPANTS
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Meaning of depository
A depository is an organisation which holds securities(like shares, debentures, bonds,
government securities, mutual fund units etc.) of investors in electronic form at the request of the
investors through a registered Depository Participant. It also provides services related to
transactions in securities.
Depository Participants (DP):
A DP is investors representative in the depository system and as per the SEBI guidelines,
financial institutions/banks/custodians/stock brokers etc. can become DPs provided they meet the
necessary requirements prescribed by SEBI. DP is also an agent of depository which functions as
a link between the depository and the beneficial owner of the securities. DP has to get itself
registered as such under the SEBI Act. The relationship between the depository and the DP will
be of a principal and agent and their relation will be governed by the bye-laws of the depository
and the agreement between them. Application for registration as DP is to be submitted to a
depository with which it wants to be associated. The registration granted is valid for five years
and can be renewed. As depository holding the securities shall maintain ownership records in the
name of each DP, DP in return as an agent of depository,
Shall maintain ownership records of every beneficial owner (investor) in book entry form.
A DP is the first point of contact with the investor and serves as a link between the investor and
the company through depository in dematerialisation of shares and other electronic transactions.
A company is not allowed to entertain a demat request from investors directly and investors have
to necessarily initiate the process through a DP.
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ELIGIBILITY CRITERIA FOR DEPOSITORY PARTICIPANTS:
The following entities are eligible for becoming depository participant in accordance with
Regulation 19 of the SEBI (Depositories and Participants) Regulations, 1996.
Apublic financial institution as defined in Section 4A of the Companies Act, 1056.
A bank included in the second schedule of the Reserve Bank of India Act, 1934.
A foreign bank, operating in India with the approval of Reserve Bank of India.
A state financial corporation established under the provisions of section 3 of the State Financial
Corporations Act, 1951.
An institution engaged in providing financial services, promoted by any of the four institutions
mentioned above.
A custodian of securities, who has been granted a certificate of registration by SEBI under
Section 12(1A) of the SEBI Act, 1992.
Characteristics of depository participant:
1. Acts as an Agent of Depository
2. Directly deal with customer
3. Functions like Securities Bank
4. Account opening
5. Facilitates dematerialization
6. Instant transfer on payout
7. Credits to investor in IPO, rights, bonus
8. Settles trades in electronic segment
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CODE OF ETHICS FOR DPS
The Business Rules of Depository provide the general principles and operational principles for
Depository/DPs. The Business Rules of NSDL provide as under:
(A) General Principles
(i)Professionalism: A DP in the conduct of its business shall observe high standards of
commercial honor and just and equitable principles of business.
(ii)Adherence to Business Rules: DP shall adhere to the Bye-laws and Business Rules of the
Depository and shall comply with such operational parameters, rulings, notices, guidelines and
instructions of the relevant authority as may be applicable from time to time.
(iii)Honesty and fairness: In conducting its business activities, a DP shall act honestly and
fairly in the best interests of its BOs.
(iv) Capabilities: A DP shall have and employ effectively the resources and procedures which
are needed for the proper performance of its business activities.
(B) Operational Principles
(i) DPs shall ensure that any employee who commits the DP to a transaction has the necessary
authority
to do so;
(ii) DPs shall ensure that employees are adequately trained in operating in the relevant areas they
are assigned to and are aware of their own, and their organizations responsibilities as well as
the relevant statutory Acts governing the DP, the Bye-Laws and the Business Rules including
any additions or amendments thereof;
(iii) No DP or person associated with a DP shall make improper use of BOs securities or funds;
(iv) While performing any transaction in the BO accounts, the D must ensure that, great care is
taken at all times not to misrepresent in any way, the nature of the transaction;
(v) No DP shall exercise any discretionary power in a BOs account unless such BO has given
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prior written authorization in this regard.
(vi) (a) Whether the DP has appointed Principal Officer as required under PMLA Act ?
(b) Whether the DP has prepared a proper policy framework as per the guidelines of PMLA ?
(c) Whether DP is compliant with PMLA guidelines and latest SEBI Master Circular.
(C) General Guidelines
No DP shall shield or assist or omit to report about any DP whom it has known to have
committed a breach or evasion of any Rules, Bye-laws, or Regulations of the Depository or of
any resolution, order, notice or direction there under of the Executive Committee or the
Managing Director or any Committee or officer of the Depository authorized in that behalf.
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OPERATIONAL AND FUNCTIONAL ASPECTS OF DEPOSITORY
PARTICIPANT
Account Opening :-
An entity that wants to keep its cash safe in a bank has to open an account with a bank as a first
step and maintain cash in book entry form. Similarly, an investor has to open a demat account
with any DP of CDSL as a first step to hold securities in demat form in the depository system.
CDSL system facilitates opening of demat accounts for different categories of investors. Demat
accounts opened with CDSL are referred as Beneficial Owner Accounts or BO account. As
explained earlier, when securities are held in physical form name of the investor is recorded in
the books of the company as Registered owner. When the same securities are converted into
electronic form and held in a demat account, the depository becomes registered owner of the
securities A demat account may be opened and maintained in the name(s) of one person (sole
holder) or more than one persons (joint holders). All the joint-holders have to sign the
application form and the agreement. Though the beneficial ownership of jointly held securities
vests equally in all joint-holders, communications about the joint demat account are provided
only to the first holder. The dividend and interest warrants, annual reports and notices for
meetings are also issued to the first holder only. All BO accounts are operated at DP level;
however, data is maintained at CDSL level. A BO does not have direct access to CDSL system
and must act through his / her DP.. Every demat account opened in the CDSL system is
allocated a 16 digit number and isreferred as BO ID. Following is an example explains the
components of the 16 digit BO ID.
The first 8 digits form the DP ID and the remaining 8 digits form the Client ID.
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ACCOUNT ADMINISTRATION AND MAINTENANCE
After a demat account is opened, BO may want to change certain details such as address,
signatures or any other details allowed by CDSL. This activity forms part of account
administration and maintenance. Any additions, deletions and modifications in the account
details should be done only against duly signed account modification form from the BO. Joint
holders cannot individually make a request for any account modification. All additions/
modifications/ deletion entries are logged into CDSL records for audit purposes. DPs should
verify the signatures of the BO on the Account Modification Form with the signatures of the BO
captured in the CDSL system. Only those fields can be modified under a given BO status, which
are predefined as modifiable.
Further, the requested modifications can be entered into CDSL system only if the account
Status is Active. Following changes can be done:
Modification of Account Holder Names
Modification of Address
Change of signature and address
Change in nameDelete Name and Address
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DEMATERIALISATION
Dematerialization is the process by which a BO can get his physical securities converted into
electronic form.
Pre-requisites for dematerialization are:
Investor should have a demat account with any DP of CDSL.
Securities to be dematerialized must have been admitted in CDSL i.e. ISIN for the securities
should be available in CDSL.
Investor should be the registered holder for the securities in the books of the company.
The BO submits a request to the DP in the Dematerialization Request Form (DRF) alongwith the certificates. The DP verifies the information on the DRF and physical certificates and
enters the details in the system to setup a request electronically. The DP sends the physical
documents to the concerned Issuer/ RTA. If the Issuer/ RTA finds the DRF and certificates in
order, it registers CDSL as the registered holder of the securities and confirms the DRN
electronically to CDSL. On receiving such confirmation, CDSL credits the BO account.
If the issuer / RTA rejects all or some of the certificates in a demat request then the same
are sent back to the DP mentioning the rejection reason(s). DP will then ask the BO to rectify the
reason of rejection and send the certificates again for dematerialization under a fresh demat
request.
Transfer cum dematerialization of existing scrips
Transposition-cum-Dematerialization
Transposition is Change in order of names. For example, if the certificates are in the
names of A & B, the same can be lodged for dematerialization under account held in the
name of B & A, by filling up the DRF and the Transposition Request Form (TPRF). This
will enable the Issuer/RTA to transpose the securities in the order of the names in which
the account is opened and then accept the dematerialization request.
In case the BOs wish to transpose and demat the securities, the DP shall handover a
TPRF along with the DRF to the BOs.
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In case of transposition-cum-dematerialization, the BO should mention the details of
the account in which they wish to dematerialize the securities.
The DP shall verify the following on the TPRF :
Whether the TPRF is complete.
Whether the TPRF contains only those names (in any order) that are the holders of the
BO account.
Whether all the holder(s) have signed the TPRF.
The DP should maintain a copy of the TPRF along with a copy of the DRF.
Transmissioncum - Dematerialization
In case of death of one or more joint holders, the surviving holder(s) can get the ShareCertificate(s) dematerialized by submitting the following documents, along with the
Share Certificate(s) :
a) Dematerialization Request Form
b) Original or copy of the death certificate of the deceased holder(s), duly notarized or
attested by a Gazetted Officer.
c) Transmission Request FormAnnexure 4.5 (for death of one/more of joint holder(s))
The DP should ensure that the demat account is in the name of the surviving holders
only.
DP should setup a demat request and submit all the documents to the Issuer/RTA with the
system generated letter.
DP should write in the FROM BO ID column as Transmission-cum-Demat.
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SETTLEMENTS
When securities are purchased or sold, the same need to be transferred into the buyers
account or transferred out of the sellers account. Since settlement of trades in all listed
securities is to be compulsorily done in the dematerialized form, the transaction has to be
routed through the depository system. The securities could either be sold or purchased through
the stock exchange mechanism or outside the stock exchange mechanism.
A demat account can be debited / credited only on instructions of the BO. BO therefore needs
to give instructions to his / her DP to affect debit / credit of securities out of his / her demat
account. However, instructions are, generally, required only for debit since a BO can give a one-
time standing instruction to the DP, for crediting the account without a credit instruction, at the
time of account opening. This one-time instruction is known as Purchase waiver. The DP
executes all instructions in the CDSL system, only after verification of the signature of the
account holder(s).
TRANSMISSION
The objective of transmission functionality is to allow the transfer of title of securities in case of
death of an account holder and inheritance by a successor, as stated by the deceased BO. The
securities are transferred into the account of either the surviving joint holder(s) or the claimant to
the securities.
This transaction can be initiated by the DP for transfer of securities only in case of death of all
or any of the holders or in any other case with the prior approval of CDSL. For transmission of
securities in case of death of one of the holders, the new account would need to be opened in
the same order of names of the surviving holders as given in the old account. For example: If
the old account is in the names of A, B & C and "C" expires, the new account, shallnecessarily be in the names ofA and B.
In case the surviving holders wish to transfer the securities to a demat account with any other
DP of CDSL, the DP shall ensure that the names of the surviving holders are in the same order
of names as in the existing account. The surviving holders shall submit to the old DP, the
Client Master Report of the new account duly stamped and signed by the new DP for effecting
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the transmission of securities. A declaration stating that all transactions in the account are
authentic shall be submitted by the surviving holders to the old DP.
If the surviving holders wish to transfer the securities to a demat account with the same DP,
the new account may be opened by the DP, based on the documents submitted at the time of
opening of the original account. However, if the 1st
holder in the new account is different from
that in the old account, the DP shall ensure that the existing KYC norms are adhered to in
obtaining the required proofs for recording of permanent and correspondence address. A
declaration stating that all transactions in the account are authentic shall be submitted by the
surviving holders to the old DP. Further, DPs shall ensure that the KYC documentation, for
opening of new accounts, is as per SEBI and CDSL specifications in force at the time.
REMATERIALIZATION / REPURCHASE
Rematerialisation allows to convert the electronic balances held by the BO in itsdemat
account into physical form.
In the case of Repurchase, the remat module is used to expunge (remove) the securities and
obtain the proceeds against the same.
Features
Rematerialisation is a process by which the Securities held in electronic form are converted
into paper mode securities by the Beneficial Owners.
While, in the case of Repurchase, the payment is issued to the BO by the Issuer/RTA in lieu
of securities held in electronic form.
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ACCOUNT CLOSURE
The BO himself or his DP or CDSL may initiate the request for Account Closure. A DP
may request the closure of its BO accounts by specifying appropriate reason. A BO
account can also be closed by CDSL on reasonable grounds. A CM may request closure
of his CM Unified Settlement (CM Pool) Account / CM Principal Account / CM Clearing
Member Account.
A DP can set-up or cancel an account closing request only for the BO accounts serviced
by the DP or its branches, if the Main DP has taken the rights from its branch with itself
for this function.
Procedure
A BO account can be closed in the following cases:
Closure initiated by BO
Closure initiated by DP
Closure initiated by CDSL
The Account shall be closed by the CDSL system only when all the balances in the account
are Zero.
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PENALTIES FOR VIOLATIONS, IRREGULARITIES, NON-COMPLIANCES OR DELAY
IN COMPLIANCES
The objective of imposing penalty on the Depository Participants (DP) is to impress upon everyDP the importance of observing compliance of various regulatory requirements and to
discourage them from non-compliance or violation of these requirements.
Classification of violations
Violations are classified into four categories :
1) Fraud committed at the offices of DPs, including fraudulent / benami / fictitious demat
accounts opened with DP.
2) Failure to resolve the grievances of investors.
3) Disruption of services due to system-related / connectivity failures.
4) Other procedural lapses.
Scale of penalty
The scale of penalty to be levied for non-compliance, irregularity, violation or delay in
compliance is furnished in Annexure 11.1 for DPs. The DAC will have the power and
authority to impose penalties higher than mentioned in the said annexure depending upon
the nature of irregularities observed.
It shall be open to the authority empowered to impose the penalty to refer any violation
to the DAC, if he deems it necessary to do so, irrespective of the monetary limits.
The list of non-compliances is subject to such modification as may be deemed fit by
CDSL from time to time and the same shall be effective on its notification to the DPs
through communiqu.
Procedure for imposition of penalty on DPs
In case any violation, irregularity, non-compliance or delay in compliance is noticed, the
concerned functional department will inform the A I & C Department about its findings.
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All instances of complaints / cases involving or allegation of frauds will be reported to
DAC.
Non-compliances where monetary penalty is levied
The penalty amount will be included in the monthly bill of the DP.
If the DP does not pay the monetary penalty within a month of the due date of the
relevant bill, the matter will be reported to DAC.
If penalties are imposed but the DP does not confirm rectification of non-compliance
within 60 days of imposition of penalty, the matter will be referred to DAC.
Verification of Compliance
The compliance reported by the DP will be verified during the subsequent inspection. In case the
compliance reported by the DP is found to be false, materially incorrect or misleading, the matter
will be referred to the DAC for necessary action.
Penalties for non-compliances not covered in Annexure 11.1
The MD or ED or COO will have the authority to introduce monetary penalty for such types of
non-compliances which are not covered in Annexure 11.1, subject to reporting to the DAC for
information and review.
General guidelines for imposition of penalty on DPs
If the total monetary penalty levied on a particular DP in last 3 years exceed 1,00,000/-,
the matter will be referred to DAC.
The penalty will be accumulated for a period of 3 years. At the beginning of the 4th
year,
the penalty accumulated in the 1st
year will be dropped and the penalty levied in the
2nd
and 3rd
year will be considered as the opening balance and so on for the subsequent
years.
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If any non-compliance attracts penalty under more than one head, the higher of the
penalty will be applicable.
The actual cost of travel & stay, etc. of depository officials and / or other person/s on
behalf of depository, if any, with respect to the ascertainment or waiver of penalty or for
rectification of the non-compliances will be recovered from the DP.
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CHAPTER 2
REVIEW OF LITERATURE
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REVIEW OF LITERATURE
The role of financial system is considered to be the key to economic growth. A well-developed
financial system promotes investment by identifying and financing lucrative businessopportunities, mobilising savings, allocating resources efficiently, helping diversify risk and
facilitating the exchange of goods and services. A growing body of literature has affirmed the
importance of financial system to economic growth. Stock market development has assumed a
development role in global economics and finance following the impact they have exerted in
corporate finance and economic activity
Comincioli (1996) provided theoretical justification for stock prices to act as indicator of
economic growth. According to fundamental valuation models, stock prices depend onexpectations about the future economy. Therefore, expected changes in real economy cause the
values of stock prices. According to wealth effect, however changes in stock prices cause the
variation in the real economy.
Luintel and Khan (1999) studied 10 developing economies and find bi-directional causality
between financial development and economic growth in all sample countries. Measure stock
market development along various dimensions: aggregate stock market capitalisation to GDP
and the number of listed firms (size), domestic turnover and value traded (liquidity), integration
with worlds capital markets, and the standard deviation of monthly stock returns (volatility). The
results suggest a strong and statistically significant relationship between initial stock market
development and subsequent economic growth.
Dennis O.Odife (2000) studied the state and extent of stock exchange and capital market
development in sub-saharan African has come under scrutiny arising from increased global
interest in emerging markets. Recent changes in stock exchange and capital market development
all over the world and especially in the emerging economies of eastern Europe contains lessons,
which African nation need to imbibe for their benefit. These changes are in the area of ownership
and operations of stock exchanges, distribution of stock exchanges worldwide, trends towards
alliances between stock exchange in Europe, and in economic literature concerning economic
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growth. This paper examines some of these changes and suggests new direction for African
economies in their quest for more rapid and broad based sustainable economic development
Mukherji and Joydeep (2000) concluded that regional stock exchanges in india have for a long
time, being suffering from low turnover and lack of liquidity. After NSE launched its screen
based trading through terminals located all over the country, regional exchanges were facing a
very tough time and struggling to survive. This note describes the status, operation and sources
of revenue of one such regional exchange. This note also provides comparative data on the
regional exchanges in india.
P.V. Nishanth (2000) studied that capital market has witnessed numerous changes in the recent
past as seen earlier. Traditionally stock market booms and decline have resulted in a number of
problems for lay investor. A close introspection of this problem will reveal that most of them are
due to intrinsic nature of the paper based trading and settlement system. Indian economies have
been globalized and the capital market has been linked to the international financial market.
Foreign individuals and institutional investors have encouraged to participant into it. So there is a
need for raising the Indian capital market into the international standards in terms of efficiency
and transparency.
Goel and Prabhu (2004)concluded that National Securities Depository Ltd.(NSDL) is Indias
first and largest depository with more than 90% market share. NSDL provides infrastructure
facility to hold and transfer shares, debentures, bonds and such securities in electronic book entry
form. NSDL provides these services to 48.85 lacs investors from 1700 locations in the country
through the network of around 400 business partners connected to its central system over
VSAT/Leased line closed user group network. NSDL has also set-up PKI enabled Internet based
economic infrastructure facility to enable its business partners to receive instructions from
depository user in an electronic form. The system holds records of over Rs. 9 lacs crores
securities assets and handles close to million booking transactions and settlement exceeding Rs.2000 crores. For NSDL, authenticity of debit instructions, privacy of investors data, continuity
of its service, reconciliation and system integrity are core area of risk containment.
Adjasi and Bickpe (2005) find that positive influence of stock market development on
economic growth is significant for countries classified as upper middle-income economies from
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the study of 14 african countries. Even when accounting for expectations, represented by the
economic sentiment indicator, the stock market has certain predictive content for the real
economic activity.
Paudal (2005) studied that stock markets, due to their liquidity, enable firms to acquire much
needed capital quickly, hence facilitating capital allocation, investment and growth. Stock market
activity is thus rapidly playing an important role in helping to determine the level of economic
activities in most economies. However, controversy does exist on the role of stock market as an
indicator of future economic activity.
Sabharwal and Falcon (2009) concluded that to fill the gap in the literature by re-examining the
performance of value and growth strategies in India. Note that stock returns in India increases
with market cap and P/E. their emerging market data are limited, however, and their
counterintuitive results for India are neither statistically nor economically significant. We use a
large and recent data set, and we are surprised to find that these odd results have maintained their
sign and strengthened dramatically. In particular, we find that stock returns in India increase
strongly with both market cap and P/E, and decrease strongly with dividend yield. International
investors need to be aware that Indian markets do not follow the patterns that we have seen in
most other markets and that growth beats value on the Bombay Stock Exchange.
Study found that depository is the main element of stock exchange. Previous researches had
found that how the depositories have undergone a huge change in the working of the
depositories, how the dematerialization of the shares has been extremely beneficial to the
investors. The facts that are missing in the previous studies are operational aspect of depository
and how the trading has changed due to introduction of depositories.
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CHAPTER - 3
DATABASE ANDMETHODOLOGY
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RESEARCH METHODOLOGY
Research Methodology refers to search of knowledge. One can also define research methodology
as a scientific and systematic search for required information on a specific topic. In Research
Methodology we study the various steps that are generally adopted by a researcher in his
research problem along with the logic behind them..
In a research various methods are used. The selection of method depends on the nature of
problem selected and kind of data necessary for the solution.
OBJECTIVES OF THE STUDY
To study the working system of depository participants.
To study factors affecting the choice of investments.
To study the procedure regarding depository.
SAMPLING PLAN:
a) Sampling unit: It consists of investors, brokers etc.
b) Sampling size: 100 respondents were selected
c) Sampling procedure: To obtain representative sample, non sampling procedures were
adopted. Sampling was done to silent the most accessible population.
d) Contact method: The respondents were personally interviewed.
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DATACOLLECTION:
Data has been collected both from primary as well as secondary sources as described below:
Primary data
Primary data has been obtained through questionnaires and personal interview.
Secondary data
For this project secondary data is also used. Secondary data is the data compiled by someone
other than the user. It includes published data in the form of documents, research papers, web
pages and other organizational records.
Analysis method:
The data was tabulated and frequency distribution was developed. The percentages are computed
for different variables
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CHAPTER - 4
DATA ANALYSISAND
INTERPRETATION
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Q1. Do you invest in stock market?
Response Respondent
Yes 45
No 55
Interpretation:
The researcher metpeople and firstly he asked that Are they investing their money in stock
market or not because this is necessary to know of him for their research and the result is 45%
are people are investing their money in stock market and 65% are not investing their money in
this.
55%
45%Yes
No
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Q2. How long you are investing in stock market?
Response Respondent
Less than 1 year 28
1-5years 48
5-10years 14
More than 10 years 10
Interpretation:
The researcher met those people who are trading in stock market to know the time period.
According to him there are 28% people who are working in stock market since less than 1 year
like this there are 48% people who are working since 1 to 5 years, 14% people are working since
5 to 10 years and 10 % people working in stock market since more than 10 years.
28%
48%
14%
10%
less than 1 yr
1-5 yrs
5-10 yrs
more than 10 yrs
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Q3. Which type of trading do you trade in stock market?
Response Respondent
Intraday 14
Delivery 13
Future and option 6
Intraday &delivery 41
Intraday &F&O 11
Delivery & F& O 4
Intraday .Delivery & F& O 11
Interpretation:
There are three option of trading in stock mardet:1) Intraday(buy today sell today), 2) Delivery
and Future and Options. There was 14% investor trade in Intraday, 13% in Delivery, 6% in
Future & Options, 41% in Intraday and Delivery, 11% in Intraday and Future & Options and 4%
in Delivery and Future & Options and 11% investors in Intraday, Delivery and Future &
Options.
0%5%10%
15%20%25%30%35%40%45%
Intra
day
Deliv
ery
F&
O
intra
day&
delive
ry
Intra
day&F
&O
Deliv
ery&F
&O
Intra
day,
Delive
ry,F
&O
Series1
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Q4. Which among the following is deciding factor before your investment?
Response Respondent
News paper 19
Friends and Reletives 48
Brokers 10
Online 8
Self 11
Other 4
Interpretation:
There are various factors on which investment depends. There are 19%investors decides from
newspaper,48% from friends and relettives, 10% from brkers, 8% from online , 11% self, and
4% from other factors .
Respondent
News paper
Friends and Reletives
Brokers
Online
Self
Other
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Q5. What factors affect your strategy of Investment?
Response Respondent
Company name 14
Growth 40
Investment 8
Price of share 12
Annual report 26
Interpretation:
Every investor thinks before investing money in any kind of investment. In stock market
whenever and however an investor invests money he just think about that where he is investinghis money in good company or not. So every investor has some strategy before investment.
There are 14% investment on the basic of brand name of the company, 40% investor watch the
growth of the company, 8% investment see the investment of the company, 12% investor take
the decision of investment on the basic of price of shares and 26% investor invest money after
watch on annual result or report of the company.
14%
40%8%
12%
26% Company name
Growth
Investment
Price of share
Annual Report
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Q6. In which particular sector do you invest your money?
Response Respondent
Bank 14
It 10
Real Estate 6
Petroleum 10
Retail 6
Mix 54
Interpretation:
There are 23 sectors in stock market but researcher take some sector from them those are running
on boom at present. As per the matter of investment in different types of sectors of the investors
invest money in more than one sector. There are 54% investors who in more than one sector,
14% are like to invest to invest in Bank, 10% are in IT, 6% are in Real Estate, 10% are in
Petroleum and 6% are in retail sector.
14%
10%
6%
10%6%
54%
Bank
IT
Real Estate
Petrolium
Retail
Mix
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Q7. When would you like to invest your money?
Response Respondent
Raising Time 32
Falling Time 68
Interpretation:
In stock market 68% investor likes to invest their money in Falling Time. Because that time the
price of share is going to less and investor thinks is the right time of investment. It is a fact that
most of the investor in stock market are like to buy shares at minimum price. There are 32%
investors believes investing their money in Raising Time. Because in raising time these investors
thinks that market is going more up so they like to buy share that time.
0%
10%
20%
30%
40%
50%
60%
70%
Raising Time Falling Time
Series1
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Q8. What strategy do you adopt when market is going up?
Response Respondent
Sell 68
Purchase 24
None 8
Interpretation:
When the market is going up 68% investors sell out there shares and short sell the shares.
Investors who trade on Delivery basis they sell out there shares on the higher price as compare to
buying price of shares so that they get returns in higher market and investor who trade on
intraday basis they short sell the shares and waiting for the down of price of short sell share and
buy them to make profit. 24% like to buy the shares when market is going up.8% investor does
not want to trade at this time. They just wait and watch the market.
68%
24%
8%
Sell
Purchases
None
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Q9. What strategy do you adopt when market is going down?
Response Respondent
Purchase 74
Sell 8
None 18
Interpretation:
When market is going down 74% investors like to buy at this time. The reason being most of the
investors like to purchases shares at minimum price,8% investors sell out their shares that time
reason being the limit of trading, capacity of facing loss and fear of market can go down
more,18% investors are waiting for right investment at right time.
0%
10%
20%
30%
40%
50%
60%
70%
80%
Purchases Sell None
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FINDING
According to many persons Stock Exchange is a place of high risk and high return.
Most of the people are trade according to themselves.
Company growth and annual result plays a crucial role in investment.
Investment in long term is safe and gives secured returns.
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LIMITATIONS:
1. The sample size taken during project study may not represent the realistic picture hence
there may be a margin of error.
2. Time constraint in the project. The survey was carried through questionnaire and the
questions were based on perception.
3. There may be some interpretation error.
4. Complete data was not available due to company privacy and secrecy.
5. Since a smaller sample was chosen so it may not be a true representative of the
population under study.
6. The possibility of the respondents responses being biased cannot be ruled out.
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SUGGESTION:
1. Since dematerialization has a great bearing on the creation and protection of wealth and
investment earnings of an investor, DPs must increase their efforts in promoting
enhanced services in general, and in those involving security and safety in particular.
2. To encourage the existing and prospective shareholders, all efforts should be made to
ensure good returns, in addition to providing greater security and safety.
3. Since the investors expect better service form depository participants, it should provide
them value-added services.
4. The processing of the DEMAT account opening should be made fast and non-tedious.
5. The DEMAT a/c holder should be given basic information about NSDL, CDSL and
Depositaries Act 1996.
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CHAPTER - 5
CONCLUSION
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Conclusion
To conclude, it can be said that the research findings clearly reveal the goodwill and
reputation of depository system among the customers. But there is a need to strengthen this
depository system by spreading awareness about the services offered by NSDL, CSDL and its
trading companies through advertisement and by expanding the more branches of this system all
over the country and also by tapping the potential customers through innovative means.
It is very difficult to predict the stock market.
Market fluctuation plays an important role in investment.
Most of the people have same strategies.
All strategies fail when market is suddenly turned.
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Bibliography
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BIBLIOGRAPHY
WEBSITES
www.google .com
www.moneycontrol.com
www.rediff.com
www.reliamcemoney.com
BOOKS
1. Financial institutions and markets-L.M.Bhale
2. Investment management-V.K.Bhalla
3. Research methodology-Mohitgupta,NavdeepAggarwal
4. Financial services- Shashi k. gupta, Nishaaggarwal
http://www.moneycontrol.com/http://www.rediff.com/http://www.rediff.com/http://www.moneycontrol.com/ -
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Annexure
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ANNXURE
PERSONAL INFORMATION:
1. Name ____________________________________________
2. Gender: Male [ ] Female [ ]
3. Age: 20-30 years[ ] 31-40 years[ ]
41-50 years [ ] 50 above [ ]
Q1. Do you invest in stock market?
(a) Yes ( ) (b) No ( )
Q2. How long you are investing in stock market?
(a) Less than 1 year ( ) (b) 1-5year ( )
(c) 5-10year ( ) (d) above 10 years ( )
Q3. Which type of trading do you trade in stock market?
(a)Intraday () (b) Delivery ( )
(c) Future and Options ( )
Q4. Which among the following is deciding factor before your investment?
(a) Newspaper ( ) (b) Friends& relatives ( )
(c) Brokers ( ) (d) Online ( )
(e) Self ( ) (f) Others
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Q5. What factors affect your strategy of Investment?
(a) Company Name ( ) (b) Growth ( )
(c) Investment ( ) (d) Price of shares ( )
(e) Annual report ( )
Q6. In which particular sector do you invest your money?
(a) Bank ( ) (b) IT ( )
(c)Real Estate ( ) (d) Retail ( )
(e) Mix ( )
Q7. When would you like to invest your money?
(a) Raising time ( ) (b) Falling time ( )
Q8. What strategy do you adopt when market is going up?
(a) Sell ( ) (b) Purchases ( )
(c) None ( )
Q9. What strategy do you adopt when market is going down?
(a) Sell ( ) (b) Purchases ( )
(c) None ( )