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I feel deeply indebted towards people who have guided me

in this project. It would have not have been possible to make

such an extensive report without the help, guidance and

input from them. Most of my information source has been

from professional books and websites.

I would firstly like to express my gratitude towards my mentor Mr Girish Garg for having shown so much of flexibility & guiding in such a way that that helped me a lot in preparation of this project. He helped me in deciding the project topic. He showed a lot of openness in his approach and I would like to thank him for his support in a way that has led to proper & effective learning.

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The Securities Contract (Regulation) Act, 1956 [SCRA] defines ‘Stock Exchange’ as any body

of individuals, whether incorporated or not, constituted for the purpose of assisting,

regulating or controlling the business of buying, selling or dealing in securities. Stock

exchange could be a regional stock exchange whose area of operation/jurisdiction is

specified at the time of its recognition or national exchanges, which are permitted to have

nationwide trading since inception. NSE was incorporated as a national stock exchange.

Stock market is an organized set-up with a regulatory body and the members who trade in

shares are registered with the stock market and a regulatory body. Stock markets exist in

different cities all over the world with each market having a different set of "listed" shares.

Thus, the shares listed in the Bombay Stock Exchange (BSE) will be different from those in

the Delhi Stock Exchange (DSE), because a company may not want to be listed in a particular

stock exchange or may not fit the eligibility requirements of the particular exchange. The

stock market is also called the secondary market as it involves trading between two

investors.

ORIGIN

The origin of stock market in India goes back to the end of the eighteenth century when

long term negotiable securities were first issued. However, for all practical purposes, the

real beginning occurred in the middle of the nineteenth century after the enactment of the

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Companies Act in 1850, which introduced the features of limited liability and generated

investor interest in corporate securities.

An important early event in the development of the stock market in India was the formation

of the native share and stock brokers Association at Bombay in 1875, the precursor of the

present day Bombay stock exchange. This was followed by the formation of exchanges /

associations in Ahmedabad (1894), Calcutta (1908) and Madras (1937). In addition a large

number of ephemeral exchanges emerged mainly in buoyant periods to recede into oblivion

during depressing times subsequently.

Stock exchanges are intricacy inter woven in the fabric of a nation’s economic life. Without a

stock exchange the savings of the community – the sinews of economic progress and

productive efficiency would remain underutilised. The task of mobilisation and allocation of

savings could be attempted in the old days by a much less specialised institution than the

stock exchanges. But as the business and industry expanded and the economy assumed

more complex nature, the need for permanent finance arose. Entrepreneurs needed money

for long term whereas investors demanded liquidity – the facility to convert their

investments into cash at any given time. The answer was a ready market for investments

and this was how the stock exchange came into being.

The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are

the 2 primary exchanges in India. In addition there are 22 regional stock exchanges.

However the BSE and NSE have established themselves as the two leading stock exchanges

and account for about 80 % of the equity volume traded in India. The average daily turnover

in cash segment of BSE in 2009-10 is around ₹ 5,651 crore (source: BSE) while at NSE it was

₹ 16,959 crore. (Source: NSE)

The BSE has over 6000 stocks listed and has market capitalisation of around ₹ 9, 68,000

crore. Most key securities are traded on both the exchanges and hence the investor could

buy them on either exchange. Both exchanges have different settlement cycle, which allows

the investors to shift their positions on the bourses.

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Stock Markets In India (Source: sebi.gov.in)

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Securities

Securities are instrument representing ownership (stocks), a debt agreement (bonds) or the

rights to ownership (derivatives). Securities are a form of ownership that can be easily

traded on a secondary market. Securities allow you to own the underlying asset without

taking possession. For this reason, securities are very easily traded, or very liquid. They are

easy to price, and so are a great indication of the underlying value of the asset. The

invention of securities helped the creation of the huge success of the financial markets.

There Are Three Types of Securities

1. Equity Securities - These allow you to own shares of a corporation. The most

direct way is to buy stocks of a company yourself. One can also profit by buying shares of a

mutual fund, which invests in the stocks for you. The secondary market for equity

derivatives is the stock market, such as the BSE and the NASDAQ.

One can also buy stocks of a new company before it hits the stock exchange. The shares of

this Initial Public Offering (IPO) are bought from investment banks, like Goldman Sachs or

Morgan Stanley.

Shares are also known as stock. There are 2 types of stock:

i. Common Stock Common stock is, well, common. When people talk about stocks

they are usually referring to this type. In fact, the majority of stock is issued is in this

form. We basically went over features of common stock in the last section.

Common shares represent ownership in a company and a claim (dividends) on a

portion of profits. Investors get one vote per share to elect the board members,

who oversee the major decisions made by management. Over the long term,

common stock, by means of capital growth, yields higher returns than almost every

other investment. This higher return comes at a cost since common stocks entail

the most risk. If a company goes bankrupt and liquidates, the common shareholders

will not receive money until the creditors, bondholders and preferred shareholders

are paid.

ii. Preferred Stock Preferred stock represents some degree of ownership in a

company but usually doesn't come with the same voting rights. (This may vary

depending on the company.) With preferred shares, investors are usually

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guaranteed a fixed dividend forever. This is different than common stock, which has

variable dividends that are never guaranteed. Another advantage is that in the

event of liquidation, preferred shareholders are paid off before the common

shareholder (but still after debt holders). Preferred stock may also be callable,

meaning that the company has the option to purchase the shares from

shareholders at any time for any reason (usually for a premium). Some people

consider preferred stock to be more like debt than equity. A good way to think of

these kinds of shares is to see them as being in between bonds and common

shares.

2. Debt Securities -Debt instrument represents a contract whereby one party

lends money to another on pre-determined terms with regards to rate and periodicity of

interest, repayment of principal amount by the borrower to the lender. In the Indian

securities markets, the term ‘bond’ is used for debt instruments issued by the Central and

State governments and public sector organizations and the term ‘debenture’ is used for

instruments issued by private corporate sector. These allow you to provide loans, called

bonds, to a company or even a country. Ratings companies, like Standard & Poor's, Moody's

and Fitch's evaluate how likely it is the bond will be repaid. To ensure a successful bond sale,

borrowers must pay higher interest rates if their rating is below AAA. If the ratings are very

low, they are known as junk bonds. Despite their risk, investors buy junk bonds because

they offer a higher interest rate.

3. Derivative Securities - Equity derivatives offer retail investors another way

to participate in the price action of an underlying security. Derivative is a product whose

value is derived from the value of one or more basic variables, called underlying. The

underlying asset can be equity, index, foreign exchange (forex), commodity or any other

asset. Derivative products initially emerged as hedging devices against fluctuations in

commodity prices and commodity-linked derivatives remained the sole form of such

products for almost three hundred years. The financial derivatives came into spotlight in

post-1970 period due to growing instability in the financial markets. However, since their

emergence, these products have become very popular and by 1990s, they accounted for

about two thirds of total transactions in derivative products. The value of an equity

derivative comes, at least in part, from the value of the underlying security. Investors who

trade in equity derivatives seek to transfer certain risks associated with the underlying

security to another party. Not surprisingly, there are many equity derivatives traded

throughout the world. Here we look at some equity derivatives:

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i. Stock Options

Stock options, the most popular equity derivative, provide investors a way to hedge the risk

or speculate by taking on additional risk. Holding a stock option provides the right, but not

the obligation, to buy (call options) or sell (put options) a quantity of stock at a set price by

an expiration date. Since they are traded on exchanges and centrally cleared, stock options

have liquidity and transparency working for them, two important factors when considering

equity derivatives.

The primary factors that determine the value of an option are the time premium that decays

as the option approaches expiration, the intrinsic value that varies with the price of the

underlying stock, and the volatility of the stock. Time premium decays exponentially as the

option approaches the expiration date, eventually becoming worthless after that date. The

intrinsic value is the amount an option is in the money. When the stock price climbs, the

intrinsic value of an in-the-money call option will rise as well. Intrinsic value gives option

holders added leverage over owning the stock itself. The higher the volatility of the stock

the greater the premium an option buyer must pay to own the option. Of course, this

provides the option seller with higher income potential if they sell an option at the peak of

its volatility.

ii. Single Stock Futures

A single stock future (SSF) is a contract to deliver, in most cases, 100 shares of a specified

stock on a designated date in the future. The market price of SSFs is based on the price of

the underlying stock plus the carry cost of interest minus any dividends paid over the term

of the contract. By locking the interest rate into the price of the contract, you know the

carrying cost in advance.

Trading SSFs requires a lower margin than the underlying stock as investors typically use a

20% margin to buy them. The lower margin gives investors more leverage than they would

get trading stocks. SSFs are not subject to day trading restrictions or to the uptick rule for

short sellers.

iii. Warrants

Stock warrants are rights to buy a stock at a certain price until a predetermined date. Similar

to call options, investors can exercise stock warrants at a fixed price. When issued, the price

of a warrant is always higher than the underlying stock price. The major difference is that

stock warrants normally have a long-term time limit before they expire, such as five or even

15 years. When an investor exercises a stock warrant, the company issues new common

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shares to cover the transaction. This is different from call options, where the call writer

must provide the shares should the call option be exercised.

Functions of a stock exchange

The efficient functioning of a stock exchange creates a conductive climate for an active and

growing primary market for new issues. It enables entrepreneurs to raise resources for their

companies and business ventures through Public issues (IPO). An active and healthy

secondary market in existing securities leads to positive environment among investors.

Some of the important functions of stock exchange are:

i. Providing liquidity and marketability to existing

securities: the basic function of a stock exchange is the creation of a

continuous market where securities are bought and sold. It gives the investors a

chance to disinvest and reinvest. This provides both liquidity and easy marketability

to already existing securities in the market.

ii. Pricing of securities: share prices on a stock exchange are determined

by the forces of demand and supply. A stock exchange is a mechanism of constant

valuation through which the prices of securities are determined. Such a valuation

provides important instant information to both buyers and sellers in the market.

iii. Safety of transaction: the membership of a stock exchange is well

regulated and its dealings are well defined according to the existing legal

framework. This ensures that the investing public gets a safe and fare deal on the

market.

iv. Contributes to economic growth: A stock exchange is a

market in which existing securities are resold or traded. Through this process of

disinvestment and reinvestment savings get channelized into their most productive

investment avenues. This leads to capital formation and economic growth.

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v. Spreading of equity cult: The stock exchange can play a vital role in

ensuring wider share ownership by regulating new issues, better trading practices

and taking effective steps in educating the public about the investment.

vi. Providing scope for speculation: The stock exchange provides

sufficient scope within the provisions of law for speculative activity in a restricted

and controlled manner. It is generally accepted that a certain degree of health

speculation is necessary to ensure liquidity and price continuity in the stock market.

LEGAL FRAMEWORK OF STOCK MARKETS

IN INDIA

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BASIC TERMS USED IN STOCK MARKET

CIRCUIT BREAKERS

Refers to any of the measures used by stock exchanges during large sell-offs to avert panic

selling. It is sometimes called as "collar”. After an index has fallen a certain percentage, the

exchange might activate trading halts or restrictions on program trading. For example, if the

Dow Jones Industrial Average falls by 10%, the NYSE might halt market trading for one hour.

There are other circuit breakers for 20% and 30% falls.

SHORT SELLING

The selling of a security that the seller does not own, or any sale that is completed by the

delivery of a security borrowed by the seller. Short sellers assume that they will be able to

buy the stock at a lower amount than the price at which they sold short. Selling short is the

opposite of going long. That is, short sellers make money if the stock goes down in price.

This is an advanced trading strategy with many unique risks and pitfalls. Novice investors are

advised to avoid short sales. Short selling is partly banned in India.

DEMATERIALISATION

Dematerialisation in short called as ‘demat’ is the process by which an investor can get

physical certificates converted into electric form maintained in an account with the

Depository Participant. The investors can dematerialize only those share certificates that are

already registered in their name and belong to the list of securities admitted for

dematerialisation at depositories.

DEPOSITARY

Depository is a facility for holding securities, which enables securities transaction to be

processed by book entry. To achieve this depositary holds share in immobilized forms or

dematerialized form. There are two major Depositories in India – National Securities

Depositories Limited (NSDL) and Central Depository services Ltd. (CDS). Depository holds

beneficiary owner's shares in electronic form through a registered Depository participant.

Depository participant is an agent to depositary which is authorized to offer depositary

services to investors. They are the intermediaries between the depository and the investors.

The relationship between the DPs and the depository is governed by an agreement made

between the two under the Depositories Act. In a strictly legal sense, a DP is an entity who is

registered as such with SEBI under the sub section 1A of Section 12 of the SEBI Act. As per

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the provisions of this Act, a DP can offer depository-related services only after obtaining a

certificate of registration from SEBI.

Benefits of depository

Bad delivery eliminated

Immediate transfer of shares

No stamp duty on such transfers

Elimination of risks that are normally associated in dealing with Physical

certificates - loss / theft / mutilation due to careless handling / forgery / etc.

Reduced transaction cost

transparency

MARGIN MONEY

Margin is a line of credit issued to an investor typically from a brokerage firm using other

investments held in the account as collateral. Margin money is a minimum amount in your

account with bank/brokers for trading stocks. It is fixed by brokers. If your account balance

is not sufficient for trading, the brokers sell your holding and maintain the amount. Before

selling the security the broker makes a call and that is called margin call.

SETTLEMENT CYCLE

The period of time between the settlement date and the transaction date that is allotted to

the parties of a transaction to satisfy the transaction's obligations. The buyer must make

payment within the settlement period, while the seller must deliver the purchased security

within this period. Depending on the type of security traded, the exact length of the

settlement period will differ. The settlement period is often quoted as T+1, T+2 or T+3;

which means the transaction date plus one, two or three days. For stocks, the settlement

period is three days (T+3) after the transaction. This means that the buyer must transfer

cash to the seller, and the seller must transfer ownership of the stock to the buyer within

three days after the trade was made. For certificates of deposit and commercial paper, the

transaction must be settled on the same day.

Bull Market

A financial market of a group of securities in which prices are rising or are expected to rise.

Bull markets are characterized by optimism, investor confidence and expectations that

strong results will continue. It's difficult to predict consistently when the trends in the

market will change.

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The use of "bull" to describe markets comes from the way the bull attack their opponents. A

bull thrusts its horns up into the air. These actions are metaphors for the movement of a

market. If the trend is up, it's a bull market.

Bear Market

A market condition in which the prices of securities are falling, and widespread pessimism

causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear

market and selling continues, pessimism only grows. Although figures can vary, for many, a

downturn of 20\% or more in multiple broad market indexes, such as the Dow Jones

Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-

month period, is considered an entry into a bear market.

The use of "bear" to describe markets comes from the way the animals attack their

opponents. A bear swipes its paws down. These actions are metaphors for the movement of

a market. If the trend is down, it's a bear market.

LISTED SECURITIES

The securities of the companies which have signed listing agreement with a stock exchange are called listed securities.

PERMITED SECURITIES

To facilitate the market participants to trade in securities of such companies which are active on other stock exchanges but are not listed on that particular stock exchange, trading in such securities is facilitated as “ permitted securities “ as per relevant norms of the stock exchange.

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

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Holdings through the FDI Route

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.

The remaining shareholders fall under the Free-float category.

Blue chip

Blue chip stock is qualified as a high-quality and usually high-priced stock. It has high price

because of public confidence in company's long record of steady earnings. The name "blue

chip" came about because in the game of poker the blue chips have the highest value

Blue Chip Company is very strong financially, with a solid track record of producing earnings

and only a moderate amount of debt. It also has a strong name in its industry with dominant

products or services. Typically, these companies are large (international) corporations that

have been in business for many years and are considered to be very stable. There is no

formal requirement for being a blue chip.

Blue chip index is indicator used to measure and report value changes in representative

stock groupings. It is often price-weighted; it means that stocks with the highest prices will

have the most influence and those with the lowest, the least influence. Example: BSE’s

SENSEX is a blue chip index.

I n d e x An Index shows how a specified portfolio of share prices is moving in order to give an indication of market trends. It is a basket of securities and the average price movement of the basket of securities indicates the index movement, whether upwards or downwards. Example: SENSEX, NIFTY

PARTICIPANTS OF STOCK MARKET

1. Issuer of securities

2. Investors

3. Intermediaries like Merchant Banker, Broker, etc.

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National Stock Exchange

The National Stock Exchange (NSE) is a stock exchange located at Mumbai, Maharashtra,

India. It is the 16th 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$985 billion and over 1,640 listings as of

December 2011. 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 capitalisation.

NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies

and other financial intermediaries in India but its ownership and management operate as

separate entities. There are at least 2 foreign investors NYSE Euronext and Goldman Sachs

who have taken a stake in the NSE. NSE is the third largest Stock Exchange in the world in

terms of the number of trades in equities. It is the second fastest growing stock exchange in

the world with a recorded growth of 16.6%.

Origin

The National Stock Exchange of India 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. In April 1993, it was recognized as a stock exchange under the Securities

Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market

(WDM) segment in June 1994. The Capital market (Equities) segment of the NSE

commenced operations in November 1994, while operations in the Derivatives segment

commenced in June 2000.

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Innovations by NSE

NSE pioneering efforts include:

Being the first national, anonymous, electronic limit order book (LOB) exchange to

trade securities in India. Since the success of the NSE, existent market and new

market structures have followed the "NSE" model.

NSE is also the first exchange to propose an investor grievance cell and an investor

protection fund

Setting up the first clearing corporation "National Securities Clearing Corporation

Ltd." in India. NSCCL was a landmark in providing innovation on all spot equity

market (and later, derivatives market) trades in India.

Co-promoting and setting up of National Securities Depository Limited, first

depository in India.

Setting up of S&P CNX Nifty.

NSE pioneered commencement of Internet Trading in February 2000, which led to

the wide popularization of the NSE in the broker community.

Being the first exchange that, in 1996, proposed exchange traded derivatives,

particularly on an equity index, in India. After four years of policy and regulatory

debate and formulation, the NSE was permitted to start trading equity derivatives

Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in

India.

NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBC-

TV18.

NSE.IT Limited, setup in 1999, is a 100% subsidiary of the National Stock Exchange of

India. A Vertical Specialist Enterprise, NSE.IT offers end-to-end Information

Technology (IT) products, solutions and services.

NSE (National Stock Exchange) was the first exchange in the world to use satellite

communication technology for trading, using a client server based system called

National Exchange for Automated Trading (NEAT). For all trades entered into NEAT

system, there is uniform response time of less than one second.

Markets

Currently, NSE has the following major segments of the capital market:

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Equity

Futures and options

Retail debt market

Wholesale debt market

Currency futures

Mutual fund

Stocks lending and borrowing

In August 2008 currency derivatives were introduced in India with the launch of Currency

Futures in USD INR by NSE. Currently it has also launched currency futures in euros, pounds

and yen. Interest Rate Futures were introduced for the first time in India by NSE on 31

August 2009, exactly one year after the launch of Currency Futures.

NSE became the first stock exchange to get approval for interest rate futures, As

recommended by SEBI-RBI committee, on 31 August 2009, a futures contract based on 7%

10 Year Government of India (Notional) was launched with quarterly maturities.

Working Hours

NSE's normal trading sessions are conducted from 9:15 am India Time to 3:30 pm India Time

on all days of the week except Saturdays, Sundays and Official Holidays declared by the

Exchange (or by the Government of India) in advance. This timing is not valid for currency

segment of National Stock Exchange. The exchange, in association with BSE (Bombay Stock

Exchange Ltd.), is thinking of revising its timings from 9.00 am India Time to 5.00 pm India

Time.

There were System Testing going on and opinions, suggestions or feedback on the New

Proposed Timings are being invited from the brokers across India. And finally on 18

November 2009 regulator decided to drop their ambitious goal of longest Asia Trading

Hours due to strong opposition from its members.

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On 16 December 2009, NSE announced that it would advance the market opening to 9:00

am from 18 December 2009. So NSE trading hours will be from 9.00 am till 3:30 pm India

Time.

However, on 17 December 2009, after strong protests from brokers, the Exchange decided

to postpone the change in trading hours till 4 Jan 2010.

NSE new market timing from 4 Jan 2010 is 9:00 am till 3:30 pm India Time.

Milestones

November 1992 Incorporation

April 1993 Recognition as a stock exchange

May 1993 Formulation of business plan

June 1994 Wholesale Debt Market segment goes live

November 1994 Capital Market (Equities) segment goes live

March 1995 Establishment of Investor Grievance Cell

April 1995 Establishment of NSCCL, the first Clearing Corporation

June 1995 Introduction of centralised insurance cover for all trading members

July 1995 Establishment of Investor Protection Fund

October 1995 became largest stock exchange in the country

April 1996 Commencement of clearing and settlement by NSCCL

April 1996 Launch of S&P CNX Nifty

June 1996 Establishment of Settlement Guarantee Fund

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November 1996 setting up of National Securities Depository Limited, first depository in

India, co-promoted by NSE

November 1996 Best IT Usage award by Computer Society of India

December 1996 Commencement of trading/settlement in dematerialised securities

December 1996 Dataquest award for Top IT User

December 1996 Launch of CNX Nifty Junior

February 1997 Regional clearing facility goes live

November 1997 Best IT Usage award by Computer Society of India

May 1998 Promotion of joint venture, India Index Services & Products Limited (IISL)

May 1998 Launch of NSE's Web-site: www.nse.co.in

July 1998 Launch of NSE's Certification Programme in Financial Market

August 1998 CYBER CORPORATE OF THE YEAR 1998 award yes.

February 1999 Launch of Automated Lending and Borrowing Mechanism

April 1999 CHIP Web Award by CHIP magazine

October 1999 setting up of NSE.IT

January 2000 Launch of NSE Research Initiative

February 2000 Commencement of Internet Trading

June 2000 Commencement of Derivatives Trading (Index Futures)

September 2000 Launch of 'Zero Coupon Yield Curve'

November 2000 Launch of Broker Plaza by Dotex International, a joint venture between

NSE.IT Ltd. and i-flex Solutions Ltd.

December 2000 Commencement of WAP trading

June 2001 Commencement of trading in Index Options

July 2001 Commencement of trading in Options on Individual Securities

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November 2001 Commencement of trading in Futures on Individual Securities

December 2001 Launch of NSE VaR for Government Securities

January 2002 Launch of Exchange Traded Funds (ETFs)

May 2002 NSE wins the Wharton-Infosys Business Transformation Award in the

Organization-wide Transformation category

October 2002 Launch of NSE Government Securities Index

January 2003 Commencement of trading in Retail Debt Market

June 2003 Launch of Interest Rate Futures

August 2003 Launch of Futures & options in CNXIT Index

June 2004 Launch of STP Interoperability

August 2004 Launch of NSE’s electronic interface for listed companies

March 2005 ‘India Innovation Award’ by EMPI Business School, New Delhi

June 2005 Launch of Futures & options in BANK Nifty Index

December 2006 'Derivative Exchange of the Year', by Asia Risk magazine

January 2007 Launch of NSE – CNBC TV 18 media centre

March 2007 NSE, CRISIL announce launch of IndiaBondWatch.com

June 2007 NSE launches derivatives on Nifty Junior & CNX 100

October 2007 NSE launches derivatives on Nifty Midcap 50

January 2008 Introduction of Mini Nifty derivative contracts on 1 January 2008

March 2008 Introduction of long term option contracts on S&P CNX Nifty Index

April 2008 Launch of India VIX

April 2008 Launch of Securities Lending & Borrowing Scheme

August 2008 Launch of Currency Derivatives

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August 2009 Launch of Interest Rate Futures

November 2009 Launch of Mutual Fund Service System

December 2009 Commencement of settlement of corporate bonds

February 2010 Launch of Currency Futures on additional currency pairs

October 2010 Launch of 15-minute special pre-open trading session, a mechanism under

which investors can bid for stocks before the market opens.

Indices

Graph of S&P CNX Nifty from January 1997 to March 2011

NSE has also set up as index services firm known as India Index Services & Products Limited

(IISL) and has launched several stock indices, including:

1. S&P CNX Nifty (Standard & Poor's CRISIL NSE Index)

2. CNX Nifty Junior

3. CNX 100 ( S&P CNX Nifty + CNX Nifty Junior)

4. S&P CNX 500 ( CNX 100 + 400 major players across 72 industries)

5. CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200)

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Exchange Traded Funds on NSE

NSE has a number of exchange traded funds. These are typically index funds and GOLD ETFs.

Some of the popular ETF's (Equity ETFs on NSE) available for trading on NSE are:

1. Nifty – Benchmark ETF (NIFTYBEES)

2. Junior Nifty – Benchmark ETF (JUNIORBEES)

3. Bank – Benchmark ETF (BANKBEES)

4. PSU Bank – Benchmark ETF (PSUBNKBEES)

5. Shariah – Benchmark ETF (SHARIABEES)

6. S&P CNX Nifty UTI Notional Depository Receipts Scheme (UTISUNDER)

7. KOTAK PSU Bank ETF (KOTAKPSUBK)

8. Reliance Banking ETF (RELBANK)

9. Quantum Index ETF (QNIFTY)

10. KOTAK NIFTY (KOTAK NIFTY)

11. Most Shares M50 ETF (M50)

12. Infrastructure – Benchmark ETF (INFRABEES)

13. Most Shares M100 ETF (M100)

Certifications

NSE also conducts online examination and awards certification, under its programmes of

NSE's Certification in Financial Markets (NCFM). Currently, certifications are available in 19

modules, covering different sectors of financial and capital markets. Branches of the NSE are

located throughout India. NSE, in collaboration with reputed colleges and institutes in India,

has been offering a short-term course called NSE Certified Capital Market Professional

(NCCMP) since August 2009, in the campuses of the respective colleges/ institutes.

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BOMBAY STOCK EXCHANGE (BSE)

The Bombay Stock Exchange (BSE) (formerly, The Stock Exchange, Bombay) is a stock

exchange located on Dalal Street, Mumbai and is the oldest stock exchange in Asia. The

equity market capitalization of the companies listed on the BSE was US$1 trillion as of

December 2011, making it the 6th largest stock exchange in Asia and the 14th largest in the

world. The BSE has the largest number of listed companies in the world.

As of December 2011, there are over 5,112 listed Indian companies and over 8,196 scrips on

the stock exchange, the Bombay Stock Exchange has a significant trading volume. The BSE

SENSEX, also called "BSE 30", is a widely used market index in India and Asia. Though many

other exchanges exist, BSE and the National Stock Exchange of India account for the

majority of the equity trading in India. While both have similar total market capitalization

(about USD 1.6 trillion), share volume in NSE is typically two times that of BSE.

Hours of operation

Session Timing

Beginning of the Day Session 8:30 - 9:00

Pre-open trading session 9:00 - 9:15

Trading Session 9:15 - 15:30

VISION: "Emerge as the

premier Indian stock exchange

by establishing global

benchmarks"

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Position Transfer Session 15:30 - 15:50

Closing Session 15:50 - 16:05

Option Exercise Session 16:05 -

BSE's normal trading sessions are on all days of the week except Saturday, Sundays and

holidays declared by the Exchange in advance.

HISTORY

The Bombay Stock Exchange is the oldest exchange in Asia. It traces its history to the 1850s,

when four Gujarati and one Parsi stockbroker would gather under banyan trees in front of

Mumbai's Town Hall. The location of these meetings changed many times, as the number of

brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in

1875 became an official organization known as 'The Native Share & Stock Brokers

Association'. In 1956, the BSE became the first stock exchange to be recognized by

the Indian Government under the Securities Contracts Regulation Act. The Bombay Stock

Exchange developed the BSE SENSEX in 1986, giving the BSE a means to measure overall

performance of the exchange. In 2000 the BSE used this index to open its derivatives

market, trading SENSEX futures contracts. The development of SENSEX options along with

equity derivatives followed in 2001 and 2002, expanding the BSE's trading platform.

Historically an open outcry floor trading exchange, the Bombay Stock Exchange switched to

an electronic trading system in 1995. It took the exchange only fifty days to make this

transition. This automated, screen-based trading platform called BSE On-line trading (BOLT)

currently has a capacity of 8 million orders per day. The BSE has also introduced the world's

first centralized exchange-based internet trading system, BSEWEBx.co.in to enable investors

anywhere in the world to trade on the BSE platform. The BSE is currently housed in Phiroze

Jeejeebhoy Towers at Dalal Street, Fort area.

TIMELINE

Following is the timeline on the rise of the SENSEX through Indian stock market history.

1830's Business on corporate stocks and shares in Bank and Cotton presses started in Mumbai.

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

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

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1986 SENSEX first compiled using a market Capitalization-Weighted methodology for 30 component

stocks representing well-established companies across key sectors.

30 October 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.

5 December 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.

6 July 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.

19 September 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.

26 September 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.

9 October 2007 The BSE SENSEX crossed the 18,000-mark on October 9, 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.

15 October 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.

29 October 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.

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

13 June 2008 the SENSEX closed below 15,200 mark, Indian market suffer with major downfall from

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25 June 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.

2 July 2008 The SENSEX hit an intra-day low of 12,822.70 on July 2, 2008. This is the lowest that it

has ever been in the past year. Six months ago, on January 10, 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.

6 October 2008 The SENSEX closed at 11801.70 hitting the lowest in the past 2 years.

10 October 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

18 May 2009 after the result of 15th Indian general election SENSEX gained 2100.79 points from the

previous close of 12173.42, a record one-day gain. In the opening trade itself the SENSEX evinced a

15% gain over the previous close which led to a two-hour suspension in trading. After trading

resumed, the SENSEX surged again, leading to a full day suspension of trading.

19 October 2010 BSE introduced the 15-minute special pre-open trading session, a mechanism

under which investors can bid for stocks before the market opens. The mechanism, known as 'pre-

open session call auction', lasted for 15 minutes (from 9:00-9:15 am).

5 November 2010 BSE SENSEX crossed the 21000 mark (exactly 21004.96).

27 December 2011 BSE SENSEX is at 15,873.95

Indices

The graph of SENSEX from July 1997 to March 2011

The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised 100 stocks listed at five major stock exchanges in India - Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index was renamed BSE-100 Index from October 14, 1996 and since then, it is being calculated taking into consideration only the prices of stocks listed at BSE. BSE launched the dollar-linked version of BSE-100 index on May 22, 2006. BSE launched two new index series on 27 May 1994: The 'BSE-200' and the 'DOLLEX-200'. BSE-500 Index and 5 sectoral indices were launched in 1999. In 2001, BSE launched BSE-PSU Index, DOLLEX-30 and the country's

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first free-float based index - the BSE TECk Index. Over the years, BSE shifted all its indices to the free-float methodology (except BSE-PSU index). BSE disseminates information on the Price-Earnings Ratio, the Price to Book Value Ratio and the Dividend Yield Percentage on day-to-day basis of all its major indices. The values of all BSE indices are updated on real time basis during market hours and displayed through the BOLT system, BSE website and news wire agencies. All BSE Indices are reviewed periodically by the BSE Index Committee. This Committee which comprises eminent independent finance professionals frames the broad policy guidelines for the development and maintenance of all BSE indices. The BSE Index Cell carries out the day-to-day maintenance of all indices and conducts research on development of new indices.

SENSEX is significantly correlated with the stock indices of other emerging markets.

* SOURCE: bseindia.com

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SENSEX EPS We know that EPS is calculated for all the companies to show how much a company

generates the net profit for every outstanding share. Likewise EPS is calculated for SENSEX

as well so that we can have a better understanding about the market.

For its calculation we need all the 30 SENSEX scrips (discussed in next part) along with their

free float adjustment factor.

Example: take HDFC bank for example, present EPS for HDFC bank is ₹44 and free float

adjustment factor is 0.85.

Multiply the EPS with adjustment factor which is 44 * 0.85 = 37.4. This 37.4 is the

contribution of the HDFC bank towards SENSEX EPS. Likewise we need to calculate it for all

30 stocks and add it together to get the final value of Sensex EPS which would be around ₹

900 these days.

SENSEX PE PE Ratio is calculated for companies which show what the investors are ready to pay for

every rupee of earnings. If we calculate the same thing by taking into account all the 30

Sensex stocks, then we will end up with Sensex PE.

How to calculate?

Consider the HDFC Bank. Multiply the market price of HDFC Bank with the number of shares

outstanding which should be equal to Market Capitalisation.

Market Capitalisation = share price * total shares

Then calculate the net profit by multiplying the EPS with total shares.

Do this for 30 Sensex stocks.

At present Sensex PE is around 16.41 (30/12/2011) and it provides useful information about

Sensex. Analyst predict the level of Sensex using this number only .suppose Sensex PE is 12

and Sensex EPS is 900, then the index should be = 10800. For example if we believe the

earnings of the companies would grow at 10 % this year, and then apply the same growth

rate to both Sensex PE and EPS to predict the Sensex next year.

SENSEX PE = sum of market capitalisation of 30 SENSEX stocks

Sum of net profits of all the 30 SENSEX stocks

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This calculation is only an estimate about the Sensex. The calculation may not be accurate

calculation of Sensex it is just because Sensex is dependent on various factors that keep on

changing with time.

SENSEX AND ITS CALCULATION

The performance of stock market is quantified by calculating an index using benchmark

scrips. SENSEX is calculated since 1986 and initially it was calculated based on the total

market capitalisation methodology and this methodology was changed in 2003 to free float

market capitalisation. Hence, these days, the Sensex is based on free float market cap of 30

SENSEX stocks traded on BSE relative to the base value which is 100 (1978-79) and it is

calculated every 15 seconds.

Free Float Market Capitalisation is defined as the value of all the shares available for public

trading excluding the promoter equity, holdings through FDI Route, Holdings by private

corporate and holdings by employee welfare fund.

Why free flow market cap?

1. It depicts market more rationally.

2. It removes under influence of government or promoter shareholding, thereby giving

the equal opportunity for companies to be in the Sensex.

3. Almost all the indices in the world are calculated by this methodology.

4. It gives fund managers more authentic information for benchmark comparisons.

SENSEX - Scrip Selection Criteria

1. Equities of companies listed on Bombay Stock Exchange Ltd. (excluding companies

classified in Z group, listed mutual funds, scrips suspended on the last day of the month

prior to review date, scrips objected by the Surveillance department of the Exchange and

those that are traded under permitted category) shall be considered eligible

2. Listing History: The scrip should have a listing history of at least three months at BSE.

An exception may be granted to one month, if the average free-float market capitalization

of a newly listed company ranks in the top 10 of all companies listed at BSE. In the event

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that a company is listed on account of a merger / demerger / amalgamation, a minimum

listing history is not required.

3. The scrip should have been traded on each and every trading day in the last three

months at BSE. Exceptions can be made for extreme reasons like scrip suspension etc.

4. Companies that have reported revenue in the latest four quarters from its core activity

are considered eligible.

5. From the list of constituents selected through Steps 1-4, the top 75 companies based

on free-float market capitalisation (avg. 3 months) are selected as well as any additional

companies that are in the top 75 based on full market capitalization (avg. 3 months).

6. The filtered list of constituents selected through Step 5 (which can be greater than 75

companies) is then ranked on absolute turnover (avg. 3 months).

7. Any company in the filtered, sorted list created in Step 6 that has Cumulative Turnover

of >98%, are excluded, so long as the remaining list has more than 30 scrips.

8. The filtered list calculated in Step 7 is then sorted by free float market capitalization.

Any company having a weight within this filtered constituent list of <0.50% shall be excluded

9. All remaining companies will be sorted on sector and sub-sorted in the descending

order of rank on free-float market capitalization.

10. Industry/Sector Representation: Scrip selection will generally attempt to maintain index

sectoral weights that are broadly in-line with the overall market.

11. Track Record: In the opinion of the BSE Index Committee, all companies included within

the SENSEX should have an acceptable track record.

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LIST of 30 scrips included in Sensex as on 9 -1-12

S. No.

SCRIP CODE

NAME FREE FLOAT FACTOR

INDUSTRY

1 500010 HOUSING DEVELOPMENT FINANCE CORP. LTD

0.95 FINANCE

2 500087 CIPLA LTD 0.65 HEALTH CARE

3 500103 BHARAT HEAVY ELECTRICALS LTD 0.35 CAPITAL GOODS

4 500112 STATE BANK OF INDIA 0.45 FINANCE

5 500180 HDFC BANK LTD 0.8 FINANCE

6 500182 Hero Moto Corp Limited 0.5 TRANSPORT EQUIPMENTS

7 500209 Infosys Ltd 0.85 INFORMATION TECHNOLOGY

8 500312 OIL AND NATURAL GAS CORPORATION LTD

0.2 OIL & GAS

9 500325 RELIANCE INDUSTRIES LTD 0.55 OIL & GAS

10 500400 TATA POWER CO.LTD 0.7 POWER

11 500440 HINDALCO INDUSTRIES LTD 0.7 METAL & MINING

12 500470 TATA STEEL LTD. 0.7 METAL & MINING

13 500510 LARSEN & TOUBRO LTD. 0.9 Construction & Engineering

14 500520 MAHINDRA & MAHINDRA LTD 0.75 TRANSPORT EQUIPMENTS

15 500570 TATA MOTORS LTD 0.65 TRANSPORT EQUIPMENTS

16 500875 ITC LTD 0.7 FMCG

17 500900 STERLITE INDUSTRIES (INDIA) LTD 0.45 METAL & MINING

18 500696 HINDUSTAN UNILEVER LTD. 0.5 FMCG

19 507685 WIPRO LTD 0.25 INFORMATION AND TECHNOLOGY

20 524715 SUN PHARMACEUTICAL INDUSTRIES LTD.

0.4 HEALTH CARE

21 532155 GAIL INDIA 0.4 OIL & GAS

22 532174 ICICI BANK LTD 1 FINANCE

23 532286 JINDAL STEEL & POWER LTD 0.45 METAL & MINING

24 532454 BHARTI AIRTEL LTD 0.35 TELECOM

25 532500 MARUTI SUZUKI 0.5 TRANSPORT EQUIPMENTS

26 532540 TCS LTD 0.3 INFORMATION TECHNOLOGY

27 532555 NTPC LTD 0.2 POWER

28 532868 DLF LTD 0.25 HOUSING RELATED

29 532977 BAJAJ AUTO LTD 0.5 TRANSPORT EQUIPMENTS

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30 533278 COAL INDIA LTD 0.1 METAL & MINING

How does BSE determine the Free-float factor for each Index constituent?

BSE has designed a detailed Free-float format to be filled and submitted by all index

companies on a quarterly basis. BSE determines the Free-float factor for each company

based on the detailed information submitted by the companies. Free-float factor is the

multiple with which the total market capitalization of a company is adjusted to arrive at the

Free-float market capitalization. Once the Free-float factor of a company is determined, it is

rounded-off to the higher multiple of 5 and each company is categorized into one of the

bands given below. The banding structure reduces the potential of frequent changes in

Free-float factors of index companies. A Free-float factor of say 0.6 means that only 60% of

the market capitalization of the company will be considered for index calculation.

% Free-Float Free-Float Factor % Free-Float Free-Float Factor

>0 - 5% 0.05 >50 - 55% 0.55

>5 - 10% 0.10 >55 - 60% 0.60

>10 - 15% 0.15 >60 - 65% 0.65

>15 - 20% 0.20 >65 - 70% 0.70

>20 - 25% 0.25 >70 - 75% 0.75

>25 - 30% 0.30 >75 - 80% 0.80

>30 - 35% 0.35 >80 - 85% 0.85

>35 - 40% 0.40 >85 - 90% 0.90

>40 - 45% 0.45 >90 - 95% 0.95

>45 - 50% 0.50 >95 - 100% 1.00

How the SENSEX is calculated? The formula for calculating the SENSEX

=

Where, 100 is the index value during 1978 -79.

SENSEX = (SUM OF FREE FLOW MARKET CAP OF 30 BENCHMARK STOCKS) * INDEX FACTOR

INDEX FACTOR 100

MARKET CAP VALUE IN 1978 -79

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The market cap is not a static value but keeps changing because they need to account for

special events like rights issue, bonus issues, change of companies in the index so that these

special events don’t affect the continuity of the index.

Example:

Assume SENSEX has only 2 stocks namely SBI and RELIANCE. Total shares in SBI are 500 out

of which 200 are held by government and only 300 are available for pubic trading. RELIANCE

has 1000 shares out of which 500 are held by promoters and 500 are available for trading.

Assume price of SBI stock is ₹ 100 and reliance is ₹ 200. Then free float market cap of these

2 companies = (300 * 100) + (500* 200) = ₹ 1, 30,000.

Assume market cap during the year 1978- 79 was ₹25000

Then SENSEX = (130000* 100) / 25000 = 520

The methodology in the example is exactly followed to calculate the SENSEX, only difference

being the inclusion of 30 stocks.

Like any other index – it tells you how the stock market is performing at any given time – a

higher Sensex means share prices are higher and a lower Sensex means share prices are

lower and that share price movement is captured in the form of free float market capital in

the Sensex.

Sensex and economic growth Often, Sensex is seen, though wrongly, as a leading indicator of India’s economic strength.

There are many investors who believe that the rise or fall of Sensex on the BSE is directly

related to the strength or weakness of India’s economy. Stock markets, by nature, go up and

down in unpredictable ways. Likewise, Sensex also moves in different directions –

depending on factors, like, corporate performance, availability of money at cheaper rates,

sentiments of the investors’ community, the growth of India’s national income and several

other factors – including global factors. The movement of Sensex usually reflects the

investors’ perception of the company’s future profits. So, it is not necessary that the rise in

Sensex is directly related to the growth of India’s economy. On the other hand, it is not

necessary that the fall of Sensex is due to the weakness in the Indian economy. It is not

necessary that Sensex is a barometer of India’s economy.

Sensex is expressed in number of points indicating the relative price movements of India’s

30 topmost companies as compared to previous day, year, decade or even a minute. The

Sensex changes its value every nano second, in a constant manner, during the market

trading hours.

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Sensex is the most popular index in Indian Stock Market. It is followed by millions of

stakeholders and general public all over the world. It is synonymous with the strength of

financial markets. Its movement is widely tracked because it is easily understandable by all

people as it is just a number and investors find it extremely simple to follow. It has attained

iconic status in India in the last three decades. It has achieved massive brand value not only

in India but all over the globe. As Such, this is just a start-up or a springboard for several

investors who are testing the stock markets for the first time in India. It is no wonder it has

become an integral part of India’s economy and has become leading economic indicator in

India. However, it is not necessary that it is a barometer of India’s growing economy.

SEBI The Securities and Exchange Board of India (frequently abbreviated SEBI) is the regulator for the securities market in India.

It was formed officially by the Government of India in 1992 with SEBI Act 1992 being passed by the Indian Parliament. SEBI is headquartered in the business district of Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern and Western regional offices in New Delhi, Kolkata, Chennai and Ahmedabad.

Controller of Capital Issues was the regulatory authority before SEBI came into existence; it derived authority from the Capital Issues (Control) Act, 1947.

Initially SEBI was a non-statutory body without any statutory power. However in 1995, the SEBI was given additional statutory power by the Government of India through an amendment to the securities and Exchange Board of India Act 1992. In April, 1998 the SEBI was constituted as the regulator of capital market in India under a resolution of the Government of India. Upendra Kumar Sinha was appointed chairman on 18 February 2011 replacing C. B. Bhave.

Organisation structure The Board comprises

Name Designation

Upendra Kumar Sinha Chairman

Prashant Saran Whole Time Member

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CA. T.V. Mohandas Pai Director, Infosys

Dr. Thomas Mathew Joint Secretary, Ministry of Finance

V. K. Jairath Member Appointed

Anand Sinha Deputy Governor, Reserve Bank of India

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 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.

SEBI has also been instrumental in taking quick and effective steps in light of the global meltdown and the Satyam fiasco. It had increased the extent and quantity of disclosures to be made by Indian corporate promoters. More recently, in light of the global meltdown, it liberalised the takeover code to facilitate investments by removing regulatory structures. In one such move, SEBI has increased the application limit for retail investors to ₹ 2 lakh, from ₹ 1 lakh at present.

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Powers For the discharge of its functions efficiently, SEBI has been invested with the necessary powers which are:

1. To approve by−laws of stock exchanges.

2. To require the stock exchange to amend their by−laws.

3. Inspect the books of accounts and call for periodical returns from recognised stock exchanges.

4. Inspect the books of accounts of financial intermediaries.

5. Compel certain companies to list their shares in one or more stock exchanges.

6. Levy fees and other charges on the intermediaries for performing its functions.

7. Grant licence to any person for the purpose of dealing in certain areas.

8. Delegate powers exercisable by it.

9. Prosecute and judge directly the violation of certain provisions of the companies Act.

SEBI Committees

1. Technical Advisory Committee

2. Committee for review of structure of market infrastructure institutions

3. Members of the Advisory Committee for the SEBI Investor Protection and Education Fund

4. Takeover Regulations Advisory Committee

5. Primary Market Advisory Committee (PMAC)

6. Secondary Market Advisory Committee (SMAC)

7. Mutual Fund Advisory Committee

8. Corporate Bonds & Securitization Advisory Committee

9. Takeover Panel

10. SEBI Committee on Disclosures and Accounting Standards (SCODA)

11. High Powered Advisory Committee on consent orders and compounding of offences

12. Derivatives Market Review Committee

13. Committee on Infrastructure Funds

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Bibliography

Newspapers – economic times

www.moneycontrol.com

http://www.sebi.gov.in

http://www.bseindia.com/

http://www.nseindia.com/

http://www.wikipedia.org/

“ HANDBOOK OF STATISTICS ON THE INDIAN SECURITIES

MARKET 2010 ” by SEBI

Investopedia.com

“ Handbook on Basics of Financial Markets ” by NSE of

India

“ Intelligent Stock Market Investing ” by N. J. Yasaswy

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