3Ps of Indian stock market

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    3 Ps of the Indian Stock Exchanges Past, Present & Perspective___________________________________________________________________________________

    ACKNOWLEDGEMENT

    I thank Dr. Sanja Srivastava, Director! P"D#, $%it 'siness Schoo(,)oida, for providing the fo'ndation for this st'd. *he str'ct're, the foc's and the

    direction for the s'ccessf'( co%p(etion of this project +ere provided hi%, and had

    it not een for the c(arit that he provided, this dissertation report +o'(d not have

    een possi(e.

    I a(so take this opport'nit to thank % fac'(t g'ide Prof. -ikas Sriviastava,

    $S, )ID$. *he sincerit, dedication and interest that he sho+ed in % st'd +as

    ver enco'raging and of extre%e va('e. I a% ver gratef'( to hi% for the pains hetook to s'pport this st'd giving %e va('a(e insights and reference %ateria(.

    Sir +as a(+as a g'iding (ight of this st'd right fro% the +ord go. /e gave

    %e certain insights +hich have proved to e ver 'sef'( for %e +hi(e I +ent ao't

    doing this st'd.

    I +o'(d a(so (ike to thank #r. Sanja $ggar+a( of )D$ "ro'p of 0o%panies,

    #r. Sa'rah "'pta & #s. #eenakshi "'pta of India'((s Sec'rities 1i%ited #r.

    Paresh hagat of #anga( 2eshav Stock and Share rokers for he(ping %e ana(e the

    s'ject and providing %e +ith necessar infor%ation.

    I +ish to express % heartfe(t gratit'de to a(( the fac'(t and staff %e%ers

    +ho have een associated +ith this st'd in %an s%a(( and ig +as.

    I a(so +ish to express % gratit'de to the estee%ed respondents of %

    research for their co!operation and s'pport.

    1ast 't not the (east4 I thank % +orth friends and fa%i( %e%ers +ho

    have constant( een enco'raging and s'pporting %e thro'gh o't the vario's stages of

    this st'd.

    Vikash Goyal

    200501109

    SECTION - A

    PDGM 2YFT

    CLASS OF 2005AMITY !SINESS SC"OOL# NOIDA

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    AMITY !SINESS SC"OOL

    SECTO$ % &&

    NOIDA

    200' % 2005

    C E $ T I F I C A T E

    *his is to certif that M() VI*AS" GOYAL has s'ccessf'(( co%p(etedhis dissertation project on +'P,s o Th. I/ia/ Sok Ma(k.s % Pas#P(.s./ 3 P.(s4.i.6 +ith AMITY !SINESS SC"OOL# NOIDA& s'%itted the project report on the sa%e in a satisfactor %anner 'nderthe g'idance of D() Sa/6ay S(iasaa 3 P(o) Vikas S(iasa)

    *his project is s'jected to partia( f'(fi((%ent of the re7'ire%ent for thea+ard of t+o ear f'((!ti%e dip(o%a of Pos G(a7a. Di4lo8a i/7si/.ss Ma/a.8./)

    P(o) Vikas S(iasaa

    P(o.sso(

    AS# NOIDA

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    Table of Contents

    Objectives 005Executive summary 006

    About Bombay Stock Exchange (BSE) 011

    About ationa! Stock Exchange 01"

    An overvie# o$ the $actors 0%&

    'arious segments o$ stock exchanges An Ana!ysis 0%

    *he +rimary market , -n a .ee+ s!umber 0&0

    Short term 's !ong term 0&1

    -nvestors / *ra.ers 0&

    ro#th 's va!ue investing 0&6

    2hy have e3uity +rices $a!!en in the +ast4 0&

    om+any risk a c!oser !ook 0

    7arket risk 06

    8isca! +o!icy an. the stock market 06

    7onetary +o!icy an. the stock market 09

    -m+act on stock market 0"

    *he 7S- in.ex 051

    Stock auctions 05&7anagement +erce+tion 05

    Aggregate resource mobi!i:ation 061

    ;es+onse to +ub!ic issues 06&

    *he cor+orate governance mantra 0%

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    *ren.s in 8-- investments 0""

    -n.ia an attractive .estination 100

    Sustaining 8-- interest issues an. cha!!enges 10%-n.ia 's emerging markets 10&

    >emutua!i:ation an. cor+oration o$ our stock exchanges 105

    -m+ortance o$ in.ex $utures Stu.y o$ other re!ate. $actors 109

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    OBJECTIVE

    *he ojective of the project is to st'd the vario's factors that affect

    the %ove%ent of stock prices in the Indian Stock %arkets. $na(ing

    the vario's factors +o'(d he(p 's in 'nderstanding the stock %arkets

    in a etter %anner and hence ens'ring the safet of o'r invest%ents

    as +e(( as %axi%iing ret'rns on s'ch invest%ents.

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    Executive Summary

    *he sharp s+ings in g(oa( %arkets recent( have rocked Indian %arkets (eavinginvestors nervo's. *o p't %atters in context, stock %arkets sho'(d contin'e their ro(eas a((ocator of capita( for %ost prod'ctive 'ses. ;etai( investors +hose %one is einginvested sho'(d get a fair chance to create +ea(th proportionate to their risk takingappetite. ;eg'(ators sho'(d ens're fair p(a, contro( sste%ic risks and pena(ie fra'd.*he process of (ong ter% +ea(th creation sho'(d not eco%e hostage to the avarice ofa fe+ short ter% spec'(ators. *he stock %arket is a aro%eter of the f't're +ea(thcreation capacit of the ind'stria( enterprise sste%. In +hatsoever %anner theind'stria( enterprise sste% and the stock %arkets are evo(ving, these things re%ain

    the sa%e."iven that, +h do individ'a( stocks sho+ vo(ati(e price %ove%ents< $ stock price%oves 'p or do+n depending on +hether for that da or for that period s'pp(exceeds de%and or vice versa. It is this fragi(e a(ance in s'pp( and de%and +hich+o'(d deter%ine the price %ove%ents for a stock and in aggregate ter%s the price%ove%ent for a gro'p of stocks or for the stock %arket as a +ho(e.Individ'a( stocks can e vo(ati(e if, there is extre%e( positive or negative infor%ationfor that partic'(ar stock +hich is avai(a(e to traders. r, prices %a s+ing if a gro'pof traders co(('de, to create artificia( scarcit or de%and for a stock. =ina((, price%ove%ents %a happen, if at a %acro (eve(, there is nationa( or internationa( ne+s

    +hich has so%e i%pact on so%e stocks or the entire %arket.*he c'rrent vo(ati(it is the o'tco%e of a(( these factors acting together, (ike )e+tons1a+s. Stock prices %ove as a f'nction of a(( the aove %entioned factors. >hats ne+no+ is ho+ the process of g(oa( kno+(edge disse%ination has expanded and thered'ced cost of stock %arket transactions for individ'a(s. *hanks to I*, individ'a(sacross the g(oe have access to infor%ation a(%ost si%'(taneo's(. *echno(og hasa(so %ade transactions easier and cheaper. #ore infor%ation and ease of transactions%ean that #r S're Shot Singh in ?a(andhar +ants to se(( or ' depending on +hat#r ?ohn ro+n is doing in #anchester. *+o decades ago, Indians 'sed to sta 'p past%idnight to hear or see +hat S'ni( "avaskar +as doing on the cricket fie(ds of 1ords.

    )o+ the sta 'p to +atch +hat the )asda7 is doing. Infor%ation on factors affectingprice %ove%ents is avai(a(e to %ore peop(e and the are a(e to act 7'icker, (eadingto steep s+ings in prices.>hi(e I* has accent'ated short ter% %ove%ents, its %edi'% ter% i%pact is sa('tar.Infor%ation re%oves i%perfections and (ets peop(e a(ign invest%ents +ith risks.0o(('sion eco%es diffic'(t, reg'(ation easier and sste%ic risks are red'ced. Despitethe t'r'(ence (ong ter% investors have %ade good ret'rns in the past, as the +i(( inf't're.*he recent vo(ati(it serves to prick this '(e of a fiction gaining c'rrenc recent(in the Indian stock %arkets !! that e7'it stocks and %'t'a( f'nds are a +a to

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    1et 's e c(ear in o'r %inds that e7'it stocks and e7'it %'t'a( f'nds offer a +a of(ong ter% financia( (ife cc(e p(anning. Peop(e +ho have invested in these over a (ong

    period have otained exce((ent ret'rns. Peop(e +ho invest in stock %arkets ased on

    ta(oid advice and +ith the greed of overnight ret'rns are not investors 'tspec'(ators. *he can, and do get, 'rnt. =or a(( the essas +e %a +rite and a(( that%arket reg'(ators %ight tr to do, no one can protect a spec'(ator against hi%se(f.>ith the integration of o'r stock %arkets +ith internationa( %arkets, the r'(es of thega%e have changed. )o one inf('ence can g'ide the short ter% %ove%ents in thestock %arkets. $s investors, +e have to (earn to (ive +ith vo(ati(it.ne of the %ajor factors ca'sing todas vo(ati(it is the 'nani%it in investorsinc(ination to+ards ne+ econo% stocks and their sh'nning of o(d econo% stocks.*his has (ed to a h'ge po(ariation in the %arkets. *odas %arkets are characteried

    (arge invest%ent f(o+s into co%panies +ith e%erging 'sinesses !! +hich tpica((

    have (o+ f(oating stock !! (eading to +i(dprice s+ings.

    -o(ati(it has gone 'p as active( %anaged f'nds ch'rn their portfo(ios %ore often.*his gets exacerated %o%ent'% investing da traders and f'nd %anagers.Soon, stocks are not o'ght on the asis of their f'nda%enta( va('e 't on the greaterfoo( theor.Anrea(istic investor expectations driven the recent histor of the oo% in I* stocksis a ca'se for concernB no+, the 7'a(it of the stock and f'nda%enta(s are ignored in a%arket characterised dai( assess%ent of profits and (osses. ;ecent price histor

    c(o'ds the investors %inds so %'ch that the start treating that price as the rea( va('eof the stock and dont take a (onger perspective of the co%pan.

    *he ne+ econo% stocks are a different reed. *here is a (ot of the%e or conceptinvesting taking p(ace in these stocks no+. It is diffic'(t to 7'antif the f't're of the

    'sinesses and p't a va('e to those. *o disco'nt a(( the f't're cash f(o+s and p't ava('e to the co%pan is passe and PE" ratios ased on the next co'p(e of earsearnings is in. *he near ter% high gro+th rate in these 'sinesses is overshado+ingthe pricing of risk and techno(ogica( oso(escence for a partic'(ar co%pan. #arketvo(ati(it is a sign that investors are 'ns're of ho+ to va('e these stocks. In the %inds

    of investors, there is a att(e going on et+een this great ne+ paradig% and theva('ations of the stocks. In s'ch a scenario, %ood s+ings et+een hope and fearca'se vo(ati(it.

    *he vo(ati(it in ne+ econo% stocks ref(ects sste%ic changes taking p(ace in the'nder(ing 'sinesses. In the oardroo%s of co%panies, (ong gone are the %onths of

    p(anning and deate on capita( a((ocation, %ergersCac7'isitions and joint vent'res. Inthe Internet age, a three %onth de(a can e the difference et+een s'ccess andfai('re. $(so, +e are no+ in an age +hen co%panies can think of eco%ing%'(tinationa(s in a short span e.g. ahoo, $%aonF, +hen esta(ished age o(dco%panies see their fort'nes dip ver fast e.g. ritannicaF and +hen co%panies can

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    go oo% and then co%e t'%(ing do+n in a co'p(e of ears e.g. )etscapeF. >hen'sinesses are +itnessing s'ch rapid stratospheric oo%s and 'sts, it is nat'ra( toexpect their stocks to e vo(ati(e.

    In ti%es of extre%e vo(ati(it, invest%ents in diversified e7'it f'nds offer a hedgeagainst stock specific risk.*he reg'(ator sho'(d (eave the pricing of the stocks to %arkets and its p(a on fear andgreed, 't sho'(d co%e do+n heavi( on rigging ind'ced vo(ati(it. It sho'(d c(a%pdo+n on insider trading and se(ective infor%ation (eaks. Infor%ation disse%ination+hen done ti%e( and 'nifor%( to a(( investors +o'(d ring in transparenc andsho'(d he(p arrest vo(ati(it to so%e extent.

    *he %argin re7'ire%ent in the ne+ econo% stocks sho'(d e fixed at a high (eve( as

    investors +i(( have to (earn to (ive +ith high vo(ati(it in these stocks.$(( said and done, short ter% vo(ati(it in the stock %arkets is the friend of (ong ter%investor +ho 'nderstands va('e as it opens 'p for hi% opport'nities for oth entr andexit at his price (eve(s.

    -o(ati(it in stock %arkets is a g(oa( pheno%enon. #ore and %ore peop(e are getting('red the pheno%ena(, a(eit 'ns'staina(e, ret'rns especia(( in the (ong r'nF,+hich so%e stocks have seen in the recent past. *his is especia(( tr'e of tech stocks.Even as I+rite this, %arkets +or(d over have t'%(ed, +ith the dot!co% and techstock!p('nge ca'sing so%e panic a%ong investors.

    *here are as %an as 5H %i((ion da traders in the AS. >hi(e no s'ch statistic isavai(a(e for India, % g'essti%ate is that this n'%er sho'(d e 7'ite high given thatc(ose to H to JH per cent of trades in the t+o %ain exchanges, SE and )SE, arecarried for+ard or s7'ared off respective(. *his is a sign of the ti%es, that Kget rich7'ick6 attit'de present( in existence a%ong the o'nger (ot in India.

    *he extre%e vo(ati(it in the stock %arkets is certain( of concern. >hen the %arketsare in a '((ish phase, investors (ind( enter, (ike %ice fo((o+ing the proveria( PiedPiper. >hen the %arkets start rapid( going do+n, the sa%e investors exit in a h'rr.

    #ore often than not, investors get their ti%ing tota(( +rong, oth on entr as +e(( ason exit./o+ever caref'( one is, vo(ati(it cannot e e(i%inated tota((. In fact hea(thcorrections oth 'p+ard as +e(( as do+n+ard on a periodic asis are good for the(ong!ter% deve(op%ent of an %arket. $t the sa%e ti%e, it is the vio(ent %ove%ents,either 'p or do+n that are not good for either the %arket or the psche of the retai(investor.

    In the (ong r'n, the on( +a the vo(ati(it can e ro'ght do+n to so%e accepta(e(eve( is effecting certain str'ct'ra( changes in the %arket. So%e of the% are asfo((o+sB

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    ne, privatise pension and provident f'nds and a((o+ the% to egin +ith, invest as%a(( portion of their corp's sa five to 5H per centF in the stock %arket. In the AS,9H52 P(ans +hich are akin to o'r provident f'nds, have een one of the %ajor so'rces

    of reg'(ar s'pp( of f'nds to the stock %arkets. *he he(p to stai(ise %arkets.

    *+o, privatise ins'rance as soon as possi(e4 a((o+ ins'rance co%panies to invest a(arger percentage of their corp's in the stock %arkets.

    oth the ins'rance co%panies as +e(( as the pension f'nds are (ong ter% p(aers and+o'(d ring in a (ot %ore stai(it in the %arkets. >hi(e the spec'(ators +o'(dcontin'e to perfor% their ro(e and certain( assist in price discover, =IIs +i(( a(socontin'e to e i%portant p(aers, given the sheer sie of f'nds at their co%%and.Despite the gro+ing sie of the do%estic %'t'a( f'nds, neither those, nor =IIs can

    %oi(ise the kind of f'nds that can e %oi(ised (ong ter% p(aers (ike ins'ranceand pension f'nds.

    *hree, a((o+ instit'tions, anks and %'t'a( f'nds to participate in ad(a financing.=o'r, introd'ce as soon as possi(e index ased f't'res4 after the initia( teething

    period and once the index ased f't'res %arket stai(ises, consider doing a+a +ithad(a.nce the index and f't'res %arket is stai(ised, serio's tho'ght sho'(d e given to'nifor% sett(e%ent across the stock exchanges. nce these refor%s take ho(d, f't'res%arkets are stai(ised, then ro((ing sett(e%ent sho'(d e considered and phased in, for

    %ore and %ore scrips.In the i%%ediate f't're, tho'ght sho'(d e given to red'cing the eight per cent circ'itfi(ter present( in operation on a scrip +ise asis.nce the index and f't'res %arkets tr'( deve(op, the circ'it fi(ter sho'(d e (ooked atfor the %arket as a +ho(e and not at a scrip (eve(.

    Stock index represents a portfo(io of stocks and stock index f't'res is a standardiedcontract of 'ing and se((ing of portfo(io of stocks represented the stock index.

    Stock indexes have een part of invest%ent c'(t'res for %ore than 5HH ears, 'tf't'res contract on the% did not egin 'nti( 5JHs. *hese contracts contin'e todeve(op as the %arkets enter the t+ent!first cent'r. )ear( three!doen co'ntrieshave deve(oped stock index derivatives prod'cts and the (argest econo%ies in the+or(d have severa( derivatives, trading on different indexes avai(a(e in their co'ntr.

    >hi(e the rest of the +or(d progressed rapid( on the derivative front, Indian %arket(agged ehind. Anti( recent( Indian e7'it %arket +as tota(( devoid of derivativestho'gh so%e varieties of the% have een in existence in the %one %arket. /o+ever,the det %arket is s%a(( and inactive and does not provide a +ide range of invest%entchoices to investors to ena(e the% to design portfo(ios to %atch their risk!ret'rn

    preferences.

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    It +as in #a 5JJ that SEI accepted the reco%%endations %ade 1.0."'ptaco%%ittee on derivatives trading in India. S'se7'ent( SEI appointed ?.;.-er%a0o%%ittee to (ook into the operationa( aspects of derivatives %arkets5.

    *he Sec'rities 1a+s $%end%entF i(( 5JJJ +as introd'ced to ring ao't the %'ch!needed changes. In Dece%er 5JJJ, the ne+ fra%e+ork +as approved. Derivatives+ere accorded the stat's of Lsec'rities and the an i%posed on trading in derivatives

    the 0entra( "overn%ent +as revoked.

    1

    Detailed information on L.C.Gupta & J.R.Verma committee is available at SEBIs !ebsite"!!!.sebi.com#

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    ABOUT BOMBAY STOCK EXCHANGE (BSE)

    INTRODUCTION

    *he Stock Exchange, #'%ai +hich +as esta(ished in 5G: as :Th. Nai. Sha(.a/ Sok;(ok.(s Assoiaio/: a vo('ntar non!profit %aking associationF, hasevo(ved over the ears into its present stat's as the pre%ier Stock Exchange in theco'ntr. It %a e noted that the Stock Exchange is the o(dest one in $sia, even o(derthan the *oko Stock Exchange, +hich +as fo'nded in 5G.*he Stock Exchange, #'%ai SEF is genera(( referred to as the "ate+a to thecapita( %arket in India. It is a (nch!pin of the Indian 0apita( %arket. Its governing

    oard and ad%inistration are keen( a+are of the f't're needs of the exchange to%aintain its (ead ro(e. $s Indian econo% is opening 'p, the Exchange has ro'ght itsoperations at par +ith internationa( standards. It is poised to take advantage ofchanges in Indian econo%ic dereg'(ation to expand the %arket and %ake the sec'rit%arket, in India, %ore transparent and %ore (i7'id./o+ever, the ojectives and the ro(e of the Stock Exchange, #'%ai has re%ainedthe sa%e as en'nciated o'r fo'nding fathers and given to 's as a %andate in 5Gthro'gh the charter. *hese ojectives areB

    5. *o safeg'ard the interest of investing p'(ic having dea(ings on the Exchangeand the %e%ers.

    8. *o esta(ish and pro%ote hono'ra(e and j'st practices in sec'ritiestransactions.3. *o pro%ote, deve(op and %aintain a +e(( reg'(ated %arket for dea(ing in

    sec'rities.9. *o pro%ote ind'stria( deve(op%ents in the co'ntr thro'gh efficient reso'rce

    %oi(isation +a of invest%ent in corporate sec'rities.*he Exchange +hi(e providing an efficient %arket a(so 'pho(ds the interests of theinvestors and ens'res redressa( of their grievances, +hether against the co%panies orits o+n %e%er!rokers. It a(so strives to ed'cate and en(ighten the investors %aking avai(a(e necessar infor%ative inp'ts.

    $ "overning oard co%prising of J e(ected directors one third of the% retire everear rotationF, an Exec'tive Director, three "overn%ent no%inees, a ;eserve ankof India no%inee and five p'(ic representatives, is the apex od +hich reg'(ates theExchange and decides its po(icies.$ President, -ice!President and an /onarar *reas'rer are ann'a(( e(ected fro%a%ong the e(ected directors the "overning oard fo((o+ing the e(ection ofdirectors.*he Exec'tive Director as the 0hief Exec'tive fficer is responsi(e for the da!to!da ad%inistration of the Exchange.*he Exchange has otained per%ission fro% Sec'rities and Exchange oard of India

    SEIF for expansion of its SE!n!1ine!*rading 1*F net+ork to (ocations ! 55 !

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    o'tside #'%ai. In ter%s of the per%ission granted SEI, the %e%ers of theExchange are free to insta(( their trading ter%ina(s to cities +here there are no StockExchanges. /o+ever, at centres +here the other Exchanges are (ocated, the Exchange

    is re7'ired to sign a #e%orand'% of Anderstanding +ith these Exchanges per%ittingit to insta(( the 1* ter%ina(s in their j'risdictiona( areas.*he expansion of 1* net+ork +as ina'g'rated the then =inance #inister,"overn%ent of India, Shri P. 0hida%ara% on $'g'st 3H, 5JJG. *he Exchange hassigned #e%orand'% of Anderstanding +ith e(even Stock Exchanges, vi., 0a(c'tta,P'ne, $h%edaad, Sa'rashtra!2'tch ;ajkotF, #adha Pradesh, -adodara,h'anesh+ar and #agadh i.e., PatnaF, ?aip'r, 0oi%atore & 0hennai #adrasF to

    provide 1* connections to the %e%ers of these Exchanges after otainingnecessar c(earance fro% SEI. *he 1* net+ork has een expanded to centreso'tside #'%ai and covers 88G centres having @G8 -!S$*s -er S%a(( $pert're

    *er%ina(sF and J9J *>Ss *rader >ork StationsF as on $'g'st 35, 5JJJ. f these,:J: -!S$*s and HG *>Ss respective( are insta((ed o'tside #'%ai.>ith the expansion of 1* o'tside #'%ai, the average dai( t'rnover at theExchange has increased fro% ;s. 5H@9 crores in $'g'st 5JJG to ;s. 59H9 crores in$pri( 5JJ and f'rther to ;s. 88G3 crores in $'g'st 5JJJ.*he average dai( t'rnover at the Exchange has increased fro% ;s.:5 crores in 5JJG!J to ;s. 589 crores in 5JJ!JJ and f'rther to ;s. 88G3 in 5JJJ!8HHH $pri( $'g'st 5JJJF.

    1IS*I)" = SE0A;I*IES

    1isting %eans ad%ission of the sec'rities to dea(ings on a recognied stock exchange.*he sec'rities %a e of an p'(ic (i%ited co%pan, 0entra( or State "overn%ent,7'asi govern%enta( and other financia( instit'tionsCcorporations, %'nicipa(ities, etc.*he ojectives of (isting are %ain( toB

    provide (i7'idit to sec'rities4 %oi(ie savings for econo%ic deve(op%ent4 protect interest of investors ens'ring f'(( disc(os'res.

    *he Exchange has a separate 1isting Depart%ent to grant approva( for (isting ofsec'rities of co%panies in accordance +ith the provisions of the Sec'rities 0ontracts

    ;eg'(ationF $ct, 5J:@, Sec'rities 0ontracts ;eg'(ationF ;'(es, 5J:G, 0o%panies$ct 5J:@, "'ide(ines iss'ed SEI and ;'(es, e!(a+s and ;eg'(ations of theExchange.$ co%pan intending to have its sec'rities (isted on the Exchange has to co%p( +iththe (isting re7'ire%ents prescried the Exchange, +hich are as 'nderB

    Co84a/i.s

    a. Mi/i878 Ca4ial?)e+ co%panies can e (isted on the Exchange,if their Iss'ed & S'scried E7'it 0apita( after the p'(ic iss'e, is;s.5H crores and aove.

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    . Mi/i878 P7;li O.(?$s per ;'(e 5J8F F of the Sec'rities0ontracts ;eg'(ationF ;'(es, 5J:G, sec'rities of a co%pan can e(isted on a Stock Exchange on( +hen at (east 8:M of each c(ass or

    kind of sec'rities is offered to the p'(ic for s'scription. =or thisp'rpose, the ter% Noffered to the p'(icN %eans on( the portionoffered to the p'(ic and does not inc('de reservations of sec'ritieson fir% or co%petitive asis.

    SEI %a, ho+ever, re(ax this condition on the asis of reco%%endationsof stock exchangesF, on( in respect of a "overn%ent co%pan defined'nder Section @5G of the 0o%panies $ct, 5J:@.

    ih Lisi/ A(..8./

    *he co%panies desiro's of getting their sec'rities (isted are re7'ired to enter into an

    agree%ent +ith the Exchange ca((ed the 1isting $gree%ent and the are re7'ired to%ake certain disc(os'res and perfor% certain acts. $s s'ch, the agree%ent is of greati%portance and is exec'ted 'nder the co%%on sea( of a co%pan. Ander the 1isting$gree%ent, a co%pan 'ndertakes, a%ongst other things, to provide faci(ities for

    pro%pt transfer, registration, s'!division and conso(idation of sec'rities4 to giveproper notice of c(os're of transfer ooks and record dates, to for+ard copies of'naridged $nn'a( ;eports and a(ance Sheets to the shareho(ders, to fi(eDistri'tion Sched'(e +ith the Exchange ann'a((4 to f'rnish financia( res'(ts on a7'arter( asis4 inti%ate pro%pt( to the Exchange the happenings +hich are (ike( to%ateria(( affect the financia( perfor%ance of the 0o%pan and its stock prices4 etc.

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    *he 1isting Depart%ent of the Exchange %onitors the co%p(iance of the co%panies+ith the provisions of the 1isting $gree%ent, especia(( +ith regard to ti%e(

    pa%ent of ann'a( (isting fees, s'%ission of 7'arter( res'(ts, re7'ire%ent of

    %ini%'% n'%er of shareho(ders, etc. and takes pena( action against the defa'(tingco%panies.

    :: G(o74

    *he Exchange has introd'ced a ne+ categor ca((ed NO "ro'pN fro% ?'( 5JJJ forco%panies +ho have not co%p(ied +ith and are in reach of provisions of the 1isting$gree%ent. *he n'%er of co%panies p(aced 'nder this gro'p as of $'g'st 35, 5JJJare 8J3.

    O/. Bi/o> Cl.a(a/.

    Since $pri( 5JJG, the Exchange has introd'ced the concept of Nne >indo+0(earanceN for (isting of p'(ic iss'e of sec'rities of co%panies, a((ocating theco%panies p'(ic iss'es a(phaetica(( a%ongst the Exchange officia(s. $ co%pan isserved one officia( of the 1isting Depart%ent d'ring the entire process of (isting ofits sec'rities, co%%encing fro% approva( of its #e%orand'% and $rtic(es of$ssociation 'pto granting of trading per%ission for its sec'rities and re(ease of 5Msec'rit deposit.*he n'%er of co%panies (isted at the Exchange as on $'g'st 35, 5JJJ +as ::8.*his is the highest n'%er a%ong the Stock Exchanges in the co'ntr.

    *;$DI)"

    *he Exchange has s+itched over fro% the open o'tcr trading sste% to a f'((a'to%ated co%p'teried %ode of trading kno+n as 1* SE n 1ine *radingFSste%. *his sste%, +hich is oth order and 7'ote driven, +as co%%issioned on#arch 59, 5JJ:. It faci(itates %ore efficient processing, a'to%atic order %atching andfaster exec'tion of trades. $ove a((, the sste% is %ore transparent. *he %e%ersno+ enter ordersC7'otes on their *rader >ork Stations *>SsF in their offices insteadof asse%(ing in the trading ring.*he scrips traded on the Exchange have een c(assified into L$, L5, L8, L0 = and

    LO gro'p. *he n'%er of scrips (isted on the Exchange 'nder L$, L5 and L8gro'ps +hich represent the e7'it seg%ents as on $'g'st 5JJJ +as 59J, 555@ and9G9H respective(. *he L= gro'p represents the det %arket fixed inco%e sec'ritiesFseg%ent +herein @:H sec'rities +ere(isted as at the end of $'g'st 5JJJ. *he O gro'p co%prises of 8J3 scrips as of$'g'st 5JJJ. *he L0 gro'p covers the odd (ot sec'rities in L$, L5 & L8 gro'psand ;ights ren'nciations.*he Stock Exchange, #'%ai, is the on( Stock Exchange in the co'ntr to provide afaci(it of on!(ine trading in odd (ot sec'rities and ;ights ren'nciations. *his faci(itof trading in odd (ots of sec'rities and ;ights ren'nciations not on( offers an exitro'te to investors to dispose of their odd (ot of sec'rities 't a(so provides the% an

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    opport'nit to conso(idate their sec'rities into %arket (ots. *rading in this seg%entcovers a(( the scrips (isted in the e7'it seg%ent.*he trading cc(e for a(( these gro'ps of sec'rities is +eek(.

    *he trading cc(e for L$, 5, 8 and L0 gro'p sec'rities representing the phsica(seg%ent is fro% #onda to =rida and that for L= gro'p sec'rities is fro% *h'rsdato >ednesda. *he transactions in L$ gro'p scrips are a((o+ed to e carried for+ardfro% one sett(e%ent to another sett(e%ent s'ject to a %axi%'% of G: das fro% thedate of origina( transaction. *he Stock Exchange, #'%ai is the first Exchange in theco'ntr to provide the faci(it of carr!for+ard of o'tstanding positions in L$ gro'pscrips. *he trading session for carr for+ard of transactions fro% one sett(e%ent toanother is cond'cted on Sat'rdas, i.e., at the end of ever trading cc(e in the

    phsica( seg%ent.*rading on the 1* sste% is cond'cted fro% #onda to =rida et+een 5HBHH

    a.%. and 3B3H p.%. +hi(e the carr!for+ard session for L$ gro'p sec'rities iscond'cted on Sat'rdas et+een 5HBHH a.%. and 58B3H p.%.*he Infor%ation Sste%s Depart%ent of the Exchange generates the fo((o+ingstate%ents +hich can e do+n(oaded the %e%ers in their ack offices on a dai(

    asis Ba. state%ents giving detai(s of the dai( transactions entered into the

    %e%ers.. state%ents giving detai(s of %argins paa(e the %e%ers in respect

    of the trades exec'ted the%.*he %e%ers are a((o+ed to enter into transactions on eha(f of their

    Instit'tiona( c(ients, vi., Sched'(ed 0o%%ercia( anks, Indian =inancia(Instit'tions I=IsF & =oreign Instit'tiona( Investors =IIsF and #'t'a( ='ndsregistered +ith SEI. *he sett(e%ent of the trades %one and sec'ritiesF doneon eha(f of the Instit'tions %a e either thro'gh the %e%er hi%se(f orthro'gh a SEI registered 0'stodian appointed an Instit'tion. In case thede(iverCpa%ent is to e given or taken a 0'stodian on eha(f of anInstit'tion, the for%er has to confir% the trade done a %e%er. =or this

    p'rpose, the 0'stodians have een ad%itted as %e%ers of the 0(earing/o'se. In case an instit'tiona( transaction is not confir%ed the 0'stodian,the (iai(it for pa!in of f'nds or sec'rities devo(ves on the concerned

    %e%er.

    SE**1E#E)* $)D 01E$;I)"

    Pa!in and Pa!o't for N$, 5, 8& L0 gro'p of sec'rities*he trades done the %e%ers d'ring the +eek( trading period fro% #onda to=rida are sett(ed pa%ent of %one and de(iver of sec'rities in the fo((o+ing+eek. $(( de(iveries of sec'rities are re7'ired to e ro'ted thro'gh the 0(earing/o'se, except for certain off!%arket transactions +hich, a(tho'gh are re7'ired to ereported to the Exchange, %a e sett(ed direct( et+een the %e%ers concerned.

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    *he Infor%ation Sste%s Depart%ent of the Exchange nets off a(( de(ivera(e tradesp'rchases and sa(es in each scripF done a %e%er d'ring a sett(e%ent andgenerates de(iverCreceive orders and %one state%ents +hich are do+n(oaded the

    %e%ers in their ack offices.

    *he de(iver orders provide infor%ation (ike scrip, 7'antit and the na%e of thereceiving %e%er to +ho% the sec'rities are to e de(ivered thro'gh the 0(earing/o'se. *he #one State%ent provides detai(s of pa%entsCreceipts for the sett(e%ent.

    Ear(ier the %e%ers +ere re7'ired to s'%it a(ong +ith the a(ance sheet =or% 35!$F +hich inc('des the detai(s of #one State%ent, %argins paa(eCreceiva(e, andother creditsCdeits arising o't of a'ction for shortages, ojections, ad de(iver, etc.,a che7'e Cdraft depending on +hether the sett(e%ent (iai(it is a paa(e or

    receiva(e position on *h'rsda, i.e., pa!in da. /o+ever, +ith effect fro%Dece%er 88, 5JJG i.e., Sett.)o.3JCJG!JF, the ank acco'nts of %e%ers%aintained +ith ank of India, Stock Exchange ranch, the on( c(earing ank at thatti%e, +ere direct( deited thro'gh co%p'terised posting on the pa!in da for theirsett(e%ent d'es. *he (ist of c(earing anks has since een expanded to inc('de /D=0ank 1td., "(oa( *r'st ank 1td. and Standard 0hartered ank. *h's, the %e%ersare no (onger re7'ired to s'%it phsica( =or% 35!$ and che7'eCdraft as +as theear(ier practice.*he sec'rities, as per de(iver orders iss'ed the Exchange, are to e de(ivered inthe 0(earing /o'se on the da designated for pa!in ,i.e., on >ednesda and

    *h'rsda as per prescried ti%e s(ots 'pto 5BHH p.%. )o (ate de(iver of shares isper%itted. #e%ers have to de(iver the sec'rities in specia( c(osed po'ches iss'ed the Exchange a(ong +ith the re(evant detai(s distinctive n'%ers, scrip code,7'antit, receiving %e%erF on a f(opp. *he data s'%itted the %e%ers onf(oppies is %atched against the %aster fi(e data on the 0(earing /o'se co%p'tersste%s. If there are no discrepancies, then a scro(( n'%er is generated and a scro((s(ip is iss'ed. *he %e%ers then s'%it the sec'rities at the receiving co'nter. *he0(earing /o'se personne( arrange and ta(( the sec'rities received against thereceiving %e%er+ise report generated on the Pa!in da. nce this reconci(iation isco%p(ete, the ank acco'nts of %e%ers having pa!in positions are deited on

    *h'rsda. *his proced're is ca((ed Pa!in. *he ;eceiving #e%ers co((ect sec'ritieson =rida and the acco'nts of the %e%ers having pa!o't are credited on Sat'rda.*his is referred to as Pa!o't.$'ction is cond'cted for those sec'rities +hich %e%ers fai( to de(iverCshort de(iverd'ring the Pa!in. In case the sec'rities are not received in an a'ction, the positionsare c(osed o't as per the c(ose!o't rate fixed the Exchange in accordance +ith the

    prescried r'(es. *he c(ose o't rate is ca(c'(ated as the highest rate of the scriprecorded in the sett(e%ent in +hich the trade +as exec'ted or in the s'se7'entsett(e%ent 'pto the da prior to the da of a'ction or 8HM aove the c(osing price onthe da prior to the da of a'ction, +hichever is higher.

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    *he sett(e%ent sched'(es for vario's gro'ps of sec'rities have een strict( adhered to the Exchange and there has een no case of c('ing of sett(e%ents orpostpone%ent of pa!in and pa!o't d'ring the (ast over three ears.

    *he Exchange is a(so %aintaining a dataase of fakeCforgedCsto(en sec'rities +ith the0(earing /o'se so that distinctive n'%ers s'%itted %e%ers on de(iver %a e%atched against the dataase to +eed o't ad paper fro% circ'(ation.

    I)*;DA0*I) = */E DE#$* SE"#E)*

    *he Exchange has co%%enced trading in the De%ateria(ised De%atF seg%ent +itheffect fro% Dece%er 8J, 5JJG +here there is no phsica( de(iver of sec'rities as inthe phsica( seg%ent. *rading in the De%at seg%ent is on a ;o((ing Sett(e%ent asis*Q:F +here * stands for *rade Da. *he pa!in and pa!o't for the transactions in

    this seg%ent are oth cond'cted on a sing(e da. $'ction session for shortages inde%at seg%ent is cond'cted on 1* on the da after pa!inCpa!o't. *he pa!in C

    pa!o't %one partF takes p(ace thro'gh co%p'terised posting of deits and creditsin the %e%ers ank acco'nts as in the case of phsica( seg%ent.>ith effect fro% $pri( @, 5JJ, de(iveries in the de%at %ode are per%itted in the

    phsica( seg%ent. *his is so eca'se se((ers are a((o+ed to give de(iver in de%at ore(ectronic for%. $s of toda, this is app(ica(e to 8G scrips. $s s'ch, a reak!'psession is sched'(ed ever #onda +here %e%ers %a %ark the %ode of de(iver,i.e., phsica( or de%at. *he, ho+ever, have an option to change the %ode of de(iverti(( the pa!in da, i.e., *h'rsda.

    SEI has directed the stock exchanges in ?an'ar 5JJ that a(( the trades done instit'tiona( investors, vi., do%estic financia( instit'tions, anks, %'t'a( f'nds, =IIsand overseas corporate odies in certain se(ect scrips sho'(d e co%p'(sori( sett(edin de%ateria(ised for%. *his (ist has een expanded SEI fro% ti%e to ti%e and ason Dece%er 35, 5JJ trades in 559 scrips for instit'tiona( investors are re7'ired to

    e co%p'(sori( sett(ed in de%ateria(ised for%. 8J %ore scrips have een specified forco%p'(sor de%at trading for instit'tiona( investors +ith effect fro% $pri( 5:, 5JJJ%aking the tota( scrips in de%at for% for instit'tiona( investors to 593.='rther, 'nder directions fro% SEI, trades in 58 and 5J scrips are to e co%p'(sori(sett(ed a(( investors in de%ateria(ised for% +ith effect fro% ?an'ar 9, 5JJJ and

    =er'ar 5:, 5JJJ respective(. ='rther, trades in another 33 scrips and 9H scrips areto e co%p'(sori( sett(ed in de%at for% a(( investors +ith effect fro% $pri( : a 35, 5JJJ respective(. *h's, as of no+, trades in 5H9 scrips are to eco%p'(sori( sett(ed a(( investors in de%ateria(ised for%.

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    ABOUT NATIONAL STOCK EXCHANGE (NSE)

    >hat %akes )SE the dna%ic and enterprising entit that is< *he ans+ers (ie +ithin

    the porta(s of this section. $o't the %anage%ent, the financia(s, the ne+ agetechno(og, the %e%ers, the trading sste% and %'ch %ore. $(( the facts that +i((%ake o' rea(ise that )SE is %ore than a %ere %arket faci(itator. Its that force +hichis g'iding the ind'str of the region, to+ards ne+ horions and greater opport'nities.

    D..lo48./s o/ h. E@ha/.

    )SE and )S001 +ent (ive +ith the inag'ra( session for$'to%atic 1ending and orro+ing #echanis% $1#F for(ending and orro+ing of sec'rities on =er'ar 5H,5JJJ. *his

    is the first ti%e an Indian agenc approved SEI +i(( econd'cting the sec'rities (ending & orro+ing transactionsased on internationa( practices.

    M.8;.(shi4 JH trading %e%ers on the 0apita( #arket seg%ent, of +hich

    aro'nd @M acco'nt for corporates and the re%aining areindivid'a(s and fir%s.

    't of these JH trading %e%ers, J trading %e%ers are a(so%e%ers of >ho(esa(e Det #arket seg%ent, a(( of +hich arecorporates and there are G trading %e%ers excc('sive( on

    >ho(esa(e Det #arket Seg%ent.G.o(a4hi Dis(i;7io/

    ver @3J trading ter%ina(s given to the %e%ers as on)ove%er 8:, 5JJJ

    ver 8398 -S$*s across the co'ntr +ith a 89 ho'r )et+ork%onitoring sste% in over 8J5 cities as of )ove%er H5, 5JJJ.

    N78;.( o Co84a/i.s n the 0apita( #arket seg%ent, E7'it Shares of @:

    co%panies are (isted and :G8 co%panies are per%itted to trade

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    n the >ho(esa(e Det #arket seg%ent, GJG sec'rities are(isted and :5G sec'rities are per%itted to trade as of ctoer 35,5JJJ. f the GJG sec'rities (isted, 3@J are "overn%ent

    Sec'ritiesC*!i((s and the a(ance acco'nt for other sec'rities.Ca4ial Ma(k. O4.(aio/s

    )SE is +orking to increase the capacit of the trading sste%fro% the present 9,HH,HHH trades per da to %ore than5H,HH,HHH trades per da.

    *he average dai( n'%ers of trades have gone 'p fro% overJ3 trades in )ove%er!J9 to over 9,3@,3G trades in ctoerJJ. n ctoer 53,JJ the n'%er of trades reached a recordhigh of :,@9,@:3 +hich %akes )SE one of the (argest stockexchanges in the +or(d

    $verage dai( traded va('e has increased fro% ;s.G crores in)ove%er!J9 to %ore than ;s. 393J crores in ctoer JJ +itha high of ;s.9:5 crores recorded on ctoer 53, JJ

    )'%er of shares traded has increased fro% [email protected] (akhs in)ove%er!J9 to 8@,5HH.93 (akhs in ctoer JJ.

    )et traded va('e has increased fro% ;s.58: crores in)ove%erJ9 to G8,85@ crores in ctoer JJ.

    *he %arket capita(isation of co%panies has increased fro% ;s.8,J8,@3G crores in )ove%er J9 to ;s. @,GH,H@8 crores inctoer JJ.

    De(ivered va('e sett(e%ent +iseF has increased fro% ;s.@Hcrores in )ove%er !J9 to ;s.J,333 crores in ctoer JJ.

    )'%er of shares traded depositor seg%entF has increasedfro% 8HH shares in Dece%er!J@ to 55H.59 (akh shares inctoer JJ.

    )et traded va('e depositor seg%entF has increased fro%;s.H.93 (akhs in Dece%er!J@ to ;s.3J,HHJ.@9 (akhs in ctoerJJ

    *he tota( t'rnover in the 3 Da %arket seg%ent d'ring ctoerJJ +as ;s. 55GH.85 crores.

    *ota( t'rnover in the shares traded 'nder co%p'(sor de%atshares d'ring ctoer JJ +as ;s. :8,H:: crores

    Cl.a(i/ 3 S.l.8./ 0o%p(eted 8@8 sett(e%ents s'ccessf'(( +itho't an de(a or

    postpone%ent as on Dece%er H8, 5JJJ. -a('e of shares hand(ed the 0(earing ho'se per +eek has

    increased fro% ;s. 3H crores in )ove%er 5JJ9 to over;s.8938 crores per +eek in Septe%er 5JJJ.

    Inter!;egion 0(earing B )S001 has ;egiona( 0(earing 0entresat De(hi, 0a(c'tta, 0hennai and a 0entra( 0(earing 0entre at

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    #'%ai. #e%ers have the option of de(iveringCreceiving thesec'rities at a c(earing centre chosen the%.

    Bhol.sal. D.; Ma(k. O4.(aio/s *he >D# seg%ent co%%enced operations on ?'ne 3H, 5JJ9

    +ith 889 sec'rities carring an o'tstanding det va('e of ;s.5,3:,HHH crores. *his has no+ increased to 53H@ sec'rities +itha %arket capita(isation of ;s. 9,:,:95.3: crores as onSepte%er 3H, 5JJJ.

    *he highest dai( traded va('e of ;s. 8939.HH crores recordedon $'g'st H@, 5JJJ.

    *he net %onth( traded va('e in the >D# seg%ent increasedfro% ;s. [email protected]: crores in ?'( !J9 to ;s. 8@,J:G.HJ crores in

    $'g'st JJ

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    !t!"e #lans of NSE

    E@4a/sio/

    *he 0apita( #arket seg%ent of the Exchange eca%e operationa( in )ove%er 5JJ9.Initia((, the entire t'rnover acco'nted fro% #'%ai. $fter stai(ising operations in#'%ai, )SE expanded its operations to other cities. *he t'rnover fro% #'%aiacco'nts for 93M, De(hi acco'nts for 5JM, 0a(c'tta acco'nts for 55M and 8M fro%other centres. $s of =eJ, )SE ter%ina(s are present in 5G: to+ns and cities in 5@states. It is expected that the end of 5JJ )SE ter%ina(s +i(( e avai(a(e in over8HH cities. )SE +i(( add %ore ter%ina(s in cities +here it a(read has presence to

    provide etter services to investors. *he Exchange proposes to expand its -S$*

    net+ork to 8:HH and expand its reach. ='rther, )SE is +orking to increase thecapacit of the trading sste% fro% the present 9,HH,HHH trades per da to %ore than5H,HH,HHH trades per da.

    *he sate((ite h' and co%p'ter e7'ip%ent for the disaster recover site at P'ne haseen proc'red, insta((ed and tested for proper operations. $ detai(ed 'siness0ontin'it P(an 0PF has een +orked o't to p't the disaster recover site for (iveoperations. *he ack!'p site of the Exchange at P'ne +i(( e %ade operationa( soon.*his faci(it is in (ine +ith internationa( practices and the )SE +i(( e a(e toco%%ence nor%a( 'siness operations +ithin a ver short ti%e fra%e sho'(d a

    disaster occ'r.

    In keeping +ith the fast changing scenario in the 0apita( #arkets, )SE has cha(kedo't p(ans for the vario's 'siness seg%ents, so%e of +hich are.

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    An o$e"$%e& of t'e fato"s

    >e a(( +ant to %ake %one in the stock %arket. >e do so se((ing stock at a pricehigher than +hat +e ' it for. It %akes sense, then, that to %ake %one in the stock%arket, +e need to 'nderstand +hat ca'ses prices to change. having anappreciation for the things that %otivate stock price change, +e can e etter atanticipating the direction and ve(ocit of price %oves.

    >hat is Pricehi(e the capita( %arket instit'tions have gro+n and the %arkets have gro+n,sca%s and skepticis% has a(so gro+n d'ring the 5JJHs. et the capita(%arkets toda, have taken the centre stage in Indian 'siness. *he stock%arket indices are serio's( considered to e the aro%eter of the perceptionof the econo% and p'(ic po(ic initiatives.

    *he gro+th and potentia( of the Indian capita( %arket ac7'ired over ti%e, andespecia(( thro'gh the 5JJHs, are capt'red %ore easi( in the fo((o+ingstate%ents than in an n'%er of statistics ao't the c'rrent or past states ofthe econo%.

    o%a Stock Exchange SEF is $sia s first stock exchange having eenesta(ished in 5G: +hi(e the *oko Stock Exchange +as fo'nded threeears (ater in 5G.

    SE +itnesses second highest intensit of trading in the +or(d next to*aipei *ai+an F and %ore than that I 1ondon , *oko or )e+ ork

    >e have the second (argest investor pop'(ation over 9H %i((ion F in the+or(d next on( to AS$, +hich has c'rrent( ao't :5 %i((ion investors.

    India is second on( to the AS in ter%s of (isted do%estic co%panies +ithJ@99 (isted co%panies as at end! #arch 8HH8.

    India has eco%e an i%portant %arket in the e%erging %arkets of the+or(d nest on( to #a(asia, #exico, *ai+an , 2orea and *hai(and inter%s of %arket capita(iation.

    $s ear( as 5JJ3, the Internationa( =inance 0orporation ranked India 88 nd

    in ter%s of %arket capita(iation and 89 th in ter%s of tota( va('e tradea%ong 9H co'ntries +ith deve(oped as +e(( as deve(oping %arkets.

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    'r investor pop'(ation gro+s 3: (ac ever ear, according to a recentesti%ate.

    ne has to ad%it that there is f(ip too. Despite the gro+th, achieve%ents ofthe Indian capita( %arket are inade7'ate (ooking at its sie and investingpop'(ation. #arket capita(iation is aro'nd8HM of "DP, +hich is extre%e((o+ as co%pared to other deve(oped co'ntries. *he Econo%ic *i%es +or(d%arket s'rve revea(ed that India ranks 8: th in ter%s of %arket capita(iation,second in ter%s of n'%er of co%panies, 't a poor : the in ter%s ofaverage co%pan sie. In ter%s of average co%pan six, As +hich is at the II

    position ahs an average sie of R 8,5G3 %%, 't India is +a ehind +ith anaverage co%pan six of j'st R5J%%. ;ecent %arket report have pointed o'tthat Indian financia( %arket are second on( to )asda7 in spec'(ation, there

    s'rpassing %ost of the %arkets s'ch as )e+ ork Exchange )SEF 1ondonStock Exchange and %arkets in /ong 2ong, Singapore and ?apan . *he tota(pict're revea(s that despite the striking achieve%ents , the sie, the rapid andfast gro+th and a(( the hpe o'r capita( %arkets (ack the %ost f'nda%enta(

    prere7'isite of dependa(e %arkets, %at'rit.

    /aving o't(ined the deve(op%ent 'nti( ro'gh( the %id JHs the sit'ationconfronting 's and the stat's of the %arket, it is no+ ti%e to egin detai(edana(sis for the period 'nder consideration

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    THE #/IMA/Y MA/KET

    IN A DEE# SLUMBE/

    ver the (ast decade, there has een a %a%%oth dec(ine in the capita( raisingro(e of o'r sec'rities %arket. *he pri%ar %arket has een co%atose for (ongno+.. It has een denied its d'e p(ace, and o'r foc's contin'es to e on thesecond %arket and trading. >e see% to have forgotten the %ain ro(e of thecapita( %arket is to provide capita(*he a%o'nt raised a non!govern%ent p'(ic co%panies d'ring 8HH5!8HH8 is ao't

    @HM of the a%o'nt raised a decade ack. *he severit of the pro(e% can e ga'ged a (ook at so%e rief pre(i%inar statisticsB D'ring the six ear period fro% 5JJ@!JGto 8HH5!8HH8 , on( ;s.5G5 crore +ere raised thro'gh p'(ic e7'it iss'es, adis%a( 9HM (o+er than even the sing(e ear %oi(iation of ;s 53,358 crore in5JJ9!J: ='rther in 8HH5!8HH8 there +ere on( a precise( @IPs proa( the +orst

    perfor%ance in independent India. *his is in striking contrast to the peak in 5JJ8!5JJ3 +hen a h'ge .H3 crore +ere %oi(ied. >orse sti(( response for% investorseven for these pa(tr iss'es +ere %issing4 in 3 IPs , pro%oters had to stage %anagethe %andator JHM s'scription +hi(e in case, the iss'e deve(oped on the'nder+riter . n an aggregate asis retai( investor p't in on( 5.G (akh app(ications

    P) a(one had 5.: (akh app(ications F in the IPs of 8HH5!8HH8.0o%ing to specifies their are severa( facets of the ko+to+ of the pri%ar %arket+hich are far fro% satisfactor.$ggregate reso'rce %oi(iation has s'ffered a serio's setack.It is the govern%ent and not ind'str +hich is active( tapping the %arket, a(so(eading to cro+ding o'ting the processE7'it c'(t're see%s to e disappearing.IPs enor%o's( i%portant as an entr vehic(e for ne+ fir%s and hence instr'%enta(in +idening the %arket are not pop'(ar.verseas =(oatation have (ost the ear(ier 'oance

    $(( these +i(( e disc'ssed in t'rn that the process these c(ai%s +i(( e s'pported +ithevidence atte%pts +i(( e %ade to ana(e the ca'ses for the state of things ands'ggestions for i%prove%ent +i(( e %ade if possi(e.

    S'o"t Te"+ 0s Lon* Te"+

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    In the short r'n, stock prices are dictated %ore %arket senti%ent or de%and!s'pp(%is%atches. 't in the (ong r'n, stock prices va('e the earnings of the 'nder(ing

    'siness.

    All $ot%n* %s a so"t of *a+%n*1 l%-e 'e-e"s o" ba-*a++on1 &%t' a

    sl%*'t +o"al t%n*e to %t1 a 2la%n* &%t' "%*'t an3 &"on*4

    5 Hen" Da$%3 T'o"ea!

    >e have a(( cast votes in so%e e(ection or the other. It co'(d e an e(ection to e(ecto'r c(ass representative in schoo( or an e(ection to e(ect the #P of o'r constit'enc.#an of o'r votes %ade candidates +in. )everthe(ess, have o' ever +ishedso%eti%es that if on( o' had another chance, %ae o' +o'(d have voted foranother candidate +ho +o'(d have done etter. r do o' so%eti%es fee( (et do+n the person o' cast o'r vote forhat does the va('e investor hope forhat +e are driving at is that -a('e investing does not ignore the f't're. It %ere(attri'tes a (o+er proai(it of eing a(e to s'ccessf'(( predict the f't're.*he attri'tes of a -a('e Investor

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    -a('e investing p(aces a great pre%i'% on a virt'e ca((ed Patience. If o' are the kindof shopper +ho r'shes into a shop to ' +hat o' ca%e for and r'sh pro%pt( o't,then va('e investing is not for o'.

    n the other hand, if o' are the tpe to +a(k into 5H shops, co%pare prices and +orko't the arith%etic of the specia( offers efore %aking 'p o'r %ind, then va('einvesting %ight e j'st +hat the doctor orderd. *he va('e investor does not %ind+aiting for a argain to co%e a(ong ! the ann'a( $rro+ sa(e, the festiva( season...

    't that is not the on( reason +h Patience is a ke virt'e for a +annae -a('einvestor. Its one thing to possess the too(s and the kno+(edge to fig're o't thatso%ething is trading e(o+ its intrinsic va('e. 't o' %ake %one fro% an'nderva('ed stock on( +hen the price finds it correct (eve(s. *hat happens +hen

    %ore peop(e recognie the fact that the stock is 'nderva('ed. $nd that can e a (ong,(ong +ait.

    *he fact that va('e investing p(aces a pre%i'% on patience in a ro'nd ao't +aagain reinforces o'r e(ief that -a('e investing is not a ack+ard (ooking too(. *hinkao't the ce%ent co%pan in 7'estion. $s per o'r esti%ate its intrinsic va('e is;s8HH per share toda. 't re%e%er, its not +hat it is +orth toda, 't +hat it +i((

    e +orth on the da that the %arket correct( prices it, that +i(( deter%ine the profitso' %ake.

    >hat if a ne+ revo('tionar techno(og red'ces the cost of 'i(ding a ce%ent p(ant 8HM d'e to a change in the %an'fact'ring process< >hat if D'pont or P deve(ops ane+ p(astic that does a+a +ith the need for ce%ent next ear< *hen +hat< It +o'(d

    e on( fair then to pres'%e that in those circ'%stances $00s intrinsic va('e +o'(dfo((o+ s'it and head (o+er.

    *he Intrinsic va('e as esti%ated toda is ased on o'r kno+(edge of the factors thati%pact the co%pan and o'r ai(it to forecast the%.

    *he %ora( of stor is that o' can ignore the f't're on( at o'r o+n peri(. $nd a

    -a('e investor %'st recognie that. *he great -a('e investors kne+ that.

    >hat the -a('e investors are (ooking for is #argin of safet. *he are (ooking at'ing a stock at as %'ch of a disco'nt to Intrinsic va('e as possi(e. *his providesthe% +ith a %argin of safet eca'se the f't're is a(+as diffic'(t to predict

    n the other hand, the Growth Schoolets the far% on the ='t're.

    "ro+th investing, as defined #r *ho%as ;o+e Price, a pioneer of this approach inthe (ate 5J3Hs, isB

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    "ro+th stock investing foc'ses on +e((!%anaged co%panies +hose earnings anddividends are expected to gro+ faster than oth inf(ation and the overa(( econo%.

    *he rea( test for a gro+th co%pan is its ai(it to s'stain earnings %o%ent'% evend'ring econo%ic s(o+do+ns. S'ch co%panies +i(( provide (ong!ter% gro+th ofcapita(, preserving the investors p'rchasing po+er against erosion fro% rising prices.

    k, thats si%p(e eno'gh. *his is of co'rse the In schoo( for the past fe+ ears."ro+th investing has een tro'ncing va('e!ased investing for the past fe+ ears a+ide %argin. >hi(e +e have (itt(e data for the Indian %arket, there is a +ea(th of it ons'ch iss'es ao't the AS %arket. $nd if o' (ook at the chart e(o+ it is a%p( c(earthat "ro+th has een the +a to go for the past fe+ ears.

    *he asic ass'%ption 'nder(ing gro+th stock investing is that these co%panies haveaove average rate of earnings gro+th and that over ti%e their stock prices +i(( ref(ectthis gro+th. *he difference et+een gro+th and va('e investing is est 'nderstood

    the fo((o+ing 7'estion.

    >o'(d o' rather ' a great co%pan at a good price or a good co%pan at a greatpricehenever govern%ents have fa((en4 po(itica( instai(it *op!of!the!%indreca((F

    Inf(ation hitting do'(e digits4 r'pee fa((ing4 interest rate hikes thekno+(edgea(e +i(( te(( o' these are road econo%ic para%eters that affecta(( 'sinessesF

    $ (ot of peop(e +i(( te(( o' that +ars have spooked the %arketV"'(f >ar,2argi( crisis, etc co'ntr and (ives are at stake.F.

    Sca%s /'%an greed kno+s no o'ndsF. ad %anage%ent interested in %aking a 7'ick 'ck the%se(ves 0o%pans prod'cts o%ed ad ('ck, ad strateg or ad %arketing

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    1aksh%i #achine >orks s'ffers as texti(e %i((s are not doing +e(( a case of aspecific sector going ad that +ipes o't even the est of co%paniesF.

    $ che%ica( co%pans p(ant ca'ght fire destroing it co%p(ete( "od save

    'sF $ ri((iant prod'ct 't the co%pans orro+ings strang(ed the prod'ct efore

    it sa+ the (ight of the da Det (eads to deathF

    So %an of the%, o' ask< 1et 's see if +e can c(assif the% into road categories. Ifo' (ook at these reasons in detai(, o' rea(ise that there are so%e factors that are+ithin the co%pans contro( or specific to the co%pans 'siness ad %anage%ent,

    prod'cts o%ing, sector do+ns(ide, fire, orro+ingsTF. *he rest of the factorspo(itics, %acroecono%ic iss'es and +arsF affect the %arket in genera(.2, +e see% to have got t+o +atertight c(assifications for e7'it risk. ne affects

    specific co%panies and sectors. *extooks have vario's na%es for itVLdiversifia(erisk, L'nsste%ic risk, L'siness risk, Lco%pan risk and so on. *he other set ofrisk affects the entire %arketVL'ndiversifia(e risk, sste%ic risk, L%arket risk.....*he a%aing po+er of c(assification S'dden(, o'r ig (ist of risks (ooks %anagea(e.>e j'st need to 'nderstand +hich asket the e(ong to *o get the c(assificationright, (et 's de(ve a (itt(e deeper into the t+o gro'ps.

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    Co84a/y (isk? a los.( look

    *ho'gh co%pan risk is specific to the co%pan, so%e risk factors that affect the

    'siness are +ithin the contro( of the co%pan. 0orporate India is rep(ete +ithinstances of ho+ a co%pan co'(d have contro((ed its f't're etter.

    ;ea( -a('es the L0easefire co%panF i((!conceived fora into Lvac''%isers is anexa%p(e of strateg going ha+ire. *here are haar Indian pro%oters +ho havesiphoned %one fro% their (isted co%paniesVexa%p(es of ad %anage%ent. 0ore/ea(thcare ear(ier 0ore Parentera(sF is another c(assic exa%p(e of a co%pan that hadthe right prod'ct 't, in its 'rge to 'i(d %ega p(ants, it orro+ed eond its %eans

    efore creating a %arketVthe rest is histor the co%pan got into a det trap, and theprod'ct eca%e a co%%oditF.

    $(( these risks can e avoided if proper ho%e+ork is done to 'nderstand 'sinessesand %ake a f't're (ooking ca(( on their 'sinesses. n( stock!picking ski((s can seeo' thro'gh this %ae of risks. )o+ o' kno+ +h good research ana(sts are soso'ght after

    *he other sets of risks that are 'siness specific are eond the contro( of theco%pan. >hat can #adras 0e%ents do if the ce%ent %arket s'dden( s('%ps asthere is too %'ch ne+ capacit +ith no %atching de%and >hat can *)P1 do ifde%and for ne+sprint fa((s as %ore and %ore peop(e take to reading ne+spapers on

    the Internet )ot no+ 't it can happen 5H ears do+n the (ineF >hat can *isco doif Posco d'%ps a %i((ion tons of stee( in the co'ntr not (itera((F

    f co'rse there is so%ething that these co%panies can do to re+ork their strategies,'t it is ti%e cons'%ing. $nd o' kno+ o'r stock %arkets *he prices +i(( getha%%ered +ith the first +aft of ad ne+s. In an case, if one +ere to diversif onesho(dings across vario's sectors and co%panies, the risks can get %ini%ised to acertain extent.

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    Ma(k. (isk

    0o%pan risk is sti(( eas to contend +ith, 't +hat do +e do ao't %arket risks< 't

    of the n'%er of factors affecting %arkets, o'r experience te((s 's that %arketdec(ines 'nder %an of these factors are te%porar and provide exce((ent 'ingopport'nities for the patient investor +ho thinks and 's good co%panies >e (ovethis kind of an investor or co%panF#arket risk is a different ani%a( a(together. Diversification does not he(p as a(( stocksget affected these factors. 't fret not, the native ingen'it of %ankind has fo'ndso('tions to this pro(e% too, in the for% of L='t'res & Lptions

    Fisal 4oliy a/ h. sok 8a(k.

    )o escaping the fisca( deficit*heres no escaping the fisca( deficit. *he thing has escaped fro% the pink papers,+here it rightf'(( e(ongs, to the ordinar ne+spapers. *he investor has eno'gh onhis %ind tracking his portfo(io, so +h does he need to other ao't the fisca( deficithen the A*I got into tro'(e (ast ear, the %arkets took a t'%(e, and then+aited +ith ated reath for A*I to get ai(ed o't. $nd the govern%ent is %an %an

    ti%es igger than the A*I.

    S're, the govern%ent doesnt p(a the stock%arkets itse(f, except thro'gh itsdisinvest%ent progra%%es, 't it contro(s the det %arkets. *he govern%ents needfor orro+ing %one to finance its expenses is nothing 't another na%e for the fisca(deficit. )o +onder it affects the entire econo%."overn%ent orro+ing affects the entire econo%/o+ does it do that< >e((, if govern%ent orro+s too %'ch, it Ncro+ds o'tN the

    private sector. *he stock of financia( reso'rces %oneF eing (i%ited, excessgovern%ent orro+ing res'(ts in there eing (ess (eft over for the private sector. $(so,

    +hen govern%ent orro+ings increase, the de%and for credit increases re(ative to thes'pp( for it. So the cost of credit increases. *he cost of credit is nothing 't theinterest o' pa. $nd +hen interest rates rise, thats ovio's( negative for co%panies,as higher interest costs eat into profits.orro+ing fro% ;I!a s'refire recipe for inf(ationSo%eti%es, the govern%ent does not orro+ direct( fro% the %arket 't instead

    orro+s fro% the ;eserve ank. *hats act'a(( e7'iva(ent to printing %one, and isca((ed, in the jargon, %onetising the deficit. >hen this happens, the a%o'nt of %ones'pp( increases and that %akes price rise as +e((. Dont get it< >e(( if +e a(( had a

    printing press at ho%e in +hich +e co'(d print %one then +e co'(d a(( eco%e

    crorepatis. >e co'(d afford to pa an a%o'nt to ' anthing +e +anted to. ! 93 !

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    Everthing then eco%es an a'ction and there is no (i%it on ho+ high prices can goeca'se there is no (i%it on ho+ %'ch o' can afford to pa!after a((, o' have aprinting press at ho%e. 't that is a s'refire recipe for inf(ation.

    >hen the govern%ent orro+s fro% the ;I ver %'ch the sa%e happens. S're nota(( of 's have a printing press. 't this is one he(( of a ig printing press. So prices are

    o'nd to rise. $nd then the price that o' pa for %one +hich is nothing 'tinterest ratesF egins to rise too 'p.*o keep deficit in check, govern%ent raises reso'rces thro'gh higher taxes...*he %ora( of the stor is that the govern%ent sho'(d c't its coat according to its c(oth./o+ can the govern%ent do that< ne eas +a is to raise reso'rces. *he si%p(est+a to do that, as +e are painf'(( a+are, is to increase taxes. Increased taxes takesa+a p'rchasing po+er fro% peop(e, there red'cing de%and. It a(so da%pens the

    incentive for peop(e to +ork harder. D'ring the ad o(d socia(ist das, %argina( taxrates +ent 'p to over JHM, (eading to a f(o'rishing (ack econo%. *hese das,thankf'((, finance %inisters rea(ise that too %'ch taxation is co'nter!prod'ctive. 'tthe point is, +hether the govern%ent chooses to tax %ore or not has i%p(ications forco%panies and therefore for the %arkets....and that i%pacts stocks>hi(e corporate tax rates app( e7'a(( to a(( co%panies, changes in the rates ofexcise and c'sto%s d'ties affect different ind'stries in different +as. *hats +h +ehave a(( those ana(ses on 'dget da tring to ga'ge the i%pact of the 'dget

    proposa(s on ind'stries and individ'a( co%panies. vio's( stocks too are i%pacted.

    Disinvest%ent!a reso'rce!raising ro'te +hich a(so affects %arket*he other +a of raising reso'rces is thro'gh disinvest%ent. Divesting thegovern%ent stakes in good co%panies rings good 7'a(it invest%ents into thestock%arket and he(ps investors.Deficit can a(so e checked thro'gh expendit're c'ts't raising reso'rces is not the on( +a to keep the deficit in check. *he other +a isto red'ce govern%ent expendit're. Is that a good thing< It depends on the state of theecono%. If there is a recession going on and there is s'stantia( excess capacit,red'cing the deficit +o'(d red'ce p'rchasing po+er and h'rt de%and. *he need here+o'(d e to increase govern%ent expendit're to kickstart the econo%.

    *he 7'a(it of the deficit is of great i%port$t other ti%es, ho+ever, red'cing govern%ent expendit're +o'(d e a good thing. Itdepends, ho+ever, on +hat kind of expendit're o' pr'ne. If the govern%ent c'tsdo+n on capita( expendit're, that is the expendit're re7'ired for 'i(ding phsica( andsocia( infrastr'ct're, then econo%ic gro+th is o'nd to s'ffer. "overn%entinvest%ent in roads, te(eco%, ports, etc, has knock!on effects on the rest of theecono%, i%proving prod'ctivit and raising invest%ent de%and. *hat trans(ates intoorders for capita( goods co%panies. "ro+th ovio's( trans(ates into gro+th forindivid'a( co%panies, raising their va('ations. If, on the other hand, the govern%entred'ces s'sidies, rationa(ises prices, and tri%s f(a in an effort to eco%e %ore

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    prod'ctive, that is to e +e(co%ed. In other +ords, its not j'st the fisca( deficit that isi%portant, 't the 7'a(it of that deficit.State of govern%ent finances sho'(d concern investors

    *he govern%ent, thro'gh its fisca( po(ic, has the po+er to contro( the econo%,interest rates and +ith it, the direction of the %arkets. Investors have reason,therefore, to e concerned ao't the state of the govern%ents finances.

    Mo/.a(y 4oliy a/ h. sok 8a(k.

    #onetar po(ic affects a(( of 's .o' +o'(d have noticed the rea%s of ne+sprint ch'rned o't +hen the ;eserve ankof India anno'nces its %onetar po(ic ever six %onths. 1ike a (ot of peop(e, o'+o'(d have tho'ght that

    it is %ere( another reason to fi(( the financia( pages4 or, %ore charita(, it %a e i%portant for anks 't not for ordinar investors

    (ike o' and %e.*he fact is that ;I %onetar po(ic has an effect on a(( investors. 1ets take a (ookho+.$ too( to contro( inf(ation, +hich direct( affects interest rates#onetar po(ic is ai%ed at contro((ing the (eve( of inf(ation & interest rates in theecono%. *o do that, the ;eserve ank tries to (o+er the %one s'pp( +hen pricesare rising. /o+ does it do that< (o+ering the a%o'nt of %one avai(a(e +ith

    anks. ;aising reserve re7'ire%ents, i.e., the a%o'nt of %one +hich anks %'st

    keep i%po'nded +ith the ;I, is one +a. $nother %ethod is to se(( onds to theanks. >hen anks ' onds fro% the ;I, %one f(o+s o't fro% anks to the ;I,(o+ering the a%o'nt of %one avai(a(e for (ending. o'(( re%e%er that j'st eforethe 5JJ@ e(ection finance %inister #an%ohan Singh tried his est to (o+er inf(ation,

    e(ieving that a (o+er inf(ation rate +o'(d i%prove the chances of a 0ongressgovern%ent. /e got that +rong, 't in the process ;I s7'eeed %one s'pp(.

    >hat happened next is histor. eca'se %one +as scarce, interest rates started%oving 'p to astrono%ica( (eve(s. 0o%panies fo'nd that the +ere starved of f'nds,or co'(dnt afford the high rates. *he '(ti%ate res'(t +as that the econo% s(id into a

    recession.

    So changing the %one s'pp(, the ;eserve ank can deter%ine the (eve( ofinterest rates. /igher (eve(s of interest rates i%pact corporate otto%(ines anddisco'rage co%panies fro% investing. *hat s(o+s do+n gro+th.Does the process +ork the other +ahat does it %ean to e a ench%ark is h. los.-o7 4(i. a((i. a

    In three si%p(e steps.

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    S.4 o/.?*he exchange decides 'pon a fixed price and adds 8HM to it. Incidenta((,the fixed price varies +ith exchanges.

    =or the o%a Stock Exchange the fixed price is the standard rateC ha+a(a ratedecided the exchange. *his standard rate is ca(c'(ated on the (ast da of thesett(e%ent. It is the si%p(e average of a(( the trades exec'ted on that partic'(ar da.

    *he )ationa( Stock Exchange, on the other hand, takes the c(osing price of the stock'nder a'ction as the fixed price. *he c(osing price is arrived at taking the +eightedaverage of a(( the trades exec'ted in the partic'(ar scrip in the (ast thirt %in'tes ofthe trading session.

    S.4 >o?*he res'(ting price is then co%pared +ith the highest price for the stock inthe sett(e%ent in +hich the defa'(ting part so(d the scrip.

    S.4 h(..?*he higher of the t+o prices, ie the sett(e%ent price and the fixed pricep('s a 8HM pre%i'%, is considered as the c(ose!o't price.

    >hich %eans if the fixed price decided the exchange is higher than the sett(e%entprice, the sett(e%ent price is dee%ed as the c(ose!o't price. $(ternative(, if thesett(e%ent price is higher than the fixed price, the stock is c(osed o't at the sett(e%ent

    price.

    Anderstand things +ith ;e(iance1et 's 'nderstand this etter +ith an exa%p(e. 1et 's ass'%e that a part hasdefa'(ted on shares of ;e(iance Ind'stries ;I1F. $nd his shares are 'p for a'ction onthe SE. *he SE fixes the ha+a(a price for ;I1 at ;s38H. $nd as per r'(e, it a(soadds 8HM to the fixed price and arrives at the fina( price of ;s39.

    1et 's %ake another ass'%ption at this stage. *hat the highest price in the sett(e%entin +hich the defa'(ting part had so(d the stock, +as ;s9HH.

    )o+, ovio's(, the c(ose!o't +i(( take p(ace at the s.l.8./ 4(i. o $s&00, as it is

    higher than the i@. 4(i. $s'&.

    ther side of the coin

    >hat if the sett(e%ent had taken p(ace at a price (ess than the fixed price of ;s39hat if it had taken p(ace at, sa, ;s3H:< >e((, then the fixed price +i(( e taken asthe c(ose!o't price as it is higher than the sett(e%ent price. $nd the stock +i(( ea'ctioned at ;s39.

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    Mana*e+ent #e"e2t%on

    ;evered invest%ent ana(sts the +or(d over have constant( dri((ed into o'r %indsthat it pas to e invested in co%panies +hose %anage%ents are perceived to efoc'sed and proactive. $ good %anage%ent a(+as co%%ands pre%i'% va('ationsfor the stock. *he (ogic is j'stified given the fact that the %anage%ents attit'deto+ards the co%pan deter%ines the gro+th c'rve it takes. 1ets test this reasoningand see +hether the (ogic rea(( ho(ds good for Indian co%panies.=or the st'd (ets take so%e co%panies kno+n for their rep'ted %anage%ents. *hesa%p(e inc('des the (ikes of Infoss, /D=0, /D=0 ank, /11, /ero /onda, P'nja*ractors and Dr. ;edds.

    "LL Vs o/.84o(a(i.s

    =#0" %ajor, /ind'stan 1ever /11F is a pri%e exa%p(e of +hat %anage%entperception can do to the va('ations of the stock. /11 has a(+as co%%andedpre%i'% va('ations not on( eca'se of its sie, 't its consistent good perfor%ance.*ho'gh another =#0" co%pan, )ir%a, too has p't in good perfor%ance ear afterear, it sti(( (ags ehind +hen it co%es to va('ations.*ho'gh )ir%as %anage%ent is considered to e ver foc'sed on its 'siness, it is/11s %anage%ent that is considered to e %ore pro!active et+een the t+o. /11s%anage%ent has contin'a(( expanded its top(ine adding %ore prod'cts and

    'sinesses, either organica(( or inorganica((. It spreads the co%pans risk.

    #kt. 0ap. ;s %F ;E MF PCe WF

    /11 99:,G8G :H.J 95.G

    )ir%a 85,@G 8G.3 J.3

    "odrej Soaps 9,8@H 8H.8 G.H

    If o' (ook at the va('ation ta(e, it (ooks as if "odrej Soaps is ack +ith a ang. 'tthis reviva( in fort'nes of "odrej Soaps can a(so e attri'ted to a (arge extent on the

    right %oves the co%pans %anage%ent has een %aking in the (ast one ear. *he%anage%ent has roken the co%pan into t+o, to (end %ore foc's to its =#0"'siness. *he co%pan has een repaing its dets in a id to i%prove itsprofitai(it. $(( this has not gone 'nnoticed the o'rses. *he va('ations of theco%pan have started to i%prove in the past co'p(e of %onths, as the %arkets

    perceive the %anage%ent to e on the right track.

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    "DFC Vs o/.84o(a(i.s

    Indias (eading ho'sing finance co%pan, /o'sing Deve(op%ent =inance 0orporation

    1i%ited /D=0F is another fine exa%p(e. /D=0 is a pioneer in ho'sing finance inIndia. *he co%pan contro(s GHM of this %arket. Its consistent perfor%ance, othfinancia( as +e(( as in c'sto%er satisfaction has he(ped it retain its %arket share in this

    'siness. Despite ne+ entrants in the 'siness in the recent ears, it contin'es to ethe (eader.eca'se of its caref'(( (aid o't h'ge ranch net+ork it is a(e to service itscons'%ers efficient(. /D=0s %anage%ent is rated ver high( for its foc'sedapproach to its 'siness. In contrast aggressive entrants (ike I0I0I have historica((taken on %ore )P$s.

    #kt. 0ap. ;s %F ;E MF PCe WF/D=0 @@,GH8 5J.8 5@.@

    1I0/= 8,:@ 5J.3 8.9

    I0I0I G@,338 5:.G @.3

    >hi(e the co%petition p(as catch 'p +ith /D=0, the co%pan has ranched o't intoanking, ins'rance, %'t'a( f'nds and retai( (oans. Its s'sidiar, /D=0 ank, isa(read the fastest gro+ing private ank in India. Even this s'sidiar, is va('edhigh( eca'se of the %anage%ent Lfee( good factor.

    #kt. 0ap. ;s %F ;E MF PCe WF

    /D=0 ank @5,335 5@ :5.5

    I0I0I ank 33,@:@ J.8 35.

    SI 589,G33 [email protected] @.5

    A*I ank :,99G 85.3 5H.G

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    I/osys Vs o/.84o(a(i.s

    1ets take a (ook at one co%pan, +hich has no+ eco%e snon%o's +ith the

    Indian soft+are revo('tion, Infoss. *he co%pan not on( has een t'rning in goodperfor%ances 7'arter on 7'arter, 't is a(so at the forefront of %anage%ent reporting.Infact, Infoss ann'a( report +as one of the first in its kind in India that gaveco%p(ete disc(os're on the co%pans operations to its investors.*his s%a(( act %'st have added tons of good+i(( to its va('ations. Since then,disc(os'res co%panies in their ann'a( reports and %eas'res to i%prove re(ations+ith investors have to'ched ne+ (eve(s in 0orporate India. *his proactivit andforesight has he(ped Infoss eco%e one of the %ost va('a(e co%panies in theco'ntr, adding to shareho(der +ea(th ear after ear.

    #kt. 0ap. ;s %F ;E MF PCe WFInfoss 98,8:: 39.3 59J.

    Sata% 5HG,@8 3.: GJ.

    -is'a(soft 5:,G8H 35.J ::.J

    Si(ver(ine 5:,G3 5:.3 88.3

    ".(o "o/a Vs o/.84o(a(i.s

    In the t+o!+hee(er seg%ent, it is not for nothing that the #'nja( fa%i( is revered.

    *he fa%i(s %otorcc(e joint vent're +ith /onda Inc, ?apan, /ero /onda, redefinedthe shape of the t+o!+hee(er ind'str in India. $t a ti%e +hen ajaj $'to +as the'ncro+ned king of this seg%ent read scootersF, the #'nja(s had foresight to ga'ge ashift in cons'%er preferences to+ards %otorcc(es. =or this, the +ere a%p(re+arded. )ot on( the co%pan, /ero /onda, eca%e the 'ndisp'ted king of thet+o!+hee(er seg%ent 't in the process created a (ot of +ea(th for its investors. *i((toda, the co%pans distri'tion %'sc(e co'p(ed +ith its top of the (ine ikes,co%%and the cons'%ers as +e(( the investors (oa(t.

    #kt. 0ap. ;s %F ;E MF PCe WF

    /ero /onda 33,G9J 93.3 5G.@ajaj $'to 88,3@ 5J.5 3.G

    *-S S''ki 9,335 8G.9 :.H

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    P7/6a; T(ao(s Vs o/.84o(a(i.s

    *he %anage%ent of P'nja *ractors, part of the S+araj "ro'p, is not as high profi(e

    as so%e of the (eading 'siness ho'ses in India. 't the co%pans si(ence is %orethan %ade 'p the consistent perfor%ance of the co%pan. *he co%pan is foc'sedon the tractor seg%ent, 'n(ike %arket (eader #ahindra & #ahindra. It is this foc'sthat has paid it rich dividends in ter%s of shareho(der va('e. >henever, the agric'(t'resector in India is on an 'pt'rn, P'nja *ractors is the first one to reap the dividends.n the other hand, +henever a ad crop co%es , P'nja *ractors foc's he(ps it tidethro'gh the diffic'(t sit'ations s%ooth( as co%pared to its riva(s. *he co%pans

    pr'dent financing po(icies and +orking capita( %anage%ent has kept it at the forefrontof providing the %axi%'% ret'rn to investors.

    #kt. 0ap. ;s %F ;E MF PCe WFP'nja *ractors 58,@@3 3:. J.:

    # 5,G8 59.G @.

    Escorts ,95 55.J G.J

    D() $.y,s Vs o/.84o(a(i.s

    In the (ast fe+ ears, the do%estic Indian co%panies have seen a ig re!rating in theirva('ations. *his has co%e in the +ake of the advances %ade in the fie(d of ;esearch

    and Deve(op%ent ;&DF. *he co%pan that spearheaded the Indian ;&D effort +as/deraad!ased Dr. ;edds 1aoratories. *he co%pans pioneering efforts todiscover ne+ %o(ec'(es, ahead of the %'ch dreaded prod'ct patent regi%e post 8HH:,ti(ted the a(ance in favo'r of ho%egro+n phar%ace'tica( co%panies. *hisenco'raged %an other do%estic co%panies to have faith in their ;&D effort andincreased invest%ents in this area. Its no +onder then that Dr. ;edds sits at the topof heap in ter%s of va('ations, even ahead of the #)0 phar%ace'tica( co%panies inIndia.

    #kt. 0ap. ;s %F ;E MF PCe WF

    Dr. ;edds 39,:5@ 5:. :G.8

    ;anax GJ,883 53. 9H.GS'n Phar%a J,355 8.G 5H.3

    0ip(a GH,5@: 83.5 :8.G

    't it %'st e added here, that a good perception of the %anage%ent is orne ears of so(id perfor%ance and doesnt 'i(d overnight. )o short c'ts to this

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    AGG/EGATE /ESOU/CE MOBILISATION IS GOINGDOWNSHILL

    $ (ook at the statistics for reso'rce %oi(iation the corporate sector othfro% do%estic and overseas %arkets +i(( revea( that the sit'ation is extre%e(disappointing

    *$1E 5B **$1 ;ESA;0E #I1IS$*I) */E 0;P;$*ESE0*; =;# */P;I#$; #$;2E*

    E$; $#A)* ;$ISED PE;0E)*$"E-$;I$*I)

    5JJG!5JJ 9858:

    5JJ!5JJJ @H5J8 98.J

    5JJJ!8HHH G89:H 8H.3@

    8HHH!8HH 5G99H3 8.G

    8HH5!8HH8 G3J@ :.3G

    8HH8!8HH3 9HG3.:3 !9G.@

    So'rceB Sec'rities in India a revie+, )SE. +++.nseindia.co% #onth(;evie+ of the Indian econo%, 0#IE $%o'nt are in ;s 0rore

    )ot on( is reso'rce %oi( iation increasing at a decreasing rate over theentire period, for the ear 8HH8!8HH3 the a%o'nt raised fro% the pri%ar%arket has dec(ined in aso('te ter%s.. $ s'ggestive s'%%ar of the aovedata revea(sB

    Starting fro% a striking and i%pressive acce(eration of 98.JM in 5JJ!JJ,the gro+th rate of pri%ar %arket %oi(iation do+n to a pitia(e !9G.@M in8HH8!8HH3t thro'gh a stead dec(ine.

    0orporate iss'es fig'res too( a sharp do+n+ard spin tota( a%o'nt raisedstarted at ;s 98,58: crore in 5JJG!J and ended at ;s 9H,G3.:3 crore in8HH8!8HH3 (ess that the for%er , Inspite of reaching a peak of ;s G,,3J@ crorein 8HHH!H5.

    >hat is perhaps %ost striking is the dec(ine in the corporate iss'es in 8HH8!8HH3 a(%ost :HM the a%o'nt raised fe(( nothing (ess than ;s 3G,:88.3G.

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    *$1E 8B ;ESA;0E ;$ISED */E 0;P;$*E SE0*; -IS!X!-IS ; SA;0ES ;$ISED */E "-E;)E#* =;# */E P;I#$;#$;2E*

    E$; **$1$#A)*;$ISED

    0;P;$*E SE0*; "-* SE0*;

    $#A)*;$ISED

    PE;0E)*$"E-$;I$*I)

    $#A)*;$ISED

    PE;0E)*$"E-$;I$*I)

    5JJG!5JJ 5HJ:55 9858: @G3@

    5JJ!5JJJ 5H@H@G @H5J8 98.J 5H@H@G :G.9

    5JJJ!8HHH 55333@ G89:H 8H.3@ 55333@ @.:

    8HHH!8HH5 8H@GJ G99H3 8.G 5893 53.3@

    8HH5!8HH8 88@J55 :.3G 5:8:H 5.G

    So'rceB Sec'rities #arket in India, a ;evie+, +++.nseindia.co%

    $%o'nts are in ;s 0rore

    *he i%portant facts reva('e that data areB

    )ot on( does the govern%ent raise higher a%o'nt of reso'rces ver earvis!a!vis the corporate sector, 't the rate of gro+th is a(so higher for thefor%er as co%pared to the (atter

    *he second graph sho+s that the share of the govern%ent is higher thanthat of the corporate sector on a s'stained asis.

    Data s'ggest the presence of cro+ding o't effect +herein excessiveorro+ing the govern%ent (eaves (itt(e roo% for the corporate in the%arket. Except 5JJ!5JJJ, ears of high gro+th of corporate orro+ings 8H.3@MF correspond to (o+er gro+th rates for the govern%ent @.:MF B5JJJ!8HHH and vice versa B in 8HH5!H5 and 8HH5!H8 gro+th rates forcorporate sector and govern%ent are 8.G M and :.3GM and 53.3@M and5.GM respective(.

    >ith dis%ant(ing of contro( regi%e and grad'a( (o+ering S1; and 0;;, therehas een a change in foc's in the govern%ents orro+ing progra%%e.

    Dependence oh high cost ho'seho(d saving 'nder tax reate sche%es is eing ! :G !

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    grad'a(( phased o't as it is increasing( tapping the %arket to raise reso'rceat %arket cost. 0onse7'ent( +hi(e 5M of the fisca( deficit +as eingfinanced %arket orro+ing the centre in 5JJH!J5 this fig're has co%e

    'p to a record @JM 8HH5!H8 in percentage ter%s dependence of the stategovern%ents on %arket orro+ing has not increased %'ch hovering aro'nd5M F *his has fo'nd a ref(ection in the aove trends sho+ing high share ofthe govern%ent in a%o'nt raised as +e(( as the cro+ding o't effect on thecorporate sector.

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    /es2onse to 2!bl% Iss!es

    *he sa(ient aspects +hich need to e%phasied areB

    *he response to p'(ic iss'es is +orsening over ti%e as the proportion ofiss'es e(iciting ade7'ate response Y5.: ti%esF has een steadi( dec(ining+ith on( s(ight recover in 8HH5!8HH8.

    *he percentage of iss'es s'scried to %ore that 5H ti%es is extre%e( (o+for the entire period for 5JJJ!8HH8, hovering at or e(o+ @ in there%aining ears.

    5JJJ!8HHH has een s(ight( etter +ith a significant( :3M of the iss'es

    s'scried to %ore that 5H ti%e as ho+ the peek at this ear. *his isd'e to increase in %ega iss'es d'ring this ear!there +ere 5J %egaiss'es ;s.5HHcrore and aoveF as against 55 s'ch iss'es in the precedingear.

    $nother +a to s'stantiate the contention that p'(ic iss'es are (osinggro'nd, +ith the exception of 5JJJ!8HHH, is noting that the %osts'scried iss'e d'ring 5JJ!JJ +as 2PI* sste%s +hich +as overs'scried 98 ti%es4 the 'p trend in 5JJJ!8HHHis evident in the factthat Sankha Infotech 1td., %ost s'scried d'ring the period, +as overs'scried on( : ti%es4 facts for 8HH5!H8 are extre%e( disappointing+ith P'nja )ationa( ank eing overs'scried a %ere 9.8J ti%eshigh(ighting the fact that aso('te( no iss'e +as s'scried %ore than 5Hti%es in this ears.

    ;ecent s'rves thro+ (ight on severa( aspects of the %arket that theinvestors are dissatisfied +ith and a(so revea( the pscho(ogica( attit'de of theinvestor to+ards the %arket. I%portant excerpts fro% these s'rves fo((o+B

    $ s'rve cond'cted Dr. 1.0 "'pta of Societ for 0apita( #arket;esearch and Deve(op%ent S0#;DF sho+s tat the n'%er of investors

    is stagnating at 8 crore since 5JJG . *his is s(ight( (o+er than theinvestors in #=s, +hich stand at 83 %i((ion.

    *hese investors acco'nt for are( GM of a(( Indian ho'seho(ds since 5JJ:.

    *here are st'dies ased on the active acco'nts +ith the )ationa( ShareDepositor 1td. +hich s'ggest that 8 crore %ight e an overesti%ation forinvestor pop'(ation . the p't the fig're at :H (akh or so, and given thatan person +ith a portfo(io of at (est : share has to open an acco'nt to se((these shares, this esti%ate is proa( correct.

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    *he iggest gro+th in investor pop'(ation happened et+een 5JJ5 and5JJ: 't repeated sca%s have ro'ght this gro+th to a grinding ha(t. $s'rve )SE sho+s that confidence in the %arket %echanis% has

    received (o+ after (o+ over the (ast fe+ ears d'e to repeated %arketscanda(s.

    *he S0#;D st'd points o't that investors perceive the pri%ar %arketas far riskier than the secondar %arket . *he SEI!)0$E; s'rvecond'cted in 8HHHreinforeces this.

    *he Shankarachara co%%ittee appointed the finance %inister in 5JJconc('dedN %ost corporates enjo (itt(e credii(it +ith investorsN

    $ccording to the SEI! )0$E; s'rve , safet and (i7'idit are thepri%ar considerations that deter%ine the choice of an assetB ank fixeddeposits are considered to e the safest +hi(e capita( %arket instr'%ents asthe %ost risk

    1o+ per capita( inco%e, apprehension of (oss of capita(, a and econo%icinsec'rit, +hich are a(( inter!re(ated factors, significant( inf('enced theinvest%ent attit'de of the ho'seho(ds.

    *he (ack of a+areness ao't sec'rities %arket and asence of adependa(e infrastr'ct're and distri'tion net+ork co'p(ed +ith aversion

    to risk inhiited non!investor ho'seho(d fro% entering the sec'rities%arkets

    $s per the S0#;D s'rve conc('ded in 8HH5, IPs have gone do+n intoinvestors preference +ith on( 8JM of the respondents regarding the% asNas a reasona( good (ong ter% invest%entN d'e to recent deve(op%entsand the position of the secondar %arket has i%proved d'e to refor%s , asthe corresponding percentage is 3JM.

    *he sa%e s'rve conc('des that peop(e intending to invest in N ne+ share

    iss'esN +as %'ch (o+er than those intending to ' shares fro% thesecondar %arkets , the respective percentages eing 5@M and 95M

    *he SEI! )0$E; st'd sho+s that a st'nning JHM of the e7'it investorpop'(ation o+ns : stocks or (ess. ver G:M o+ns shares in j'st threeco%panies and j'st 'nder a 7'arter of a(( investors have ro'ght shares inon( one co%pan.

    S'rprising(, near( GJM of the pri%ar %arket investors ho(d on to theirinvest%ents for over three ears.

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    *he sit'ation is indeed extre%e( gri%. *he (ast oservation sho+s that Indiahad serio's investors +ho +ere defeated repeated sca%s ands'pervisor fai('res. Severa( initiatives to t'rn aro'nd the sit'ation can e

    derived fro% the aove disc'ssion itse(f.

    >e have to 'nderstand that %aking state%ents (ikeN 0apita( %arkets cantdeve(op 'n(ess investors deve(op a hea(th and %ore confident attit'deto+ards risk taking N doesnt take 's an+here. *he econo%ics ehind thisstate%ent is expected to ho(d in nor%a(( f'nctioning and hea(th %arket ,not in %arkets , +hich are, tor%ented repeated sca%s and s'pervisorfai('re